14 May

Supporting Pyramid Schemes is Lucrative for Politicians

As Barry Minkow (Fraud Discovery Institute), Dr. Jon Taylor, Robert FitzPatrick, Eric Scheibeler and others (including me) continue the unpopular fight against multi-level marketing companies (which are nothing more than disguised pyramid schemes), I occasionally come across items of interest…

Like this one. Did you know that Utah Attorney General Mark Shurtleff has received tens of thousands of dollars in campaign contributions from Pre-Paid Legal Services (NYSE:PPD)? He has.

From Utah’s website:

All Contributions for Shurtleff, Mark Leonard

Pre-Paid Legal Services, Inc
P.O. Box 145
Ada, OK 74820
10/23/2006 20,000.00
Pre-Paid Legal Services, Inc
P.O. Box 145
Ada, OK 74820
12/12/2007 20,000.00
Pre-Paid Legal Services, Inc
P.O. Box 145
Ada, OK 74820
04/28/2005 20,000.00
Pre-Paid Legal Services, Inc.
321 E. Main St. PO BOX 145
Ada, OK 74820
04/25/2003 20,000.00
Pre-Paid Legal Services, Inc.
321 E. Main St. PO BOX 145
Ada, OK 74820
06/14/2004 20,000.00
Pre-Paid Legal Services, Inc.
321 E. Main St. PO BOX 145
Ada, OK 74820
03/02/2004 10,000.00

$110,000 in campaign contributions just since 2003 is a nice little chunk of money, I think.

And then you have to ask yourself why. Well if you’ve done much research on MLMs, you’ve found that Utah is a hotbed for these pyramid schemes. And Attorney General Mark Shurtleff loves them! Remember this video, in which Shurtleff endorsed Usana Health Sciences and said they were a wonderful company? (Wait, I thought the chief law enforcement officer wasn’t supposed to do things like this… and was instead supposed to be enforcing laws? Oh well.)

Multi-level marketing expert Dr. Jon Taylor knows exactly why Pre-Paid Legal is so motivated to give money to Mark Shurtleff….

In July 2006, Bill SB182 went into effect in Utah, essentially diluting the power of the Pyramid Scheme Act (Title 76) in Utah. The Pyramid Scheme Act dubbed companies illegal pyramid schemes if compensation is primarily from the sales of products/services to downline participants (rather than legitimate 3rd party customers).

SB182 essentially negated that provision by saying that “compensation” as defined in that Act excludes money received because of downline purchases. (i.e. Ignore the fact that the upline makes most of their money from associate purchases of products that are never sold to real retail customers.)

This seems like a picky distinction, but it’s really not. The problem with most (if not all) multi-level marketing companies is that there is not a real retail market for their products and services. There is a very, very small base of actual retail sales. But the vast majority of “sales” made by the MLM are to pyramid members who are meeting minimums or trying to move up in the pyramid. The name of the game is not retail sales, it’s recruiting other pyramid members under the guise of retail selling.

What does any of this have to do with Mark Shurtleff? He was instrumental in getting SB182 passed, essentially weakening the Pyramid Scheme Act so much that just about any product-based pyramid scheme is now legal in Utah thanks to Mark Shurtleff.

Dr. Taylor writes:

In both Senate and House hearings, it was clear that legislators lacked the time to review research that should have led to the defeat of the bill. Instead, they relied on testimony by Attorney General Mark Shurtleff, who claimed the bill retained protection against the “really bad schemes” that offer no legitimate products. Obviously, he had not read any of the research that shows that the most damaging pyramid schemes in terms of participant losses are those with products for sale – even very good products. And Mr. Shurtleff failed to disclose that his top corporate campaign contributors were companies protected by the bill…

And here’s more on why this matters:

Utah’s top law enforcement official, Attorney General Mark Shurtleff, supported the bill. He argued, contrary to the facts, that one of the distinguishing features of illegal pyramid schemes was the lack of legitimate products. This may have been a valid argument 30 years ago when product-based schemes were less common. Since then, however, the largest and most harmful of all pyramid schemes that have been prosecuted—such as Equinox, Trek Alliance, and International Heritage—offered products or services as their form of “paying consideration.” The existence or quality of the products is, today, irrelevant to the analysis. Some of Shurtleff’s top contributors were the very companies that would benefit the most from SB 182 [2]. Their operations would no longer violate the state’s anti-pyramid scheme statute.

The Direct Selling Association (DSA) initiated this bill. While the DSA likes to pretend it’s a group looking out for consumers, it is really an organization that looks out for the best interest of multi-level marketing companies. It’s member-run, and their real purpose is to pretend that 99% of participants in MLMs don’t lose money, and that MLMs are the way to financial freedom for many.

The DSA wanted this bill passed in Utah because the Pyramid Scheme Act was much too restrictive, and if law enforcement in Utah ever decided to enforce the law (not likely while under Mark Shurtleff’s command), then a lot of MLMs would be in trouble.

Let’s face it. Utah AG Mark Shurtleff is heavily influenced by MLM companies, which are big campaign contributors. Check out this listing of contributors to his campaign since 2003. $231,000 alone from known MLMs and the DSA. This doesn’t include any individuals who might be associated with the MLMs, as I was only looking for relevant company names. That sheds a little light on Shurtleff’s favorable stance on this legislation, doesn’t it?

2 thoughts on “Supporting Pyramid Schemes is Lucrative for Politicians

  1. Pingback: Fraud Files Forensic Accounting Blog » Mark Shurtleff Arrested by FBI

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