MLM Scams

First, we recognize that all MLM companies are NOT scams. This post is only to warn you to do your due diligence, because some MLMS ARE scams.

MLM scams have been around nearly as long as MLM businesses have been around, and over the years hundreds of thousands, if not millions of people around the world have been victimized to some degree by an MLM scam. Of course when someone finally discovers he or she has been scammed, the first reaction is to want to try to get their hard earned money back.

Unfortunately, MLM scams are usually among the smartest of fraudulent businesses and have devised ways to make legal recourse for victims nearly impossible. There are a few main methods employed to avoid ever having to answer for financial damages caused to victims; the most common method is to make themselves impossible to contact.

Having false addresses and phone numbers, or numbers that never allow you to actually speak to a live person is an easy way to doge having to answer uncomfortable questions. It is also common for the headquarters of MLM scams to move frequently so when lawyers come knocking, there is nothing left but an empty warehouse.

A more sophisticated and foolproof method of dodging responsibility is by adding confusing and often hidden clauses in the company contract. Many MLM businesses, even legit ones, require new recruits to sign a contract compiled of vast amounts of information, and buried somewhere in there in miniscule writing is an agreement not to sue the company for financial losses.

They literally make taking people’s life savings with little or no chance of any return on the investment legal. So when a victim realizes that he or she has been pouring time and money into an MLM business venture and is getting nothing back, he or she has already signed a contract to do nothing about it.

It’s best to just not get involved in MLM businesses until you’ve checked with the Better Business Bureau to make sure it’s a legitimate company. If you do decide to invest in an MLM business, make sure you read every line of the contract carefully, with a lawyer if possible, to make sure you understand all the implications before you sign. And if down the road you do discover you’ve been scammed, good luck to you and your lawyer getting any of that money back.

Bob Schmidt was a top-level XanGo distributor who was scheduled to speak at their next convention. He was in network marketing for 33 years and was 63 years old. Already beating cancer, he died while kyaking at Lake Tahoe over Memorial Day weekend.

Here is a tribute to him from XanGo that they showed at convention in Florida:

Just for fun I wanted to see what MLMs are best represented on the Internet. To give you an idea I listed the top 10 MLM companies based on about how many people search for their name. Avon has been along longer than most MLMs and several years ago they focused on improving their internet presence.

10 MLM companies online (number of searches)

1. avon 410,942
2. pampered chef 209,940
3. mary kay 200,016
4. monavie 130,821
5. quixtar 98,766
6. herbalife 79,995
7. primerica 74,853
8. melaleuca 62,965
9. xango 55,189
10. amway 42,233

Later on the list there were MLM companies like (ones listed first have more searches): shaklee, usana, noni, arbonne international, tahitian noni, nuskin, stampin’ up, nature’s sunshine, forever living products, nu skin, pre-paid legal, neways, nouveau riche, tahitian noni international, goyin

These numbers are approximate, but it gives you a rough idea. What I find interesting is that TNI has three variations of their business ranking: noni, Tahitian noni, and Tahitian Noni International.

We found this post about evaluating an MLM business. The blog generally takes a pro-MLM stance - if there is good training. What I found is good information about the MLM industry by a man named Tim Sales (I didn’t make that up and as far as I know that’s his real name).

So I have a question for our readers - from your experience which MLM companies are the best, and why? How do you evaluate an MLM business?

You know what a Ponzi scheme is, right? Named after Charles Ponzi who ran several pyramid schemes during the early 20th century, a Ponzi scheme uses money from one set of “investors” to pay off a later set. This works great for a little while until investors start to run out.

However, to pay off the first investor, Ponzi required payment from three or more other investors in pay himself and the original investor. Now he has four investors. To pay them all off, he needed 12 more for a total of sixteen. To pay them, he needed 48 more, then 180, then 684, and so on, thus the more well-known term of “pyramid scheme.” It’s illegal because there is no product or service being provided in exchange for the “investment.”

BING! Then a light bulb went off in somebody’s head. Provide a product or service, and suddenly your pyramid scheme is legal!

Along comes Amway. Not the first “legitimate” MLM company, and far from being the last, but it is arguably the most well known and successful MLM in the world’s history. Now, Amway created a lot of millionaires. So it’s good, right?

Sure it’s great, if you’re one of the guys smooth-tongued enough to convince hundreds of people to fork over their cash for overpriced products. Have you noticed that an MLM pitch is never about the product, but rather about selling the dream of financial freedom?

Who do you know who is willing to pay $10 for a $2 bar of soap? But they will if it means getting rich quick! There are no hard statistics on the matter, but some estimate the failure rate of MLM distributors to be as high as 99.9 percent.

I’d rather take my chances at the blackjack table. At least there I have a 50/50 chance of winning and, even if I lose, my garage won’t be full of soap.

We want you to spread the word! Believe the Movie - a mockumentary about the MLM business is officially out on DVD.

The movie is written and directed by former Amway distributor Loki Mulholland. For 4 years “I was one of those gung-ho distributors who listened to the tapes and went to the conventions. I did it all… except make money. Little did I know that you have better odds winning in Vegas than you do succeeding in multi-level-marketing,” says Mulholland.

He tapped his own experiences as a basis for the movie. “The film is a reflection of a lot of people’s experiences with MLM,” says Mulholland, “and is a light-hearted comedy about the business in a way that MLMers can get a good laugh as well as those who oppose MLMs. But there’s a lot of truth to the movie as well.”

Believe is set in the anywhere town of Springfield and follows the life of Adam Pendon (played by Larry Bagby, Walk the Line), a laid off steel mill worker who must find a new way to provide for his family, when he is introduced to Believe Industries, a multi-level marketing company, by an overzealous recruiter, Mark Fuller (played by Lincoln Hoppe, Saints and Soldiers).

The movie follows the “unique” lifestyles of several different “Believers” (Believers are distributors who work for Believe Industries), including a couple who can’t seem to make a dime and another couple destined for either the high life or the divorce court. Believe the Movie features an appearance by Graham Russell of Air Supply, who sings an original song by Mulholland.

You might laugh or, depending on how much you’ve lost on MLM ventures, cry. The movie is a very inexpensive form of therapy!

Title: Believe
Running Time: 82 minutes
Rating: PG