MLM CRITICS TACKLE THE WATCHDOGS PART 2
(The bashers that cost you 2 million good recruits a year)
www.mlmsurvivor is run by Ruth Carter. The website is registered to Sue Perkins.
Yahoo Groups Drop - by and pass back their fibs!
MLM BASHERS THAT ARE IN THE (SAME AS SCAM ARTISTS) = BROWN TYPE
LEN CLEMENTS MARKETWAVE ONE OF GOOD GUYS = DARK BLUE TYPE
YOUR EDITIOR ROD COOK WITH COMMENTS COMMENTS TO MLM CRITICS = RED FOR IRRITATED!
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Rod Cook WatchDog ED. Note: These were saved from MLM Survivor group. Now they can be used by investigators for writing style comparisons with illegal shorting posts on Yahoo Financial groups. The posts were made to bash Usana stock and drive DOWN the price of their stock. If the poster has an adverse financial interest in the stock this is criminal activity! Barry Minkow Fraud Discovery Institute may have (in my opinion) lead the open attack. Jon Taylor and Robert Fitzpatrick are tied into Yahoo Usana groups by a document they submitted.
Note: I was of the opinion that KUBLAIKANT was Robert Fitzpatrick now? Is it the guy named Brooks on the Pyramid Scheme Alert committee?
Len:
No, I'm not Robert Fitzpatrick. I am an experienced civil appellate lawyer who has been studying MLM and the law related to it for about nine years. Believe it or not, lots of legal scholars understand this issue the same way Fitzpatrick does. Remember, I was of the opinion that KUBLAIKANT was Robert Fitzpatrick now it appears it may have been a lawyer named Brooks that belongs to the Pyramid Scheme Alert or it may have been Fitzpatrick being coached by him.
"PRIMARILY", Len.
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Got your attention?
Now let's begin . . .
You said:
" The point I was trying to make, which within the limitations of this forum I admit I did not make clearly, was that the Omnitrition case created only an *opinion* (not law) and all subsequent cases (that I have reviewed, which have been many) have cited the 9th Circuit's opinion as their precedent. In other words, no other federal court has, subsequent to the Omnitrition case, entirely on their own, produced the same opinion."
You aren't a lawyer, are you? Of course subsequent federal courts would cite Omnitrition, it's a well-reasoned discourse on the nature of pyramid schemes with an accurate and concise explanation of the meaning and purpose of the Koscot rule...
Remember Len and I both were of the opinion that KUBLAIKANT was Robert Fitzpatrick I had one of our appellate lawyers that does MLM read all of this guy's posts. He said Huh?
You're right in that the then 20 year old "Koscot rule" was used to guide the 9th Circuit Court in this case. However, the DSA offered an Amicus Brief (for the layman reader - also called a "Friend of the Court" document in which a person or organization with a high level of knowledge and expertise in the case being considered offers guidance and information it feels would be helpful in educating the court about the field which it's case is associated). The 9th Circuit Court refused to even consider this information. Also, on several points it's decision contradicted the higher federal court in the FTC vs. Amway case 15 years earlier. Based on these points alone it is arguable as to whether this case was "well-reasoned."
Federal courts have cited Omnitrition and the thirty year old precedent from Koscot on which Omnitrition is based. In U.S. v. Gold Unlimited, the Sixth Circuit Court of Appeals explains how Omnitrition isn't really saying anything different than Koscot did twenty-five years before. The Sixth Circuit is right by the way. The law has regarded the payment of compensation unrelated to outside retail sales the sine qua non of an illegal pyramid scheme for the last thirty years...
No it has not. And your above claim does not say the compensation must be derived "primarily" from outside sales (nor did Jonathon, who's post I was originally rebutting). You just said simply paying compensation unrelated to outside sales is indicative of an illegal scheme. Funny how you would forget that after repeating "PRIMARILY" so many times in your post.
Being as astute in the law as you seem to be, wouldn't you agree that the manner in which the courts INTERPRET and APPLY the law is more important that the literal wording of the law? Would you also agree that Federal law trumps state law? Yes, there are state statutes and some federal cases where the wording suggests what you are saying is true. Yet, if that were the case, about 2,100 MLM companies today would be operating illegally. The enforcement of these laws (as you claim they apply) would generate cumulatively BILLIONS of dollars in fines and punitive damages. And filing and winning such suits would be like shooting fish in a barrel. Yet, 50 state AGs and the FTC have utterly ignored them for decades. Strange, isn't it? So, there at least seems to be some ambiguity about how the FTC might be INTERPRETING and APPLYING the law.
So let's just ask them! Which is what the DSA did last January. They even asked about how the FTC applied the "income must come PRIMARILY from outside sales" (paraphrase) rulings in the cases you quoted. And, once again, here is what they said:
"...these orders often contain provisions that place EXTRA constraints upon wrongdoers that DO NOT APPLY TO THE GENERAL PUBLIC. These "fencing in" provisions only apply to the defendant signing the order... THEY DO NOT REPRESENT THE GENERAL STATE OF THE LAW... when the Commission brings a pyramid scheme action, the case often concludes with a consent order. ...most such orders contain definitions that exclude any sale to a participant in the business from the calculation of the venture's legitimacy. These definitions draw very clear lines for those who have demonstrated a willingness to violate the law, BUT ARE NOT INTENDED TO REPRESENT THE STATE OF THE LAW FOR THE GENERAL PUBLIC."
Rod Cook ur Editor Posts this:
Your lack of a response to the FTC's clear and specific statement that unequivocally disproves your position was glaring.
I hate to yell but I'm sick of explaining this: "INVENTORY LOADING" IS ANOTHER WAY OF SAYING THE PRODUCTS AREN'T BEING SOLD TO OUTSIDE CONSUMERS TO BRING MONEY INTO THE "MARKETING" ENTERPRISE. Therefore, regardless of the manner in which the scheme discourages retail sales IT IS THE LACK OF RETAIL SALES that creates a situation where money primarily (there's that word again) comes into the enterprise by recruiting more participants. That's what makes it an illegal recruiting scheme.
When did we start debating the issue of "Inventory loading?" Yes, inventory loading is illegal, because it goes to the MOTIVE for buying the product, which is to artificially meet a quota, not because the product is genuinely desired. The MOTIVE for buying the product is, in the vast majority of cases, the crux of the legal challenge. And, once again, this is clearly expressed in the FTC letter when they state:
"The AMOUNT of internal consumption in any multilevel compensation business does NOT determine whether or not the FTC will consider the plan a pyramid scheme" (emphasis mine). They go on to explain that the motive for buying the product is the key factor.
This FTC position was quoted in my original response to Jonathon, so perhaps you missed it.
You said: "Furthermore, the other pre-Omnitrition cases you cited, some dating back 30 years, are no longer relevant to current day MLM law (and the FTC has recently demonstrated their concurrence with that position, which I'll get to in a moment)."
They are very relevant. The law hasn't substantially changed in thirty years...Remember I was of the opinion that KUBLAIKANT was Robert Fitzpatrick.
The INTERPRETATION and APPLICATION has changed significantly. I described in detail as to why in my last post. That being, in an effort to be *less* legally vulnerable the vast majority of MLM companies now have very little, and many have no, enrollment cost. Therefore it would obviously behoove every retail customer to call an 800-number and enroll as a rep for free and get their same favorite products for 25-35% less. Doesn't that make sense? But then, I've already explained this, and you've conveniently pretended I didn't and ignored it.
YES, Len, you can pay a bonus on personal consumption...
But you just said "The law has regarded the payment of compensation unrelated to outside retail sales the sine qua non of an illegal pyramid scheme for the last thirty years." So is the payment of compensation that is unrelated to outside sales "the sine qua non" (essential element or condition) of an illegal pyramid or not? (See, I can play tricky lawyer games, too :-)
You can not operate a scheme in which the compensation is paid "PRIMARILY" on sale of products for the distributors themselves. That's where you were being misleading in your original post. I corrected you in my post. You are still trying to play word games by glossing over the FTC's rule that a scheme cannot primarily (there's that word again) pay compensation on self- consumption by suggesting that the FTC does not forbid paying compensation for self-consumption...
How can you say this after I directly quoted the FTC in crystal clear English in that "The AMOUNT of internal consumption in any multilevel compensation business does NOT determine whether or not the FTC will consider the plan a pyramid scheme," In other words, even if it is derived PRIMARILY from personal consumption, this is not necessarily indicative of an illegal pyramid. You went on, in your original rebuttal, to site two cases (Equinox and Five Star Auto) where the FTC specifically stated that compensation must come primarily from outside sales. That was your evidence to back up your case, correct? But then I quoted the FTC who said: "..most such orders contain definitions that exclude any sale to a participant in the business from the calculation of the venture's legitimacy. These definitions ... ARE NOT INTENDED TO REPRESENT THE STATE OF THE LAW FOR THE GENERAL PUBLIC." Now you accuse me of "playing word games" by "glossing over the FTC's rule"?
I'm really beginning to doubt whether you understand this issue at all. Of course the FTC does not forbid paying commissions on self-consumption. The rule I'm talking about clearly contemplates some commissions paid on self-consumption. What the FTC CLEARLY AND UNEQUIVOCALLY forbids is paying the commission PRIMARILY (that is "most" of it or "more than 50%) on self-consumption. ED. Note: Remember this is the MLM critic that fibbed about the state laws!!!!
Now I have to ask - did you even read my entire response? Are you just hoping that no one else has read my response? Do you think I, and the readers of this thread, will forget the FTC statements that utterly and completely disprove your position?
"The AMOUNT of internal consumption in any multilevel compensation business does NOT determine whether or not the FTC will consider the plan a pyramid scheme." As much as you wish to ignore it and pretend they didn't say that, that's the FTC's position. You're wrong.
Read Schrader v. State out of the Maryland Court of Appeals if you have any questions as to the meaning of "primarily." I doubt federal courts will have a problem with it either. Clearly it doesn't bother the FTC.
Clearly, you have no idea what the FTC's position is. I think you arrogantly jumped into this debate with no knowledge what-so-ever of the 1/14/04 FTC letter. Now you are, as any good lawyer would, desperately trying to veer attention away from my evidence. And, as I know is taught in law school, if you can't diminish the credibility of the opposition's case, try to diminish the credibility of the opposition. Which obviously is what you have resorted to with your mocking, sarcastic, condescending personal remarks.
That's where HR1220 is effectively legalizing most pyramid schemes. It is written so that 100% of the products can be sold to the participants themselves.
Here's an example:
Let's say I want to start a new pyramid scheme. I decide that I want my pyramid scheme particpants to pay $100 each as their entry fee and that I'll pay back $35 on each membership in a complex compensation scheme to the various upline for each new partcipant. The remaining $65 I'll keep as profit. I can't just ask for cash payments, however, because that would be too obvious.
What I do instead is find a product - a "widget," let's say- that I can get from the supplier for $1 and that has or would have an ordinary retail market price of $1.50. I charge each new particpant in my scheme $101 to buy a widget and join the scheme with the right to recruit more widget buyers. The new participant and his upline share in the $35 pyramid kickback - which I'll now refer to as a rebate - or even more deceptively - a "discount." I make $65 profit and anyone who can recruit enough people buying widgets underneath them can eventually make a profit off their small share of the $35 kickback on each sale.
What practical difference is there between this example and simply taking an up-front cash payment from each participant with no product at all?
There is no difference. The added premium to fund the pyramid kickback makes the product unsellable or very, very difficult to sell outside the scheme's participants guaranteeing that the only way to recoup the investment is to recruit more people. That is inherently fraudulent as virtually every court has recognized since Koscot, thirty years ago!
Your DSA's HR1220 legalizes the scheme I just described. Hell, it would legalize the schemes run by Glenn W. Turner in "Koscot Interplanetary, Inc." and "Dare to be Great." It would also legalize the BSM business that makes Quixtar/Amway such a bad deal for almost 100% of its participants. In fact, it would be even worse. The systems could drop the products business altogether and teach their downlines to spend even MORE money on tools (and recruit others to do the same).
Have you even *read* the bill? It's only two pages long, so how could you have missed:
SEC. 2. FINDINGS.
(1) Pyramid promotional schemes, chain letters, and related schemes are enterprises--
(A) that finance returns to participants through sums taken from newly attracted participants;
SEC. 3. DEFINITIONS.
(7) INVENTORY LOADING- The term `inventory loading' means that the plan or operation requires or encourages its independent salespersons to purchase inventory in an amount that unreasonably exceeds that which the salesperson can expect to resell for ultimate consumption, or to use or consume, in a reasonable time period.
(11) PYRAMID PROMOTIONAL SCHEME- The term `pyramid promotional scheme' means any plan or operation in which a participant gives consideration for the right to receive compensation that is derived primarily from the recruitment of other persons as participants in the plan or operation, rather than from the sales of goods, services, or intangible property to participants or by participants to others.
Any one of these three sections would not only not have protected "Koscot" and "Dare to be Great" it would have been the *catalyst* to the FTC's law suit!
The DSA bill still goes to the MOTIVATION for buying the product. If 100% of it is personally consumed by folks who genuinely love the products and would have bought them anyway (including the smart retail customer who didn't want to pay retail when they could simply get the same product at wholesale), then this bill would protect that company. As it should. However, if even a majority of participants are buying the products as a token purchase just to meet a quota in the compensation plan, such as your $101 Widget, this bill would absolutely define that operation as an illegal pyramid.
I suppose you could rebut this if you want, but the sections above are exact quotes from the bill. It's right there in black and white. You're wrong again.
Again . . .Len Clements
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Got it?
Pardon my tone, but you did NOT answer my questions posed to you in the last post. Moreover, mischaracterizing the issue throughout your response as you did and re-using the same strawman twenty times I find to be disingenous - at best.
LEN: The irony of that paragraph is so thick I couldn't cut it with a diamond bladed, 350 hp chain saw.
Remember I was of the opinion that KUBLAIKANT was Robert Fitzpatrick now the investigation goes on.
The word "primarily" answers every other point in your post. Jonathan has you here. You either don't understand or refuse to address the notion that most of the sales need to be outside the pyramid of distributors for the scheme to be legal. That didn't start with Omnitrition. It is the law for the last thirty years.
kublaiKant
Rod Cook WatchDog ED. Note: Now don't drag Jonathan into this argument. His argument established the legitimacy of most older MLM companies since they have more customers (that do not belong to the pay plan) than distributors. I fight MLM pyramids and the junk they push every day. The MLM critics on this board are so wasted on these anti-MLM fibs that you bring tears to my eyes.
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"All lies and jest. Still a man hears what he wants to hear and disregards the rest."
I rest my case.
Len Clements
Then the board monitor answers Kubliakant's rebuttle to Len...
AKA RUTH CARTER PUTS THIS RIDICULOUS MESSAGE ON BOARD
Len will not be answering. He attempted to post a message that clearly violated our rules, and he has been silenced. (As our rules state, there is a double standard with regards to pro-MLMers. Insults and argumentation in favor of MLM are not permitted here. Additionally, when proMLMers make claims, they are expected to back
them up with verifiable evidence. (ED. Note: LEN DID!!!) We try to allow some latitude, but when arguments start appearing claiming that black is white, rules have to be enforced.) However, you and everyone else are welcome to continue addressing him, since he is allowed to read messages posted here.
PW
P-A-L
ED. Note: We fight MLM pyramids and the junk they push every day. MLM critics FABRICATE and hide THEIR NAMES because they DON'T KNOW THE LAW or what the FTC is doing. Those who run the MLM Survivor board are critics and experts at myths and lies.
MORE TO COME....!!!! Rod Cook, Ur Editor
KEY WORDS: FTC LETTER 2004, MLM LAW, ROBERT FITZPATRICK, MLM CRITICS, MLM CRITIC LIES
