Thread: MarketWave, Inc. - Len Clements

I have another question. Are the numbers of distributors counted as such just because they are buying the products for personal use/consumption and not selling it/them? Are those people in the mix of numbers as well as though selling the products? Is anyone who purchases the product(s) called a "distributor"?

ChrisDoyle thinks that distributors that are buying for personal use are customers. He thinks their reason for buying determines their classification. Unfortunately for him the courts and even most pro-MLM attorneys count a customer as a purchaser who is not participating in the payplan.

Kevin Thompson, Len Clement's goofy MLM attorney friend, insists that customers are outside the payplan, but thinks a good compnay has 30% of its sales come from customers. That is laughable. The reps can't make money without the vast majority of purchasers being retail customers. That is why Harvard does not teach MLM courses. MLM is pure scam as no business in the real world marketplace can compare!

Soapboxmom

Remember this one:
06-01-2009, 10:24 AM
Soapboxmom
Taking a much deserved vacation!! Love all you guys!!!
Join Date: Sep 2005
Location: Mars
Posts: 2,256



Re: The History and Truth of Network Marketing
ChrisDoyle,

Here is some info on court cases discussing retail sales in MLM.

http://www.mlmconsultant.com/mlm_law.htm
Quote:

The U.S. FTC has been moving steadily toward measuring the amount of Sales to Distributors compared to the dollar amount generated by sales to end consumers (Customers that do not belong to the pay plan). If there aren’t enough Customers, the MLM Company is considered a Pyramid Scheme. Regulators have found that pure pyramid schemes don’t have any end consumer customers. The definition of a Customer is a person that only buys product or services and doesn’t belong to the compensation plan and has no expectation of making money. The FTC Consumer Affairs people said in public speeches (not written rules) that MLM – Network Marketing Companies need to have a minimum of 50% Customers (that do not belong to the pay plan) to prove they are not a pyramid scheme. ....

"CUSTOMERS" CASE #1

FTC BURNS BURN LOUNGE!

The money in Burn Lounge was coming from recruiting.... Not the 50% of income from Customers/Product Sales the FTC wants.....

CASE #2. In this case with Mall Ventures in 2004 the FTC took court action but did not shut the company down.

CASE #2 PARAGRAPH 9. “Retail Sales” means sales of products, services, or business ventures by defendants, their successors, assigns, agents, servants, employees, and those persons in active concert or participation with them to third-party end users. Retail Sales does not include sales made by a participant in a multi-level marketing program to other participants, recruits, or the participant’s own account....

"CUSTOMERS" CASE #3

The FTC and Federal Marshals walked into SkyBiz offices on 31 August 2001 and shut the company down. This is normal for the FTC since they don’t want to fight the legal power MLM and other types of companies have. They get a preliminary injunction in secret, walk in, and shut the company down.

This is from 2 Jan 2002 FINDINGS OF FACT AND CONCLUSIONS OF LAW AND ORDER FOR PRELIMINARY INJUNCTION REGARDING SKYBIZ INTERNATIONAL LTD. .For complete case see CD-ROM #1 FTC that comes with the law book. Please note the critical elements (causes for action) presented on pages 14 and 15 of the lawsuit in this case. The third paragraph is the newest refined and the biggest change in the Customer direction for the FTC in determining MLM vs. Pyramid Scheme. The height of humor (or despair) was when SkyBiz sent out this email looking for Customers a couple of days before the trial started. Have a laugh, or frown, Skybiz did not even know if they had customers that were end users! Read This:

aaa@attglobal.net; Leslie Tumlin (*********'s buddy in Local Ad Link) ; Sent: Tuesday, September 18, 2001 12:04 PM

Subject: Trial Preparation Friends of SkyBiz:



Urgent To All SkyBiz Members

We need the names and addresses of EVERY SATISFIED consumer that bought the SkyBiz products and have never sold the business opportunity. We also need the names and addresses of five VERY ZEALOUS Associates who are in the program, but haven't made a whole lot of money. Please keep in mind, we need consumers and associates who would not be reluctant about testifying in court and who presumably are in the United States (for travel purposes). If any of the potential witnesses you suggest are outside the U.S., please identify what country they're in. I need this information at your earliest convenience. Thank you.

Martin Allen Brown, General Counsel

SkyBiz

World Service Corporation

(Author Note) In this following paragraph, the FTC shows it’s push for “retail sales to customers who don’t belong to the pay plan.”

CASE #3 PARAGRAPH 15. A lawful multi-level marketing program is distinguishable from an illegal pyramid scheme in the sense that the "primary purpose" of the enterprise and its associated individuals is to sell or market an end-product with end-consumers and not to reward associated individuals for the recruitment of more marketers or “associates” See Gold Unlimited, 171 F.3d at 483-84 (suggesting that based on a statutory survey of state criminal laws against pyramid schemes, this is a difference). See also Ger-Ro-Mar, Inc. v. FTC, 518 F.2d 33. 36 (2d Cir. 1975) (explaining that the distributors profited by earning commissions from their own sales and those of their recruits); In re Amway Corp., 93 F.T.C. 618, 716 (1979) (sponsors do not make money from their recruits' efforts until a newly recruited distributor begins to make wholesale purchases from his sponsor and sales to consumers) ....

"CUSTOMERS" CASE #4

FTC Press Release: Consumers paid a registration fee to join the NexGen program, and most also purchased a “WebSuite” including the Internet Mall and related goods and services. A “Basic WebSuite”cost $185, including the registration fee, and a “Power Pack WebSuite” cost $555. NexGen allegedly claimed that “each activated business center has the potential to earn up to $60,000 per week.”

CASE #4 PARAGRAPH 24. NexGen also paid commissions to affiliates on purchases from Internet merchants that resulted from visits to the affiliates' malls. Similarly, affiliates earned commissions from purchases directed to third-party Internet merchants as a result of visits through the malls of their downline. The commissions NexGen paid on these purchases were relatively small compared to the commissions it paid on sales of websuites to new recruits....

"CUSTOMERS" CASE #5

CASE #5. In the “BigSmart” case, you can see that the FTC is refining its wording of end user and customer. This was a walk in and shut down operation by the FTC and Federal Marshals. You can see some outline of changing requirements:

CASE #5 Subparagraph C. “Prohibited marketing scheme,” means a pyramid sales scheme, Ponzi scheme, chain marketing scheme or other marketing plan or program characterized by the payment participants of money to the program in return for which they receive (1) the right to sell a product or service and (2) the right to receive in return for recruiting other participants into the program rewards which are unrelated to the sale of products or services to ultimate users. Rewards are “unrelated” to the sale of products or services to ultimate users if rewards are not based primarily on revenue from retail sales.

CASE #5 Subparagraph D. “Retail Sales” means sales of products, services, or business ventures by Defendant, his successors, assigns, agents, servants, employees, and those persons in active concert or participation with them to third-party end users. “Retail Sales” does not include sales made by participants in a multi-level marketing program to other participants, recruits, or to such a participant’s own account.

CASE #5 Subparagraph E. “Ultimate users” are purchasers of retail sales.......
"CUSTOMERS" CASE #6

On December 9, 1999, the FTC filed suit in U. S. District Court for the District of Maryland seeking a preliminary and permanent injunction and a legal asset freeze against Dallas-based 2Xtreme Performance International that was a Pyramid Scheme (bad one) disguised as an MLM – Network Marketing Company. The FTC legal complaint alleged that the defendants used Web sites, direct mail, infomercials, telemarketing and seminars to convince consumers they could make substantial income by investing in their multi-level marketing scheme, which marketed nutritional supplements, beauty, weight-loss and other products. Marketing materials represented that consumers could expect to earn enough MLM – Network Marketing income to retire in two years, while the pseudo MLM Company ripped them off for $10,000 - $30,000. We can see the shaping of precedent law in the following paragraph. The Final Settlement said:

CASE #6 Subparagraph F. “Prohibited marketing program” means any marketing program, Ponzi scheme, chain marketing scheme, or other marketing plan or program in which a person who participates makes a payment and receives the right, license or opportunity to derive income as a participant primarily from: (i) the recruitment of additional recruits by the participant, program promoter or others; (ii) non-retail sales made to or by such recruits or their recruits; or (iii) any other payments made by recruits. For purposes of this Final Order, a "prohibited marketing program" does not include a marketing plan or program in which the program promoter demonstrates to the defendant that it has instituted and enforced rules that have the actual effect of ensuring that the participants in the program derive income from the retail sale of goods or services to persons who are end-users of the goods or services and who are not participants in the program....

"CUSTOMERS" CASE #7

The FTC charged that income from the FutureNet multilevel marketing plan did not depend on sales of the Internet devices they were purportedly selling, but rather on the recruitment of new distributors -- the typical profile of an illegal pyramid....

FEDERAL MLM - TO PYRAMID CASE HISTORY JEWELWAY INTERNATIONAL

"CUSTOMERS" CASE #8

In a pyramid scheme there is almost no emphasis on making retail sales of products to persons who are not participants in the program. According to an FTC expert, earnings claims made in conjunction with promoting a pyramid scheme are false because pyramids inevitably collapse when no new participants can be recruited and approximately 90% (or possibly more) of the participants consequently lose their money..... CASE #8 PARAGRAPH 15. A lawful multi-level marketing program is distinguishable from an illegal pyramid scheme in the sense that the "primary purpose" of the enterprise and its associated individuals is to sell or market an end-product with end-consumers and not to reward associated individuals for the recruitment of more marketers or “associates”

Customers, customers, customers. Chris, legitimate companies have customers!

Soapboxmom

Mom, this is something that has always bothered me about all MLMs and their reporting of any members and "customers", distributors, reps, affiliates, associates, or whatever they choose to call them, let alone their income claims. The waters are always murky. We won't even get into how they keep all the defunct/inactive members on their active counts to boost their hyping b.s. even further. I wish Usana would return to answer my questions.

Just a thought......since the first annual ( that was what THEY called it) Yoli Convention was in Vegas in January 2010, what happened to this year's convention? And, since Len has claimed that his MLM career started in 1979, why hasn't he made a million bucks yet? I mean he's been in how many MLMs now, and 32 years later what does he have to show for all of it? Inquiring minds want to know.

Originally Posted by A Life Aloft

There are just over 7 million citizens in Hong Kong. I have a question.

No, you have many questions :)

Originally Posted by A Life Aloft

How can anyone prove that all the distributors listed or registered from/in Hong Kong are actually citizens of Hong Kong?

Nobody can prove it except the Hong Kong government, the Chinese Government, and USANA's corporate office.

Originally Posted by A Life Aloft

How many of these distributors are actually from mainland China or even from Taiwan??

I'm willing to bet that MOST of the distributors in Hong Kong are actually citizens from mainland China. Taiwan is no issue because USANA's MLM structure is allowed in Taiwan.

Originally Posted by A Life Aloft

I find it very hard to believe that you could walk up and down Harbor City or Pacific Place and meet hundreds of Usana reps. How would one actually know or get the true figures for active reps/distributors also?

Only by deciphering USANA's SEC filings and transcripts from quarterly conference calls.

Originally Posted by A Life Aloft

Aren't all MLMs and and any forms of multi level marketing still banned by the Chinese government?

Absolutely. No multilevel marketing recruiting schemes are allowed. Only single level direct selling companies are allowed. USANA purchased Babycare Ltd. in China which has a direct selling license. It is a single level structure, so distributors cannot recruit more distributors, which forces the distributors to actually sell the product, not the opportunity.

USANA just announced at their Hong Kong convention (within the last few days) that a few of USANA's products have just received approval from the Chinese government to be sold in mainland China. So USANA products will now be sold in mainland China, but only through Babycare Ltd. USANA's MLM business opportunity is still banned.

USANA claims that since their product will now be sold in China, that they will start to lose many of the Hong Kong distributors. This is because many of their Hong Kong distributors are from Mainland China! I believe that if these distributors leave USANA's Hong Kong territory and joins Babycare Ltd., that USANA will likely count those people TWICE. So when their next quarterly statement comes out with distributor figures, be sure to investigate whether the numbers are true, or if they just counted the same person twice.

Originally Posted by A Life Aloft

How are they getting around this?

Well, apparently USANA believes it is perfectly legal for Chinese Nationals to open up a bank account in Hong Kong and become a USANA distributor in the Hong Kong territory.

Originally Posted by A Life Aloft

How many reps are they claiming are in Singapore?

USANA did not disclose their active associate numbers for Singapore for their last quarterly report. I did request from USANA their associate numbers during their 2nd quarter last year and compiled it in the following table: USANA Watch Dog - MLM Pyramid Scheme Scam?: USANA's Active Associate Per Territory, Evidence of Illegal Recruiting in Mainland China, and Misleading Philippines Associate Figures.

Originally Posted by A Life Aloft

Also the populace are still very much into natural herbs, teas, various ingredients like fish oils, certain parts of various sea creatures, various algaes, roots, leaves, berries, fungal products and the like. I do know that a lot of Centrum is sold there, though. Do Usana product meet all of the requirements, labeling requirements, ingredient and other regulations to be sold there? (Chinese Medicine Ordinance)

Four of USANA products are approved in China and will be sold through Babycare Ltd.

Originally Posted by A Life Aloft

I have another question.

Another question?!

Originally Posted by A Life Aloft

Are the numbers of distributors counted as such just because they are buying the products for personal use/consumption and not selling it/them?

Active Associates are counted each quarter as long as they purchase 100 Personal Sales Volume (About $112) worth of product at least one time during the last 3 months. This 100 PSV is not a “SALE” at all, but actually a “PURCHASE” by the distributor themselves. This requirement is what actually keeps the pyramid scheme churning. If USANA did not require this mandatory purchase, then USANA would go out of business because the only people who would purchase the product would be those who actually want it.

Originally Posted by A Life Aloft

Are those people in the mix of numbers as well as though selling the products?

USANA does not provide any information regarding actual sales by their distributors. These are disclosures that should be required. In fact, they would be required if MLMs were required to abide by the “Franchise Rule”. The ONLY way MLMs skirt the Franchise Rule is because MLMs like USANA charge less than $500 to "join" the business. USANA only requires $20 to “Join” the business..

I think this is BS because a lot of distributors end up purchasing over $1000 to start their distributorship, ie the purchase of their “Professional Starter Pack” for $1200.

Originally Posted by A Life Aloft

Is anyone who purchases the product(s) called a "distributor"?

USANA has a section for “Preferred Customers” who only want to purchase the product. Anyone who purchases a Business Opportunity Start Kit for $20 is considered an “Associate” or a “Distributor”. Anyone who purchases their 100 PSV requirement for a given 28 day period is considered “Active”.


Sorry this response took so long. I'm about to be a father and have been working hard on the house among other things.

I want to thank you so very much for addressing every one of my questions and doing it in exactly the concise details that I was looking for. This is very enlightening and eye opening. I suspected a bit of the info but I am surprised by most of what you provided here. Clever bastards aren't they? I bet that you are also correct in your assumptions about their operations and in detail what they are doing and how these numbers are counted, etc. There is a huge amount of b.s. in the details isn't there? It's very reminiscent of the old "Shell Game", to me.

As I understand it, Baby Care has been doing business in Mainland China for some 11 or 12 years. They had investors in Hong Kong and in the US, and have (or had) a parent company in the US. I was at first surprised to see that Usana bought Baby Care. But, in doing a bit of research, I see that BC was never very profitable and being that Usana was desperate to get into China........man talk about timing. A parent company most likely happy to dump BC and Usana frothing at the mouth to stick their fingers into China and voilà, there you go. The luck of scammers. Man, they paid a small fortune for BC. Way more than they were worth. BC apparently sold nutritional items for babys and Mothers and provided a lot of other goods and services as well. This explains though how Usana will then be a direct selling business in China and not an MLM. Brother! It tells me also that they will use the licenses/permits or whatever they are called that Baby Care already has set up for approval of Usana's products. Am I correct on this? They will not have to get separate approval for their products that they bring into China now? If that is the case, big loophole there in that system.

I think that original founder of Baby Care has started another business in China which is also geared towards Mothers and babies, but it's some sort of media business. Guess he is out of the picture now. I imagine that Usana will be limited (for now) also to just baby type products, and maybe products for Mothers, which could be anything at this point. Who knows. It will be interesting to see how all of this plays out, if this concept is "accepted" by the citizens of China and how well they do in the long run.

I would still bet my left nut that many, many of the so called distributors registered in Hong Kong are indeed from Mainland China. It's also my understanding that the number of licenses for Direct Selling is really small in China and something like only two dozen companies have this right. Have you learned yet exactly how Usana will structure their compensation plan in China? Have they officially even began business operations there yet?

The real bottom line of course is how Usana reports their numbers. All the numbers. The numbers of active distributors/members (whatever) and the income/earnings of those people. I swear I tried rifling through a bit of it and I am no accountant but I am very familiar with basic business accounting, but so much of it did not make sense to me. You would have to be a forensic accountant to make sense of it and get to the entire truth. That is if you actually had access to all the true data which I do not believe that they make public. I think you see what they want you to see and how they want to present it. I don't how you figure out the poop on those financials. My hat is off to you.

Don't worry at all about answering my couple of questions in this post til it's convenient.

The important and exciting news is it's BABY TIME!!!! CONGRADULATIONS!!! Seriously. This is very wonderful and happy news!!! Sleep while you can!! lol Your life will be forever changed. And it will be changed in marvelous and magical ways that you never imagined. You must be so busy. Babies need so much stuff!!! It only gets worse! lmao My best wishes to you and your wife. Take an evening if you can, before the baby comes for the two of you to spend alone and treat her like your girl. Make it romantic. Buy her something special, just for her. Spoil her. She'll be a Mommy for many years to come, but she'll treasure a special evening before the event. Trust me on this.

Again, thank you so much for all the very informative and detailed answers and CONGRADS DAD!

FYI, Len Clement's old website was wiped out by his pal who's in jail. He went to a different host and started "insidenm.com" instead.

This "how to detect MLM hype" is actually pretty good advice!