Foreword: Read at your own Risk

After a baffling involvement in a national mania, called the “Airplane Game” that spread across America in the late 1980s, I began obsessively researching pyramid schemes and multi-level marketing (MLM). I had to understand the mysterious force of attraction that had lured me and so many thousands of others into a delusional dream world and financial folly. This eventually led to my writing and publishing False Profits in 1997, the first book on the market to critically examine the exploding phenomenon of multi-level marketing, its relationship to illegal pyramid schemes and the mirror it holds up to America’s darker and less explored values and aspirations.

My book prompted an almost immediate and totally unexpected request to appear on CBS 60 Minutes in a segment about a popular multi-level marketing company that had defrauded over 150,000 people. My role was to explain what MLM is and how it operates. This request from one of the country’s most authoritative news sources reflected that pyramid schemes disguised as sales companies were sweeping the country, and though they operated in plain sight, the public could not recognize this new type of fraud. They did not understood how they worked, even as millions poured money and hope into the schemes. Even more amazing, there was general unawareness in the news media as to why Americans were flocking to MLM. 

This national exposure was soon followed by a request to serve as an expert in a federal court case against the oldest and  largest MLM, Amway. The lawsuit was brought by the Recording Industry Association of America for Amway’s unauthorized use of famous and copyrighted music at its massive recruiting events. The attorneys for the music artists fully understood copyright law violations. Reflecting the wider confusion and unawareness about MLM, they called on me to explain how Amway used the rousing and inspirational music as part of its money scheme. I explained its economic value and purpose for Amway in inducing millions of people to invest – without due diligence – and in maintaining a grip over the minds of followers even as they lost money. My testimony and consultation about Amway’s recruiting, control and redirection methods helped the recording artists recover $9 million from Amway in a settlement.

My knowledge and interest in MLM evolved from there and expanded into a distinct intellectual discipline, shared only by a handful of others around the world. This MLM topic crosses through business law, criminology, politics, business economics, psychology, accounting, marketing (of course), and even includes inquiries into the origins of authoritarianism and methods of cult persuasion. More on that later. 

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By 2001, I co-founded Pyramid Scheme Alert, a non-profit consumer education and advocacy group. I have continuously managed its website, one of most comprehensive and accessed resources on “MLM.” Since the Amway court case, I personally combatted the MLM phenomenon in more than 30 other cases as an expert witness, consultant, friend of the court, and even once as defendant. I’ve also  provided professional consultations to dozens of Wall Street analysts, investors, and researchers seeking an understanding of the MLM “business model.” I have been featured in film and radio investigations of MLM on NPR’s This American Life and the Netflix’s Betting on Zero. I appeared in and worked closely with the producer of John Oliver’s hilarious 2016 exposé of MLM on HBO and viewed on YouTube by more than 20 million and Penn & Teller’s similar take on it on Showtime. In 2018, I was extensively interviewed on the popular 11-segment podcast, The Dream, distributed by Stitcher, on the history and realities of MLM. I also assisted and appeared in a news documentary on MLM deception produced for Channel One, Russian television.

The majority of my time and effort are expended as unpaid educator and advocate in thousands of face-to-face, online and email inquiries from MLM victims, families of victims and those trying to understand or seek a way out of MLM’s hall of mirrors. I have listened to stories of bankruptcy, divorce, alienation from friends and family, and suicides tied to experiences in multi-level marketing. I never argue with someone committed to promoting MLM. I don’t try to persuade. There is not time enough on earth for that.

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None of these efforts has measurably affected the epic spread of MLM. I have watched “MLM” – operating under hundreds of company names – spread like a forest fire from blue collar sectors, among evangelical Christians, and in small towns, up the social and economic ladder through suburban management ranks to professionals, doctors and dentists, buying vitamins and supplements promoted as miraculous cures by Mormon-run MLMs from Utah where the “supplement” industry is concentrated. I have seen it invade and conquer the Facebook communities of stay-at-home mothers on the Upper West Side of New York with cosmetic and clothing-based MLMs, and then, without changing its structure or basic message also pour down upon undocumented immigrants, struggling military spouses, impressionable high schoolers and debt-burdened college students. 

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Globally, MLM’s most aggressive invasion has been among the 1.4 billion people of China whose Communist Party-controlled government fully opened the country to MLM only in 2005. Tens of millions have since been led to believe MLM embodies the true spirit of capitalism and offers deliverance from deadening jobs assembling iPhones, plastic junk and appliances.

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My work and words have also not awakened interest among regulators or legislators. To the contrary, US regulators have weakened consumer protections against pyramid schemes, even exempting MLMs from disclosure rules when making financial solicitations. The “MLM” movement is now syndicated into an “industry” with its own lobbying and PR organization on K Street in Washington DC, and has assembled a protective caucus of lawmakers in the U. S. House of Representatives. Donald Trump is MLM’s most famous and highest paid spokesman, endorsing and promoting it for more than 10 years, leading up to his presidential candidacy in 2015. MLM’s leading and largest enterprise is the Amway Corporation. Its most controversial representative is Herbalife, which you may recognize as the subject of a five-year battle between billionaire investors Bill Ackman and Carl Icahn. There are hundreds of others that will be explored further in the coming pages.

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Multi-level marketing, sometimes also called “network marketing” now covers the entire earth, with a claim of over 100 million households paying into it every year. In America alone, where it all began in 1945, official MLM representatives claim that over 18 million households – one in six – are under contract to MLM companies each year. More than half of that figure joins yearly, replacing those who quit. Every year, the recruited participants expend between $20 and $30 billion in fees and purchases, though that estimate does not come close to actual total expenditures when related expenses and opportunity costs are included.

My efforts have not even made a significant difference that I could tell among my own friends and family some of whom have sheepishly admitted to joining and losing their money in MLMs without telling me. They explained they had been taught that a positive attitude and unflinching belief were the most important factors for success in MLM. Negative voices from non-believers and cautious calls for “due diligence” are to be shunned and avoided. In the ideology of the MLM movement, I am fiendish dream-stealer, malevolent negative-thinker, "Pathetic Loser" (a popular term used in MLM to demean all critics).

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In the face of all this – the unrelenting spread of MLM, the massive consumer losses in its wake, its enchanting attraction, the resistance to facts or exposure and seeming immunity from fraud prosecution – I am often asked to explain the larger meaning of the  MLM phenomenon that would keep me engaged. I warn questioners, as I now do the readers of this book, deeper inquiries into the areas of cultural habit and belief that give rise and support to MLM may cause the ground on which the inquirer stands never to feel stable again.

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To separate MLM from its benign and uplifting disguises of “direct selling” and “income opportunity” requires an unflinching inquiry into the words and practices of sales, marketing and advertising – the drivers of our consumer economy – where sociologist Jules Henry wrote that “pecuniary truth” rules, not factual reality.

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To see how MLM’s money transfer scheme remains safe from regulation, one must re-examine other areas of the economy that are based on manipulated transfers, such as in the stock market, investment banking, unpayable government debt, housing and commodity bubbles or the prevalence of state lotteries replacing sustainable taxation for current public services.

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To understand how MLM’s leaders are revered even by followers who lost money, the inquiry must also venture into matters of religion and faith where financial “prosperity” is theologically defined as a divine blessing and poverty a pre-ordained or self-inflicted punishment.

To grasp how MLM seemingly shuts down critical thinking leading to financial self-destruction requires that the term “cult persuasion” also be considered in modern advertising, marketing, economic beliefs and political propaganda. 

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And to make sense of MLM’s historical immunity from fraud prosecution, one must delve into the world of K Street lobbyists, revolving doors between the Federal Trade Commission and MLM and the selling of the public trust by some of our most famous leaders, naming these individuals from the mid-1970s up to Donald Trump himself. 

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To get to the core reality that can explain MLM’s phenomenal spread one must also re-examine the state of opportunity in America today, the decline of the middle class and popular views of wealth as measures of “success”, happiness and human worth.

These are the hallowed grounds of American society guarded by firmly-held but seldom examined beliefs. They are areas of reality and truth generally outside the bounds of news media coverage. To date, not a single book has been published in America that examines the MLM phenomena, its roots and how it operates. Similarly, MLM is not a focus of independent research by government or any university. 

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Those who pursue the untold story of multi-level marketing risk being cast as heretics or accused of cynicism, socialism, negativity or blasphemy. Those who follow this inquiry into the depths of “MLM” do so at their own risk.