Medifast sued us for daring to say that their Take Shape For Life multi-level marketing division is a typical recruiting scheme and looks like a pyramid scheme. FitzPatrick has done years of research on MLMs, in large part using the numbers publicly released by companies to demonstrate how the vast majority of participants lose money. He wrote two formal reports on Medifast and their numbers – - he basically showed that the company’s financial gains in the last year or two have come almost solely from their multi-level marketing division. (The first report is here, and the second report is here.)

How dare FitzPatrick say such a thing, especially when the numbers demonstrate exactly what he reported!!!

FDI produced several press releases on the findings about Medifast, and I reproduced and quoted some of those releases and reports, as well as wrote my own analysis of the company… questioning whether TSFL could be considered a pyramid scheme.

So Medifast sued us. For what? They claim we defamed the company by writing untrue things about it, yet they have failed to point out any specific inaccuracies in the reports that were produced about Medifast. Instead, all they’ve really done is act insulted for being compared to Bernie Madoff and for being called an endless chain recruitment scheme. (I’ve yet to find a multi-level marketing company that is not an endless chain recruitment scheme, but what do I know?)

As many are already aware, there is a First Amendment right to free speech, and we are allowed to talk about our opinions on things, including Medifast and Take Shape For Life. (Won’t it be fun to have the court consider this issue of free speech?)

So litigation has commenced and none of us defendants seems scared. Pooh. That’s not what Medifast wanted. They wanted us shaking in our boots and vowing to never speak of them again. So much for that. It seems instead that Medifast will now fall victim to the Streisand effect, since all this hubbub just serves to shine a brighter light on their multi-level marketing business.

William Lobdell wrote up a list of ten questions Medifast could answer to end the controversy about its Take Shape For Life business. We say the TSFL business has accelerated because of recruiting. They say it’s not because of recruiting. Here are a few of Lobdell’s ten questions… which surely could put this issue to rest if only Medifast would be willing to pony up the data:

• On its website, Medifast has advertised two income scenarios: one based on the coach selling the meal replacements to clients, the other based on the coach recruiting new coaches. One showed $8,000 a month in income, and the latter, $20,000 a month. What percentage of all coaches who have worked for Medifast over the years have earned either of those illustrated income examples?
• What is the average income of all coaches from product sales to clients, not from bonuses and commissions derived from recruiting other coaches who recruit other coaches who recruit other coaches?
• What is the average monthly income of all coaches who were enrolled during a year, not just the active ones?
• Medifast advertises that financial health is a key element for success in losing weight and offers its “coaching” program as the prime means for achieving financial health. What is the average net profit  to the coaches gained from sales to clients, factoring in all normal business costs (i.e., advertising)?
• What percentage of all coaches earn more per month than the costs of the product and related business expenses?
• The Medifast pay plan rewards coaches to recruit more coaches. The majority of commissions, per sale, are transferred to recruiters in the upper levels, making recruiting more lucrative than retailing.  When are there too many coaches in any given area? Is the sales force expected to grow without limits in all market areas?

Check out ibizreporting.com for the full list of questions posed to Medifast.

Yet inevitably, when Barry exposes a fraud, the critics are quick to bring up his past as a fraudster and completely discount his findings. The same goes for the former CFO of Crazy Eddie, Sam Antar. He’s been writing extensively about the financial statement fraud at Overstock.com, and has been dismissed by some as a con artist with ulterior motives.  But Sam has been vindicated, as Overstock.com has announced another restatement of earnings, meaning the company has a full decade of inaccurate financial statements now on file with the SEC. (Thankfully, the officers and directors of Overstock.com don’t have to take any responsibility for repeated misstatements of the financials, and are still getting health bonuses!!!!)

I’ve learned in working with both Barry and Sam for the last few years that sometimes, it takes one to know one. When we analyze public companies, these guys see something different than I do. I come from side of walking the straight and narrow and abiding by the laws. They come from the side of the criminals, and they ask themselves “how would I commit fraud at this company.”

One of my favorite topics on this blog is multi-level marketing companies (MLMs). Let me be clear: The laws in the United States protect these companies. They have a long history of projecting public images that make them look like legitimate business opportunities, in spite of the fact that almost everyone who gets involved loses money. In my opinion, they’re nothing more than glorified pyramid schemes, disguised by a “product” which everyone pretends is the focus of the opportunity. The truth is that recruiting people into an endless chain recruitment scheme is the real deal, and that my friends, is the pyramid.

So it is with great interest that I read the writings of Greg Caton, a multi-level marketing scammer. Admittedly, he’s still involved in some sketchy science with a product called Cansema, which purports to cure skin cancer.  He was sentenced to 33 months in prison and 3 years of supervised release for selling this product without FDA approval and for fraud in the marketing of it.  The guy still sells the product, however, as he ran off to Ecuador in 2008 to avoid regulation by U.S. authorities.

But lets set aside the facts about his products for a minute, and focus on the issue of selling products through a multi-level marketing system. Caton founded Consumer Express in 1984, and the company later became Nutrition For Life. It utilized MLM methods to “sell” the products and was apparently successful in doing so.

Caton published a book called MLM Fraud in 1990, and continues to speak out occasionally on the issue of fraud in multi-level marketing companies. Here he has written about why companies selling nutritional products via the MLM method are full of it. I submit to you that the fraud via multi-level marketing is not just limited to health products, but that is simply what Caton writes about because it’s what he is familiar with. But his arguments against MLM can be applied to virtually all MLMs, no matter what they’re selling.

Here’s a summary of why he believes that multi-level marketing (often called “network marketing” or “direct selling” in an effort to avoid association with the concept of pyramid schemes) sucks:

Myth 1: MLM Products Are A Competitive Alternative To Conventional Retail Marketing

MLM promoters go out of their way to tell you how expensive it is for companies to market through “traditional” outlets. They point out the “middlemen”, the advertising costs, and the chain of distribution. They claim that multi-level marketing companies eliminate all this by selling their product directly to distributors, who sell directly to end-users.

Sounds great, right? Except the MLM method is neither better nor cheaper. The MLM companies do have one distinct advantage in this regard: the people marketing their products can get away with a lot of improprieties that the companies themselves cannot. If the companies advertise their products, they have to be careful about claims they make. They have to be truthful! Independent distributors, on the other hand, run around largely unregulated. They can say whatever they want with little chance of them ever being taken to task for false claims, and the companies themselves can disavow knowledge of false claims and remind everyone that the distributors are “independent” and whatever they say is not sanctioned by the company.

But as for being a cheaper method of distribution? Not true. Caton explains:

The commission structures of the more successful MLM companies put them at a huge disadvantage to other forms of retailing. Example: at Alpha Omega Labs it is not uncommon for us to purchase a product from another manufacturer in quantity, paying the very same price that a large MLM company would pay, private-labelling it, and then marking it up just 50%. In other words, the product cost us $10 and we are retailing that product for just $15. That very same product will retail in the MLM pipeline for $70 to $100. It simply has to — MLM companies cannot survive on small markups.

When we have been approached by MLM companies in the past to purchase something that WE manufacture (about 50% of everything we sell is manufactured in-house), we are invaluably told upfront, “Now realize that your price has to be competitive enough for us to add our customary 5 to 10 times markup!”

Multi-level marketing companies simply do not make their money because they have an amazing product at a competitive price. They make money because they are recruiting people into the “business opportunity.” They wish for consumers to focus on the existence of the product, but all of the company’s activities are really focused on recruiting. Caton says:

What drives MLM is not the product or its price.

What drives MLM is the “business opportunity” — thus making the product a means to an end and not the end in itself.

MLM products are not a competitive alternative to conventional retail marketing for one very simple reason:

They don’t have to be.

Let’s look at another example — in terms of hour-for-hour entertainment value, are gaming devices at any of the thousands of casinos and other gambling establishments in North America competitive with even the most expensive Nintendo or Game Boy products that entertain youngsters? Of course not.

Some might not think this is a fair comparison, but the fact is, both MLM marketing programs and gambling establishments share an appeal for those who believe in “Something for nothing.”

The gambler who sits before a “one-armed bandit,” believing he has a reasonable chance of being the next big winner, is running off the very same motivation that drives an MLM distributor to work a downline in the hopes of soon retiring off the labor of those beneath him. Both are motivated by the dream of huge returns for comparatively small efforts expended. And both are working in the hope that these rare exceptions, and not the normal play of Universal or Natural Laws — will apply to them. And this is what defines MLM — it is a corporate-sponsored form of a lottery . . . (Okay, maybe that’s the best comparison . . . Lotteries have a higher “percentage payout” then most MLM companies — “percentage payout” defined as the total given out in winnings (commissions) divided by gross sales.)

Since when do lotteries have to be competitively priced?

Answer: They don’t.

Myth 2: My MLM Company has proprietary products not available elsewhere
It seems every multi-level marketing company is selling something special…. magical juice, face potions, weight-loss miracles, super-duper energy drinks, and cosmetics like no other. The guise of something unique or special is used as a tool to justify the high price of the products. As you’ve already seen, the overpriced nature of MLM products is a result of the need to pay out commissions to many levels (not that any of those levels other than the top one or two makes enough to actually make a living, but that’s a different article on a different day.)

I write quite a bit about Mary Kay Cosmetics. Their products are average, at best. Yes, some women happen to have extraordinary results with the products when no other products worked for them. That’s to be expected with any facial product… it’s going to work for some and not for others. But by and large, the products are of the quality you can find at Walgreens, Target, or Walmart. Yet the prices are closer to what you see in department stores with high-end brands. Why? Because of the commissions paid to multiple levels. The products are not priced based on quality, they’re priced based on what the company needs to bring in to pay the commissions.

So are MLM products “cutting edge” and special and magical and all-around different from what you find in retail stores? No. Caton says:

If you discovered an ingredient or other proprietary health product and you wanted to recoup your investment by maximizing the distribution possibilities would you: (1) Sell exclusively through an MLM company, or (2) Sell to both direct sales and conventional retailing channels — thus maximizing sales potential? Everyone knows the answer to that question. The “closed architecture” model for the distribution of proprietary products doesn’t work — or at the least can cause substantial loss of market share. (Can you spell “Apple Computer”?)

Whether it’s “Sea Silver,” or transfer factor, or specialized colloidal minerals, or “egg immune factors” — you name it — there are multiple sources of supply.

Excepting the fair use of trademarks, which provide distinction between the product of one maker versus those of his competitors, beware vendors who will tell you, “You can only get this from us.”

A company may well own a trademark, but rarely do they own the technology that produces a given product’s underlying functionality — and if they did, they certainly wouldn’t restrict themselves to the MLM market.

Myth 3:  The MLM Industry is highly regulated so they are usually truthful on product claims

This is a total joke. MLM is barely regulated at all. In fact, multi-level marketing companies have a little organization they call the Direct Selling Association.  They’ve mis-named it purposely, again trying to get the focus away from the recruiting aspect on which the companies rely. Direct selling? They really mean direct recruiting!

Then they promote their fake agenda: “Ethics. Trust. Confidence.” You can be assured that none of those three are really a concern of the MLM companies that are members of the DSA. This slogan is merely an attempt to fool readers into thinking the DSA is some sort of “industry watchdog” or consumer protection organization. It is neither.

The DSA exists solely to lobby lawmakers in Washington D.C. to ensure that laws are never enacted that restrict the activities of MLM companies. Remember the proposed Business Opportunity Rule from a few years back, which would have forced multi-level marketing companies to back up their income claims, provide data on distributors, and generally NOT engage in fraudulent practices? The DSA lobbied so hard against this rule that it is now permanently shelved. It’s in limbo, and unlikely to ever emerge from there. Mission accomplished by the DSA! Provide more information to the people you’re trying to recruit into your scheme? Never!!!!

The laws that do exist regarding pyramid schemes and business opportunity schemes are rarely enforced. And there are a bunch of attorneys out there just waiting for you to hire them so they can tell you how to get around any pesky laws that might affect your multi-level marketing scheme.

Regulation of MLMs is almost non-existent. Caton writes:

Even those on the inside at the various state Consumer Protection divisions will tell you that most MLM companies are hard to regulate or bring into compliance because they do not advertise their outrageous or false claims — but instead, let them propagate informally, via word of mouth, throughout their network. In addition, there are too many companies to regulate versus those assigned to enforcement.

As for self-policing, this is almost non-existent in the MLM industry, since industry “watch groups,” such as MLM Watchdog or MLM Watch exist as media for the publications’ principals to shill their own latest plans. (Another example of misdirection is MLM Fraud, an organization that has nothing to do with reforming the industry.)

Given its propensity for legal entanglements, few are surprised that the industry has, just within the last twenty years, given rise to attorneys specializing in defending MLM companies.

(Similar points on this issue are made in Vandruff’s piece: What’s Wrong With Multi-Level Marketing?)

So there you have it… the words of a scammer himself. A guy who was on the inside of multi-level marketing and knows the truth about their false claims.

A new essay recently posted on the False Profits Blog addresses a question many of you  have raised.

Why are multi-level marketing pyramids and financial ponzis able to ensnare so many people today? What is the power behind this Main Street epidemic?

This question goes beyond the lack of law enforcement, the failure of the FTC and SEC, or the difficulty of grasping “exponential expansion.”

The False Profit Blog ventures an answer: It is that pyramid schemes, operating as multi-level marketing, are a new form of fraud that public awareness and law enforcement have not caught up to. This new form of fraud is called “marketing fraud.”

Marketing fraud evolved from the earlier  stages of “product frauds” and “financial frauds.”  Its uses bogus or overpriced products and deceptive money transactions like older models of fraud do, but that is not the heart of this new fraud. The power of this fraud is in marketing. It employs the most powerful tools of business today — branding, positioning, community and identity — to swindle.

Like all powerful marketing, frauduklent marketing promises to fulfill basic and crucial needs, much more valuable  than just money or the hyped up benefits of products. The needs that these pyramid marketing scams claim to fulfill address people’s deepest longings and their greatest fears. The sophistication of the marketing program, complete with Washington DC lobbyists, trade association, “education” foundation, gifts to charity, celebrity endorsements, sports sponsorships, national conventions, and church affiliations – prevent many in the media and government from grasping the extraordinary deception or to accept the devastating financial consequences they inflict on millions of people. Even many of the victims cannot believe they were defrauded by an organization of such benevolent outward appearance. Many choose instead to take on personal blame for their misfortune rather than face this reality. Powerful marketing, whether in the employ of legitimate business or pyramid frauds, has the ability to transcend verifiable reality and hard cold facts with its own fictional narrative.

The blunt instrument used by marketing frauds to carry out their theft is the “endless chain” or “closed market” a.k.a. pyramid scheme.  This is a classic swindle but is now carried out within a  marketing program so powerful it leads the victims not only to fall into the financial trap but to to support the perpetrators against exposure and to enroll their  closest friends and relatives into the scam as well.

I will appreciate your comments and thoughts on the Blog.

Sincerely,

Robert L. FitzPatrick, Pres.
Pyramid Scheme Alert

For example, the company touts average income of $802.62 per North American distributor per month. But that’s very misleading. The income is very top-heaving, meaning a select handful at the top of the pyramid make a lot, and almost everyone else makes nothing. Further, this is gross income, not net. Associates have to pay all their business expenses out of this, leaving them with much less at the end.

And the truth is that Usana has an ugly history of manipulating the “earning” figures to make it look like distributors are earning more than they really are.  Take a look at the reality. The bottom 64% of associates make nothing. The bottom 92% of associates make $6 per week or less (still with that 64% making nothing).

Indeed, Usana is just like all other multi-level marketing companies: Almost everyone who participates loses money. It doesn’t take a lot of guesswork to figure this out. Usana’s own numbers prove this reality.

Following the first report, several updates were issued. It was determined that Usana executives and board members had been lying about their credentials. FDI demonstrated how little product Usana reps are actually selling. And FDI criticized Usana for knowing about illegal sales of its products in China (where multi-level marketing was illegal), and actively participating in the process.

Usana filed a lawsuit against Barry Minkow in late 2007, but eventually the lawsuit Usana filed against Minkow was settled. First the court made Usana pay Barry Minkow’s legal fees. It was clear that Minkow was winning the court battle. Then Usana came to its senses and dropped its lawsuit after agreeing to pay Minkow an undisclosed sum of money.

Little has been heard about Usana since, but it’s time to revisit the issue of sales in China. Right before the release of FDI’s report on Usana sales in China, the company acknowledged what a lucrative market China is:

For us, China is a wait and see, with the laws the way they are and currently they are throwing more laws and getting stricter.  We see that as a very difficult environment to be successful.  We are waiting to see if some of the other companies crack the code and come up with a way to be successful there.  We have not seen a lot of success from our competitors.  We do not want to jump into that situation that has not been successful for others.  So we are going to have things going slowly in the sidelines, keeping an eye on it and watch it till we believe it is a potentially successful market for us and then we will pursue with great speed.

Minkow released his report on illegal selling of Usana products in China, and Usana was unusually quiet about the issue. No press releases. No discussion of it on conference calls. The issue died rather quietly.

But new information suggests Usana is well aware of the illegal selling of its products in China. An internal compliance training document shows that Usana knows all about illegal sales:

IV. What is the biggest market that buys our products that we are not eligible to operate in?

i. Once again I couldn’t give you an exact answer on this. Since I work with our Asian markets, I know that a large sum of product ends up in China, but I’m sure product somehow gets shipped to other unauthorized markets as well…

Of course the company can distance itself from these sales by simply calling the participants “rogue associates”:

VI. Question #6: Which market experienced the greatest sales growth from 2007-2008, and by how much?
i. Answer: East Asia (Hong Kong mainly and a little Taiwan), increased by almost $13 million.
ii. Things to look out for – rogue associates in Mainland China, trying to order US product.

Is Usana doing anything to cut down on these illegal sales? It’s hard to know, but they certainly haven’t addressed the issue publicly. Why would Usana choose to not enforce the rules with its associates? Probably because the market in China is so huge and there is a lot of money to be made. The company doesn’t have to take any serious actions if regulators aren’t pushing the issue. They can sit back and collect their money, knowing that someday illegal sales in China might come back to bite them, but knowing that in the meantime they’ve made enough money from it to make whatever small punishment (if any) they receive worthwhile.

Why has Barry Minkow gone after multi-level marketing companies and why does he continue to go after MLMs? Because people are literally losing billions of dollars each year to these schemes which promise riches and deliver financial devastation to almost everyone who participates. People sign up with the intention of making money (maybe even just a little bit) and end up spending far more than they ever earn.

Are you one of those who thinks Barry Minkow is just a hack… a no good felon who is up to no good? His track record speaks for itself. He has been responsible for uncovering almost $2 billion of fraud for law enforcement and stopping fraudsters in their tracks.

Following the release of FitzPatrick’s first report last year, Medifast management came out with bizarre statements. The most recent version of their statement was included in a 10-Q filed with the Securities and Exchange Commission on November 9, 2009:

An Independent Committee of the Board of Directors of Medifast was constituted to review the public allegations of a third party “Convicted Felon” on his website.  The Independent Committee of the Board of Directors of Medifast Inc. recommended that the Company make a formal complaint to the Securities and Exchange Commission and the Attorney General of Maryland as it pertains to the convicted felon Minkow and his ”for profit” company’s false and misleading claims against Medifast. There are currently no pending matters of a material nature related to any government investigation of the case involving Mr. Minkow, his company, its affiliates or associates. Any actions related to any government investigation pertaining to this complaint have been deemed confidential at this time.

The problem is that the allegations weren’t made by convicted felon Barry Minkow. The allegations were made by multi-level marketing expert Robert Fitzpatrick, who has researched hundreds of MLMs.  Minkow didn’t make any “false and misleading claims.” FitzPatrick made claims based on Medifast’s own published numbers, none of which the company has refuted in any forum.

The madness doesn’t stop there, however. In reaction to FitzPatrick’s most recent report, Medifast issued a press release entitled “Medifast, Inc. Comments on False and Misleading Allegations.” It states in part:

The independent Directors’ Committee, after investigation of facts and information concluded the allegations were false, misleading, and/or without merit. The same is true for the re-issue of the report posted January 8, 2010 – the allegations are false, misleading, and/or without merit.

Yet the company has not seen fit to point out what might be false or misleading about FitzPatrick’s report. They have the data at their fingertips that could supposedly refute any allegations made, yet the company declines to provide any specifics.

Why not? Because FitzPatrick printed the truth based on Medifast’s own numbers. Apparently it isn’t bad enough that the company doesn’t tell the whole story about the business to either stockholders or health coaches. Now they’re maligning an independent expert who merely used the company’s own data to show what an awful “opportunity” TSFL offers health coaches, and how heavily the company relies on the recruiting of coaches to grow revenue.

Barry Minkow has issued an invitation to Medifast executives. He’s inviting them to point out exactly what is false or misleading about FitzPatrick’s report, and to provide the documentation that proves their points.  Certainly if there really are material points that FitzPatrick has made which are false or misleading, the company would like to immediately identify them? And Minkow has even offered to retract his statements about FitzPatrick’s report and apologize to the company in return for them backing up their allegations about the report.

Those recruiting for MLMs are quick to tell you about how much you can make if you sell their product (often glossing over the fact that you’ll have to recruit new people into the scheme in order to have any chance of making a living), but they will never tell you that it’s next to impossible. They forget all the reasons why people in these MLMs are selling so few products and making so little money from selling.

Fitzpatrick clues us in:

The income opportunity, based on the plan’s structure, rules, bonuses and commission schedule, primarily depends upon endless chain recruiting of more “coaches”, not on retail sales of its products. The cost of selling, competitive factors, and the paltry 15-20% commission offered on retail sales make that option a myth and facade to obscure the recruitment pyramid. The income scheme is a classic “endless chain.” The report also raised the question of the plan’s legality, its jeopardy under California’s statute against “endless chain” plans, and the risk of its being challenged by other regulators or by consumers in court as a fraud.

And here’s my problem with MLMs in general, in the words of Fitzpatrick:

The pay plan pays far more – per sale – to those who recruit other coaches than to those who actually sell products to consumers, and the greatest share of all commissions is transferred to those in the top positions of the pyramid.

That’s right… recruiting pays more than selling. The upline is making way more money off the sale of products than those actually doing the selling.

And here are some hard numbers:

• Top 1%  (1.28) of coaches receive 28% of all commissions
• Top 4% (4.25) of coaches receive 43% of all commission
• Top 10% (10.56) of coaches receive 67% of all commissions
• Bottom 50% (51.11) of coaches receive 6% of all commissions

Check that out. The bottom half of coaches only receive 6% of all the commissions the company pays. The above statistics are typical for MLMs…. unless you can get into that top tier of the pyramid (and almost no one does), you aren’t going to make any money.

FitzPatrick writes:

The foundation of Medifast’s stock surge is the recent rise in its revenue, which is driven by the “endless chain” income opportunity that it markets to consumers. Medifast’s income scheme is a solicitation to consumers to become distributors that buy and sell the company’s meal replacement products and to recruit others to do the same. Medifast seamlessly integrates its “income opportunity” product with its meal replacement products. It makes earning money a key part of its three-part “system” for weight control and good health – the only company in that field to do this – and it offers consumers the company’s own recruitment scheme as the means to meet financial goals.

He also reports the following:

• About two-thirds of every commission dollar generated by sales or purchases of the bottom 80% are transferred to the top 20%
• 67% of all commissions paid out on total revenue were transferred to the top 10% of active coaches
• Take Shape for Life’s new disclosure continues to conceal critical data factors. In particular it does not reveal how much of the income of the top 1% is derived from retail sales they themselves made and how much is merely “overrides” on the purchases and sales of the “downline.”
• The mean average commission income for the bottom one-half of the “active” sales channel (Fast Track Coaches and Health Coaches) – $24 a week – indicates a monthly retail sales level of about 2 meal replacement customers per coach.
• Medifast does not disclose the overall average retail sales per coach, just as it does not reveal how many coaches are actually enrolled, including those that make no sales but do purchase goods and pay fees.

This report is an update to a mid-2009 report issued by FitzPatrick. The full text of the current report is found here. And here is my analysis of Medifast and Take Shape For Life from last year.

The argument in favor of the UFirst MMA that seems most likely to get any traction is: “You just don’t understand the product!” I’ve been asked a zillion times whether I’ve actually used the product, and have been told I don’t really know how it works. Nothing could be further from the truth.

I don’t have to flush $3500 down the toilet to know that the UFF Money Merge Account is worthless. I know enough about numbers to analyze the program and see that it doesn’t offer consumers any savings. They’d be better off doing one simple thing: Pay the minimum on all debts each month, and use any extra cash they have left toward the debt with the highest interest rate.

UFF would have you believe that some complex “factorial math” is necessary and is what creates the savings for the consumer. But that’s a lie.  Sure, there may be hundreds of different ways to pay your 10 debts each month, but only ONE way matters. Paying the minimum on all debts and using all extra cash to pay down the debt with the highest interest rate. You don’t have to be smart to do this. It really couldn’t be any simpler.

MMA proponents have often challenged me to compare the do-it-yourself (DIY) method I promote (which is free!) and the UFF program (which is $3,500) to see which puts the consumer further ahead. None of them have actually participated in their own challenges, although I’m more than happy to do so.

But we don’t need my participation. On FatWallet.com, this challenge has been completed over and over, and the UFF MMA loses every time. Here is a set of links that will show you how the MMA loses. It is astonishing that promoters of United First Financial can still pretend that their product is worthwhile:

There once was an agent named James Hughbanks.

He challenged us to see the truth. He said that spreadsheets and other cheap stuff are nothing compared to what the MMA can do.

10 different scenarios to prove that MMA is better. Different loans, different interest rates, life-changing situations.

A simple spreadsheet we created. In all 10 scenarios, the MMA was behind.

In the end, he had to admit the truth. The MMA will always lose.

The UFF agent proposed 10 different scenarios. Under every single one of them, the consumer using the UFF MMA would lose… taking a longer time to pay off their debts.

UFF Results::
MONEY MERGE ACCOUNT START PAYOFF PERIOD 6.75 YEARS
SCENARIO PAYOFF
1. PAY RAISE OF $50 BIWEEKLY – PAYOFF – 6.667 YRS 8/2014
2. SAVE $150 MO IN BUDGET – PAYOFF – 6.25 YRS 3/2014
3. SPEND $900 FRO 8.5 MO – PAYOFF – 6.583 YRS 7/2014
4. DEPOSIT 3500 – PAYOFF – 6.417 YRS 5/2014
5. SPEND 20,350 FROM EQUITY – PAYOFF – 7.167 YRS 2/2015 TRUE COST IS $28,084
6. BUY CAR-12K PAY MO. PAYMENT PAYOFF – 7.583 YRS 7/2015
7. LOSE JOB OF BIWEEKLY ———- OUT OF MONEY IN 35 MONTHS FROM EQUITY LINE
8. SAVE $500/MO IN CHILD CARE PAYOFF – 20.667 YRS 8/2028
9 NEW BIWEEKLY JOB – PAYOFF – 10.583 YRS 7/2018
10 RUN HELOC AT 18% FROM DAY ONE PAYOFF – 11.167 YRS 2/2019

DIY Results:
Base: 5/2014 (6.5 years)
1. 2/2014 (6.25 years)
2. 10/2013 (5.917 years)
3. 2/2014 (6.25 years)
4. 12/2013 (6.08 years)
5. 8/2014 (6.75 years)
6. 1/2015 (7.167 years)
9. 4/2016 (8.417 years) (7, 8 and 9 are related scenarios.)
10. 5/2016. Note that my simulation did not get affected that much by the HELOC rate increase to 18% because I used HELOC for emergency purposes only. Total HELOC interest incurred (Cell T7, non-compounded) increased from 557.23 to 1487.94 but you are still able to pay off the loan at the same month.

Summary:
The DIY approach had a .25 year (3 months) advantage to begin with because of the $3500 software cost. From scenarios 1 to 6,the DIY approach remained between .20 to .40 year advantage (~2 to 4 months). This is to be expected since we’re supposedly running the same scenarios, therefore similar results. The variance of +/- 1 month between the scenarios would be due to the fact that the loan could be paid off in month x, but in certain instances there is some balance left causing the other scenario to finish the following month.

Our end result after scenario 9 are quite different, so we would have to look into that. As mentioned above, the DIY approach did not get affected by the HELOC rate change (Scenario 10).

JHB, I do not need to see your software as we have produced similar results (except maybe for 7, 8, 9 where you end much later). If you disagree on the result in any scenario, investigate the spreadsheet. I display ALL the data monthly. If you think I entered the wrong payment scenario (incorrect start or end month, incorrect amount), go ahead and change it and click on Calculate. It should give you the payoff date.

And now, I rest.

And it was all done with one simple spreadsheet. No factorial math. No complicated paydown scenarios. Just the simple “pay more toward the debt with the highest interest rate” plan.

Almost five years ago, women started speaking out about Mary Kay on the internet. My site Pink Truth is the most visited “anti-Mary Kay” site around, and each day, we have thousands of visitors to the site.

The reason why Pink Truth is telling the “other side of the story” about May Kay is because the company’s success depends so heavily on half-truths, long-running myths, and outright deception. Of course, Mary Kay Inc. isn’t directly involved in these deceptions, but they’re aware that their representatives are telling tall tales in furtherance of Mary Kay domination of the world. We want to give the rest of the story at Pink Truth!

Representatives are notorious for telling lies like “Mary Kay is Taught at Harvard!” and “You can start your own business for only $100!” and other fairy tales.

Below is an excellent example of how women repeat untrue things about Mary Kay ad nauseum, and those who hear these lies are none the wiser. Without sites like Pink Truth, they’d have no way to debunk these myths and find out the truth. This comment was left by a visitor to this site:

WOW! Funny how this article is supposed to “educate” women to make a good decision… but yet it says NOTHING about what Mary Kay is founded on: God first, Family 2nd, Career 3rd… I know literally hundreds of women who bring in tens of thousands of dollars a month, who have travelled around the world for free, and whose husband retired in their 20’s or 30’s and stayed home full time with their family BECAUSE of their wives’ MK careers. I know mothers who get to be at every soccer game, every PTA meeting, and anything else BECAUSE of their MK careers. I can’t even begin to list all of the things I find wrong with this “article” What an amazingly one-sided, narrow-minded, un-researched blog.

This woman claims she knows hundreds of women bringing in tens of thousands of dollars a month via Mary Kay.  That is a flat-out lie, and here’s the data to prove it.

Every month Mary Kay puts out a publication called Applause, which is the promotional magazine they send out to consultants. In that magazine is a rundown of the top commission earners in the company. This data proves beyond a shadow of a doubt that hundreds of women are not bringing in tens of thousands of dollars a month in Mary Kay Cosmetics.

Here are two pages from the December 2009 Applause Magazine. These pages show the highest earners at the level of National Sales Director (NSD) and Sales Director (SD). I added up how many women made $20,000 or more (that’s tens plural, right?) in commissions for the month of August 2009, which is what is presented in the December issue.

NSD – 40 women at $20,000 or more commission
SD – 0 women at $20,000 or more commission

What if we get rid of that plural — tens of thousands — and just look at who made $10,000 or more:

NSD – 143 women at $10,000 or more commission
SD – 24 women at $10,000 or more commission

But wait! The Mary Kay supporters may say that August is one of the lower earnings month for all of the pyramid participants! In that case, let’s take a look at June 2009 earnings. That is always the highest earning month, because the upline is putting extreme pressure on the downline to buy more and more product to “help the team” achieve a goal for the end of the fiscal year (June 30).

Here are the two relevant pages from the October 2009 Applause Magazine. The women making $20,000 or more in the highest earning month of the year for Mary Kay representatives:

NSD – 97 women at $20,000 or more commission
SD – 7 women at $20,000 or more commission

Again getting rid of the plural and looking at who made $10,000 or more:

NSD – 185 women at $10,000 or more commission
SD – 227 women at $10,000 or more commission

What do these numbers tell us? That the commenter’s claim that hundreds of women are making tens of thousands of dollars each month with Mary Kay is false. In the best month, 104 women made $20,000 or more. That’s not hundreds of women. In a regular month,40 women made $20,000 or more.

Even if we lower our standards and look at those who made $10,000 or more in a month, we only have 412 women in the best month, and 167 in a normal month.

You think that sounds impressive? Well remember that these figures are gross income. All of their business expenses have to come off that figure. And don’t let anyone convince you that the expenses are low. At this level of the pyramid, the expenses are high.

And you might look at the 412 women in the best month making $10,000 or more and think that’s a big number. Remember that there are approximately 750,000 representatives in the United States. That means 0.05% (yes, a fraction of 1%) made $10,000 or more in the best month. 99.95% of the representatives did not.

And there are 14,000-15,000 sales directors in the United States, which are considered to be near the top of the pyramid in a prestigious position. Yet of those 14,000-15,000 women who are “at the top”, only 227 of them made $10,000 or more in commissions in Mary Kay’s biggest month of the year. 227 is a whole 1.6% of those top people. 98.4% of those women at the top are making less than $10,000 per month with Mary Kay.

So please, let’s stop the lies about the earnings in Mary Kay. Almost no one makes an actual living from Mary Kay, and even fewer make what might be considered an “executive level income.”

The company is named, along with CEO Harland Stonecipher anbd Chief Marketing Officer Mark Brown. The FTC seeks not only to take away the money Pre-Paid Legal made on these services, but also permanent injunctive relief.

Of course, the company’s press release made no mention of all the work done by Robert FitzPatrick of Pyramid Scheme Alert and Barry Minkow of Fraud Discovery Institute, who both worked vigorously to expose the frauds being perpetrated on consumers by Pre-Paid Legal.

You can read more about the work of both Robert and Barry, which I participated in, on this blog.