Archive for November, 2012

Shellie Gold Davidson of ViSalus Doesn’t Understand Pyramid Schemes

I don't like to call out individuals for scamming people, but since Shellie Gold Davidson decided to go with "Educate Yourself! Know the Difference!" in the following photo, I thought I'd break down the chart of false information she's spreading.

Shellie Gold Davidson of ViSalus Doesn't Understand Pyramid Schemes

Shellie Gold Davidson of ViSalus Doesn't Understand Pyramid Schemes

Let's start off with the first row and the columns. Yes pyramid schemes are illegal. Thanks for letting us know that. Putting 100% Legal under the column of "Legal Multi-Level Marketing" is a little redundant, no? Well let's move on...

Row #2: Main Income Sources - Notice the use of "solely" in recruiting others for illegal pyramids and MLM is legal if "ONLY" by product sales. So it's black and white, but what if income is earned both ways as in MLM where the Income comes from sales of those who were recruited? The FTC says the following about MLMs and Pyramid Schemes: "If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money." and "Avoid any plan where the reward for recruiting new distributors is more than it is for selling products to the public. That’s a time-tested and traditional tip-off to a pyramid scheme."

Clearly the FTC has a different definition than Shellie Gold Davidson of Pyramid Schemes. We'll be referring back to this document a few more times more than likely.

Row #3: Primary Purpose for Recruitment - I don't see either of these as a differentiating factor in the FTC guidelines. In MLM, why would you need to recruit people for product sales and distribution? For ViSalus (Davidson's MLM), distribution is done by the ViSalus via mail to an individual... the same way it is done from Amazon.com, which isn't an MLM. Come to think of it, they also do product sales. There's no need for a network for sales or distribution except to incentivize distributors to buy product to get involved in a fabricated "business opportunity."

Row #4: Plan - While a get rich scheme is certainly a red flag, claiming that MLM requires "true and personal effort" doesn't absolve it from being a pyramid scheme. I challenge you to figure out how to run a pyramiding business that doesn't require "true and personal effort." You can't, because you need to trick people into the scheme.

Row #5: Business Entry & Barriers - According to the FTC guidelines MLMs that are pyramid schemes can have low cash-out, low or no front-loading, and a buy back guarantee. So these aren't relevant. Furthermore Davidson's ViSalus coerces front-loading and high-cash out by requiring distributors put up $499 of product to be eligible for the BMW bonus of the "business opportunity." It's front-loading a bunch of product, though you could argue that high-cash out is a relative term.

Row #6: Value for Money - This is going to come up in the Pricing section below, but since ViSalus is overpriced, it fits the "product value far less than cash out" section of illegal pyramiding.

Row #7: Income Stability - This is just a boldface lie and the FTC guidelines make it clear. There's nothing defining about whether the income stops if the recruitment stops.

Row #8: Training - Training is not a differentiator of whether something is a pyramid scheme or a legal MLM. This chart is making up features of pyramiding just so that MLM can look good without actually addressing the FTC guidelines.

Row #9: Regular Product Movement - This is again another non-factor. Consumable products can and are often part of illegal pyramid schemes, because most of the sales are made to other distributors within the scheme. It is noteworthy that this mentions few retail sales (high cost doesn't matter). A look at ViSalus' co-founder Sarnicola shows he is making most of his money from recruiting... there's no reporting on how many retail sales he makes a month.

Row #10: Pricing - Using this test Davidson is pitching a pyramid scheme because ViSalus is clearly overpriced.

Row #11: Marketing - Refer back to Row #2 about how the money is being earned. If you are making most of your money selling product to people outside the scheme then its good. If you are recruiting others into a downline and making money from sales to them and their sales, it's an illegal pyramid scheme. Sounds like ViSalus'... and most MLMs... compensation plans are set up this way.

I've done all the hard work for you by creating a page that makes it quite clear: MLMs Vs. Pyramid Schemes. It has all the citations by the FTC and is much more reputable than Shellie Gold Davidson's biased disinformation.

This post involves:

MLM Scammers

... and focuses on:



MLM Scammer Profile: Nu Skin’s Christine Sutherland

I'm not the kind of person who picks on or calls out others (except for Tim Sales), but since Christine Sutherland, a high-level Nu Skin distributor approached me, I feel it is worthwhile to tell the story. Christine Sutherland is a Ruby distributor for Nu Skin. This means that she is more successful than 99.76% of Nu Skin distributors. (Side Note: Christine Sutherland is in New Zealand and these are United States numbers. I couldn't find the posted numbers for New Zealand, but typically these numbers are the same because the compensation plan is the same. For example I've shown MonaVie’s Global Income Disclosure Statement and MonaVie’s Canada Income Disclosure Statement are essentially the same.)

Christine showed up on my Jusuru post and left a series of comments. She claimed to an analyst, but presented no background to that. She supported MLM, but was against Jusuru. At the same time she praised what I was doing by demanding clinical evidence that the product works. She went on to say that there was at least one MLM out there doing excellent work.

From there, Christine Sutherland started to show her true colors. She went on to claim that the MLM has a proven "nutricential." A simple Google search shows that the term is used closely with Nu Skin. She then went on to quote a well-known “nurses’ study” where multi-vitamin supplementation showed a a 75% reduction in cancer after 15 years. I decided to counter with my previous research that supplements may do more harm than good.

However, I looked into the nurses' study and found that the 75% only applied to colon cancer. That's still pretty good, but the same study found increased risk of disease such as for non-Hodgkin’s lymphoma. Most importantly that link showed "The National Institutes of Health concluded that there was not sufficient evidence to recommend taking vitamins for chronic disease prevention" and "The American Cancer Society’s guidelines on nutrition and cancer prevention do not recommend taking multivitamins." (If you are interested in this stuff see this), because there is a lot more).

She took all those reputable sources such as the NIH and ACS and proving that she wasn't being open about the study only applying to one type of colon cancer and increasing another. She concluded that "for those without a background or training in clinical research, the task of assessing for validity is very tough if not impossible" which ignores the fact that the reputable sources have that background and assess the validity for us. She suggested that I should ignore those and instead read this anonymous source of wellness information.

With that she disappeared for two and half months only to come back November 1st saying, "I’ve given up dialogue with the guy because not only is he just plain negative and nasty, but he’s completely selective in the research he quotes. As a clinical researcher I work to educate people about snakeoil products."

That made me look a little deeper into Christine Sutherland's Nu Skin scam.

Ms. Sutherland claims to be both a clinical researcher and a analyst (presumably a business analyst from the context she used the term) now. She's failed to address internationally-recognized, industry-leading organizations with an unknown anonymous source of http://www.optimal.co.nz/health_studies.html. Yep, I was completely selective in the research that I quoted.

More importantly she's pitching herself as a work from home expert (while being a clinical researcher and a business analyst) creating websites such as http://www.flexiblehomebusinessideas.com/, http://www.need-to-work-from-home.com/, and http://www.2-percenters.com/. If you fill out the form on the middle one there, you can get a free e-book on making $5000 a month in 6 months... but you can get it here without giving out any personal information.

The book is essentially a marketing pitch or Nu Skin and a bunch of misleading information making it seem like a good idea.

One tidbit from Christine’s eBook scam is to state that less than 1% of people aged 65 and over earned $60,000. (Why do we care about the people age 65 and over, their peak earning years were likely 20-30 years ago when $60,000 was a worth a lot more money?) Instead she pushes that “a million a month is possible” in the MLM business… strange that she doesn’t give the percentage of people who actually do it in MLM... She

In another tidbit, she mentions that Nu Skin has increased 540% on NYSE in the last two years, more than Apple or Google. It’s performed well, but it’s up 60% in the last two years, quite a big difference than 540% and significantly trails Apple over that time. And that’s with Apple losing $100+ a share in the last month or so as of this writing. The graph gets really fun if you look at the last ten years. That’s 7000+% for Apple vs. 300+% for Nu Skin. And Christine wants to complain about selective in the research that I quote?

However, if you don't want to download that eBook and read all the crap you can check out another of her eBooks on Amazon: Work From Home - Choose Smart & Live the Dream. Notice all the terrible reviews that say it is little more than a pitch to join her MLM.

People wonder why I am against MLM. Besides the clear mathematics that show it is an unsustainable business model, it's because of people like Christine Sutherland who seem like decent people on the surface, but underneath are forced to commit a trail of fraud to be "successful" in MLM.

I honestly hate having to write posts like this, but if it helps one person avoid Nu Skin's and Christine Sutherland's scam then it's worthwhile.

Update:

I decided to subscribe to Christine Sutherland's Newsletter and found that she's spreading disinformation there as well.

Here's a quote (screenshot to newsletter):

"But you know, there are literally hundreds of excellent, award-winning MLM companies out there whom anyone would be proud to hitch their wagon to. The Wall Street Journal recently did an industry feature praising the operation and performance of some of the best.

Warren Buffet, Robert Kiyosaki, and Donald Trump all agree that this leveraged business model is an exceptional choice for anyone who wants to build real wealth, and together they've helped to drive a new admiration and respect for the way top MLM businesses operate, and deliver."

It sounds impressive until you realize that the Direct Sale News paid Wall Street Journal for an advertising section. It's not the opinion of the Wall Street Journal and they don't endorse MLM in any way. It's clear when you see that the section has no articles written by their writers and every page has an advertisement for an MLM company. It's despicable that MLM distributors hold this up to defraud people out of their money.

As for Kiyosoki, Trump, and Buffett, let's take them in order:

  • Robert Kiyosaki and Multi-Level Marketing Exposed! - Can't get much more fraudulent than that investigative article I researched and wrote.
  • And we covered MLM and Donald Trump here previously... One thing that I'll add is that Donald Trump has gone bat excrement crazy tonight, election night, and I'm pretty sure everyone knows he's on the way to the looney bin.
  • I have a ton of respect for Buffett, but like Trump, he wants to own the slave network company that has found a way to pay its sales people less than minimum while requiring them use what little money they would pay them to buy the products.

It's the same three people that MLM people always mention. None of them are willing to become MLM distributors... they are smart enough to know it is a losing business. Well, Kiyosaki tried with Amway decades ago, but failed.

The sad part is that people are trusting by nature and some will fall into Sutherland's trap of misinformation.

This post involves:

MLM Scammers

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MLM Distributors and Telling Lies

You can't go too far without finding a lie being told about an MLM. Here are a few common ones:

It is with that in mind that I found this article in New York Magazine about Jonah Lehrer interesting. Jonah Lehrer was found to be fabricating quotes and information in his stories. In particular the article starts off with this:

"Dishonesty is everywhere … It’s an uncomfortable message, but the implications are huge.”

Lehrer’s blurb was for behavioral economist Dan Ariely’s The (Honest) Truth About Dishonesty: How We Lie to Everyone—Especially Ourselves. Among Ariely’s bite-size lessons: We all cheat by a “fudge factor” of roughly 15 percent, regardless of how likely we are to get caught; a few of us advance gradually to bigger and bigger fudges, often driven by social pressures; and it’s only when our backs are up against the wall that we resort to brazen lies.

I don't believe that everyone operates by a "fudge factor" of 15%. However, for sake of argument, I won't quibble with it. With MLM the fudges are driven by social pressures, an upline pushing you to recruit more people.

It's also notable that people resort to brazen lies when their backs are against the wall. In more than a few MLMs, I've seen them set up people in big debt to start with. The only way out is often to makes hundreds of sales of overpriced product, which is extremely difficult, or recruit others.

It's not surprising that we see these brazen lies in MLM given the circumstances.

This post involves:

MLM Scam

... and focuses on: