Pyramid Scheme Alert update

In late November, I announced that I had been appointed to the Board of Advisors of Pyramid Scheme Alert (PSA). PSA is an organization dedicated to educating consumers about multi-level marketing companies and pyramid schemes. While MLMs are technically legal in the United States, the vast majority of them are nothing more than product-based pyramid schemes which depend upon an endless chain of recruitment of new members.

I bring to the Board of Advisors my expertise as a fraud investigator, as well as in-depth knowledge of Mary Kay Cosmetics, a multi-level marketing company that’s been around for over 40 years. The founder of PSA, Robert FitzPatrick, is very selective in his appointments. Those who are on the board must have expertise relevant to MLMs and the mission of the organization. I’m honored to be a part of such a credentialed group.

I’ve been working to pull together information on Mary Kay for PSA. Mary Kay Inc. has been flying under the radar for years! The company has generally enjoyed a good reputation in the business community. Mary Kay Ash was well-respected because she was a shrewd businesswoman who developed this company from the ground up. Unfortunately, that has overshadowed the abusive nature of the business opportunity. People haven’t recognized that the MLM system utilized by Mary Kay is very profitable to the corporation itself, but very detrimental to the individual business owners.

PSA never really considered Mary Kay to be a company that they should look into. It just wasn’t “out there” as a recruiting scheme or product-based pyramid scheme. That’s where I come in. I’m putting together materials on the pay plan and recruiting, as well as some of the “official” and “unofficial” materials distributed by Mary Kay and its representatives.

My website Pink Truth strives to educate consumers and potential recruits about the grim reality of this pyramid scheme. I present daily posts about realities of Mary Kay, examining the real earnings of representatives, why the plan is abusive, and how millions of women a year are conned into putting money into this losing proposition.

Additionally, I’ve been working on some other things related to MLMs, and generally enjoying playing an active role in PSA. More to come…

1 thought on “Pyramid Scheme Alert update”

  1. This was copied from a consumer affairs website. Here’s the link: http://www.consumeraffairs.com/news04/2008/07/ftc_pyramid.html

    BOY DOES THIS SOUND LIKE A FAMILIAR THEME!!!!!!!! Just change the name of BurnLounge to, well you’ll get the picture.

    Pyramid Scheme Operator Settles FTC Charges

    BurnLounge promoted online music store ‘opportunity’

    July 2, 2008

    An operator who used deceptive earnings promises to recruit consumers for a multi-level marketing operation that turned out to be a pyramid scheme has agreed to settle Federal Trade Commission charges that the operation was illegal and violated federal law.

    The settlement bars BurnLounge and its principals from participating in any pyramid scheme or other prohibited marketing scheme, bars false earning claims, and requires him to give up $20,000 in ill-gotten gains.

    In June 2007, the FTC charged that BurnLounge recruited consumers claiming they were likely to make substantial income operating on-line digital music stores.

    BurnLounge sold them so-called “product packages,” ranging in price from $29.95 to $429.95 per year. More expensive packages purportedly provided participants with an increased ability to earn rewards through the BurnLounge compensation program.

    That compensation program primarily provided payments to participants for recruiting new participants, not for selling products or services, which the FTC alleges would result in a substantial percentage of participants losing money.

    The FTC contends that BurnLounge and Scott Elliott operated an illegal pyramid scheme, made deceptive earnings claims, and failed to disclose that most consumers who invest in pyramid schemes lose money. These practices violate the FTC Act.

    U.S. District Court Judge George Wu ordered a halt to the deceptive practices and froze the defendant’s assets, pending a trial, to preserve them for consumer redress. The settlement announced today ends the litigation with Elliott.

    The settlement bars Elliott from participating in or assisting others in participating in prohibited marketing schemes, including pyramid schemes. It also prohibits misrepresentations about earnings in any multi-level marketing program or business venture.

    A judgment of $117,710.69 — the entire amount earned by Elliott through BurnLounge — is suspended subject to a payment of $20,000 based on his limited ability to pay. Should the court find that Elliott misrepresented his financial circumstances, the entire amount will be due.

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