I was recently interviewed for a Brazilian blog dedicated to exposing multi-level marketing companies and pyramid schemes for the scams that they are. Here are their questions and my responses:
1. How did you became involved with MLMs? What attracted your attention, personal experience or otherwise? At the time I got involved in Mary Kay Cosmetics, I was simply looking for an opportunity that I controlled. I didn’t look at it as a potential career for me, but as a part-time job for which I controlled the hours and the activities. I was also attracted by the supposed ability to earn a lot of money for my efforts. Little did I know that was a complete lie.
2. If some companies are real financial pyramids, why there is no intense action to prevent and correct them in the USA? Quite simply, the U.S. government has decided not to enforce the laws on the books. I think it is partly for political reasons, and it is partly because the companies running the pyramids are quite clever about it. Companies like Amway, Mary Kay, Usana, Herbalife, and the like have very cleverly masked their pyramid schemes with what appears to be a legitimate retail product. They ask the government to focus on the product, while in reality, the representatives of the companies are focusing on recruiting new members to the pyramid.
3. What’s your opinion about the FDI’s documentary? I have been involved with FDI in investigating Usana, Herbalife, and other companies. I think the work we are doing is eye-opening to many. I can only hope that the government authorities eventually see the truth we are uncovering and take action against these companies.
4. The documentary reports that 98% of distributors of HBL quit after 14 months. What is your opinion on this statistic, never accepted by Herbalife? I think there is documentation that will prove that statistic to be true.
5. In your opinion, the pharmaceutical industry is the victim of companies that sell food supplements or there is some sort of collusion? I think there are MLMs selling overpriced vitamins and things that claim to cure illnesses, when there is no proof of those cures. I don’t think that the issue is the pharmaceutical industry as much as it is the fact these companies are MLMs. MLMs look for “unique” products that they can sell at high prices. Pharmaceutical products happen to fit that bill because most consumers don’t know a lot about medicines and vitamins.
6. What can be expected of the authorities after running the FDI’s documentary? I’m not sure. I’d like to be optimistic and say that they will jump into immediate action. Unfortunately, the authorities have much work to do and many cases to investigate. I can’t say for certain that this issue will be one of their top priorities.
7. In Brazil, we do not have specific laws. Is there a bill in progress in the United States that can help establish a similar project in Brazil for future development? Sorry, I don’t know.
8. Is there a study in the United States about the loss of money by people in Herbalife? Robert FitzPatrick has studied many companies and the losses to distributors. Check his website: Pyramid Scheme Alert.
9. What do you think about the involvement of people of repute, as Paul Zane Pilzer, and Robert Kiyosaki, with the MLMs? Those people create a problem, as the average consumer thinks they have credibility. These “experts” know that MLM participants are likely to put a lot of faith in their words, and they use that loyalty to sell their books. It’s sad, really.
10. In Brazil we (recently) had a company called Omni International, which operated a pyramid under the financial facade of sales of virtual stores. Despite numerous reports of its members, justice has not made any apparent effort to close the company, which was only stopped after a complaint to the national network. In the United States there are other mechanisms to close a company of fraudulent MLMs, outside the pressure of public opinion? There are laws in place which could be used to close MLMs. The agencies responsible for enforcing these laws are notoriously lax, and only seem to enforce the laws when the violations are especially egregious.
11. What’s your opinion on this subject: SEC have stopped the research on USANA, although FDI has shown strong evidences of a Ponzi scheme. I am saddened that the SEC didn’t feel FDI’s case against Usana was strong enough to initiate a formal investigation. However, this doesn’t mean that they won’t reopen their file on Usana sometime in the future. This is what I hope happens.
12. Do you have knowledge (or do you know where we can get a historical series (at least 10 years) of the annual review (six-monthly quarterly) of HBL in the United States and the world (preferably in their other 2 largest markets: Mexico and Brazil), from nominal and operational’ results? Information from the SEC can be found here.
13. What do you think of the assertion that the company’s products use cutting-edge technology? This type of claim is common with MLMs. The truth is that MLM products are overpriced when compared to their competitors. The high prices are due mainly to the fact that the companies pay out a small amount of commission to many levels of distributors for each sale. But the companies can’t admit that this is the real reason for the high price. So instead, they have to make their product unique. They often use claims of high quality, unique products, or the latest technology as the reason for the high price.
14. Do you know the procedures of “brainwash” that are used in events, and, if you do so, is there any draft law in the USA (or in any American state) to correct/prevent this practice? I don’t know about the laws, but I do know about such practices in the United States, particularly as it relates to Mary Kay Cosmetics: