MLM: Kevin Trudeau's GIN is just one toxic drop in a huge ocean of fraud

Inspired by Barbara, a regular commenter on the Salty Droid blog

All you have to do to succeed :: is succeed at convincing others that they can succeed at succeeding … just by convincing others to succeed.
It’s that simple {of a mindf--k}.
Why aren’t you doing it?
Oh and also :: it will most likely tear your life apart … and ruin everything.
~ Salty Droid, on the MLM monster, 4 October 2013

Statistically, 997 of every 1,000 MLM recruits will sustain a net loss over the course of their involvement.
~ "Roger Willco," anti-MLM activist, in a comment on a July 2013 Salty Droid blog post

For the past few months I've been focusing a lot -- perhaps even a bit too much -- on the courtroom dramas of serial scammer Kevin Trudeau. I know some of you are probably getting a little bored with that, and perhaps you wish I would either get back to my old-Whirled roots of just writing about the silly and wackadoodle aspects of New-Wage/selfish-help/McSpirituality culture (I know you're still out there, HHH!). Others of you probably think I should turn my attention again to some of the larger and more serious problems, of which Kevin Trudeau and his scammy, Ponzi-like Global Information Network (GIN) are but one smallish part.

Well, I agree with all of you. Everyday I see silly wackadoodle things that are seriously blogworthy, so don't give up on me, HHH. But today, I fear, we are going to have to be a little more seriously serious, because I was reminded again of the larger and more serious problems when reading Salty Droid's blog post today, which features a "confesstimonial" from one Roger Willco (not his real name). Roger in recent years has become an activist against multi-level marketing, or MLM, for several very good reasons. Some of those reasons will become painfully obvious when you read Roger's story on the above-linked Salty post.

Now, before I go any further, understand that I have no intention of abandoning my courtroom vigil (or PACER.gov vigil, as the case may be) where True-dough is concerned. (I updated my most recent Katie blog post just now, with a link to more court documents filed today. Here's the link to the post; scroll to the bottom.)

And in fact, today's blog post about multilevel marketing and the damage it does is related to Trudeau and GIN as well, because Trudeau has been involved in MLMs for decades himself -- starting with Amway, and then, after his prison stint, going on to Nutrition for Life, as well as grooming Barb and Dave Pitcock, who made their fortunes with an MLM they call Livinity, which last year merged with another MLM called Youngevity, which is run by veterinarian and naturopath Joel Wallach... and oh, the bigness and the sickness of the big sick machine -- even just True-dough's part of it -- boggles the mind, but this sentence is already far too long, so I'd better cut it off now.

As most of you are well aware, one of Trudeau's biggest schemes to date, GIN, has a significant MLM arm, in which thousands of people over the few years GIN has been in operation have placed their hard-earned money, as well as their hopes and dreams of achieving the lavish lifestyle and pure happiness that Trudeau always bragged about. The "product" being sold via that MLM is a Level One GIN membership, which costs $1,000 for the "initiation" and $150 per month thereafter. Members are strongly and unceasingly encouraged -- pressured, actually -- to upgrade to ever more expensive levels of membership. That all seemed to be working out fine for a while; well, at least it worked to put money in Trudeau's pockets and those of a few of his cronies and KT's lawyers. It appears that almost everyone else lost money, though many are still unwilling to admit it.

These days, due to Trudeau's own long-standing legal troubles, GIN too is clearly in all sorts of trouble, with even the court-appointed receiver, Robb Evans and Associates, raising questions about the legitimacy of GIN as an MLM. The receiver says there is no real "product" -- fancy that. Of course this story isn't over yet. I'm watching it.

But today's post on the Salty Droid blog focuses on MLMs in general, with a story told by someone who was once very close to a serial MLM junkie, and saw firsthand how MLM devotion can wreck bank accounts and lives. And I think you need to read it. Roger Willco actually lays out dollar figures of how much his ex spent on MLM products and recruiting "tools," versus how little she made, as she worked her way through one MLM after another after another after another. Her story is far from atypical. It's much more the rule than the exception.

Following his narrative, Roger very concisely reiterates what is fundamentally wrong with MLMs:

The MLM business model is reliant on convincing prospects of two foundational fictions:

• There is an endless chain of prospective distributors.
• There is a perpetually virgin market for the products being sold.

If prospective distributors aren’t at least implicitly convinced these two fictions are actually truths, an MLM cannot even launch, let alone survive.

Other pertinent points from Roger:

Only a very few MLM distributors eventually become knowing perpetrators of predatory fraud.  Their prey are new recruits, many of whom become unwitting predators as well.  Unaware participants lose their money—sometimes all of it, rack up debt—often insurmountable, sully or destroy some or all of their personal relationships and give up their personal credibility.  Most of what they sacrifice can never be recovered.

They are the victims of the most pervasive and costly ongoing business opportunity fraud in America—15.6 million victims losing in aggregate, $15 billion in 2012, according to forensic accountant and certified fraud investigator, Tracy Coenen.

When these unfortunate victims run out of money, credit and other external means of support, they tiptoe out of the industry—embarrassed and convinced they were the cause of their own failure.  They “didn’t work hard enough”, they “didn’t follow the system well enough” or they “didn’t believe enough”.  And because of their embarrassment, they seldom complain to regulators.

That latter point explains why more ex-GIN MLM-ers haven't publicly spoken out about their money and just how much they lost. And even with all of the media publicity about GIN, many may never speak out. Many would rather just forget it, including, apparently, one former "Inner Circle" GIN member who spent more than $130,000 in GIN. That person was a member of a private Facebook forum in which I also participated, but the person now seems to be M.I.A.

Roger has contributed previously to Salty's blog (and on mine too). On a July 30, 2013 blog post about Herbalife on Salty's blog, Roger wrote:

Pyramid standards are the biggest among many problems inhibiting FTCs enforcement of consumer protections against MLM abuses. Whether or not any company can classify the requisite percentage of sales as “retail” is nothing more than a red herring to which the commission has been susceptible since the 1979 Amway case. It’s unclear if Amway purposely concocted “pyramid standards” to suit their purpose. However it’s served the MLM industry well in keeping the the FTC at bay. Any MLM relying on the promise of exponential growth to recruit distributors (are there any that don’t?) is running a pyramid scheme.

In fact, conceptualization of exponential growth progressions as anything remotely resembling a pyramid is simply fallacious. A binary growth model (one recruits two who each recruit two who each in turn recruit two and so on), can only reach 32 levels before the entire population of the planet–every man, woman and child–is exceeded…not really new information. But if one graphs the same model such that each level is represented as one inch high and each recruit is represented as one inch wide the resulting figure is 32 inches tall and 67,786 MILES wide–essentially an extremely long flat line with an imperceptible peak in the middle. By any reasonable analysis, such a growth pattern is completely unsustainable. MLM proponents will try to throw wrinkles into this mathematical reality; but the core principle remains unchanged. If a trinary or greater model is used, as is the case with most MLMs, the line is even flatter.

Statistically, 997 of every 1,000 MLM recruits will sustain a net loss over the course of their involvement.

Until the Commission recognizes they’ve been sidetracked by a red herring and understands that the MLM model is, in all cases, flawed, they’ll remain paralyzed in their enforcement of consumer protections against MLM abuses.

I’ll concur with whatever profanity Salty Droid applies to this unfortunate circumstance.

In my opinion, the least costly way to curb MLM fraud is for the FTC to mandate and monitor accurate disclosure of historical income data to prospects by those seeking to recruit them into any MLM “business (bankruptcy) opportunity. The industry contends that such disclosures would severely impede their ability to recruit distributors…No shit! And they’ve successfully lobbied MLM’s exemption from the disclosure requirements of the Commission’s recently promulgated Business Opportunity Rule. Interesting posture for an industry that promises incredible wealth to its prospective distributors. If their promises were well founded, it sorta seems like they’d jump at every opportunity to trumpet them.

The day after Roger made that comment, another frequent and spot-on Salty Droid participant, Barbara, wrote on another Salty post:

@ Roger Willco,
Yesterday you wrote:
“Statistically, 997 of every 1,000 MLM recruits will sustain a net loss over the course of their involvement.”
I’m embroidering that on a sampler right now. It seems more important than Home Is Where The Heart Is.

I cannot embroider worth a crap, but I have become quite proficient at crude Photoshopping.


Some damage can never be undone
Sometimes MLMs -- and the self-improvement culture that supports and enables them -- can cause (or contribute to) much more than financial, psychological, emotional, and spiritual damage to the participants and/or those who love them. Sometimes, lives are lost. There is a tragic epilogue to the narrative above, but it has to be told right, and we're still working out those details. Suffice to say for now that there is an MLM as well as a self-improvement LGAT (Large Group Awareness Training) connection to the tragedy.

One thing I've noticed from my own firsthand observations is that MLM people just love them that "self- improvement" stuff. They are drawn to it like hipsters to upscale food trucks. (I think I've used that simile before but what the heck, here it is again.) MLM-ers are often enthusiastic consumers and promoters not only of their MLM but also of various self-improvement groups and LGATs. The tragic story in question seems to be an an undeniable example of how MLM involvement leads to suspended critical thinking, rendering followers susceptible to the many prosperity and self-improvement cults that orbit around MLM and rely on their victims' diminished analytical ability to get into their wallets.

This case is particularly sad because it involves someone who, thanks to strong MLM influences, began involvement with a self-improvement LGAT as a youth. As you may know, most of these LGAT orgs have youth and kid versions, because they like to start 'em young. (Access Consciousness is one particularly disturbing example.)

I'll tell more as soon as I can. The story is too important not to be told right. I've written before about the darker side of LGATs, and how they can sometimes contribute to psychotic episodes that result in suicide or other violent acts. Here's one example. And the terrible tale of James Arthur Ray follower Colleen Conaway, told in such poignant detail on Salty Droid's blog, appears to be another example of what can happen when disastrously unqualified "leaders" recklessly mess with the psyches of vulnerable people.

We don't just have to sit idly by and take it.
Roger Willco tells me he is currently directing many of his efforts, both individually and as part of an anti-MLM consortium/coalition, to persuading the Federal Trade Commission (FTC) to open an investigation of the entire MLM industry. One point of contention is the FTC's explicit exclusion of MLMs (presumably including GIN’s MLM program) from the disclosure provisions of its revised Business Opportunity Rule (16 CFR Part 437 -- here is a direct link). Activists want the FTC to rescind that exclusion. As Roger noted in another comment to Salty's "Falsifyingly Herbalife" blog post, the documents linked to in the previous sentence...

...make repeated references to the cooperation, goodwill and good rapport that exists between the [MLM] industry and the FTC. While this commentary doesn't constitute a slam-dunk admission of agency capture, it's perilously close; and it indicates the sort of relationship I'd hope wouldn't exist between an industry and the government agency charged with regulating it.

(I've long said that if Katie had just stuck to MLM-ing his GINfolk -- using some of the proceeds to pay on that big FTC fine, instead of doing everything he could to dodge the fine and hide his assets overseas -- the FTC would have been cool with it, since they seem to have a cozy relationship with MLMs in general. Trudeau could have avoided several if not all of the contempt charges that now threaten to land him in prison. And he could have avoided most of the Ponzi accusations (accurate or not) if he'd avoided some of those dodgy bonus schemes and Lazyman promos and incentive deals that initially got some of the troops complaining in early 2012.)

"There are some 20-30 other consumer advocates currently active in the anti-MLM cause," Roger tells me, "addressing the issues in several different ways; and among them, they’ve made a tremendous amount of good information available to the public."

But Roger thinks that ongoing education efforts, including informative blogs such as Salty Droid's, and hey, even snarky blogs like this one, are an important part of the equation as well.

As for the ex? Roger tells me that his ex has informed him she has "given up recruiting" for MLM. But, he says, "She's now an ardent GIN member and buys Trudeau's BS about his messianic qualities." 

And so it goes, with the big sick machine sucking 'em in and spitting 'em out, and then lathering, rinsing, and repeating (I apologize for the mixed metaphors). One big problem is that so many people, either because of desperate circumstances or chronic deep denial, are willing to crawl right back in and start over, again and again and again and again. And the scammers will scam on, as long as there are people who are willing, against all rational evidence and horrid reality, to believe in them.

But make no mistake: this isn't a blame-the-victim screed. The onus is still on the scammers not to scam, and on the regulatory agencies to regulate, and enforce those regulations, responsibly.

As Salty says, "It’s not that we can’t do something about it … it’s just that we haven’t."

But we can.

This may be a good beginning. I expect more links to be coming to this page soon.

A little related history: Back in Time with the big sick machine 

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