MLM History – News & Schemes

News Archives: 1st Quarter 2002
January, February, March

(NON MLM) NIGERIAN SCAMS
30 mar 2002  – NON MLM – After 4 tons of criticism the Nigerian Government has put up a scam watch site for the scum that try to hustle stupid people into giving up their bank account number so they can be ripped off (the stupid people).  If you get one of the scam email.ANYTHING from Nigeria send it to  http://www.nigerianfraudwatch.org
 
COCOONING ILLEGAL PYRAMID SCHEME IN CANADA
Mar 29 2002 – The Canadian Cocooning Club tried to do the TV Informercial  “We’ll build your downline trick” like Scamster John Polk did with 2 eXtreme Performance in Dallas.  The Mounties are faster and less tolerant than the FTC and nailed them to the wall. It took the Mounties 2 months. It took the FTC 2 years to get 2XP.  Rod Ed. Note: Great idea!  Send the FTC to study under the Mounties!
 
GALAXY TELPHONE – IWC PYRAMID SCHEME FIXED
28 Mar 2002 – Several months ago I wrote about them having a classic little pyramid scheme going.  If you look at the pyramid scheme pages you will see that I say some ready innocent and decent people use them accidently.  This was the case with Galaxy.  The owner found out that what they were doing was a little pyramidy and fixed it.  There are good folks out there and are not ashamed to fix things to stay on the good side of the law.  Galaxy has a good comp plan now with customer acquisitions bonuses and they should run strong.  I think they need a great hand of recognition for thier efforts and williness to be good citizens.
 
www.GOLDQUEST.com PYRAMID SCHEME
27 Mar 2002 – Let’s see, Gold Quest out of Hong Kong is selling numismatic rare special design pieces around precious metal.  So does Franklin Mint in the US.  Ever try to sell a Franklin Mint special edition anything?  Wait 60 years and it may be worth something!  GoldQuest is still using a Binary and issuing VOUCHERS,  so we know they are not operating legally in Taiwan…..  Since Singapore has starting cracking down on Binaries and vouchers — GQ is probably not booming there.  Their pitch on their website today is:
                                     “Don’t just stare in awe at the screen. Grab this chance to hold and have your
                                                    very own collection of numismatic legends before they vanish.”
Ed. Note: LOL and ROFL. Vouchers mean that they are issuing you a credit instead of  product or commission money.  GQ says you have to cash them in for their ??? stuff in 90 days!  Vouchers are the kiss of death in most countries ..  Because in MLM you are supposed to sell product —not paper!  Yes!  Get these numismatic legends before GoldQuest disappears!  FOLLOW UP
 
MLM WORLD NEWS TODAY MLM STOCK SCAM GONE
24 Mar 2002 – Update on earlier report.  Website Gone but stock still valued at 1-2 cents, they didn’t file bankruptcy!  Jim Franz not to be found.  Where did the $300 (x 4-6,000 people who ordered) for the Web Tool Kit go?  Poor Ron Touchard who was doing ops at MLMNWT made a second mistake and went to www.MyEbiz.com.  MyEbiz had headhunters out pulling …. ARE YOU READY FOR THIS?  $100,000 to be a founder!  I think we may see legal action over this.  Next story coming is NuWays and the two judgements against the owner.  Sounds questionable! 
 
USANA DOES STOCK SWAP
18 Mar 2002 Take this Yahoo news release to your stock analyst and ask them what is going down!  Interesting and complicated way to go private. 

FTC TO ATTACK SCAM SPAM
Warn Your Company to Put Out Alert To Stop Outlaw Distributors
15 Mar 2002 – The day after the FTC (U.S. Federal Trade Commission) shut down a scam that used Spam e-mails to sell phony domain names, they announced they would go after spam scams.  This is a wild departure from their normal operations,  which are usually are top secret, before they hit targets.  The FTC used the word “aggressively” which usually means they are going to partner with the state AG’s to do a “Sweep.”   Warn your company — to put out an emergency message to distributors not to do ANY outlaw Spamming for at least 3 months (preferably never).   This is one of those things the Watchdog does believe that could justify termination of a distributor.   This is A Critical Alert To Good Companies – One bad distributor making an unwarranted income claim could bring down your whole company or cause bad Damage!   Send a link to this Article to your CEO, COO and CFO — ASAP

MLM IS THE ONLY ALTERNATIVE
12 Mar 2002 – Despite all the bad press that we “jumps” out at us in the MLM industry this is still the last hope for a person to become a winner or even make a decent living.  If you don’t have any developed skills like computer programming or medical transcription there is not a lot of future out there for you.   The majority of  opps you see advertised  — “work at home” are scams like the one we listed a month or so ago.  I get reports from Attorney General’s, the minority of Business Opportunities that get “hit” are MLM.   In fact major corporations like Enron make  MLM scams look sweet.  The Baptist investment fund used religious influence to bilk almost a billion dollars from elderly investors.  The world is a financially dangerous place and full of sharks.   The MLMWatchDog is not here to bash the MLMindustry like many others.   It is here to clean up the only decent chance left in the world for the little guy!   Ed Note:  I just had to clear the air!
 
WHY DO I THOUROUGHLY DISLIKE MLM BASHERS?
11 Mar 2002 – Most have never been close to a good MLM company.  They took one bad experience and go bonkers about it.  Their point of veiw is a pinhole to match the brain in their pinhead.  Most are wage earning tongue draggers that have not been outside thier local city limits.  Why do I get mad at them?   I have  global experience.   I have lost more money in more business (the majority non mlm) than those losers ever made!  I have also made more money (some of it in MLM) than they could even remotely imagine!  Some of the idiot bashers hate successful people and went into a state of shock when they saw “ignorant” people (by their silly standards) making money.  The bashers never figured out that ignorant or undeducated are not automatically dumb.  The bashers were outraged when they saw high school dropouts making $500k a year.  Of course they were really outraged when they found they would have to sell something…..yes.. work!  Work on my no!  Let’s Bash!  Bashers want people to live in cradle to grave society with no risk and wash dishese their whole life.  They are the “new communists” and work hard at destroying vestiges of the last bastion of economic freedom in America and the world!  Rod:  “Bash the Bashers”
 
$250k TO START A MAC DONALDS FRANCHISE – HAH!
10 Mar 2002 – If you are still quoting that old number here is an update!  I have a friend, that just opened one up last week.   Ready?   Three point three Million dollars ($3.3) to get the doors open and that store was in a “poor” part of town.  Franchises I am Involved with only cost $150-250k@.  Rod: I like to keep my gambles down in the low range!

NETWORKING TIMES BORN!  GREAT!
7 Mar 2002 – Out of the ruins of Upline comes a new magazine (no ads) with some good folks at the helm.  Like Upline it will be industry neutral with a serious editorial board. Chris Gross is the Chairman of the Board of Gabriel Media Group, Inc who are the publishers.  I have known Chris since Upline days and found him to be an honest man.  To prove it, by my estimates he personally lost over $250k in the Network Marketing Lifestyles debacle.  Yet, he comes back with a vision to help the industry and provide a quality publication.  I have been, kind of, an unpaid consultant to this project and just finished telling Chris he should not give away subscriptions to people that were Lifetime members of Upline. He said they are going to do it!  So, I implore you that are not lifetime members to subscribe, renew or start a new subscription.  Life time members of Upline don’t you dare sign up unless you bring 2 new subscribers to the magazine or the WatchDog will bite you!    Ed. Note: Go Subscribe Right Now at…
 
LIBERTY LEAGUE INTERNATIONAL
6 Mar 2002 – This one is a learning lesson for all of you. Selling education (any type, size, shape or form) MLM is risky business!  Especially when you get up to the $13,000 range.  This started in the 1960’s when Leadership Dynamics and Dare To Be Great were in full swing.  Are there any laws!  Yes, lots of precedent case law.  The only way this company can survive is to have over 50% of the people that go to the seminars pay the full price and do not belong to the comp plan!  You say Tony Robbins charges $5000.  Yes, he does but almost nobody that goes to his trainings makes money for it.  They are all customers!  We could MLM Tony Robbins all day long …no risk!   Ed. Note: short story with a long history.

GREAT SEX IN A BOTTLE!  FLUNKED MLM 101!
5 Mar 2002 – Great sex in a bottle that is spaming the heck out of the Internet,  started as an MLM company back in 1996/97.   They pushed cases of the stuff.  People ran ads sold bottles with their reorder phone numbers.  Results!  Sales dropped like a ROCK!   Unless they did something with the formula this stuff is a dud.  The only results will be fornication of your pocket book!

WHY “WE BUILD YOUR DOWNLINE” SCHEMES DON’T  WORK
DUE TO CRITICISM (SEE DOWNLINE BUILDING SCHEME BELOW)
3 March 2002 – We will “Build Your Downline” schemes  require an endless streams of recruits for success.  “New” recruits  give money to recruiters who swear that they will build their downline.  Some of these “builders” are honest but just “MATHEMATICALLY CHALLENGED.  The pile of people to build a downline for everyone that comes along would be about 63 feet high (figuring the average height in the US at 5’8″).  To recruit 10 people if  for every one if you were on the 9th level would take 10 billion people.  Little hard since there are only about 4.7 billion people on earth! Intergalactic recruiting?
 
A diagram will help!: 
1
10
100
1,000
10,000
100,000
1,000,000
10,000,000
100,000,000
1,000,000,000
10,000,000,000
Ed Note: Now you can bet that the founders of the company or downline building scheme have themselves and their family filling levels 1, 2, and 3 (or more).  So you are starting, at best, on level 4.  For the 1000 of you starting on level 4 it is going to take 10,000 people just to get you 10 people.  To get you guys 20 people it is going to take 100,000.    To make any of you money you have to fill your 3rd level which will take a million people (1,000,000).  For your information there are no million people MLM’s left in the U.S.  To continue your 4th level would take 10 million people!   Ed. Note: That is why Winner’s Circle, Winning Edge, Purchase Plus, and others ended up with Attorney General’s eating their lunch.  The numbers don’t work and the money doesn’t flow!  Simple Math!
 
MLM WORLD NEWS TODAY MLM STOCK SCAM GONE
Flash back to 17 Jan 2001 – Website Gone!  Last year we put out in the Feb 2001 MLMWatchDog Ezine to run like hell from MLM World News Today.  For those of you that are not subscribers I offered to help MLMWNT out when they started.  I had gotten notes from two of our reporters that of the 1000 companies listed on their website that about 30% were gone.  I offered to help by having Margaret Root one of our prime online trackers update their files (all of them).   I left the $$ to be agreed on by her and  Jim Frans who was CEO then.   They talked and he told her to go ahead.  She did but told him to send $$$ before updating list.  He didn’t!  Two good clues right?  BAD list from a publisher trying to give a good image and NO money for accuracy.  That gave us the tip to watch for the stock jock play they did (very poorly too!).   After they suckered in a bunch of people by starting an MLM company to try to sell something whatever it was nothing ever was delivered and since they had Dramtime Software they couldn’t pay money on the scam even.  This is really bad!  Then they did a Wrap with the failed and sick eWorldnet that was trying to pull their own stock fraud deal.  Both failed!  Ed. Note: If it wasn’t for the reputation of MLM being hurt again. I will tell you this would have been a comedy of errors by incompetent shysters!

OH NO!  ANOTHER SINGLE LINE DOWNLINE!
27 Feb 2002 – Just when we thought the plague of single line downlines had died another one pops up!  The law doesn’t like single line downlines.  Alabama slammed Coastal Vacations and locked up the owner and hammered some of the top distributors!  Why?  A single line downline is a direct cousin to the “Airplane Game” where you fill up the seats and collect money.  Fill up the positions in a single line downline and collect $.  Wow  No wonder the regulators are hard on these Pyramid Schemes!  Besides that being a pyramid scheme they collapse.and if you noticed the other single line downlines they died rather quickly even when the law didn’t intervene!   Losers All!  We recommend to be quickly scammed that you click the link below right now as those who join after you from this e-mail notification will be inserted and scammed below you!  Thanks to An Avid Reader for forwarding this new scam example to us.  As most of you realize these future failures are listed as lessons to folks what to avoid and in some cases these people do not know that they are running a scam. Ed Note:  They sure picked a bad state to learn in!
 
OH NO!  DOWNLINE BUILDING AND AN UMBRELLA COMPANY!
26 Feb 2002 – Another deadly guaranteed failure downline building  WE BUILD YOUR DOWNLINE!.   It is like a matrix all the FREE LOADERS and free lunch folks jump in and when you get to level 12 or so they need 1.2 billion people to fill the downline.  Well that is never going to happen!   So the Window Shade Effect goes into action.  It is like the old window shade pull it down and let go quickly and it “zip-frap-flap-flap and rolls up.  That is what the downline builder deals do except with a lot more noise (from distributors who came out in the red).   OH NO!  When you combine that with the promise of goods and services from a lot of companies to confuse what few distributors might want to work.FLOP!   And there have been some really good people try doing umbrella companies.Go see   Ed. Note:  Score of 100 Umbrella Companies Started in the last ten years = O (zero) survivors!  Ask one of the Good guys Steve Carr about his Destiny Program or one of the bad guys Don Mikrut and his ABP program (jail time).

WHERE HAVE ALL GOOD MLM PUBS GONE?
25 Feb 2002 – This is a good post from a message board asking a great question that we will cover more of.
Why do good straight forward printed pubs end up “gone”
 
What Happened?
Len Clement’s “Market Wave” (print edition) . . . gone
Chuck Huckaby’s “Profit Now” . . . gone
Rod Cook’s “MLM Insider” & “Watchdog” . . . gone
Corey Augenstein’s “Network Marketing news” . . . gone
“Success” Magazine . . . gone then back … then gone
and now . . . “Network Marketing Lifestyles” and “Upline Journal” . . .gone.  Why is it so difficult to keep hard-hitting journal reporting about our industry operating in the black? Has the industry had too many crooks and scams to be taken seriously? Is there any credible print source for information? The recent death of NML an and Upline is not something to be taken lightly. NML attempted to be mainstream, and I think they did a credible job of separating themselves from most of the junk that appears at newsstands promising instant wealth with no work. Upline was perhaps the best-kept secret in our fraternity and a really quality publication.  Am I the lone voice in the wilderness or do others wonder why we cant keep honest publications in running condition?   Bob
 
THE ANSWER TO BOB’S MAGAZINE QUESTION ABOVE
25 Feb 2001 – The answer to the question above isn’t a simple one.  Good neutral publishing in this industry is a “hard row to hoe.”   I first started the “Golden Opportunity” in 1986 and the only reason it prospered was it was purely mercenary (I wish I had not sold it!).  There have been a lot of MLM pubs come and go since that time.  Some of the biggest problems for truthful publishing start in the middle – lower ranks of leadership they have a problem with insecurity and money.  Too many developing leaders say:

1.  I and my downline, spend our money on our company’s material, training and don’t see a need to read anything else.  If I can’t buy it at the company store I don’t want it!  Also my company might terminate us if they found out!
 
2. I don’t want my downline to see good material – other distributors might write, because they might go join the downline of that writer.  I am an insecure leader.
 
3. I don’t want people to see that magazine because I think the publisher and editor are in another MLM Company and they might steal my distributors using their subscription list.  I don’t want to risk recommending it!
 
4. I don’t want my people to see any academic studies of the MLM industry because it might break their “bubble” to find out everyone doesn’t make millions!  Truth may be dangerous to my downline!  (real insecure and your editor has heard it a 100 times)
 
5.  There is a lot of free info on the Internet, why should I pay for anything that is peer reviewed and subject to public scrutiny?  Free is better even if some of it is “Schlocky.”
 
6.  I want my downline to go to Company meetings and not any sponsored by a Magazine.  If they need to learn anything they can learn it at our Company meetings.   Besides, they might meet someone at a big meeting and realize that I am an insecure leader.
 
Ed. Notes: There are about another 40 reasons I have heard.  Most of them are illogical and narrow in focus.  Some are real, I remember the shockwave that went through the industry when it leaked out the old publishers of Success were in Quorum and had published the issue featuring Quorum.  A little suspicion goes a long way in this industry.    Other suspicions are totally groundless.  The major reason that most of the print pubs have gone out of printed copy is just the high cost of printing and mailing with many subscribers “forgetting” to renew because of all the tons of info on the Internettruthful or not.   Also publishing is hard work.  Believe it or not it is tough to get writers to get stories in on time.  Getting a magazine laid out for printing is hard.  Getting it out .especially newsstand editions is terrible!  If the magazine is selling advertising it is hard.  The Internet has pulled away a lot of ad revenue for easy leads on the Internet (whether this is true or not is a whole separate issue!).  Oh, and in the preceding post from a board..  The MLM WatchDog is NOT GONE  just changed format to the Internet.  More coming -Rod
SKYBIZ MONEY NOT HIDDEN
14 Feb 2001 – I know that some of you think I am nuts when I say the CIA can track money down to dollar in and out of this country.  The new Anti-terrorist laws now give them the legal capability to go down to pennies.  It was not an accident that the excess Skybiz funds were tracked to Ireland.  Don’t try tax evasion by joining some really dumb scam that offers to pay you offshore with a Debit or Credit card.   You are making yourself a TARGET for the Feds.   You do not want to get on any computer lists of Feds this day and age!  Ed Note: I really bet Eli Masso wishes he had talked to me when I called him last year!

WATCHDOG WORRIED – DISTRIBUTORS GOING TO JAIL?
Generally in the past when a bad company was taken down by the Law only the owners were hit hard in the pyramid scheme.  It started with Big Smart . Taking down some of the top distributors in the legal proceedings.  There are strong rumors and some suspicious questions being asked about several deals.  It looks as if they (regulators state and feds) are going to take down the top distributors in companies too!   Some are innocent and will be hurt.   Others are bad as the owners and actually get the owners to do illegal things.

SKYBIZ PYRAMID SCHEME DONE FOR
13 Feb 2002 –  Back commissions only paid on new FTC pay plan from Nov., no more commissions after the 8th of Feb for this pyramid scheme.  Web service to be moved to another company at $10 a month.  Ed. Note. Thanks for all the nasty email for me telling you this was exactly what was going to happen with this pyramid scheme that so many innocent people belonged to!  It did! Shut Down Done For!
 
MARY K TO MERGE
15 Jan 2002 – With Mary K herself passing to a higher reward and in the wake of the Exxon/Mobil deal, and the AOL/Netscape deal, here Is a coming MLM merger we can expect to see: >>Hale Business Systems, Mary Kay Cosmetics, Fuller Brush, and W.R. Grace Company will merge to become…. Hale Mary Fuller Grace.  Ed. Note: Not sick humor but a fitting tribute to one of the leading promoters of  women in business.

COURT SLAMS SPAMMERS
11 Jan 2002 – The California Court of Appeals in San Francisco on the 9th of January handed down a ruling that “Spammers” must identify their pitches with ADV or ADLT (sex) for Unsolicited Commercial Email  – Spam.  California law Section 17538.4 of the California Business and Professional Code requires this be in the header.  The ruling handed down also forces and “opt out” feature to be included in the Spam.  Congress is still hacking over a similar national law since 1994 and 18 states have passed similar laws which in some form require email removal from lists or a toll free phone line.
 
PRSI  PYRAMID SCHEME OWNER GETS 14 YEARS
11 Jan 2002 – William Caudell, CEO of the now-dead Pyramid Scheme – Professional Resource Systems of Boca Raton is now merrily on his way to jail!  Caudell ripped of about 48,000 people for a suspected #13 million.  He is getting less time for good behavior because it seems  he is going to testify against the Mafia, who got their hands in the cookie jar.  PRSI was started in April of 1999 as a web site seller and mall host.  One little problem even with all that money rolling around they couldn’t get a few electrons up to support even a pathetic attempt at giving web service.  Talk about dumb crooks!  We know web host and mall companies that have gotten running for as little as $50k.  So these dummies were running along until Jan. of 2000 charging $174/$295 to become a ‘Cybermerchant” or “Cybermanager.”  PRSI took in about $13 million and Florida said they identified 6 million.  In any case the law never seems to mention how much was paid out in commissions.  The Florida law kicked in the door with MP-5s (machine guns) in their hands.  Ed Note: the really sad thing is there were some good companies that gave up the ghost that delivered everything and more but still crashed.  The Crooks did good! TANJ!
 
PILL PLODS ON?
8 Jan 2002 – Your editor was cleaning out old Attorney General files and found a notice on Prosper Iinternational League Ltd from the Mich. AG to them in Winter Park Fl. back in March of 1998 (action 98-10017).  We know that the Florida AG hit them after that.  We have heard that they moved offshore.   Any links to thier current scam anyone?

ZIG ZIGLAR A HIT?  WITH SCAM ARTISTS!
7 Jan 2002 – Zig Ziglar’s MLM company bit the dust and was absorbed into another company.  However that bit of history lives on to haunt him through the Delphi forums!  Some distributors that must have been in his company have a board which is scam central for the Internet (is this why his company failed?) under Zig Online!  I don’t think Zig has any connection.  It is hilarious —  Zig’s karmic past comes back to haunt him.  Little known to most, Zig was “The Trainer” for Holiday Magic one of the most evil empires to exist in MLM history.   Leadership Dynamics, the training element of HM was comprised of torture, brainwashing, and EST (old psych program).  A book, THE PIT,  was published in 1971 by Gene Church,  about LD and it was used to bash all MLMs in court cases and legislative hearings.  This story about dog piles of naked humans, hanging people from 14 ft. high crosses and barbwire around testicles did not enhance the reputation of MLM in the early 70’s.  In fact,  Glenn Turner another MLM legend started out in Holiday Magic and left because of the torture and brainwashing being done by HM and LDI.  It is my personal editorial opinion that Zig Zigglar did not participate in LD training, but have had several serious arguments with people that said he did.  Anyhow the karmic past comes back to haunt Zig at http://forums.delphiforums.com/ZigOnline/start
 

WASHINGTON STOMPS NON MLM PYRAMID SCHEME
5 Jan 2002- Seattle – Attorney General Christine Gregoire today continued her campaign against Internet fraud by pushing onward against a company that markets a work-at-home program considered to be an illegal pyramid scheme.  The AG’s High-Tech Unit accused SJ Gabel, a Bremerton company, and its owners, Susan J. Gabel and Claudette Richardson, of violating the state’s Chain Distribution Scheme Act and Consumer Protection Act.
 
According to the lawsuit, filed Sept 9 2001,  SJ Gabel uses the Internet to market a home-based work program that promises clerical jobs, some of which pay as much as $1,000 a week. To qualify, however, consumers must pay $14.95.  Instead of offering these positions, consumers receive materials containing instructions how to earn a $3 commission for each new participant the consumer enrolls in the program.  Gabel also offered a “Telecommuting Jobs Directory” that purportedly contains “hundreds of available telecommuting positions.” However, none of the companies listed offer home-based telecommuting positions of any kind, the complaint alleges.  Ed. Note: Your lesson – Not all pyramids are MLM!  The word pyramid can be used to describe a one level opportunity program.  How does it qualify?  Products have no value and the opportunity to induce others into the program for financial gain exists.

DUTCH BUYING OUT MLM – NOW WORLD FINANCIAL
4 Jan 2002  – Georgia – World Financial Group has entered the final closing to sell World Financial Group to Ageon of Holland    CEO Humbert Humphrey considered by many to be the moving power behind A.O. Williams (now PrimeAmerica) sold the company to the Dutch for an undisclosed amount (reported at $1.1 billion) and also kept the Mortgage company that was part of WFG!  Wow!  Humphrey started WFC in 1996 after falling out with Williams over the sale of the AL Williams Company.  Your editor considered Humphrey to be one of the top trainers in the last 2 decades.  This is now the 3rd major U.S. MLM bought out by a Dutch company.  Royal Numico of the Netherlands purchased both Enrich and Rexall Sundown two major MLMs in the last two years. Ed. Note:  Who is next! We have heard of going to the Dogs. But “Going to The Dutch”  — has to be a step up!
6 months ago

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