Using a Hybrid Securities Test to Tackle the Problem of Pyramid Fraud
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July 18, 2017 the Honorable Paul Ryan Office of the Speaker United
July 18, 2017 The Honorable Paul Ryan The Honorable Nancy Pelosi Office of the Speaker Office of the Democratic Leader United States House of Representatives United States House of Representatives H-232, The Capitol H-204, The Capitol Washington, D.C. 20515 Washington, DC 20515 RE: Consumer groups’ opposition to Moolenaar amendment to the Financial Services appropriations bill Dear Speaker Ryan and Leader Pelosi, The undersigned consumer organizations wish to express our strong opposition to an amendment offered by Congressman Moolenaar that was included in the FY18 Financial Services and General Government Appropriations bill, which is currently pending before the House.i This amendment, based on the “Anti-Pyramid Scheme Promotion Act of 2016,”ii would rob the Federal Trade Commission (“FTC”) of its ability to protect consumers from all but the most egregiously fraudulent pyramid schemes. This amendment is problematic for a number of reasons: ● First, it eliminates the need for direct selling companies to establish their product with a retail customer base other than distributors themselves. It relieves distributors of any responsibility to sell to retail customers, other than those that they recruit to pursue the business opportunity, who in turn recruit others for the purpose. This would relieve direct selling businesses of the need to operate a viable retail business, as opposed to a fraudulent or deceptive recruitment scheme.iii ● Second, it allows direct selling companies to profit off a churning base of recruits who are incentivized and often required to continually repurchase product directly from the company in order to qualify for rewards, rather than meeting legitimate retail demand for the product or service on offer. -
FTC V. Burnlounge
12-55926, 12-56197 and 12-56288 (Consolidated) IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT FEDERAL TRADE COMMISSION, Plaintiff-Appellee v. BURNLOUNGE, INC., JUAN ALEXANDER ARNOLD, AND JOHN TAYLOR, Defendants-Appellants and ROB DEBOER, Defendant On Appeal from the United States District Court for the Central District of California No. 2:07-03654 – Honorable George Wu SECOND CROSS-APPEAL AND ANSWERING BRIEF OF PLAINTIFF-APPELLEE FEDERAL TRADE COMMISSION Of Counsel: DAVID C. SHONKA CHRIS M. COUILLOU Acting General Counsel DAMA J. BROWN Federal Trade Commission JOHN F. DALY Atlanta, GA Deputy General Counsel for Litigation BURKE W. KAPPLER Attorney Federal Trade Commission 600 Pennsylvania Avenue, N.W. Washington, DC 20580 (202) 326-2043 TABLE OF CONTENTS PAGE TABLE OF AUTHORITIES......................................... iv JURISDICTION ...................................................1 ISSUES PRESENTED ..............................................2 STATEMENT OF THE CASE........................................3 A. Nature of the case, the course of proceedings, and the disposition below..................................................3 B. Facts and proceedings below ...............................5 1. Introduction ........................................5 2. BurnLounge Background .............................6 3. Bonuses ...........................................8 a. Mogul Team Bonuses ...........................9 b. Concentric Retail Rewards......................12 4. BurnLounge’s Promotion and Marketing ................14 -
No. 16-1309 S.G.E. MANAGEMENT, L.L.C., Petitioners, V
No. 16-1309 IN THE S.G.E. MANAGEMENT, L.L.C., ET AL.. Petitioners, v. JUAN RAMON TORRES, ET AL. Respondents. On Petition for a Writ of Certiorari to the United States Court of Appeals for the Fifth Circuit BRIEF IN OPPOSITION Eric F. Citron GOLDSTEIN & RUSSELL, P.C. 7475 Wisconsin Ave. Suite 850 Bethesda, MD 20814 (202) 362-0636 [email protected] QUESTION PRESENTED The class certified in this interlocutory appeal con- sists of the victims of an alleged pyramid scheme. Un- der the unchallenged, substantive law applicable to such cases, pyramid schemes are deemed “inherently deceptive” and “per se illegal,” and thus constitute “schemes to defraud” as a matter of law for purposes of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §1961; see, e.g., See Webster v. Omnitrition Corp., 79 F.3d 776, 788 (9th Cir. 1996). Both lower courts here found as a matter of fact that: (1) participation in the scheme a plausible proximate cause of the victims’ injuries; and (2) “the record is de- void of evidence that a single putative class member joined [the scheme] despite having knowledge of the fraud,” or “would have paid to [join] knowing of the fraud.” Pet.App. 24a. Both lower courts further con- cluded that petitioners never “even attempted” to show that class members’ injuries were attributable to any- thing other than reliance on the defendants having falsely held out their operation as a legitimate business rather than an inherently fraudulent pyramid scheme. Id. 25a. Accordingly, the question presented is: Whether a plausible allegation, supported by exten- sive proof, that defendants operated an inherently de- ceptive and illegal pyramid scheme, and thereby caused a class of victims to inevitably lose money by paying to participate, can support class certification under Fed- eral Rule of Civil Procedure 23(b)(3)—at least where “the Defendants produced no evidence that a single class member even knew of the fraud or would have paid to become [a part of the scheme] knowing of the fraud.” Pet.App. -
Network Marketing Central, 9 Feb
www.GerriSonger.com Marketing Networks 1 Top 50 MLM Companies by Global Revenue Avon Products (avon.com) Beauty, fashion Menard Japan Cosmetics (menard- jewelry, apparel - $11.3B cosmetic.com) skin care, makeup, body care Amway (amway.com) primarily in the health, fragrances - $434M beauty, and home care markets - $10.9B Cosway Corp. Ltd. (cosway.com.my) Herbalife (herbalife.com) develops, markets and supplements, skin care, personal care, sells nutrition supplements, weight management, cosmetics, household products, car care, food sports nutrition and personal-care product - and beverage, clothing - $433M $3.5B DXN Holdings Berhad (dxn2n.com) food and Natura Cosmeticos (natura.net) Cosmetics and beverage, home décor, kitchenware, home care personal care - $3.0B - $420M Vorwerk & Co. (vorwerk.com) Cosmetics, For Days Co. (fordaysusa.com) cosmetics, food household appliances, home care - $3.0B and beverage, wellness - $400M Mary Kay (marykay.com) cosmetics products - KK ASSURAN skin care - $370M $2.0B Better Way Co. (mistine.co.th) cosmetics - Tupperware Brands Corp. (tupperware.com) $370M storage and serving products, beauty, personal Nature's Sunshine Products care - $2.6B (naturesunshine.com) herbal supplements, Oriflame Cosmetics (oriflame.com) hair, skin vitamins, minerals and nutritional supplements - and personal care, color cosmetics, fragrances $368M $2.1B WIV Wein International (wiv-ag.com) wines Nu Skin Enterprises (nuskin.com) develops and $365M sells personal care products and dietary *Arbonne International, LLC (arbonne.com) supplements - $1.7B skincare, bath & body, hair, sun, makeup, and Belcorp (belcorp.biz) cosmetics and personal nutrition products - $353M care - $1.6B Southwestern/Great American, Inc. Primerica Financial Services (primerica) (southwestern.com) family-oriented educational insurance and financial services company - reference books and software - $353M $1.1B Neways (neways.com) personal care products, Ignite Inc. -
Case 2:14-Cv-12693-MFL-DRG ECF No. 75 Filed 03/09/16 Pageid
Case 2:14-cv-12693-MFL-DRG ECF No. 75 filed 03/09/16 PageID.<pageID> Page 1 of 55 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION TIMOTHY KERRIGAN et al., Plaintiffs, Case No. 14-cv-12693 Hon. Matthew F. Leitman v. VISALUS, INC. et al., Defendants. ________________________________/ OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTIONS TO DISMISS (ECF ## 61, 62) Case 2:14-cv-12693-MFL-DRG ECF No. 75 filed 03/09/16 PageID.<pageID> Page 2 of 55 In their First Amended Complaint, Plaintiffs Timothy Kerrigan (“Kerrigan”), Lori Mikovich (“Mikovich”), and Ryan Valli (“Valli”) (collectively, “Plaintiffs”) allege that they were defrauded by an illegal scheme created and operated by the Defendants. Plaintiffs say that in 2012 and 2013 they attended events promoting Defendant ViSalus, Inc. (“ViSalus”), a retailer of weight-loss shakes. (See First Am. Compl., ECF #55 at ¶¶ 8-14.) Plaintiffs allege that at these events, they were misled into paying to enroll in the “ViSalus Program” – the system through which “individual promoters” (“IPs”) earn commissions and bonuses for selling ViSalus products and recruiting other IPs. Plaintiffs insist that the ViSalus Program is a fraudulent pyramid scheme, and they claim that they lost all of the money they paid to ViSalus to enroll in the program. Plaintiffs first filed this action against ViSalus and many individuals and entities allegedly associated with ViSalus on July 9, 2014 (the “Complaint”). (See ECF #1.) Plaintiffs alleged in the Complaint that the Defendants violated, and conspired to violate, the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. -
1 of 93 1 2 3 4 5 6 7 8 a B C D E F G First Name Last Name City State Zip Country Willie Gobabis Omahe Ke 9000 NAMIBIA Z
A B C D E F G 1 First Name Last Name City State Zip Country Petition Comment Willie Gobabis Omahe 9000 NAMIBIA 2 ke zohaib jhelum 49600 PAKISTAN truth of mlm companies 3 4 Armando AZ 85257 USA 5 Yesenia CA 90063 USA Jayasankar Chennai Tamil 600034 INDIA Dear President, I am from India. Kindly ban the MLM companies nadu like AMWAY which is making false claim and cheating people of India.We people of India see you as a Different from other President's who ruled US> we see you next to Abraham Linkcon,JFK. we all hope that you will bring a Amendentment in the Senete to BAN MLM COMPANY AMWAY. 6 LONNIE & LACOMBE ALBER T4L 2N5 CANADA MERLO TA 7 SULZLE Londell & Jodie LACOMBE ALBER T4L 1P4 CANADA Sulzle TA 8 Petitions for Regulation of Multi-Level Marketing – PUBLIC 1 of 93 Gathered on http://www.pyramidschemealert.org A B C D E F G Dahya Des Plaines IL 60018 USA Government must take strong actions against all the pyramid and so called MLM schemes.common people fall for ir as they are pitched well and are very deceptive.For people awareness past records and investigations should be made to run again on TV and other medias. have been financially hurt by Amway/Quixtar,and finally left it.FTc especially should investigate the support systems so called motivational organisations associated with the Amway like BWW,LTD,WWDB,network21 and so on..who litterly sucks money out of the members by selling cds,videos,meetings,books and whatever they can.I humbly asks a Congressional Investigation of the FTC and SEC regarding enforcement of laws against Pyramid Selling Schemes, Multi-level Marketing Scams, Ponzi Investment Frauds, Bogus "Motivational organisations" and "Work from Home" Schemes. -
July 17, 2006 E-MAIL SUBMISSION ONLY Federal Trade Commission
July 17, 2006 E-MAIL SUBMISSION ONLY Federal Trade Commission Office of the Secretary Room H-135 (Annex W) 600 Pennsylvania Avenue NW Washington, DC 20580 To the Commissioners of the Federal Trade Commission: Re: Notice of Proposed Rulemaking Business Opportunity Rule, 16 CFR Part 437 INTRODUCTION I served as an Assistant Attorney General with the State of Wisconsin for 30 years, until retirement in 1997. During this period I litigated a number of pyramid cases – including extensive litigation against Amway1 in the early 1980’s and cases against Koscot Interplanetary, Bestline, and Holiday Magic in the early 1970’s. These actions were pursued with the direct co-operation of Commission staff. My most recent pyramid case, against Fortune In Motion, was successfully concluded in 1997. I am currently a licensed attorney in the State of New York. Because of my interest in the area of pyramid based business opportunity fraud, I have followed the Commission’s activities and stayed in contact with others having similar interests, namely those associated with Pyramid Scheme Alert, which has filed its comments with the Commission through its president Robert Fitzpatrick. In my dealings in this area, both before and after retirement, the single most disturbing element I have encountered in respect to pyramid schemes is the absence of a meaningful legal standard and enforcement posture on the part of the Federal Trade Commission. Since the Commission’s Amway decision in 1979, the concept of a pyramid scheme has been confounded by the emergence of “Multi-Level Marketing”2 which is portrayed as a legal business opportunity patterned after the Amway decision. -
A Study on Direct Selling Through Multi Level Marketing
International Journal of Advancements in Research & Technology, Volume 1, Issue 4, September-2012 1 ISSN 2278-7763 A Study On Direct Selling Through Multi Level Marketing F. MARY MERLIN Department of Management Studies, Manonmaniam Sundaranar University, Tirunelveli, India. Email: [email protected] ABSTRACT Direct selling is a multi-level marketing in which the sales force is compensated not only for the sales they make but also for the sales done through their recruit. This recruited sales force is referred to as the participants who can provide multiple levels of compensation. A person's job would be to recruit others to sell their product, and in return, receive a percentage of their sales. The next person's job then is to recruit people even more so below them, and receive a percentage of their sales. Other terms for Multi-level marketing include network marketing and referral marketing. Commonly, the salespeople are expected to sell products directly to consumers by means of relationship through referrals marketing. Some people use direct selling as a synonym for MLM, although MLM is only one type of direct selling Keywords : Multi-Level Marketing, Direct Selling, Traditional Marketing. 1 INTRODUCTION evolution of direct selling. According to Biggart, direct selling has grown to become a major form of commercial activity in Direct selling is marketing and transaction of consumer goods the US, despite encountering opposition from other sectors of directly to the consumer; it does not depend on direct mail, the business community during various stages in its product advertising or fixed retail outlets. Self-governing sales development. -
5M1b Ltr to FTC Re MLM Income and Health Claims FINAL
June 30, 2021 VIA EMAIL Samuel Levine Acting Director, Bureau of Consumer Protection Federal Trade Commission 600 Pennsylvania Ave. N.W. Washington, D.C. 20580 [email protected] Dear Mr. Levine: For far too long multilevel marketing (MLM) companies have used deceptive marketing to promote the business opportunity and sell their wares.1 In fact, the problem is so longstanding and pervasive that the MLM industry’s self-regulatory body, the Direct Selling Self-Regulatory Council (DSSRC), stated just last month that: Though the industry has made significant strides to curtail the dissemination of unsupported claims regarding income potential …, there is still a great deal of work ahead of us to assure that the product and earnings claims communicated to consumers and potential salesforce members are truthful and accurate.2 Moreover, industry trade group, the Direct Selling Association (DSA), published an article in its January 2021 journal that stated, “[d]irect sellers will never be able to wholly prevent distributors from making improper claims.”3 Such pessimism is cause for concern as improper health and income claims not only deceive consumers but also lead to social, emotional, and physical harms, and financial hardship.4 Given this backdrop, TINA.org urges the Commission to implement a penalty offense program targeting the direct selling industry and its market-wide practice of utilizing deceptive earnings representations and false health claims.5 For more than 40 years, the FTC has consistently pursued individual MLM companies making -
The Pyramid Scheme Industry
THE PYRAMID SCHEME INDUSTRY: Examining Some Legal and Economic Aspects of Multi-Level Marketing Douglas M. Brooks Robert L. Fitzpatrick Bruce Craig The announcement on March 12, 2014, that Herbalife Ltd. (NYSE: HLF) had received a Civil Investigative Demand from the Federal Trade Commission caps a twenty-two month period during which persistent questions have been raised concerning the purported business opportunity known as multi-level marketing (MLM). While much of the financial media has recently been focused on the Herbalife story, the problems with MLM are not new, and they are not limited to Herbalife. As we explain in this paper, there are fundamental problems at the core of the MLM business model, and with the efforts of the FTC to regulate the MLM “industry.” The authors of this paper are all members of an international coalition of consumer advocates which, on October 24, 2013, filed a formal petition with the FTC requesting that it investigate the MLM industry and promulgate regulations to protect consumers from unfair and deceptive MLM business opportunities.1 This paper is intended to build on the Petition and to assist legislators, regulators and interested persons to understand the MLM industry and the need for further action. Why all the fuss over MLM? Why are Wall Street billionaires fighting very public battles over MLM? Is MLM merely a form of direct, person-to-person selling in which independent distributors can earn money both by selling products directly to consumers or by 1 See http://pyramidschemealert.org/wordpress/wp-content/uploads/2014/02/Petition-of-Ad-Hoc- -
July 18, 2017 the Honorable Paul Ryan Office of The
July 18, 2017 The Honorable Paul Ryan The Honorable Nancy Pelosi Office of the Speaker Office of the Democratic Leader United States House of Representatives United States House of Representatives H-232, The Capitol H-204, The Capitol Washington, D.C. 20515 Washington, DC 20515 RE: Consumer groups’ opposition to Moolenaar amendment to the Financial Services appropriations bill Dear Speaker Ryan and Leader Pelosi, The undersiGned consumer orGanizations wish to express our stronG opposition to an amendment offered by ConGressman Moolenaar that was included in the FY18 Financial Services and General Government Appropriations bill, which is currently pending before the House.i This amendment, based on the “Anti-Pyramid Scheme Promotion Act of 2016,”ii would rob the Federal Trade Commission (“FTC”) of its ability to protect consumers from all but the most eGreGiously fraudulent pyramid schemes. This amendment is problematic for a number of reasons: ● First, it eliminates the need for direct sellinG companies to establish their product with a retail customer base other than distributors themselves. It relieves distributors of any responsibility to sell to retail customers, other than those that they recruit to pursue the business opportunity, who in turn recruit others for the purpose. This would relieve direct selling businesses of the need to operate a viable retail business, as opposed to a fraudulent or deceptive recruitment scheme.iii ● Second, it allows direct sellinG companies to profit off a churning base of recruits who are incentivized and often required to continually repurchase product directly from the company in order to qualify for rewards, rather than meetinG leGitimate retail demand for the product or service on offer. -
List of Participating Merchants Mastercard Automatic Billing Updater
List of Participating Merchants MasterCard Automatic Billing Updater 3801 Agoura Fitness 1835-180 MAIN STREET SUIT 247 Sports 5378 FAMILY FITNESS FREE 1870 AF Gilroy 2570 AF MAPLEWOOD SIMARD LIMITED 1881 AF Morgan Hill 2576 FITNESS PREMIER Mant (BISL) AUTO & GEN REC 190-Sovereign Society 2596 Fitness Premier Beec 794 FAMILY FITNESS N M 1931 AF Little Canada 2597 FITNESS PREMIER BOUR 5623 AF Purcellville 1935 POWERHOUSE FITNESS 2621 AF INDIANAPOLIS 1 BLOC LLC 195-Boom & Bust 2635 FAST FITNESS BOOTCAM 1&1 INTERNET INC 197-Strategic Investment 2697 Family Fitness Holla 1&1 Internet limited 1981 AF Stillwater 2700 Phoenix Performance 100K Portfolio 2 Buck TV 2706 AF POOLER GEORGIA 1106 NSFit Chico 2 Buck TV Internet 2707 AF WHITEMARSH ISLAND 121 LIMITED 2 Min Miracle 2709 AF 50 BERWICK BLVD 123 MONEY LIMITED 2009 Family Fitness Spart 2711 FAST FIT BOOTCAMP ED 123HJEMMESIDE APS 2010 Family Fitness Plain 2834 FITNESS PREMIER LOWE 125-Bonner & Partners Fam 2-10 HBW WARRANTY OF CALI 2864 ECLIPSE FITNESS 1288 SlimSpa Diet 2-10 HOLDCO, INC. 2865 Family Fitness Stand 141 The Open Gym 2-10 HOME BUYERS WARRRANT 2CHECKOUT.COM 142B kit merchant 21ST CENTURY INS&FINANCE 300-Oxford Club 147 AF Mendota 2348 AF Alexandria 3012 AF NICHOLASVILLE 1486 Push 2 Crossfit 2369 Olympus 365 3026 Family Fitness Alpin 1496 CKO KICKBOXING 2382 Sequence Fitness PCB 303-Wall Street Daily 1535 KFIT BOOTCAMP 2389730 ONTARIO INC 3045 AF GALLATIN 1539 Family Fitness Norto 2390 Family Fitness Apple 304-Money Map Press 1540 Family Fitness Plain 24 Assistance CAN/US 3171 AF