MLM Absurdities: How Scam Evolve Around MLMs and Pseudo-MLM Scams

Previously, MLM Skeptic have pointed out that many so-called "legitimate" MLMs have scams revolving around them in what's known as "lead generation" companies. They work by sending out teases to large number of people by selling them bogus "business starter kits", then sell the info of these people who bought a kit to affiliates desperate to sign people up. Company benefits twice. (Read full details on the Verge)

Herbalife had realized this and in 2013 have disallowed the use of most lead generations companies, esp. those ran or have close ties to its own affiliates. According to its own affiliate agreement, affiliates are prohibited from selling leads to each other, but these lead generations companies had NOT been scrutinized... UNTIL Ackman raised the pyramid scheme allegations.

While the Herbalife situation is rather unique, in that Shawn Dahl's company is a clone of his mother-in-laws pyramid operation outlawed in Canada (also for Herbalife), the phenomenon of creating potentially ILLEGAL business around supposedly legitimate companies is hardly unique to Herbalife.

Let us explore the underbelly of network marketing... You will learn about:

• How "fake" lead generation really works
• How "sales aid" companies perpetuate the "tool scam"
• How top affiliates get rich from training other affiliates
• How feeder matrix schemes feed pyramid schemes
• How fake ad posting requirements in Ponzi schemes spawn ad posting companies

Let's get started... First stop... How "fake" lead generation really works...

Scam Psychology: Why Scammers Use Testimonials, and Why You Should NOT Trust Positive Reviews

Why do advertisements almost seem to have testimonials? Because they do influence us.

Human beings are social creatures, and we do learn from each other, so when we hear testimonials, we pay attention. This is sometimes called 'social proof'. Some benefits from testimonials include:

• It builds trust
• It sound less sales-y
• It demonstrates the benefits of products/service

The problem happens when we do not apply "crap filter" to testimonials, and scammers start to seed the testimonials with fake entries. In fact, you can find people who will do fake testimonials for you for a mere $5.00 USD on Fiverr.com  Furthermore, in the modern world of information overload, people are less and less likely to fact-check or do "due diligence" on common stories.

Image via CrunchBase

It's estimated that in a few years, 20% of all reviews online (including testimonials) will be fake. The crowd-review websites such as Yelp, AngiesList, and so on who rely on testimonials and reviews are starting to combat this problem, and even government have started to notice such problems.

So you should NOT trust positive reviews, but seek to verify the claims.

And if you do find a sincere positive testimonial, it may STILL be "wrong"... in that the testimonial may be influenced by the five factors that result in a sincere but fake review.

BREAKING NEWS: NuSkin in Serious Legal Trouble in China

NUSKIN logo (Photo credit: Ellery Chen)

China usually don't advertise internal troubles, except when they are about to make an example of somebody. So when NuSkin was mentioned on People's Daily, the official newspaper of the government, people really noticed. And it's NOT in a good way. 

Just reading this paragraph from Xinhua (Chinese official press agency) is enough to send NuSkin stock price in the US plummet 30%. 

BEIJING, Jan. 16 (Xinhua) -- Local authorities have been told to investigate media reports that allege Nu Skin distributes false information and conducts illegal business in China, the country's State Administration for Industry and Commerce (SAIC) said Thursday.

The "media reports" in China had been posted in June or July 2013, as had continued research from Citron Research, since 2012! [Link 1]  [Link 2]

if you wish to do your own research, what you need to know is reports are in Chinese, so you will need to search with the Chinese name: 如新

When China represents 30% of the company's revenue, and sales had SHRUNK in the rest of the world vs. China, this is going to be a MAJOR blow to NuSkin, whether the reports are 100% true or not. And there's no doubt there is *some* truth to the media reports, esp. when it came from widely different sources, in different parts of the country, and even Citron's own investigative report.

But what's REALLY disturbing is the cult-brainwashing.

Bad Argument: "You can't live a positive life with a negative mind"

Recently, I ran into some MLM promoters, who, when confronted with problems about their particular scheme(s), tossed back this particular reply:

"You can't live a positive life with a negative mind."

Frankly, this is just sloganeering. And it's often used with a favorite: "Analysis paralysis."

Care to guess who was this quote attributed to? Miley Cyrus. Yes, *that* Miley Cyrus. Though this is apparently from her pre-Twerk days, as part of her song lyric. 

Of course, nowadays, when we think of a Miley Cyrus quote it'd be like this:

Obviously Miley Cyrus didn't invent the quote, but she sure made it popular in recent years. 

Of course, I'd tell you first that who said it wasn't important. If it's true, it's true no matter who said it. So, is the quote "you can't live a positive life with a negative mind" true or false. 

The answer is: it is true for life in general, but false in the context in which it was used. 

Now you're probably thinking: did you just give a weasel answer? 

No, I'll explain that in detail. 

Scam Psychology: The Need for Self-Delusion

English: Saul Bellow (Photo credit: Wikipedia)

MLM Skeptic has tracked various scams over several years, and it is always amazing to the MLM Skeptic how much self-delusion can the victims of a scam engage in, refusing the believe they were involved in a scam. Instead of probing for the truth and understand how they had been deceived, they instead invest their intelligence into justifying their own delusion that they could not possibly be involved in a scam.

The following quote seem to illustrate the point perfectly.

“A great deal of intelligence can be invested in ignorance when the need for illusion is deep.”
― Saul Bellow, To Jerusalem and Back

And indeed, the victims of a scam, so shocked by the news, have a deep need for illusion, or delusion, to prove to themselves that somehow, they could not have made a mistake, that everybody else must be mistaken.

Let us explore our cognitive biases, and understand how we came to behave irrationally.

Bad Argument: Lion Doesn't Lose Sleep Over Opinion of Sheep

Tywin Lannister armor (Photo credit: paul.hadsall)

Sometimes, when confronted with detailed criticism and lacking a proper reply, a MLMer would resort to sloganism, such as

"Lion Doesn't Lose Sleep Over Opinion of Sheep"

Apparently it had been adopted by Vemma followers as a general psych defense against criticism, as a substitute for "I don't care what you think. Ha!"

But what does this quote *really* mean?

Origin of the Quote

It was recently uttered by Tywin Lannister in "Game of Thrones" in the following form:

"A lion doesn't concern himself with the opinion of a sheep."

The origin of the expression seem to be lost in history. I've seen claims that it originated in Aesop's fables, in Homer's Illiad, and so on. What can be positively attributed was American author Vernon Howard (1912-1992), who wrote:

A truly strong person does not need the approval of others any more than a lion needs the approval of sheep.

The quote is a little on the wordy side, and let's just say Vernon Howard's books leans a bit toward the, uh... esoteric... With such words like "Cosmic Power", "Mental Magic", "Mystic Path", and so on...

It seems Mr. Howard merely rephrased Andrew Carnegie (1835-1919) who stated:

Do not look for approval except for the consciousness of doing your best. 

Screen cap of The Simpsons 3e07 "Marge be NOT Proud"
where Bart put a lampshade over his head and is beating on it
with his slipper so he can't hear Marge lecturing him.
Is that you, when faced with proper criticism?

Clearly, the intent of the quote is to explain that if you do something, you should not do it because other people approve of it, you should do it because YOU want to do it.

It is NOT about criticism. It is about approval.

Therefore any attempt to use the quote to deflect criticism, i.e. "I don't want to listen to your negativity", is wrong. It's be like Bart putting a lampshade on his head and beating on it with his slipper so he can't hear Marge lecturing him.

But let's explore a little deeper...

Bad Argument: Neglect to Mention, Revisited (How Crooks are Riding the Coattails of Bitcoin to scam people)

Do you ever hear something, accepted as "yeah, that's cool", only to realize later that you've been hoaxed or been told only half or less of the story? If so, you've been victim of "neglect to mention" bad argument.

The problem is with the modern tech devices such as smart phones and tablets, we often do "like" or "retweet" or "repost" without doing any fact-checking. I admit I sometimes do stuff like that, but I generally do it to cute-sy stuff like cute animals, funny pictures, and so on. I don't form opinions about something important, like money, based solely on one-sided info... Or I try to. And I've been hoaxed recently when I reposted that story about that alleged ex-marine waitress who got no tip because she claimed the family took her for a lesbian.  I didn't look carefully and later when it was revealed to be a hoax, I was embarrassed.

I vowed to fact-check stuff I repost or share or comment from now on. But apparently some people don't, as they've been influenced by half (or less) of the story.

Recently some celebrity / news / Bitcoin worshipper made the following comment in response to my opinion/rant about Bitcoin is too risky.

Forgive me K Chang. But Bitcoin has already been around since 2009 (5years). Even Sir Richard Branson And Lamborghini is taking Bitcoin payments.
Neither you or I have a crystal ball. But I would rather listen to Billionaires like Sir Richard Branson that have vision, rather than an opinion shot from the hip :-)

Nothing wrong with Lambourghini or Sir Richard Branson accepting Bitcoins... Except neither are true, or at least, not completely true.

Q: Is Sir Richard Branson accepting Bitcoins?

A: Sort of. Virgin Galactic, the $250000 USD spaceflight takes Bitcoin

Source: http://www.theverge.com/2013/11/22/5133362/richard-branson-endorses-bitcoin-says-virgin-galactic-will-accept-the

Analysis: Well, that's not so impressive now, is it? Can you buy a Virgin Atlantic ticket with Bitcoin? Apparently not! I guess if you're a billionaire you don't care if you accept some Bitcoins and they become worthless... And the PR value alone (getting mentioned in every newspaper in the world) is worth it.

Q: Is Lambourghini accepting Bitcoins?

A: No. One Lambo dealer in Long Beach claimed to accepted Bitcoins for a brand new Tesla Model S. However, later they admitted they asked the payer to convert it into dollars first.

Source: http://www.theverge.com/2013/12/6/5181864/lamborghini-dealership-starts-accepting-bitcoin

Again, the dealer is relying on the PR value, getting mentioned in every newspaper in the world (or at least the US) is worth it. Besides, they even made the guy convert the payment into dollars first. They will lose nothing. It's a publicity stunt, nothing more.

Later the commenter did a shifting goalpost, and claimed that it was all Lambo dealers in UK that's accepting Bitcoins, but further research got NOTHING, and the comment has produced no proof. Heh...

The commenter has made a fundamental mistake of not doing his/her own fact-checking, and fallen for the "sensational headline" soundbites, and then applied that mistaken impression as evidence to support a premise, that Bitcoin is NOT as risky as I claim it is.

Bad Argument: If it were a scam it would have been busted by cops long ago!

Previously we had covered the bad argument: Wall Street Legitimacy Gauge, where being traded on Wall Street, for a long time, was used as "proof" of legitimacy when it's proven that Wall Street don't care as long as the stock prices go up.

Today we'll cover a parallel bad argument: because the government(s) haven't closed them for such a long time (5 years, 10 years, or even longer) they must be legal beyond reproach.

Very often, the fact that the network marketing company had been around for more than 5 years was touted by some of the most junior reps as a sign of legitimacy (both to themselves and to others), with an implied corollary "If they were illegal government would have shut them down long time ago!"

If you put it in the A therefore B form, it would be

a) company has not been deemed illegal for X years
therefore
b) company will never be deemed illegal in the future

Logically, this doesn't fly, as it's "appeal to age/tradition" fallacy.  It is... because it always had been. That's not a reason, that's just a statement.

Frankly, there is one example in 2013 that easily disproves this bad argument... Fortune High Tech Marketing, otherwise known as FHTM. FHTM was founded by Paul Orberson in 2001, and closed by FTC and several state attorney generals in January 2013. Took the authorities 11 years to close this pyramid scheme.

However, the problem apparently was even more endemic than that... the problem is the authorities... In that the victims have to complain for the authorities to act... and Pyramid/Ponzi schemes are very good in keep its victims in the dark with the mushroom treatment.

BREAKING NEWS: Is WCM777 / Kingdom 777 going to be banned in Brazil?

TelexFree seem to be focusing all the attention of Brazilenos nowadays, it's rather interesting that some OTHER scam got mentioned along with TelexFree... But it did... via an official press release on the Ministry's website, issued by Prosecutor's Office of Consumer Protection:

http://www.mpac.mp.br/caso-telexfree-nota-de-esclarecimento-2/

And here's the automatic Google translation (click on link above to read original Portuguese)

On the same occasion, in view of the fact that news reached the public prosecution brought by people who invested in financial pyramids by foreign websites and does not receive any promised amount, especially by Chinese website, which has no relationship with the Ympactus , it is good to clarify, investors should be aware that standard does not exist on the cyberspace, and that there are only a few tried allowing the process tramite the Brazilian courts without prejudice to the foreign investors seek justice in the case, the Chinese with all the difficulties that this represents. These legal issues should serve to alert everyone of the risks they run.

Is there some OTHER Chinese website offering financial pyramid that's heavily promoted by Brazilenos?

Nope, this can only be Ming Xu's WCM777, i.e. Kingdom 777

There's a couple more countries in South America though...  They've only been outlawed in 3 so far...

Related articles

• BREAKING NEWS: WCM777 and TelexFree now ILLEGAL in Peru
• BREAKING NEWS: WCM777 settles with US State of Massachusetts for Securities Violations
• BREAKING NEWS: WCM777 now ILLEGAL in Colombia, promoters may face arrest
• BREAKING NEWS: WCM777 admits being an ILLEGAL US business, may be involved in insulting Muslims?

MLM Absurdities: MLMers Encouraging College Kids to Drop Out and Do MLM Full-time... Crazy.

One of the most dangerous absurdities is the notion that MLM offers an even playing field, therefore you need NO education to succeed in MLM, and thus, college is not necessary and a complete waste of money (thus you should drop out). Plenty of people dropped out of college and went on to successful ventures.

This is often used by MLMs that concentrate on younger people, such as Vemma, with their Verve energy drink line, signing college kids and even some high school kids as their affiliates (formerly "brand partners").

We have to look at this myth in separate pieces.

• Does network marketing really offer a level playing field? 
• Can *any one* succeed in network marketing? Or is talent / education required?  
• Is College a waste of money? 
• Are the the successful college dropouts actually relevant to the premise? 

Does Network Marketing Really Offer a Level Playing Field for All? 

One of the often repeated myths is that NM is a level playing field, in that anybody can succeed. 

Frankly, that is absurd. The idea that you have an upline and s/he benefits from YOUR work should tell you this is NOT level at all. He got there first. 

Furthermore, there are a LOT of circumstantial evidence that the industry is plagued by insider advantage and cronyism... just like the "regular corporate America". 

Did you know that a mother-daughter team in Vemma, both "Ambassadors" (making 15000 a month in commissions) actually is related to the head motivational speaker for Vemma, and the speaker is a close friend of head of Vemma BK Boreyko and his parents? 

Did you know that a member of Herbalife's Board of directors has TWELVE family members and relatives among the top-tier "President's Team"?  

Network Marketing is not as level as they want you to think. 

Can any one succeed in network marketing?

I've had network marketing enthusiasts claim that the top income careers all require heavy education or extreme amount of physical talent, like doctors, engineers, sports stars, and so on... Except network marketing.  The claim is anybody can succeed in network marketing, and the playing field is even. 

At first glance, this sounds reasonable, as the top twenty income careers based on US Bureau of Labor Statistics are mostly medical and engineering careers. However, is it true that any one can succeed in network marketing? 

US Bureau of Labor Statistics 2010 "20 highest paying occupations, by median annual pay, 2010 census data"
The top entries are doctors, surgeons, engineers, lawyers, and very senior managers

The idea that you need no education to succeed in network marketing is actually quite ludicrous. At the minimum, you need to learn how to market. It is network MARKETING, after all. While some people have a talent for it, all people need some tests to assess their skills and add some remedial lessons for the areas they are lacking. In a Harvard Business Review blog entry, the author estimated that 70% of top salespeople have innate talent or natural instincts that give them an edge ins ales, while 30% had to learn to sell, having no such talent.   

It's safe to say that if you had not specialized in sales career before, you probably don't have much sales talent or instinct. Thus, let's assume that you have no such talent or instinct. What are your chances of 'success'?

According to the same author, given 100 people with no talent, 40% will fail, 40% will do average, and 20% will do above average, in a sales career.

Keep in mind that in network marketing, in almost every major MLM, "average" means making a lot less than 2000. This is the figure directly from Direct Selling Association (DSA). As of 2012...  15.9 million people sold 31.63 billion worth of stuff in the US.

Now if you do the math... 31630/15.9 = 1989.31 dollars... that's average RETAIL sold per person.

That's not profit. That's just retail sold. Profit would be less than half of that, perhaps a LOT LESS. That's less than $1000 PER YEAR PER PERSON.

Extrapolating from that 40/40/20... That means 40% of you will earn practically nothing. 40% of you will earn just a little (less than $90 a month), and maybe 20% of you will actually earn enough to call it a part-time job. And a tiny percentage of that 20% will really really earn a car or whatever.

Saying that you *can* succeed in network marketing without an education is like saying anyone born in the US of A can be president. While factually true, it is of no practical use. It's like saying any valid lottery ticket has a chance of winning. Duh!

The reality is you will have to spend time and money and effort to become a good salesperson... assuming you have the right personality traits to be one. And you will keep paying for seminars, meetings, training calls, workshops, and so on and so forth, just like any other education.

Also keep in mind that there are TWO colleges in the US that offers courses in network marketing.

MLM Absurdities: Do MLMers Actually *READ* What They Post?

With the ease of simple share / retweet / like and similar buttons on social media, it seems we are less and les likely to perform any sort of fact-checking and due diligence on the information we "endorse" through our "like" or "share" and similar actions. This had lead to a plethora of spreading rumors innuendos, and just general "crap info", esp. when the original reply was misinterpreted.

Revanchist over at YPRPariah had a great example... Is it true that Coca-Cola offered BK Boreyko 2 billion bucks and he turned them down? Some Vemma noobs seem to think so and every once in a while tries to tweet this:

Tweet: "Coca cola offered Vemma 2.2 billion
dollars to buy them out. Vemma said no because
it will be worth way more. Still think it's a scam?"

The problem is there was no such offer EVER from Coca Cola. Whoever spreading this story was spreading crap info. Even BK Boreyko had debunked this... but only if you tweet him directly, like this:

BK Boreyko: Coca cola offered #Vemma 2 billion to buy them,
CEO @bkboreyko turned them down*  Actually no truth to this rumor. Thx.

But where did this rumor come from?

New Years Resolution for Network Marketers (and Wannabes)

It's New Year's Eve, December 31st, 2013, and a New Year is almost upon us.

So I'd like to propose some new year's resolutions for the various network marketers and wannabes. Here are 7 simple items.

• I will not be hurried into making a decision I shall regret later. 
• I will not be swayed into making a decision after only hearing a one-sided presentation, no matter how good it sounds. 
• I will learn how promoters use psychological coercion on me and others so I can avoid such 
• I will not make bad arguments by using logical fallacies and irrelevant facts as that would only make me sound ignorant and stupid if I make such bad arguments. 
• I will fact-check and perform due diligence on claims I repeat. I shall remember 'Extraordinary claims require extraordinary evidence'. (Arthur C. Clarke)
• I will learn about pyramid schemes and Ponzi schemes from real sources, such as lawyers and scambusters, rather than people who don't know what they are talking about. 
• I will learn all I can about the career I an interested in, such as network marketing, even "negative" stuff that nobody seem to want to talk about because I don't want to be blind-sided by anything.  

All of these are for personal improvement, and none of them are very hard.

MLM Absurdities: Due Diligence is NOT Analysis Paralysis!

One of the more subtle reality inversion techniques used by scammers (and unethical sales people), and cloned by clueless MLM noobs, is misrepresenting "due diligence" as "analysis paralysis". 

Analysis paralysis usually refers to an organization attempting to analyze a certain proposed project or change and the effect it would have, but so much time and resource was spent on the analysis that the project never was actually adopted.  For an individual, it could be that s/he is attempting to reach a decision, but that decision has so many factors s/he was overwhelmed by combination of scope and interactions and end up making no decision at all.

However, a decision to "not participate because I clearly have no idea what I am getting into" is a decision, and reaching that conclusion is NOT analysis paralysis.

Yet many MLM veterans and noobs will mischaracterize their moment of commitment as "overcoming analysis paralysis". Here is one example from MLMBlonde(dot)com:

Or they may have been polite but also declined and you were crushed
SO you went into what I call "Analysis Paralysis".
You began to question if this could work for you. You start to analyze
your decision.
YOU FREEZE. You begin to think something may be WRONG with you
or you made a bad decision, after all, if those closest to you don't "GET
IT", how you possible speak to a stranger.
You sit back and think and think , and then you just NEVER
get up the nerve to move forward. You lose your excitement. You
just DO NOTHING. 

The problem is MLMblonde had NOT described analysis paralysis. She described "self-doubt paralysis", but slapped the "analysis paralysis" label on it. 

And she's not alone in doing so. Many MLM noobs seem to think any sort of doubt is analysis paralysis, even a full on analysis (i.e. "trust, but verify"). 

And due diligence is NOT doubt. 

Scam Psychology: The Problem of Willful Blindness, Recklessness, and Negligence

Horatio Nelson, origin of "willfully blind"?
 (Photo credit: Wikipedia)

In studying various reactions to criticism by MLM participants, it is interesting that so many of them are afflicted with "willful blindness", and it is a condition that can cause serious financial and legal problems.

The most popular example of "willful blindness" is an apocryphal story of Admiral Horatio Nelson in Battle of Copenhagen. When given a flag signal by a cautious fleet commander that Nelson may "withdraw at his discretion", and asked by a subordinate what shall he do, Nelson reported raised his spyglass to his blind eye (with an eye patch and all), then replied "I see no signal to withdraw", and continued the attack. The story was often told as if Nelson disobeyed a direct order, but the flag signal is "withdraw with commander's own discretion". This gave us the expression "turning a blind eye", and the term "Nelsonian Knowledge".

In modern times, "willful blindness" is defined as a situation where a participant INTENTIONALLY puts him- or herself in a situation where s/he cannot / does not know the facts that would make him/her liable for civil or criminal acts s/he had participated in. And it is a legal term. For example, traffic mules (those who smuggle contraband across borders) asked to be blindfolded during loading process so s/he does not know what's being trafficked. And thus, s/he want to argue they are innocent victims and thus should not be counted as accessory to trafficking.

The court had NOT accepted this defense, and has taken the position that willful blindness is merely legal sophistry, if it can be proven that the participant knows that such facts exist, and has taken deliberate steps to isolate him-/herself from knowing such facts. This case was even taken up by the Supreme Court back in 2011, when it ruled a file sharing service cannot disclaim responsibility for illegal acts of its users just because it doesn't want to see what's being shared, i.e. willfully blind to the copyright violations.

This is different from recklessness and negligence. Recklessness is knowing such risks of damaging facts do it any way, and negligence is "should have know such risks, but did not".

To illustrate with an example, using the smuggler mule as example:

recklessness: I know it's illegal, I'll take my chances

negligence: I should have known it's illegal, but I honestly thought those were nothing harmful...

willful blindness: I have no idea what they put in my luggage. I never asked. Don't need to know.

And many MLMers suffer from all three: recklessness, negligence, and willful blindness.

Scam Post Mortem: How Long Had Zeek Been Investigated Before They Were Closed?

When did US Secret Service start
investigating Zeek Rewards?
(Photo credit: Wikipedia)

With clawback lawsuits about to start against the "net winners" in the Zeek Ponzi scheme (there's still time to settle, lest you enjoy being served with a lawsuit) one the the questions burning on the minds of the victims (besides "when do I get my money") is how could the Zeek ponzi scheme lasted as long as it did? When did they, the insiders (Paul Burks, Dawn Wright-Olivares, etc.), knew they were being investigated? Why did they continue to perpetrate the fraud rather than shutting the whole thing down?

Part of the answer on how long the insiders had known about the government investigation was hinted in the SEC press release on Dec 20, 2013 where they announced that SEC has brought charges of various securities law violations against Dawn Wright-Olivares and her stepson, Dan Olivares, respectively COO and CTO of ZeekRewards ponzi scheme, that they knew and covered up evidence of wrongdoing. The civil charges has been settled with both of them paying about 11.4 million dollars together, but the CRIMINAL charges being filed by the US Attorney's Office is still pending. 

Let us then put several more documented dates in a timeline so we can visualize it more clearly:

• circa early April, 2012 -- Zeek Rewards suddenly cancelled all members from certain European countries with a bogus explanation and only offered original money back
• April 18, 2012 -- Zeek Reward red carpet event in Lexington, NC
• circa end of May, 2012 -- Zeek posted a profit share of 8.9%, then told everybody they had a manual decimal displacement, it's really 0.89%. This basically proved that the percentage was not calculated, but manually entered
• May 28, 2012  -- over Memorial Day weekend, Zeek suddenly announced that all Zeek checks have to clear before June 1st or they are void. 
• June 4th, 2012 -- in a "training call" hosted by Dawn, she announced that 700 Zeek members in Montana can no longer participate due to some legal problems. 
• June 5th, 2012 -- in another "training call", Dawn announced eWallet through NxPay, then claimed that unless other affiliates put more money into Zeek's eWallet, Zeek cannot pay people. 
• June 6th, 2012 -- Zeek announced they no longer accept personal checks 
• June 6th, 2012 -- Dawn attempts to white-wash eWallet issues with now infamous "burger Analogy" (i.e. if you buy from BK you can't pick up your burgers at Wendy's, so if you buy bids with STP you can't get paid from NxPay)
• June 8, 2012 -- Dawn Wright-Olivares appeared with Troy Dooly on ACES Radio hosted by Jim Gillhouse. Dawn claimed that Burks "manages all that" when asked how was daily profit share calculated. 
• July 7th, 2012 -- North Carolina Office of Attorney General issued an information request to Zeek, but this was kept secret by both parties
• July 24th, 2012 -- Keith Laggos, Zeek consultant, "fired" for promoting Lyoness, revealed to be receiving 40K a month through Zeek as a Zeek member.
• July 30th, 2012 --  Darryl Douglas, major insider at Zeek, dropped out of sight
• August 1, 2012 -- North Carolina OAG request of Zeek documents was made public
• Circa August 6, 2012 -- training classes and red carpet event scheduled for August 22 cancelled
• August 16, 2012 -- Secret Service agents closed the doors of Zeek Rewards and RVG. 

Now, when did the Feds start investigating, and when did RVG / Zeek became aware of the investigation? 

Bad Arguments: Misrepresenting Pyramid Schemes, esp. by people who should know better

Some of the most persistent bad arguments presented by network marketers (not just noobs, but also many veterans) are various misconceptions about pyramid schemes, and using those misconceptions to explain how network marketing is NOT like that. However, that explained nothing since the rebuttal is based on a misunderstanding.

Today, we shall explore a website called "Engineered Lifestyles" by a guy named Jamie Messina, who claimed to be an automotive engineer before getting bitten by the network marketing bug. You'd think that an engineer would know about a bit of critical thinking... but let's look at the evidence, rather than presumptions.

Okay, what does Jamie Messina say about pyramid schemes? This can be found at:

http://engineeredlifestyles.com/mlm/pyramid-scheme.html

For a page with the title "Recognizing Pyramid Schemes, and subtitle: Is MLM a Pyramid Scheme?", the page is surprising light on information, as there is not a proper definition of pyramid scheme on this page at all. Instead, the entire page is actually a sales pitch about network marketing in an attempt by pointing out the pyramid like structure is all around us therefore a pyramid shaped organization is nothing to be afraid of.

While technically correct, that pyramid shaped organization is all around us and nothing to be afraid of, it is IRRELEVANT as it has NOTHING to do with a "pyramid scheme". This is a very common obfuscation defense even by famous "advisors" such as Robert Kiyosaki. A pyramid scheme is a type of FINANCIAL FRAUD and nothing nothing to do with organizational shape of an organization.

Jamie has gotten off to a bad start. Let's see if he can redeem himself in the second half...

Scam Psychology: Why Do People Believe Celebrity Endorsement of Woo Products?

English: Jenny McCarthy (Photo credit: Wikipedia)

Celebrities pushing bad science and bad medicine is nothing new.

Jenny McCarthy -- Playboy model, actress, "celebrity", "former" anti-vaxxer, pusher of various bogus autism "treatments" (basically told parents "try anything (whatever it costs)")  [ see wikipedia entry ]

Suzanne Summers -- actress, singer, celebrity, and promoter of "Wiley Protocol", a hormonal replacement therapy that was NEVER proven with scientific study and may be dangerous, among other things. [ see wikipedia entry ]

English: Lisa Oz and Mehmet Oz at the 2010 Time 100. (Photo credit: Wikipedia)

And let's not forget the Oprah spawned... Mehmet Oz, i.e. "Doctor Oz"...  who seems to often fail basic grasp of science despite his medical training, as he had featured such pseudoscience on his show as homeopathy, Reiki (his wife's a Reiki master), bogus report of arsenic in apple juice, bogus "magic" ingredient of weight loss, and "curing homosexuality" among many others. [ see wikipedia entry ]

People who follow these and many other celebrities out there giving BAD ADVICE are very likely to take these people's BAD ADVICE seriously... JUST BECAUSE THEY ARE CELEBRITIES. 

And their reasoning process is virtually the SAME as people who got scammed out of money.

Just what *are* Your odds in Vemma? Is there an "insider's club" in Vemma?

Previously, MLM Skeptic have, through SaltyDroid's little expose on the Tartol Clan of Herbalifers, illustrated how what you thought are good odds are actually not so good for you average Joes in Herbalife, though absolutely great for the "insiders". John Tartol is on Herbalife board of directors, and 12 of his clan are among the top earners in Herbalife. Still think you have the same odds as them?

Science_getting_rich (Photo credit: kas10900)

Today, we shall explore Vemma... and whether someone closely related to the top of the company, unlike you, has an edge that you don't.

Any one heard of Bob Proctor? That's him in the middle there, in that beige suit. He was part of "The Secret", or "law of attraction", which, IMHO, is just positive thinking wrapped with mysticism and bogus psycho-babble. But that's not what's important here.

Turns out his wife, Linda Proctor, has rank of 'ambassador' in Vemma, with estimated intake of $14500 a month, according to a "top earners" website.  She was even profiled by Vemma themselves in a short video (where she goes to shop in some fancy store and have lunch in fancy restaurant) earlier in 2013.

According to Vemma dashboard, Mrs. Proctor appeared at "Star Presidential" rank on June 2011.

Which is actually... "level 10" on Vemma chart. Ambassador is only one level above that. And according to separate Vemma news, she achieved that on November 2011, the first Canadian to do so.

What's her secret? She claims it's great salesmanship and great inspiration from her husband, Bob Proctor.

What if it's not that? What if she has an "inside track" and has been "predestined" to success?

What if I told you that her husband, Bob Proctor, is a personal friend of Vemma head BK Boreyko, and Bob Proctor had appeared at many times at Vemma conventions as keynote speaker? Would that affect your view of her "success"?

What if I tell you that at least one OTHER person in the Proctor household is also a Vemma ambassador?

Robert Kiyosaki's Faustian Bargain With Network Marketing Is Confirmed

Previously, MLM Skeptic has raised the question whether Robert Kiyosaki had made a Faustian bargain with Network Marketing 

That's when someone pointed me to this sound-bite from Amquix, which confirmed that Kiyosaki was a downline in Amway under Bill Galvin.

http://www.amquix.info/sounds/kiyosaki_in_amway.mp3

Bill Galvin was a "diamond" level sales leader in Amway from way back when. In fact, he was thanked in the dedication / acknowledgement page of "Rich Dad Poor Dad". Here's a screenshot from the Amazon "look inside" and there's the name "Bill Galvin" right there. In fact, if you Google the names on this list, most of them *are* high-level Amway IBOs.

This is also confirmed via research done by SimpleDollar

Amway Global (Photo credit: Wikipedia)

He [Robert T. Kiyosaki] was involved in several business deals (most notably, nylon Velcro wallets) in the 1970s and 1980s which fell apart, leaving him bankrupt in the mid-1980s. In this timeframe, he became heavily involved with Amway, a multi-level marketing system, and began to cultivate relationships with many of the “top” members. In 1985, Kiyosaki founded Cashflow Technologies, a company that was designed to pitch a series of books and other educational materials that eventually evolved into Rich Dad, Poor Dad. 

By the mid-1990s, Kiyosaki had self-printed Rich Dad, Poor Dad and it was starting to appear in wide distribution among members of the Amway/Quixtar organization, as individuals higher in the pyramid would recommend it to people further down the chain looking to get ahead. 

Yet you NEVER hear Kiyosaki talk about his MLM career, did you? Nope. It was NOT mentioned in ANY of his books.

Perhaps he doesn't want you to know, hmmm?

But wait, there's more!

Scam Psychology: Intuitive Mind vs. the Rational Mind

A scammer is always leading you into getting the wrong impression of him, and thus of his scheme, and thus, this calls for you to think as little as possible. How that works requires explaining how your mind works.

Basically, your mind has roughly 3 parts... Reflexive, Intuitive, and Rational.

The reflexive mind (something that's so ingrained in you, it's a reflex, like move your hand away from something that causes pain, such as hot plate, electric shock, and so on. Thats completely automatic that you don't even have to think about it. It's in your subconsciousness.

Daniel Kahneman (Photo credit: Wikipedia)

The Intuitive mind handles something that is not completely similar (i.e. handled by reflex), but is similar enough that you are comfortable the recognition. This is "common sense", "going by feeling", "first impression", and so on. This is also sometimes known as "System 1" per Daniel Kahneman's book "Thinking... fast and slow".

The Rational Mind handles the rest, when something requires deeper thought beyond intuition and impression, such as logical and scientific analysis. This is also known as "System 2" per Kahneman book.

Scammers can't do anything about your mind... except how you perceive the scheme, so they will do all they can to make their scheme look familiar, and thus you NOT engage the rational mind, but stay with the intuitive mind. There are many ways to do that, but the the 4 basic techniques are

• Priming the idea
• Clear Visual Display
• Keep you in good mood
• Repeated experience

If they can use these four techniques on you, and you are not the pensive kind (i.e. you prefer to think things over, instead of doing things on impulse)  they can basically make you forget about "due diligence" and join just because "it sounds good".  

And that "first impression" will be wrong.. because the scheme was designed that way to take advantage of your cognitive biases to give you the wrong impression.