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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