BREAKING NEWS: First Zeek Co-Conspirators Plead Guilty to Federal Charges (updated)

online fraud (Photo credit: ivers)

According to Times-News of North Carolina, Dawn Wright-Olivares, former COO of Zeek Rewards, and her son stepson Dan Olivares, former CTO of Zeek Rewards, have accepted a plea deal with the Federal prosecutors regarding criminal fraud charges against them. It is not known if they will receive jail time, but according to documents filed with the court, together they have received over TEN ELEVEN MILLION dollars from Zeek, and have agreed to restitution as a part of a separate deal with SEC's civil fraud charges.

It is now known if other "insiders" will also get similar deals. Other Zeek insiders includes Paul Burks, Darryl Douglas, Alex deBrantes (Dawn's new husband) and possibly many other individuals.

According to PatrickPretty.com, the charges were tax fraud, conspiracy to commit tax fraud, investment fraud, and conspiracy to commit investment tax fraud. Wire fraud was also alleged but have been dropped as per the plea deal.

Furthermore, the document suggests that Dan Olivares had been negotiating with Federal prosecutors since JULY 2012, almost a MONTH before SEC closed Zeek for good.

MLM Mythbusting: MLM is a lot like ___________, therefore it is legit

Real Estate Agent... is it comparable to MLM?
(Photo credit: Wikipedia)

Many of the newcomers to MLM, finding people's natural reluctance toward MLM, tried to use bad facts or outright lies and misinformation to present MLM in favorable "familiar" terms, as they often just "inherit" such bad information from their uplines, who simply parrots the information from THEIR upline without any understanding of the issues. 

For these noobs, MLM is often compared to:

• Real estate, for its two-level commission system
• Franchising, for the any one can "own a piece of the action"
• Buying club, for the "share the low prices sell direct" type deal

Unfortunately, all these analogies just proves that these noobs have NO IDEA what they're talking about. Let me explain one by one. 

The Real Estate Analogy

When I posted my first MLM Critique piece, I was called "king of disinformation" (really?) by a guy who took exception to EVERYTHING I wrote, and his first example was "real estate". (scroll down to first comment)

Creating your own competitors?

What, that is how Realty firms work. They train people on the laws and teach them how to sell houses for them for 1/2 of the commissions. Then once the "new" guy gets his/her license they become direct competition. 

In MLM you should train people how to sell the products and help them develop new business builders. This is where the residual income is found, or as you put it your number 2 flaw.

 My reply to him:

RE: Creating one's own competition -- except real estate agents usually have to sign non-competitive clauses for X years upon joining and getting trained, and MUST work through a "broker" who gets half the commission, right? Hardly comparable to MLM, where there is NO training, NO qualification, NO non-competition period, and runs in the SAME social circles. Real estate agent may run in the same local area, but they usually work on the SAME listings and split the rewards if they share sales. RE is far more cooperative than competitive.

I actually took a real estate course to be a real estate agent, but I never bothered to take the test as I am not interested in the field. But the system is pretty simple. Buyer has an agent. Seller has an agent. Each agent with has a "broker" who's sort of a supervisor / boss. Standard commission on real estate is 6%, which is split 4 ways: 1.5% each for buyer's agent, his broker, seller's agent, and his broker.

Agents basically take a course, pass a test, get RE Agent's license, and work under broker, get a sales streak going, and either become a broker, or find a better market. Brokers train agents to go out and find more deals, both as buyers and as sellers, and as explained, gets 50% of their commission.

But as I said in my reply, trained agents usually sign non-compete contracts and minimum employment length for informal apprenticeship, and agents are NOT allowed to sell without a broker (legally forbidden). MLM has no such restrictions. Real estate also only have two levels. MLM can have bazillion levels.

NOT COMPARABLE.

Why Is Robert Kiyosaki Trying to Shoehorn MLM onto his Cashflow Quadrant in the WRONG Quadrant?

One of the most frequent pro-MLM arguments from fans of network marketing is "Robert Kiyosaki likes it!" (with an implied "he knows what he's talking about!")

Previously, MLM Skeptic has documented that Kiyosaki was actually an Amway rep (and a rather unsuccessful one, as he never touted his success there, or rather, NEVER EVER mentioned it) once upon a time, his book only became successful because it was "discovered" by Bill Galvin, a then diamond Amway rep, who recommended his sales organization, i.e. Yager Team, adopt it wholesale, as a part of the "Amway Tool Scam".  With the sales numbers "kickstarted" via MLM, Kiyosaki went to Warner Business Books and FINALLY (after YEARS of trying) got a real publisher instead self-publishing.

Thus, let's just say that Robert Kiyosaki is not exactly an impartitial expert when it comes to network marketing. Because he owes his entire publishing success to it, he's unlikely to say bad things about it.

But let's analyze the book Rich Dad Poor Dad, and its sequel, Cashflow Quadrant instead, and how it REALLY applies to MLM.

Most people who got the "recruiter's version" of "why you should choose MLM" will basically explain to you that MLM is in the "B" quadrant of Cashflow Quadrant, which looks like this, from a MLMer...

Employee works for Business owner, "has a job"

Self-Employed, or specialists, controls/owns their own job

Business owners own a system, so they can sit back and their business will continue to make money. (they hire employees)

Investor owns investments... money makes more money.

Sounds pithy, yes? Nothing *really* wrong with that. But... Where does a MLMer fit in on this quadrant?

The MLMers will say that it's in "B" quadrant. In fact, even Kiyosaki claimed that "network marketing is what I recommend for people who want to move to the B quadrant".

WRONG!

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!

MLM Absurdities: Once a Woo Peddler, Always a Woo Peddler?

Penta Water: proven woo on multiple contients (Photo credit: Wikipedia)

I was just reading a review of "Nature's Sunshine" nutritional supplement MLM on Oz's BehindMLM when I spotted a name I never thought I'd see again: Penta Water.

For those of you who don't know, Penta Water is woo... it claims to be ultrapure water that somehow is "better" for you, with some buzzwords like "improved cell survivability" and other random junk jargon, coupled with WTF? claims like "using these in medical tests improves test accuracy"... But they'll gladly sell you bottles of it for you to drink (at a premium, of course, at prices higher than even Evian water). It was so bull****, the British ad supervisory agency shut them down for making false claims.  It's so notorious, it has its own Wikipedia page.

James Randi (Photo credit: Wikipedia)

And in the US, it attracted the attention of no less than James Randi, probably the best known skeptic in the world, and the entire skeptic community in debunking their bull****. James Randi has long offered a prize of $1 million dollars of any evidence of paranormal supernatural, or occult occurances, abilities, or products... under proper observing conditions (i.e. reproducible). To date it had NOT been claimed even once. Penta Water was at one time announced that they will try for the prize, then wiffle-waffled, then tried t
o stipulate that they want to use their machine, which JREF said fine, as long as you can detect 37 out of 50 random users that drank your Penta Water. Then after a while, Penta Water stopped responding altogether, claiming it can't find a representative to oversee the test.

And the head of Penta Water was Gregory L. Probert.

Apparently, Mr. Probert had been pushing woo for a while, as he's now head of "Nature's Sunshine", after Penta Water went... down the drain (so to speak).

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. 

Bad Argument: I Only Listen to People Who Made Money

One of more "cultish" arguments raised by followers of a particular scheme (starts with V) is "I don't have to listen to you. I listen to people who made money! How much did you make, huh?"

A somewhat more polite version would be, "If I want to play basketball I want to be like Michael Jordan. If I want to play football I want to be like Peyton Manning. If I want to make money I'll want to be someone who has made lots of money, such as my leader _______ in ______."

This sounds like it made sense... For about 3 seconds.

Why would you NOT want to emulate the top billionaires in the US of A... like Bill Gates (Microsoft), Warren Buffet (Berkshire Hathaway), or Larry Ellison (Oracle), or heck, Mark Zuckerberg (Facebook)? Why would you suddenly lower your goalpost? What sort of crazy argument is that?

It's like saying, "I want to be the best in the field... EXCEPT when it comes to money!"

WTF?! Man... WTF.

But wait, there's more!