SEE UPDATE AT THE END (after the PS)
~CC, 23 December 2013
While serial scammer Kevin Trudeau continues his proxy prison ministry, allowing his long-time companion Janine Nubani Contursi to babble on the Facebooks about life
lessons and miracles, the paper
shuffling in his long, drawn-out civil case continues (Case
number 1:03-cv-03904, Judge Robert Gettleman presiding). On
December 20, 2013, the Federal Trade Commission (FTC) filed its
opposition to the November 18, 2013 motion by Ohio GIN member Perry
Kiraly et al. to intervene in the case.
In its statement the FTC calls the suspended-for-now MLM arm of
Trudeau's Global Information Network (GIN) an illegal pyramid
scheme. The first clue that the FTC is not going to be gentle on
the Intervenors is in the main document's title:
FEDERAL TRADE
COMMISSION’S OPPOSITION TO PYRAMID SCHEME
PARTICIPANTS’ MOTION TO INTERVENE
The "pyramid scheme" participants =
Perry Kiraly and his fellow Intervenors.
Here is a direct link to the document and the exhibits -- all 256 pages.
Heck, I could have told all of 'em that GIN was a pyramid scheme.
In fact I believe I first suggested it back in... oh... 2009, when I
first heard of GIN. I kind of mentioned it again in 2011. But then, I'm no credentialed expert.
To those who have been following (and swallowing) Perry Kiraly's Stand
With GIN updates, these documents may
come as a little bit of a shock. After all, Perry made it sound
as if the receiver's attorney and the FTC attorneys were quite
sympathetic to the Intervenors' desires to take over GIN. But to
the rest of us, particularly those who have been casually
exploring the background of some of the Intervenors and
their lawyers, the Shimkos,
for the past two months, the lack of accuracy might not be such a
shock. Background research or not, anyone reading the GIN
Membership Agreements, which most of the Intervenors signed,
could see that they had no legal ownership in GIN. It would
appear that Perry may have been erring on the side of optimism in
some of his reports and updates. Or maybe he was simply misled by
his Shimkos. If so... bad, bad Shimkos.
The FTC called upon their senior economist, Peter
J. Vander Nat, Ph.D., who has been with
the agency for 25 years and is an expert on MLMs and pyramid
schemes. Dr. Vander Nat, unlike so
many gurus of Scamworld (John Gray, Joe
Vitale, Loony Coldwell), is what is known as a real
Ph.D. His detailed analysis of GIN's pyramid-ishness is included
in the exhibits accompanying this document. In their motion to
oppose intervention the FTC cites Dr. Vander Nat's findings
several times.
The Intervenors have until January 17, 2014 to reply to the FTC's
opposition to their motion to intervene. Another hearing is
scheduled for January 30 at 9:00 AM. At that time, presumably,
the court will rule one way or the other. It's important to
remember that the final decision will still be made by the court.
I am of course no legal expert, but from what I can see, both the FTC and Dr.
Vander Nat make a very good case for GIN's MLM having been an
illegal pyramid scheme. As noted above, the court still has to rule on this, of
course. But Dr. Vander Nat has an excellent
track record, at least according to him and to the FTC, who claim
that to date no court has ever rejected his conclusion that an
enterprise was a pyramid scheme.
The part of the latest court docs that details exactly why the
FTC believes GIN is an illegal pyramid scheme is Doc 803-3,
"Declaration of Dr. Peter Vander Nat" etc., supported
by FRC PXC:1. It is part of that large doc I uploaded. Here is the link again.
On page 2 Dr. Vander Nat goes into "The Meaning of a Pyramid
Scheme." He also explains Ponzi schemes, which are clearly
illegal in the US. Both his report and the FTC statement of
opposition cite numerous case precedents, including the
40-year-old Koscot
case (involving old-school motivational
huckster Glenn Turner) that first
brought MLM dodginess to the public's attention in a big way. I
have a three-quarters-finished blog post about Glenn Turner; I
really do need to finish it.
Anyway, in his conclusion, Dr.
Vander Nat says that in his opinion GIN's program fully meets the
"Koscot test" for being a pyramid because "the
firm offers substantial rewards for recruiting members without
any requirement for retail sales; i.e., product sales outside the
network."
And the FTC makes no bones about its contempt for the
Intervenors:
In the latest obstacle to achieving
consumer redress and concluding this matter, twenty-five
participants in Kevin Trudeau’s Global Information Network
(“GIN”) pyramid scheme (collectively, "the GIN
Participants") seek to intervene—apparently because
the Receiver halted their pyramid payments. For several
reasons, however, their misguided motion is both legally
meritless and factually baseless. First, because the GIN
Participants neither own GIN nor have any right to unlawful
pyramid payments, they lack a sufficient stake in this
litigation to satisfy Article III standing requirements.
Second, their motion is untimely because, through its
attorneys, GIN knew about this litigation for nearly two
years before anyone moved to intervene—after extensive
litigation concluded, after the Court resolved the key
factual issues, and after the Court created a receivership
that the GIN Participants now seek to unravel.
Third, even if the motion were timely—and it is not—the
GIN Participants still fail to satisfy the requirements of
either Rule 24(a) or (b) because they lack any cognizable
interest in this case, they raise no question of law or fact
that has not already been litigated, and their intervention
would prejudice the FTC substantially. If everyone involved
with Trudeau’s machinations were permitted to intervene,
there will be thousands of parties before the Court. It makes
no sense to spend public resources and the balance of the
Receivership Estate sorting through the mess that
intervention will precipitate. In short, the interests of
justice demand that the Court deny the motion.
The FTC also gets a little snarky about the
Intervenors' MLM expert, Thayer Lindauer, who, by the way, wants to be "your network
marketing attorney." Thayer will help you structure your MLM
scheme to get around the regulators. But even Thayer thought GIN
was operating an illegal pyramid scheme (and I'm sure he would be
glad to make it a legal pyramid scheme, for a price). Here is a link
to a page that contains Thayer's test about whether a company is
an illegal pyramid scheme (for the
record, Thayer thinks Herbalife is illegal too). And here
is Thayer's discourse on "pyramid consequences," including his take on the ethical dilemmas faced by attorneys who
advise MLM-ers.
But back to the court docs at hand. This is from Document 808-0,
the FTC's statement of opposition to the motion to intervene:
D. The Pyramid Scheme Participants
Significantly, more than half of the twenty-five GIN
Participants received payments from GIN for their
“recruiting” efforts... In fact, their own alleged
“expert,” Thayer Lindauer, opines that GIN operated as an
illegal pyramid scheme:
My review of the current sales program
of Global Information Network indicates that [it] was
almost certainly operating as a pyramid promotional
scheme as defined by various administrative decisions of
the Federal Trade Commission under Section 5 of the
Federal Trade Commission Act.
That was an excerpt of a letter from Lindauer
to Timothy Shimko, one of the Intervenors' lawyers.
The FTC statement continues:
The FTC’s pyramid scheme expert
concurs. Specifically, economist Peter Vander Nat—arguably
the country’s preeminent expert on pyramids—provides an
expert report including thorough economic analysis. Dr.
Vander Nat “conclude[s] that GIN is a pyramid scheme.”...
Among other things, he opines that the overwhelming majority
of GIN pyramid participants will lose money: GIN promotes its
business opportunity as a “perpetual money-making
machine.” In reality, it is a perpetual recruitment scheme
that dooms the vast majority of the participants (well above
90%) to financial losses by the very design of the
compensation plan...
But the FTC seems to have Perry and gang's
numbers too (in more ways than one).
...Although almost everyone loses, a very
few do not. Perry Kiraly, the lead proposed intervenor, made
almost $48,000, and would stand to make more if the Receiver had
not dismantled Trudeau’s pyramid...Several other GIN
Participants who seek to intervene also made money, and stand to
make more at the expense of lower-ranking members. Many others
have not yet recouped their pyramid payments, but apparently hope
to do so if Trudeau’s pyramid continues functioning...(as Dr.
Vander Nat explains, for this reason, it is typical for
middle-level pyramid scheme participants to want the pyramid to
continue—so they can recover their “investment” from
lower-ranking members... This is why the GIN Participants allege
that they “benefit financially from their membership in [GIN]
in the form of residual income paid to members for attracting new
members”... and why they complain that the Receiver deprived
them of their purported “rights to income disbursements...
This may not necessarily mean that Perry's gang or some other
group has zero chance of acquiring GIN at some point in the near
future and re-creating it as a "legitimate" club (and
possibly a legit MLM). They have a Plan B in mind too, which
Perry has indicated since he first started doing his Stand With
GIN updates. In fact, that is supposedly why they've been working
with Thayer Lindauer: to clean up GIN's MLM and start 'er up
again.
But if the FTC has its way, the court will not recognize their
right to act as Intervenors -- after all, as the FTC patiently
explained, they were members, who signed membership agreements
stipulating that they had NO ownership. Moreover, their
"intervention" wasn't timely, according to the FTC. So if they have any
chance whatsoever of making GIN their baby, they will more than
likely have to find some other way besides
"intervention."
Some of us have thought all along that they were fighting a losing battle with the "Intervenor" effort, but they did
manage to get themselves added to the docket and have become part
of the case. In other words, they weren't laughed out of court
right off the bat. Still, my sense is that the court will agree
with the FTC that the Intervenors have no ownership in GIN. But
again, that doesn't mean GIN is completely dead... yet. Even so,
it looks as if the well-intentioned folks who contributed to the
Stand With GIN fund may have just been throwing their money away,
as many did for years in GIN. But at least those Shimkos will
have a little extra spending money.
Bottom line is that the FTC, with the help of their economist/MLM
expert, have defined GIN's pyramid dodginess pretty accurately --
which is another nail but possibly not the final one if GIN can
somehow be taken over, revived, and turned into a legal scam.
Though Perry Kiraly's "Intervention" effort will
probably fail, Perry and his pals are probably not going to give
up. And there are no doubt other parties fighting for the remains
of the moribund beast.
More popcorn, please.
PS ~ Self-proclaimed GIN destroyer Abe Husein
is excited because he, Peter Wink and Loony Coldwell were
mentioned in a March 2013 email from Kevin Trudeau to some of his
cohorts. Katie apparently panicked and clumsily tried to do some
damage control after ABC News showed up outside of his luxury
digs in Zurich in March. It was apparently those "ambush
journalists" who spooked Katie into trying to discredit some
of his detractors. It's almost as if he didn't really realize what they were up to until he got shaken out of his complacency by ABC's visit. More than likely he was also inspired by his
looming court cases and upcoming hearings and trial. But his main
concern besides discrediting his detractors seemed to be to get
tons of pro-GIN testimonials into the right hands. In fact, he
seemed more concerned with getting those testimonials than with
discrediting Abe, Wink, and Loony. Word has
it that no one in the GIN offices actually embarked upon a
campaign to discredit the Three Stooges, reasoning that the
Stooges did their own self-discrediting better than anyone else
ever could.
Here's a shot of the emails.
"Video testes from cruise"... that kind of sounds like he's
talking about naughty movies. I'd heard that some of those cruises got a little wild... Well, Katie is not the world's best
speller or punctuator.
Obviously any efforts at damage control that may have been made
in the wake of the ABC "ambush" were ineffective; ABC aired their
episodes of The Lookout, one in May and a followup in August, with, it must be noted, a
segment featuring Abe (but with no mention of Loony or Wink). I
think that most journalists who have had any interaction with
Loony or Wink, particularly Loony, can sense that showcasing them
as sources would not be the best move, credibility-wise, for any
news media outlet. (Peter did give a "press conference" after one of Katie's hearings, and some of the Chicago
journos used some quotes from him, but that's about the extent of
Peter's front-and-center exposure in this saga. I hear that some of the Chi-town journos think he is a little sleazy.)
The one major point that Loony, Peter, and Abe were and are
correct about, of course, is that Trudeau is a scammer and GIN is
a scam, which I've been saying for years. Where they are concerned it may be a pot-and-kettle situation, but they are
correct about that one point and yes, they (particularly Abe) have earned themselves
some media coverage for criticizing GIN and Katie. I did find it interesting that Katie's fans talk
about him taking the "high road" when it comes to
dealing with his detractors, when his emails indicate that he so
clearly did not want to take the high road. It's worthy of note,
I think, that this is the way that most Scamworld gurus handle
their critics, when ignoring them does not work: by trying to
discredit them. Loony Coldwell has tried that with all of his
critics, including me, of course -- this being just one example.
In this case, Loony was totally making up lies about me (major
fail in the discrediting effort), whereas if Katie's guys had
wanted to discredit Loony and Wink and Abe, they would have had
some legit info on which to draw. But Katie's own lack of
credibility was kind of an issue, to say the least, and ABC had
enough goods on him to neutralize any efforts to discredit
sources. They obviously did their own research and digging.
And so the saga continues, with no neat and tidy endings in
sight.
UPDATE 23 December 2013:
Perry Kiraly sent out another update today (actually the update is dated December 20, but the email has today's date).
Apparently, after discussion with one of his Shimkos and with other GIN members, he has changed his tune about the receiver and now
agrees with those who feel the receiver is interfering with and
destroying GIN. The receiver has bad vibes and it's ruining the
club, I tell you... ruining it! Here's a sample of what Perry wrote
in his email:
Exposure to the Receiver's vibration is
changing the vibration of our club and a few of the members
have already succumbed. The recent claim of the Receiver of
being assisted by members of the club (whom the Receiver
refuses to identify and plans to make an advisory board of), is
an ominous signal that such is occurring. Are these members
suffering from Stockholm syndrome? Maybe, but it is sure
that the presence of the Receiver and his minions are the
culprits.
More details to come.
Other relevant Whirled links about
MLMs and pyramids:
Out of this Whirled...
Here's more information about the difference between a
"legitimate" MLM and an illegal pyramid scheme. Many
activists argue that there really is little difference when it
comes to results, because all MLMs are structured so that only
the top few people ever make any significant money -- and they do
so at the expense of hundreds of thousands of rank-and-file
members.
http://www.dsa.org/ethics/internalconsumptionwhitepaper.pdf
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