Scamway to Close its Doors

By Rabbi Eli Teitelbaum

I must admit that I was caught by surprise when I recently read that one of the oldest and biggest MLM companies called Amway was finally going to close its doors. “Make an extra $2,000 or $3,000 a month just by working part-time with your friends and neighbors” was their deceptive claim to fame. They promised great wealth by selling consumer products to one’s friends and neighbors but made most of their money getting people to recruit new salespeople to work under them (their downline) and taking a commission or “bonus” from their sales. For many years they have been charged with running a pyramid scheme, in which the profit is made by luring ever increasing people into their system rather than from the sales of the actual product. Additional charges included “false and misleading advertisements,” since people never made anywhere close to the money they said that one could earn. Yet the courts have allowed it to operate because they only charged $40 for their sales kit and claimed that they were selling a product. Actually, Amway made its big money by luring people into buying their business kits, motivational tapes, and getting their salespeople to come to their seminars. Instead of making money, most people lost thousands of dollars by buying their worthless motivational products and attending their hyped up fraudulent seminars.

In an excellent book entitled “Behind the Smoke and Mirrors” by Ruth Carter, she reveals the delusion and deception of the entire bogus business.  Amway promised wealth, opportunity and freedom to all those who joined and were willing to put in significant time and effort. They tried to sell hope but all one got in return was lots of soap and heartaches. There are former distributors who claim to have lost their shirts, their marriages and their families because of their involvement in the Amway business. To understand how it worked, one must read Ruth Carter’s excellent book that tells her own life story in great detail since she herself went through it all.

Yet, as is almost always the case, these companies never give up. When one company closes up, two others take its place and there seems to be an endless supply of suckers that will be lured by their promise of easy wealth and riches that supposedly lie at the end of the rainbow. Some people will never learn.  As long as we wear green glasses one can never see red!

Before Investing in an MLM

By Rabbi Eli Teitelbaum

While there are some MLM’s that are an outright pyramid scheme and illegal, there are many others like Amway that have been ruled legal by US courts yet that does not mean that they are a good business to go into. One of the big problems with many of these MLM’s is that they easily mislead people into believing that they are an easy way to riches. Before going into Amway or any other MLM, I would very strongly suggest that one read two very important books that will open your eyes on this subject. One is entitled “Behind the Smoke and Mirrors” by Ruth Carter who had made it to the very top of Amway before she realized her mistake and the other is “False Profits” by Robert L. FitzPatrick. Ruth Carter reveals the multi-level deception, delusion and guile she found in the Amway distributor business. According to the SA4400 (a document which Amway distributors are required by the FTC to give to prospective recruits) the average monthly gross income for active distributors was $88 in January of 1998. This was of course before expenses.

I still remember when Amway started in 1959 and many of my friends joined in hope that they’d soon make it rich and retire. It didn’t take them long to realize that there was no pot of gold at the end of the rainbow and they all soon dropped out for one reason or another. Before one goes into any business, one must do careful research to find out the pros and cons. This is something that should be discussed with a good accountant and lawyer. The last person to ask is of course the person trying to get you into the business since he may very well have a personal interest in the matter.

The thing we must learn from the terrible Enron fiasco is that it’s very easy to make all kind of claims about a company’s great success and earnings yet it may all turn out to be a big balloon filled with lots of hot air. Since Quixtar is a “sister” business to Amway it certainly would be proper to learn a little about Amway before going into Quixtar.

Buyers Beware!

By Rabbi Eli Teitelbaum

While I don’t profess to know much about business and don’t offer any business advice, I have often written about monkey business of which I have gained a little knowledge and have written about from time to time in the CY magazine. I've done so in order to alert the public of some of the dangers that lurk in our midst and prevent the public from being conned out of their hard earned money by the charlatans and swindlers that walk the streets. While many people may be very intelligent, they have never been taught the “Street smarts,” and can easily be taken by the master con artist’s deceptive tricks.

Recently I received a call from a good friend of mine asking for my advice on a particular lucrative business deal he was being offered to engage in. Without going into any details, I advised him to stay away and not to touch it with a fifty foot pole. I was quite familiar with this Multi Level Marketing scheme and I knew that their promises were no better than Yasser Arafat’s, and that their products are overrated, and that their claims to riches were illusionary. A few minutes after I hung up the phone I received some calls from those very same scam artists who were pushing their product. They were very angry at the advice I had offered and they wanted to know why I was so strongly opposed to the deal which they claimed was a perfectly legitimate and profitable enterprise. From past experience I’ve learned that there is nothing as dangerous as empty space between one ear and the other and I knew that debating someone that’s already sold on it was worthless and no matter what I said my arguments would fall on deaf ears. Listening and hearing seem to be two separate senses.

For many years I have advised people not to waste their time and money with MLM’s such as “Amway” ( Scamway, ) “Jewel -Way” and the many others that have left many people penniless and disillusioned. Unfortunately, many ignored my advice and went into them despite all my protestations. I was even taken to bais din when I put an ad in the paper exposing one of the biggest crooks in our midst who embezzled millions of dollars from the religious public with his fraudulent business deals which he advertised in the Yiddish papers with outright impunity. I learned that people were easily bamboozled by promises of great riches that supposedly lay at the end of the rainbow and that no matter how sensible the advice, people want to believe the unbelievable and the unrealistic. Even the bais din couldn’t fully understand that when one offers 3000% interest on an investment it is ludicrous and a sure sign of fraud and allowed this scam artist to continue advertising his ridiculous claims so long as he doesn’t write the word “guaranteed” in his advertisement. It was only a few months later, when the FTC closed down the company called “Purchase Plus” that the bais din realized that they too had been taken for a ride.

The sales pitch of those who promote these pyramid, Ponzi, and MLM scams are so powerful that few people can see white light when wearing green glasses. Some people seem to refuse to take advice and have to bang their own head on the wall to believe that it will hurt. They’ll climb up to the top of the ladder of imagined success only to find it is leaning against the wrong wall. “If you want to double your money, just fold it over and put it back in your pocket” is a good piece of advice that should often be followed. While there are certainly many exceptions, one must be very weary when the offer sounds too good to be true. Unfortunately lots of people have lost their money in business deals which are nothing but camouflaged pyramid schemes or clever Ponzi scams or simply misrepresent their true earnings or the true worth of their product. It is very easy to manipulate statistics and books to make them seem very lucrative deals as we have seen happened with companies such as Enron and many others who have embezzled billions from the naive and unsuspecting investor.

That is why it is extremely important that one get the advice of a good lawyer or accountant before going into any business deal and never rely on the person who is trying to sell you the product or the business venture, unless he’s your own father. While I know that my words of caution may land on deaf ears, I will be quite satisfied and pleased if I can prevent even one person from being bamboozled.

P.S. In order to get a better understanding about such monkey businesses, I suggest you read “False Profits” by Robert Fitzpatrick and Joyce Reynolds, and “Behind the Smoke and Mirrors,” by Ruth Carter.