Pyramids, Ponzis & Amway -- Continuing Educational For Those Interested
- Unfortunately, there seems to be much confusion regarding pyramid schemes,
Ponzi schemes and the legitimacy of Amway. Rather than ridicule third parties
who admit they are not experts and then go right on to argue points and
issues that they do not understand, and pontificate as if they were the very
expert that they acknowledge that they are not, I would prefer to leave you with
It is my intention that this post be informative; if you came to see me
spank an insufferable fool who has only just recently learned who Ponzi was, this
isn't the post.
Let me begin by saying I am an internationally recognized expert with regard
to financial crimes - this is what I do. I have been quoted by financial
icons such as Forbes and Barrons and numerous other publications, the most
recent of which I am aware was last week by the Phnom Penh Post in Cambodia.
I have testified in person, and submitted numerous Affidavits and
Declarations in civil and criminal cases related to Ponzi Schemes, Pyramid Schemes,
Money Laundering, etc. For example, in the case of Arnold "Arnie" Strom, the
Florida Office of the Statewide Prosecutor published numerous press releases
characterizing his operation variously as a pyramid scheme and a Ponzi scheme.
They spent more than a week presenting their case in Charlotte County
Florida (you can easily look it up) and we destroyed it so badly that we got a
directed judgment of acquittal without putting on a defense.
Show me a person who uses pyramid and Ponzi interchangeably, and I'll show
you an expert who isn't.
Now, as for Prepaid Legal - I defy anyone to show me where I stated that
their operation is a pyramid scheme. I did not; I merely referenced the claims
being made by third parties and expressed legitimate concerns.
I do not know whether PPD is a pyramid scheme or not. Nobody has paid me to
make this determination and the determination has not been dispositively
rendered anywhere that I know of. The points and issues are so complicated that
only a fool would offer an opinion.
On the other hand, I would feel far more confident arguing that Amway IS a
pyramid scheme - a twenty-five year old FTC decision doesn't mean anything.
Those of us who make a living in this business are very much aware that Amway
has been under fire for quite some time as their program has devolved to the
point that the procedural safeguards the FTC considered, and relied upon,
have largely evaporated, and their "tools" program is especially worrisome.
Let me offer you this quote as one of many references I would rely upon:
Id., 2001 U.S.Dist. LEXIS 14455 at *36-38. The court then went on to
summarize the evidence that Amway actually is a pyramid scheme.
P&G and Dinsmore have come forward with 163 pages listing the nature of the
evidence on which they relied in asserting that Amway has not been enforcing
the rules and has allowed its business to become an illegal pyramid scheme.
The evidence includes news articles, internal Amway memoranda, Amway
motivational tapes, trial testimony from other cases filed against Amway, and
correspondence. P&G and Dinsmore have come forward with evidence that certain Amway
distributors earn far more in their sale of motivational tools than from the
sale of Amway products. They have produced evidence that although Amway set a
20% guideline for as a way to ensure proportionality of BSM sales to Amway
product sales in 1983, some distributors have exceeded this guideline. They
have produced evidence that many Amway distributors almost totally ignore the 10
customer rule. They have produced evidence that the operation of Amway's
buyback rule may not be adequate, given the Ninth Circuit's ruling in Webster v.
Omnitrition, 79 F.3d 776, 783-84 (9th Cir. 1996), that the restocking fee
prevented summary judgment on the issue of whether Omnitrition was an illegal
pyramid scheme. See Omnitrition, 79 F.3d at 783-84.
What P&G and Dinsmore knew about Amway also came from other claims that had
been filed against Amway. Since the 1979 FTC decision, a number of cases have
been filed against Amway alleging pyramid and RICO claims. P&G has produced
evidence that Amway settled the Hanrahan case, which included a RICO count.
Another court dismissed an action and counterclaim between Amway distributors
on the basis that the transactions between the parties amounted to a pyramid
scheme which was unenforceable as being against the public policy of the
State of New York. Schaffer v. Talerico, 118 Misc. 2d 66, 67, 459 N.Y.S.2d 716
(City Ct. N.Y. 1983).
P&G and Dinsmore have produced internal Amway memoranda expressing the
concerns of those at the top of the Amway corporation that the motivational tools
business, if allowed to go unchecked, had a potential for becoming an illegal
pyramid scheme [the district court's footnote cites the "Postma memo" and
the "Directly Speaking" transcript]. Amway has not only addressed the issue of
pyramid concerns internally, it has also publicly addressed the issue of
whether Amway is an illegal pyramid on the Amway website. In addition to the
information P&G and Dinsmore had when they filed the Texas case, discovery in
this case has revealed internal Amway memoranda from Mulham and Halliday which
reveal that Amway's highest executives were concerned about an illegal
It is not my intention to bore you to death; my point is that there is often
a great deal more to things than most people know, and it would be better of
people who do not know what they are talking about refrain from pontificating
as if they do.
Returning to PPD - how would we know whether PPD is, or is not a pyramid and
how significant is it that they sell a real product?
That would be a very good question and it is a question that should have
been asked rather than the declarative statements that were offered.
The fact that any entity sells a real product is COMPLETELY IRRELEVANT. The
standard of evaluation has nothing to do with that. The probative question
is, who is buying it?
A financial crimes expert would be familiar with Koscot and Omnitrition -
these are the two cases most often cited by the courts. According to these
standards, the "product" sold to distributors is not considered relevant at all
in making the evaluation - we need to know how much product is purchased by
"real consumers" and that term excludes those who are distributing/marketing
the product according to the court's definition.
"Products Purchased by a Distributor for Personal Consumption do not
Qualify as a Retail Sale"
Those who are interested are encouraged to google Koscot Pyramid and
Omnitrition Pyramid as they will provide the full background.
In sum, I would like to make the following points.
1) Neither investigators, lawyers, nor judges are per se "experts" with
regard to any particular issue. Unless they can demonstrate unique knowledge,
training and/or experience outside the common man's experience with regard to
that issue, they are not experts and they cannot proffer a credible expert
2) Virtually anyone can be an expert if they do have the requisite
knowledge, training and/or experience - an expert is whomever the Court deems it
appropriate to recognize as an expert.
3) PPD may, or may not be a pyramid scheme. I have not committed myself to
a position, I don't have the information available to make that
determination, and the determination has not been made in any forum of which I am aware.
4) Ponzi and Pyramid are not interchangeable terms - they are only
distantly related. Carlo Ponzi did not operate a pyramid scheme.
5) Amway may very well be a pyramid scheme - the 1979 FTC decision means
very little as their policies and structure has changed dramatically over the
last 25 years.
6) Any pretentious wannabe who would proffer an opinion as to whether a
complex marketing program is, or is not, a pyramid scheme without the necessary
information is a fool - how's that for a "clue for the clueless.".
Personally, I learn a lot from these lists, I believe that ongoing education
is the key to professionalism, and I appreciate those who share their
knowledge, training and experience (provided they have any) with those who are
trying to learn.
If anyone has any questions, issues, or concerns that I am qualified to
address, I will be happy to take the time to reply - subject to the Disclaimer
Bill E. Branscum, Investigator
PO Box 10728
Naples, FL 34101
(239) 304-1640 Fax
Illegitimi non carborundum
I am not a lawyer, and I don't even play one on TV. You may or may not
construe this post to be legal advice; frankly, you may construe it to be the
Holy Grail for all I care. It is my considered, and fervently held "Darwinian"
opinion that anyone who looks to posts on the Internet for legal guidance and
direction is far too stupid to deserve to survive.
On the other hand, any silly bastard who thinks they have a defamation case
to make should call me to arrange for acceptance of service. If I wasn't
anxious to straighten your silly ass out, why would I take it upon myself to
ridicule, belittle and humilate you?
[Non-text portions of this message have been removed]
- Thanks, Bill, for another of your informative missives. I have a collection
of, and refer to them.
Siedow & Associates Investigations
& Custom Legal Support Services
2629 Foothill Blvd. #262
La Crescenta (Los Angeles area), CA 91214
CA Lic. PI #22852
Need economical legal help?
No virus found in this outgoing message.
Checked by AVG Anti-Virus.
Version: 7.0.308 / Virus Database: 266.9.1 - Release Date: 4/1/2005