Back in Time with the big sick machine

I am on the run today with "real work" deadlines, so I am just lifting most of today's post from a comment I made to a Facebook group the other day. To the few who may have read that post, I apologize for the redundancy.
~CC

On first glance, this snippet from a Time magazine article about pyramid schemes would seem to point to a real breakthrough in the battle against scammers:

Hundreds of court injunctions have been filed against pyramiders before, but they usually settle out of court or ignore the actions and set up their operations elsewhere. The SEC move against [Company A] and the California suit against [Company B] are refreshing departures. The SEC is asking not just for an injunction but also for the forfeiture of all the pyramider's profits; the suit contends that pyramiding is tantamount to selling unregistered securities. In the [Company B] case, state officials declined to settle out of court and instead pressed their suit to its conclusion. [State Judge] hopes that by establishing a precedent of stiff damages against [Company B] he may make other pyramiders reluctant to do business in California and encourage other state judges to clobber them.

The battle is far from over. Pyramid operations seem to have an irresistible attraction for people with low incomes and high expectations…. Pyramiders also have a knack for forming new companies as soon as the old ones come under fire. Despite a pending FTC cease-and-desist order and numerous state injunctions, [Company B] last week was still doing business in all 50 states and several foreign countries. Laments the SEC's [staff lawyer]: "If [Company A] flounders here, they can still rape Europe, Africa, Latin America and the Far East."

I confess. I deliberately disguised the names of the companies and players so you could fill in the names of your choice. Now I’ll dash your hopes, assuming you were moving in that direction, by telling you that this was in fact a Time capsule: an article from the July 16, 1973 issue of the magazine. That was exactly 39 years ago today. Company A was Holiday Magic, and Company B was Bestline. Both were Amway type multi-level marketing (MLM) deals that sold overpriced products such as soaps and laundry detergents, but whose top people made the real money by selling memberships and upgrades. In return for the steep upgrade fees people got special "leadership" training.

For present and former members/affiliates of the infamous Kevin Trudeau's Global Information Network (GIN), some of this will sound awfully familiar -- with the emphasis on "awful."

The principals of Bestline and Holiday Magic were nabbed for operating illegal schemes, and yes, both the Federal Trade Commission and the Securites and Exchange Commission got involved. It was considered a real turning point in the battle against fraud. In 1973.

Now here we are, nearly 40 years later… Sigh.

Actually it was progress, of a sort: those actions back in the 1970s solidified the illegality of certain types of pyramid schemes. However, a 1979 action by the FTC regarding Amway made it more clear that it's not an illegal scheme if there are actual products and product sales involved. But as my pal Jack said on Salty Droid's blog recently, "One man once told me that ever since [the] AmWay decision, MLM has owned the FTC." Jack's comment, as well as many other insightful remarks, appear in this post about notorious Internet marketing huckster Mike Koenigs. The post is long and so is the comments section, but it's all worth taking the time to read. Especially if you're tempted to jump out of GIN and right into someone else's scheme, hoping that this time you'll get it right.

In the long run, it appears, the main result of the FTC's actions regarding MLMs has not been to protect the consumer (except in theory) but to help build a better scam (in practice). Many of today’s marginally legal schemes -- such as GIN -- have slightly tweaked the business model to make it legal on paper… but all too often, the results are the same. Very few people make substantial money. A lot of people lose money. And of course they’re told it’s all their fault. I have seen ample evidence of this on many forums, most recently on threads in an open Facebook group called GIN v XIN, which is a place for both GIN critics and GIN defenders to speak their piece.

A person claiming to be a GIN Inner Circle member (having paid $50,000 for the privilege) has also commented at length on my fairly recent blog post about former True-dough front man Lenny Coldwell. This person claims to have benefited greatly from GIN membership. That comment thread begins on July 12, right here. And although the conversation began respectfully on both sides, it has regressed to the point where Mr/Ms Inner Circle is calling critics "haters" who don't want to improve their lives. I have to take responsibility for this direction, since I dialed up the snark in some of my own comments.

But back to that old Time article. Here's a link to the piece online, though you apparently have to be a Time subscriber to read it. I actually have the print issue, as I collect vintage magazines. And I also have a more than half-finished blog post about some of the famous frauds of the 1970s. Obviously, I need to get busy.

For now, though, I want to make a point that expands upon my "big sick machine" post from the other day. The owner of Holiday Magic, one of the companies that got nabbed by the SEC and FTC in 1973, was William Penn Patrick, who was a mentor for Glenn Turner, the subject of another upcoming blog post if I can ever get my thoughts together enough to get it finished. Shortly after Patrick was charged by the SEC with bilking some 80,000 people out of more than $250 million through Holiday Magic (not a small sum in the early 1970s), he was killed when he piloted a plane into a mountain.

But his legacy lives on. Not only was he a mentor for Turner (who eventually ended up serving prison time but apparently went right back to huckstering, though in a more low-key manner, after getting out), but Patrick also co-owned a company called Mind Dynamics (which influenced LGAT (Large Group Awareness Training) companies est/The Forum/Landmark Forum and Lifespring. And he mentored a guy named Thomas Willhite (sometimes misspelled Wilhite), who was a Mind Dynamics instructor. Tom, along with his wife Jane Willhite, founded the LGAT company PSI Seminars in 1973. 1973 was a busy year indeed.

Here's a comment on the Rick Ross forums that might give a little more insight: http://forum.rickross.com/read.php?4,36040,86283#msg-86283

Oddly enough, Tom Willhite died in a private plane in 1983, crash ten years after the death of his mentor. Jane took over as CEO of PSI.

Today PSI Seminars remains another cog in the big sick machine, offering yet another platform for such New-Wage luminaries (and stars of The Secret) as John Assaraf, Bob Proctor, et al. More links:
http://psi-seminars.pissedconsumer.com/
http://forum.rickross.com/read.php?4%2C24037

There's a lot about the Willhites and PSI on the Rick Ross forums. Moreover, Jane Willhite is one of the founding members of the Transformational Leadership Council (TLC) that provided most of the talking heads for The Secret.

Big sick machine, indeed. And it is not a new machine by any means. Its roots run deep and, of course, go much further back than the 1970s. So when former GINsiders who are now pushing new schemes admonish you to stop obsessing on GIN and Kevin Trudeau, and to quit looking in the rear-view mirror, just remember that the failure to look in the rear-view mirror is what gets a lot of people into trouble. Arguably, the failure to do a little historical research was a factor that got a lot of folks into GIN, and it is a factor that will continue to lure people into dodgy schemes long after GIN has sunk and its founder is in jail or is on to the next scheme.

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