Saturday, July 23, 2016

OPINION: With HLF consenting to reforms, and Burks of ZeekRewards Guilty, justice prevailed, but work is never done

July 2016 has been a busy month.

On July 15, 2016, news was released that Herbalife has reached a settlement with the Federal Trade Commission where HLF agreed to a LONG list of reforms and pay a $200 million fine / reimbursement to the victims.

Then on July 22, 2016 Federal Court in North Carolina passed down the verdict... a Federal jury has convicted Paul Burks of ZeekRewards of all four counts of fraud and conspiracy to commit fraud.

MLMSkeptic has long criticized both schemes, both here on the blog, and on

MLMSkeptic had analyzed the various comments, retorts, criticisms, and cheers of Ackman's epic short of Herbalife at end of 2012 and the subsequent PR war, and pointed out problems with such arguments.  Most of the critics of Ackman then believed that HLF was "too big to fail", or perhaps "not egregious enough to die, maybe fined".

So it is with much amusement and facepalming when "journalists" loudly proclaimed "FTC says Herbalife not a pyramid", when FTC said no such thing.

How did CNNMoney got it so wrong?
FTC never said HLF is not a pyramid scheme... 
You are welcome to search the actual FTC complaint and stipulation agreed to by HLF. "Pyramid scheme" was nowhere in the documents. Furthermore, when questioned by the press at the news conference, FTC Chairwoman Edith Ramirez was asked at least FOUR SEPARATE TIMES whether HLF is a pyramid scheme, and Ramirez repeatedly dodged the question (probably as a part of the settlement).
Q: I know that you’re not going to put any labels on this, but it seems to me if we look at the BurnLounge case, that while this complaint does not use the words “pyramid scheme”, would you agree that a prima facie case of a pyramid scheme is alleged with the allegations within the complaint?
A:  Again, I will leave it up to you to draw that conclusion. Our focus in this complaint was in addressing the core issues
When asked outright about HLF's own announcement... That FTC have determined HLF to be NOT a pyramid scheme...
Q: Did you review the language in their (Herbalife’s) press-release that sort of affirmatively said that they were not declared to be a pyramid scheme? Because they’re sort of having that as an outright headline.
A: I do not agree with that statement. The word “pyramid” does not appear in our complaint that is true, but um again the core facts that we’ve alleged, that we consider to be problematic with their compensation structure, are set forth in detail in our complaint. And again, I will leave it to readers to draw their own conclusions. But that they were determined to not be a pyramid… that would be inaccurate.
And indeed, checking the HLF website no longer shows any sort of language that claimed "FTC determined HLF not pyramid scheme"...

So you know which way the CNNMoney article was written... They were written from HLF's press release, not the FTC press release. It is... biased.  Shame, CNN. Shame on you for lazy reporting.

I am not listing all the changes that FTC managed to squeeze out of HLF. You can read the documents linked above yourself. It is a LONG list of reforms, and it will likely become a new standard much as Amway's settlement with FTC created the modern MLM back in 1979.  And that pretty much tells you the fact: HLF was a scam that required reforms so it is no longer operating as a scam. Any one who argues otherwise is simply denying reality.

I may do my own analysis later on these changes, but HLF is no longer the same company. They believe they can continue to thrive (or else they would not agreed to these changes), but we shall see.

Then we come to Zeek Rewards, and Paul Burks.

Tuesday, July 19, 2016

How to spot shady opportunities V2.0: a 10 item checklist

NOTE: This was a rewritten version of the guide back in 2014.

World is full of Shady Opportunities that want you to put in money with promises of payback. Here are ten signs of shady schemes. Obviously a scheme probably would not have all ten, but the more signs you spot, the more likely it will be a scam.
  1. Clickbait-y Slogan
  2. Misinterpreted results
  3. Conflict of interest(s)
  4. Correlation vs. Causation
  5. Weasel words
  6. Bad Samples
  7. (Lack of) Control Group
  8. Unverifiable testimonial and Improper disclosure
  9. Cherrypicked and unreplicable results
  10. Paid or fake media coverage and reviews

Clickbait-y Slogan

EVERYBODY hates clickbaits... They are headlines written with intentional hyperbole and tease to get you to tease. Shady opportunities are the same. Does the scheme make incredulous claims such as "On our team everyone makes money"? Or they somehow "Pay One time $289 and get a minimum of $1040 back Guaranteed!" perhaps?  Before you say "nobody is stupid enough to make this sort of stupid claims"... think again:

Screen cap of Google Search results, yes, someone promised and guaranteed that
$289 will magically grow to $1040 and more. It's obviously clickbait.
As Carl Sagan said before, "extraordinary claim requires extraordinary evidence".  If they made such extraordinary claim, then they should supply the extraordinary evidence to support their claim. And since there are so many ILLEGAL ways of making money... Making money in itself is no proof. 

It doesn't matter if the claims are repeated by the people you trust. They could have been duped and/or brainwashed. If they didn't ask for extraordinary evidence and is convinced of such, then you should not trust their judgement, esp. when they are in no position to evaluate such. 

Misinterpreted Results

We are all affected by confirmation bias to one extent or another. If we hear some evidence, we are going to interpret them based on your experiences, while someone else may see the same data and interpret them very separately. Here's another example:

Monty comic / Is it going to be McCain or Obama?  (old joke on confirmation bias)
The sales pitch is designed to say "just enough" so you think it applies to you, and NOT tell you that parts that "this may not apply to you"... so you can misinterpret the results to be relevant.

Your mindset affects how you interpret the results, and willful blindness, Dunning-Kruger effect, and self-serving bias will lead you down the wrong path. 

Conflict(s) of interest

Most MLM companies in the "lotions and potions business" (nutritional supplements and cosmetics) employ scientists to carry out and publish research... But remember, those scientists may have conflict of interest, and if they did not disclose so, that is a huge ethical violation, as research can be misrepresented for personal or financial gain.

The worst example of which is (former doctor) Darryl M. See, who previously was a researcher at UC Irvine. He wrote a paper touting a Mannatech (MLM) product that he claimed has proven results in his study, and got it published in pretty famous American medical journal on nutrition. However, he never disclosed that 1) he had resigned from UC Irvine months before publication to pursue a career endorsing Mannatech (and was paid thousand per day for speaking gigs), 2) his wife had been a Mannatech rep for years, and 3) he made dozens of audio tapes sold at Mannatech conventions and seminars touting Mannatech products  4) His father was a personal friend of the journal's publisher.

When the news broke, UC Irvine had NO RECORD of any such study had occurred, but Mannatech's president already announced such to its legion of reps. In the end, Mannatech sued See, who jumped to a different company, before eventually forced to give up his medical license due to multiple medical ethics violations.

If someone suggests MLM as a way to solve your financial needs, you need to consider... Are they really doing it because they think it's the right thing for you to make some money... or is it because THEY, by recruiting you, will make some money off of you joining?

Stay skeptical of any and all claims, esp. when it is done with the ultimate aim to recruit you. 

Correlation vs. Causation

When two things happen together, it does NOT mean one caused the other, despite how much you feel one *must* have caused the other.

XKCD... Did cell phone cause cancer... or did cancer cause cell phones? 
Don't get the joke? Following is a 100% true graph...

Is there relation between Autism and Organic Food? They correlate to the third decimal point!?!?!
Yep, that's right, Organic food sales correlate with autism over 10 year period. Real data. But of course there's no causation... Yet that's the point: just because two things happen together doesn't mean one caused the other. It likely to be a mere coincidence.

Yet many MLMers want you to believe that their nutritional supplement made them healthier, their magic rub took away their pain, their magic juice / tea / coffee took away their diabetes, and so on, because those effects "only" appeared when they started using those stuff.

For those of you who watch Stephen Colbert, this is related to the difference between the truth... and truthiness. Or as Colbert himself puts it:
Truthiness is 'What I say is right, and [nothing] anyone else says could possibly be true.' It's not only that I feel it to be true, but that I feel it to be true. There's not only an emotional quality, but there's a selfish quality.
If you BELIEVE it's causation, you'll never accept it's merely correlation. If you believe your nutritional supplements made you feel better, or that special widget increased your car's mileage by 15%, you'll never believe accept that the supplement's merely placebo effect, and the widget is relying on your lighter foot as you FEEL less need to speed and get better mileage. You believe truthiness (There is an effect and I caused it!) instead of the truth (It's just correlation and coincidence).

Correlation is NOT causation (until proven otherwise).