Anti-MLM Zealots Me Thinks Doth Protest Too Much! Part I By Leonard W. Clements © 2004 I love Multilevel Marketing. I've been involved, full time, for over 14 years, and I've managed to make a very good living at it – and I've never front loaded anyone with product, I've never flashed my check, I've never mislead anyone into attending an opportunity meeting, I’ve never sold training or tools for a profit, I've never made an outrageous product claim, and I've never lost a single friend in the process. I have, with hard work, commitment, and patience managed to ethically and honestly build a downline sales organization that has afforded me enough residual income to "exit the rat race." However, according to some, I don't exist. There are certainly some networkers among us who might be considered "zealous" as well. Perhaps overly so. But for every person attempting to convince a jaded, wary world that MLM is true, and good, there are at least an equal number who immediately dismiss it with prejudice. And, yes, some of them can get a little overzealous as well. Anti-MLM Zealots tend to come in two flavors: Ignorant or vindictive. In other words, they've either never actually participated in MLM themselves (thus have adopted someone else's opinion as their own, or simply guessed at their conclusions), or they have participated and failed at it. Would you take marriage advice from a guy who was recently divorced? Or, worse, has never even had a girlfriend? Would you take golf lessons from someone who shot in the 120s, or who never played golf – no matter how much they claimed they had "studied and analyzed" the game? In fact, there are four individuals who have made it a point (and in some cases, it seems, their life's mission) to be a thorn in the side of every MLMer in an effort to save the other 283 million Americans from a fate such as mine. Although these Four Horsemen of the Apocryphal are small in number, thanks to the internet their words are available to millions, and they are doing some damage (do a Google search for "MLM" -- the top three results are anti-MLM sites). Whether you realize it or not, many of those who are not responding to your marketing campaign are victims of the anti-MLM propagandists. To many they seem to make sense. Do they? I certainly don’t think so, and I’ll be telling you why here in this publication over the next several issues. I think it’s about time these naysayers be taken to task. Their words have lingered unopposed long enough. They’re wrong, and here’s why... What's Wrong With Multilevel Marketing? – Dean Van Druff Dean Van Druff, the author of the well traveled, rambling, disjointed essay "What's Wrong With Multilevel Marketing?", is perhaps the most prevalent of the four in spite of making the weakest argument. Mr. Van Druff goes so far as to state that "MLM will never

work, even in theory" in the face of the blatant fact that MLM is a 64 year old industry with numerous profitable companies and thousands of successful distributors. The ignorance of most Anti-MLM Zealots is clearly evident in their reporting of basic MLM related facts and figures, and Van Druff provides a litany of them. I should point out that I am not at all implying he, nor anyone opposed to MLM, is dumb. Ignorant means to ignore readily available information, thus resulting in a lack of knowledge, not intelligence. For example, throughout Van Druff's 12 page essay he makes several observations about MLM that are simply inaccurate, such as, that we are a 25 year old industry, which would have been off by 30 years even in 1990 when his essay was originally written. This could be explained by Van Druff's own reluctant but eventual admission that he has had no personal experience with MLM and did little, if any, research into the subject previous to putting his "theoretical analysis" on paper. Besides the historical inaccuracies mentioned previously, Van Druff also claims "many high level MLM promoters have been shut down, the 'executives' incarcerated." He later claims that the founder of FundAmerica (which he misspells) was "arrested for having generated some 90% of revenues selling 'distributorships' versus product." Although FundAmerica was declared a pyramid scheme, the founder was actually arrested on fraud charges. In fact, it is extremely rare for anyone promoting even a blatant pyramid scheme to actually serve jail time, and most legal actions against MLM companies are civil, not criminal. The few criminal cases involving incarceration (three that I know of over the last 25 years) did not involve multilevel marketing companies. They were, in fact, blatant pyramid schemes. Van Druff again shows his ignorance by asking the question "If (an MLM product) is so great, then why isn't it being sold through the customary marketing system that has served human society for thousands of years?" Yes, he actually said that in his article, and its wrong on multiple levels. First, I can think of only one "marketing system" that has served human society for "thousands of years" – word of mouth. The marketing system used by MLM companies. Let's forgive his hyperbole and assume he meant store shelves. Has Mr. Van Druff ever researched what is involved with getting a product on a store shelf? Obviously not, for its a daunting, expensive, extremely competitive challenge. It also involves millions of dollars in advertising to get those products off the shelf. Where as word-of-mouth is not only the most powerful form of marketing, it’s the least expensive (that's a pretty good combination). But then, this is one of the most fundamental, basic, and most touted benefits in regard to marketing a product via MLM. Yet, Van Druff appears oblivious to it. This is the epitome of ignore-ance. It gets worse. Van Druff also claims that some MLM companies attempt to address the saturation issue "by limiting the number of people you can sponsor, say, to four." Really? Actually, no. No such limitation has ever existed in any of the several hundred MLM programs I've reviewed over the last 20 years, nor do I suspect it has ever existed. He's probably talking about matrix plans where you are limited to the number of people you can place on your first level, but not the total recruited, and he just doesn't understand what he's talking about.

He also claims MLM distributors "usually sell through prefab parties or home demos." Of course, anyone with any actual experience in MLM would know that such activity is uncommon today in all but a few old-school MLM programs (although it is making a comeback). He goes on to describe a "shadow pyramid" where people are induced into buying "motivational tapes, seminars, and videos" Of course, we all know he's talking about only one, albeit very large, MLM company. And even then its upline distributors (not the company) who are making the profit, and on a direct sales basis, not MLM, and such purchases are clearly stated by the company as being totally voluntary. He also claims the MLM company itself profits by "conning" recruits with a "distributor fee." What he is ignorant of is the easily obtainable and verifiable fact that, by law, MLM companies must sell their sales aids, promotional tools, training, and distributor kits/fees at cost! No significant profit can be made from these items, and they can not be commissioned as part of the MLM compensation plan. Sure, some MLM companies push the envelope a little on this, and yes, some push it a lot. But the vast majority do not. Furthermore, that $25-$50 annual distributor fee we all are "conned" out of typically covers such things as maintaining our sales organization, the paying of commissions to our downline sales reps, the paying of sales taxes to all 50 states, data entry services, customer support, warehousing, and various other administrative functions that would likely cost hundreds, if not thousands of dollars per month if we were to hire someone to do them for us. Van Druff then takes on "loony product claims." While I concur with his overall criticism (some are pretty loony), his theory as to how MLMers "effectively skirt the Federal Trade Commission" is by using "word of mouth testimonials, supposed 'studies' done by scientists, fabricated endorsements (etc)...". If Van Druff would have invested even ten minutes of research into this topic, he could have easily discovered that, indeed, the FTC already prohibits curative or treatment claims by all of the means he lists, including personal testimonials. In fact, the FTC has made available (for years) guidelines for product claims in their document "Dietary Supplements: An Advertising Guide for Industry (see http://www.ftc.gov/bcp/conline/pubs/buspubs/dietsupp.htm for entire text). We are just as forbidden from promoting our products in all the ways Van Druff describes as any other marketer of products. Van Druff arrogantly professes that "the law generally condemns MLM" and even goes so far as to claim that all MLMs are illegal! Of course, Mr. Van Druff is utterly and completely wrong. Our state and federal government makes those laws, and our courts decide who breaks them. And, based on decades of legal precedent involving hundreds of cases, our government and our courts have ruled that MLM is legal. Van Druff's opinion, much to his chagrin I'm sure, doesn't count. Van Druff then borders on the absurd by implying there is some grand conspiracy by MLM "experts" to "propagandize, lobby and defend" MLM. (Defend ourselves? How dare we?!!!). He theorizes (but states as a matter of fact) that the MLM industry has used "so much money from it's victims" to hire these nameless lobbyist experts who have managed to pull the wool over the eyes of state and federal regulators. Considering, once again, there are over 1,500 MLM companies in the United States, over 7 million distributors, and MLM has existed for over half-a-century, those must be darn good lobbyists! Of course, the

truth is, few MLM companies or distributors are involved in defending the industry on a regulatory level. That job is left to the MLMIA and the Direct Selling Association, which is a national trade organization representing all direct sales companies (MLM or otherwise). When I inquired as to whether or not Van Druff has had any experience with MLM, he responded by directing me to a section of his web site (which I had read) where he states his analysis was "theoretical." He then mockingly attacked my intelligence and investigative skills for not understanding that this meant he had no experience (of course, he could have just said "no"). I guess, in Mr. Van Druff's world, you can’t have any actual experience with things you theorize about. Van Druff references me in his article as a "lucid reformer within the MLM industry." Flattery will get him nowhere. Near the end of Van Druff's diatribe, he states "Anyone who has any experience with an MLM has strong feelings, either for or against..." Its even worse when people develop strong feelings about it who have no experience at all.

Mr. Van Druff was just a warm up. Next issue I’ll be cleaning up the mess made by Dr. Robert FitzPatrick, author of the books "False Profits" and "Pyramid Nation." He's also the founder of the "Pyramid Scheme Alert" organization. Naturally, he believes all multilevel marketing companies are illegal pyramids. He's wrong - on multiple levels. Stay tuned. This is going to be fun!

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Leonard Clements has concentrated his full-time efforts over the last 15 years on researching and analyzing all aspects of MLM and is a court certified expert in the field of Network Marketing. He is the author of the controversial book "Inside Network Marketing" and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." Visit www.MarketWaveInc.com for more information on Len and his generic MLM products. Len is also the co-founder and CEO of Epic Network International, a new MLM company based in Las Vegas, NV. For more information visit www.EpicNetwork.com/LenD02. Anti-MLM Zealots Me Thinks Doth Protest Too Much! Part II By Leonard W. Clements © 2004 In case you missed part one of this series – get the back issue! If you are one of the many thousands of honest, rationally thinking folks who supplement their income, or make their living, from a good network marketing opportunity, you are not going to want to miss a single word of this multi-part series. You see, there are four individuals who believe, and are

trying desperately to get you and everyone else you know to believe, that MLM is an illegal, unethical scam, and you are one of its ignorant, gullible "victims." These Four Horsemen of the Apocryphal are small in number, but thanks to the internet their words are available to millions, and they are doing some damage. Whether you realize it or not, many of those who are not responding to your marketing campaign are victims of the anti-MLM propagandists. Having heard only their side of the story, and with no ability for us to rebut their otherwise easily rebuttable rants, our prospects become their victims. I've made a good, honest living at this business for 14 years now. I sleep in as late as I want in the morning, take a day (or week) off when ever I feel like it, paid off the mortgage of a four bedroom home in less than three years, and even better, I was afforded the ability to buy a nice home near me for my elderly mother after my dad passed away last year. I certainly don't feel like a victim. And I've never front loaded anyone with unwanted products, never made ridiculous medical or income claims, never mislead anyone into attending an opportunity meeting, and never sold any training or tools for a profit. And I never lost a single friend in the process. Yet, there are surely tens-of-thousands of people who have shunned the opportunity to experience all that network marketing has given me, and so many others, because of the anti-MLM propaganda machine. Yes, there are people who have been victimized by a few bad MLM companies, or more likely bad pyramid schemes disguised as MLM companies. But as many, if not more, are "victims" of those that would have you believe there is no good in network marketing. I’ll be telling you why they're wrong here in this publication over the next several issues. The subject of Part One was Dean Van Druff, the author of the well traveled article "What's Wrong With Multilevel Marketing" (my article could have been titled "What's Wrong with Van Druff's article!"). I think it’s about time these naysayers be taken to task. Their words have lingered unopposed long enough. False Profits – Dr. Robert FitzPatrick Another prominent MLM opponent, Robert FitzPatrick, has gone so far as to co-author two books on the subject. His primary work is a 216 pager called False Profits, and subtitled "Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Scheme." I think Mr. FitzPatrick mistitled his book. It should have been called "An Expose' of the Airplane Game." Indeed the first half of the book is nothing more than an elegant rant about the classic pyramid scheme of the 70's and 80's. Even when MLM is discussed it is usually within the context of our alleged "capitalization on New Age, Mysticism and Transcendentalism." Dr. FitzPatrick often blurs the lines between present day network marketing and the New Age influence of 80's style pyramid schemes, which in my over 14 years of full time study and participation, I have never seen practiced by anyone (although New Age philosophy did permeate a small number of legal MLM organizations in the 70’s and 80’s). FitzPatrick, himself an avid student of "New Thought philosophy" and a graduate of several personal development and enlightenment courses, focuses heavily on "New Age philosophy" in False Profits, which he claims plays a "central and defining roll" in enrolling and inspiring distributors. He claims that all MLMs rely on the "core beliefs" of the New Age

community. That being, "wealth comes not from frugality, hard work or ingenuity, but from being in the right place at the right time. And faith will take you to this mystic and magical place." So, what if we (like I, and so many of my peers) apply frugality, hard work and ingenuity to their MLM business? If FitzPatrick was only denouncing the way many of us promote and conduct our MLM business I’d have to agree with him, to an extent. I don’t like the way some people pitch and practice MLM either. But why throw away the present just because you didn’t like the wrapping paper? FitzPatrick accuses MLM of wrecking the American Dream of millions of would be entrepreneurs. "It (MLM) leaves in it’s wake a trail of cynicism and disempowerment, no small wonder as recruits observe billions of dollars landing in the laps of tiny elite groups at the top." Where, I wonder, does FitzPatrick get this stuff? Most MLM recruits are in and out of the business so fast that their experience could have little impact on their psyche, and the majority of those I’ve known who’ve spent some time working their MLM business, gave it their all, and failed, simply moved on to other entrepreneurial ventures. And what about all those thousands of people like me who are making only supplemental or good living incomes and fall somewhere in the middle of their company’s hierarchy? Throughout virtually all of FitzPatrick's work it's as if this substantially larger demographic didn't even exist. It’s interesting to note that only a page later in his book, FitzPatrick states "... no one makes a substantial income in the MLM system." So now, not only do all those like me not exist, but neither do those elite few at the top. I’m really not trying to exploit poor semantics here. "No one" means NO one, doesn’t it? So which is it? FitzPatrick, an obviously scholarly and intelligent man, demonstrates his ignorance of MLM with statements such as; There are 5-10 million distributors in the U.S. selling $10-$20 billion in goods, "mostly to each other." It seems odd that such an "expert" could not narrow down such basic data to within at least a 25% margin of error. In a later section of his book FitzPatrick does acknowledge that his numbers work out to an average $2,000 per year in sales per distributor, but then notes that this would leave a "profit" of only about $50 per month, then curiously drops the point as if to imply that would be the total income. However, FitzPatrick completely fails to consider that most compensation plans pay about 8% of downline volume to each distributor in commission. How does one write a book about multilevel marketing and when challenging its income potential ignore multilevel overrides? And are we selling all this product "to each other?" No, we sure aren’t. Virtually all contemporary MLM companies today have no requirement or system in place where higher ranking reps supply those below them with product. That’s how many old-school MLM companies used to do it before affordable and practical computers. No MLM company still does that. Not one. Even in 1997 when FitzPatrick wrote his book, his comment would have been obsolete by a couple of decades. Curiously, FitzPatrick makes several references to distributors warehousing and passing on products to other distributors, yet later acknowledges that "most MLM companies distribute via computer thus freeing distributors from having to personally stock and deliver inventory." In seems as if FitzPatrick occasionally forgets his own earlier arguments only to contradict them later. In the same paragraph he goes on to say "The larger of these operations have already reached their saturation points in the United States... who has not been solicited? Who has

not tried it?" Earlier, FitzPatrick asserts that his analysis of MLM will be based on, among other things, "logic." Let’s do the same. If everyone has been solicited, or even tried MLM already, then how did so many companies that have launched in the last few years, such as Freelife, Usana, New Vision, Tahitian Noni, Xango, Isagenix and so many others, acquire tens of thousands of new reps? Is FitzPatrick suggesting these are all ex-distributors from other companies? FitzPatrick goes on to say that MLM "catapulted into economic expansion in the late 1980’s" due to the New Age movement. In fact, MLM exploded in the very early 80’s primarily due to a very favorable court ruling in the FTC vs. Amway case in 1979 (which essentially validated the legality of MLM) and economic conditions very favorable to MLM – such as the highest unemployment rate since the Great Depression. His lack of knowledge of the subject matter is never more evident than when he states "One of America’s fastest growing MLMs, Nutrition For Life, which was founded by marketer Kevin Trudeau sells the inspirational cassette tapes of the largest publisher of New Age catechism materials, Nightingale-Conant, as one of its core products." First, NFLI was not founded by Trudeau (NFLI launched under the name Consumer Express in 1984 and Trudeau was hired as a marketing director in 1987). Second, the majority of the Nightingale-Conant catalog could hardly be considered "New Age catechism material," and thirdly, the Nightingale-Conant material was only a fringe part of the more than 300 consumable products offered by NFLI and for only about two of their 19 years of business. What’s more, this "fastest growing MLM" filed bankruptcy and went out of business six years after False Profits was first published. Or, how about this statement: "...what ever the (MLM) product happens to be, it is presented as largely incidental." I wonder how distributors for such companies as 4Life, Matol, Cell Tech, Tahitian Noni, Legacy, or Xango would feel about that assertion considering their entire companies are based on one primary product. There are numerous MLM companies today whose distributors are fanatical about their products (in many cases to a fault) and who recognize that income is based on a percentage of sales volume. It’s common knowledge today (not to mention common sense) that massive product sales volume is the key factor in generating significant income. Exaggeration, hyperbole and semantic manipulation are all signs of a weak argument, and FitzPatrick resorts to such tactics on a number of occasions. For example, he sites that there are "countless" examples of MLM creeping into "the most sacred of places" - religion. Then he accounts for only three. One was a blatant pyramid scheme (not an MLM operation) back in 1988 called Corporate Ladder, and another was Pat Robertson’s short lived KaloVita company and his "prosperity theology." FitzPatrick is so desperate to come up with a third example that he throws in Robert Schuller only because his Positive Thinking tape set was once sold as part of an MLM company’s product line. Another example can be found in his discussion of Richard Poe’s book Wave 3 where Poe offers many examples of MLMers making one-half million dollar per year incomes. First he notes that Poe does concede that "only the rarest few in the industry achieve this level of success," then refers to this as an "admission of often paltry financial returns from MLM." How does acknowledging that very few make half-a-million per year get twisted into "often

paltry returns?" What about all those incomes (and thousands who earn them) that fall between half-a-million and paltry? Oh, I keep forgetting. We don't exist. In his effort to portray pyramid schemes and MLM as "Kissing Cousins," FitzPatrick comments: "Periodically, appearing under new names then running their brief and inevitable course, these schemes now emerge bearing the more respectable, legal veneer of multilevel marketing while leading ever increasing numbers of people down the same dead end." But there are dozens of MLM companies over ten years old. Herbalife is 23 years old. Mary Kay Cosmetics is 41. Amway is 46. Shaklee will celebrate its fiftieth anniversary in 2006. Brief and inevitable dead end? Really? In total, only eight MLM companies are even mentioned by name in False Profits and only four are discussed in any detail. Even then we only hear anecdotal evidence based on the experiences of a handful of failed distributors (once again, there are currently over 2,000 MLM companies in operation in the U.S., and over 10 million distributorships). FitzPatrick acknowledges that the Airplane Game is the "center piece" of his book and devotes a substantial portion of it to a detailed personal journal of his experience with it. Of those MLM companies mentioned, the vast majority of his attention is on Amway. He is highly critical, and relates numerous examples, of tactics that were virtually exclusive to Amway (aka Quixtar, aka Alticor), then couches his comments in language that suggests such tactics are universally practiced throughout the entire MLM industry. What attention is devoted to other MLMs is mostly made up of a rehashing of Nu Skin’s troubles back in 1991 and ‘92 with little mention of the extensive and model reforms they have made since then. But then, this is a common foible in every Anti-MLM Zealot's argument. That being, the actions of a few high profile regulatory or media targets is indicative of how the other 99% of MLM companies operate. It's not. Robert FitzPatrick's writings provide so much fodder for this series that I can't cover it all in one issue. His essay titled "The 10 Big Lies of Multi-Level Marketing" and newest booklet "Pyramid Nation" reveals far more and better examples of Dr. FitzPatrick's utter lack of understanding as to the true nature of network marketing today. And if you're wondering about such issues as "inevitable saturation" or "99% of all MLM participants fail" or any of the other tired, almost cliché' Anti-MLM Zealot mantras – oh, we're getting to them. The renovations begin later. This is just house cleaning.

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Leonard Clements has concentrated his full-time efforts over the last 15 years on researching and analyzing all aspects of MLM and is a court certified expert in the field of Network Marketing. He is the author of the controversial book "Inside Network Marketing" and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." Visit www.MarketWaveInc.com for more information on Len and his generic MLM products.

Len is also the co-founder and CEO of Epic Network International, a new MLM company based in Las Vegas, NV. For more information visit www.EpicNetwork.com/LenD02. Anti-MLM Zealots Me Thinks Doth Protest Too Much! Part II I By Leonard W. Clements © 2004 If you are one of the many thousands of honest, rationally thinking folks who supplement their income, or make their living, from a good network marketing opportunity, you should get the back issues containing parts one and two of this series. If network marketing matters to you, you are not going to want to miss a single word. There are four individuals out there who are doing more than just trying to dissuade your prospects from considering your MLM opportunity, they are trying to get your state and federal government to take away your choice to pursue an MLM career. If you are making an honest living at MLM, as I am, they want to take that away as well. Fortunately, they're attempts have so far been utterly ignored by regulators. However, your prospects are listening. I’ll be telling you why they're wrong here in the MLM Insider over the next several issues. The subject of Part One was Dean Van Druff, the author of the well traveled article "What's Wrong With Multilevel Marketing" (get Part 1 to find out "What's Wrong with Van Druff's article!"). Last issue I started in on Dr. Robert FitzPatrick, author of the book "False Profits." Dr. FitzPatrick has got it wrong on so many levels (pun intended) that it'll take three segments to cover even the highlights. Pyramid Nation – Dr. Robert FitzPatrick Dr. FitzPatrick's newest work (2002) is a 62 page booklet titled "Pyramid Nation: The Growth, Acceptance and Legalization of Pyramid Schemes in America." Oddly, the cover art depicts Pieter Brueghel's (1525-69) rendering of the Tower of Babel, which bares only a vague resemblance to a pyramid. Let's begin by dissecting the title itself. "Pyramid Nation." The title and cover art is misleading, at least geometrically. MLM downlines are, in fact, diamond shaped. Ironically, network marketing is the only form of business that does not form a pyramidal company hierarchy. "Growth." Really? Is FitzPatrick admitting that after 68 years of existence, this supposedly saturated industry is, indeed, still growing? This, of course, totally contradicts the very backbone of practically every Anti-MLM Zealot's primary argument. It is also quite true! "Acceptance." Yes, MLM is gaining more and more acceptance over time. FitzPatrick is right again. In so many words, he then tries to explain this away by suggesting we're just all getting better at brainwashing people, we're getting lazier in our investigation of the

opportunities we pursue, more ignorant of what defines illegal schemes, and more lax and less attentive in our regulatory duties. The whole time ignoring the easiest and most obvious reason. MLM is acceptable. "Legalization." The word implies MLM is in the process of being legalized. Yet, MLM has been formally recognized as a legal form of business and compensation model in all 50 states for over 25 years. MLM simply can't get any more legal! Dr. FitzPatrick first takes on the FTC for it's "failure to oversee multilevel marketing companies." But only a single page flip away he states that "between 1996 and 2000, the Federal Trade Commission has prosecuted more pyramid schemes than in the previous seventeen years." Keep in mind that to Dr. FitzPatrick "multilevel marketing companies" and "pyramid schemes" are synonymous. He backs up his point by dropping names such as Equinox, Jewelway and Five Star Auto Club, among others. He suggests that the only reason the FTC hasn't prosecuted the other 2,100 MLM companies is not because the others have done nothing wrong (the most logical and obvious reason), but because the FTC has become complacent and inattentive and simply hasn't got around to them yet. FitzPatrick later states that our "return on investment" (he means the income from our business) comes directly from purchases and "fees" paid by new sales reps, but not from product sales to "end-users." First, to pay bonuses from distributors "fees" is illegal, and has been the catalyst to many state and federal prosecutions. That's why virtually all MLM companies don't do that (although pyramid schemes disguised as MLM companies do, but FitzPatrick chooses to ignore any such dichotomy). He also fails to accept the reasonable – and legal – position that distributors can be "end-users." Indeed, several states have statutes that specifically recognize personal consumption by distributors as legally commissionable, and the FTC has clearly stated that they hold the same position (more on this in the next installment). It is, and with rare exception has always been, the position of regulators that who is buying the products is not as important as why they are buying them. If an MLM company is selling most of their products to distributors who actually want them, and would have purchased them anyway (even without an income opportunity attached), no problem. If they are buying the product as a token purchase just to meet a quota in the compensation plan, and that's the only reason they're buying the products, big problem. That's exactly what got Equinox and Jewelway shut down. Most of FitzPatrick's case is at least based on something. He's a smart and articulate guy who has a masterful way of making a puff of smoke into a mushroom cloud. But occasionally he comes out of left field with astonishingly ignorant comments such as "MLM... attracts millions of people to this high risk and unprotected status of... independent distributor." Wow. How could he not be aware that MLM ventures involve a fraction of the start up costs of conventional businesses? Perhaps four or five digits less! Or that an MLM distributorship is the only type of business where a failed businessperson can return their inventory and sales material for a 90% refund (try getting your franchise fee back from McDonalds, or returning all the appliances and fixtures from your failed restaurant). Or that MLM companies provide many services to distributors that conventional business owners would pay thousands of dollars a month for, such as collecting and paying sales taxes, product R&D, warehousing, customer administration, and much more – for around $25 per year. MLM is one of the lowest risk business ventures a person could possibly pursue!

Next FitzPatrick describes the daunting qualifications employed by most MLM programs to reach the highest paying rank in the compensation plan. "Only a small number can ever achieve the volume or required positions in their downline, and hence only they will ever qualify for the high commissions on each level." Here's a great example of FitzPatrick's subtle wordsmithing. Notice he says "high," not "highest." The difference is, one's wrong, one's right. By anyone's definition, "high" payouts can be achieved well before the very top rank is achieved. He's talking about how challenging the qualifications are to reach the highest pay stage, yet implies such quotas must be met to achieve "high" commissions. Furthermore, achieving the toughest to meet quotas to achieve the most rewarding stage in the commission structure is standard and acceptable procedure in every type of sales profession. Those that achieve the greatest success should be the most greatly rewarded. What rational person could challenge that? Yet, FitzPatrick oddly presents this as an inherent evil of MLM. To be fair, he made the above point within the context of how, contrary to conventional sales programs, many MLM plans reward those furthest away from the actual sale than those in the levels directly above the sale. Many (not most) plans do this. He's right. He then goes on to say this "defines the company as a pyramid recruiting scheme, not a sales company." He's wrong. This definition is entirely the invention of FitzPatrick's cohort Jon Taylor (we'll get to him later). No local, state of federal regulatory agency has ever even attempted to apply this aspect of a compensation plan to their anti-MLM prosecutions. As I've mentioned in previous installments, how an Anti-MLM Zealot defines basic MLM facts and figures tells us a lot about their actual knowledge of the subject. According to Dr. FitzPatrick, "Avon... does not use the MLM business model." Yes, they sure do. He also believes "The MLM business model was developed by the Amway Corporation in the late 1960's." Not even close. Wachters was employing a multilevel compensation system as early as 1936, and was popularized by Nutrilite in 1945. Even Shaklee and Neolife launched before Amway did - which was in 1958! Also, as any MLMer with even a moderate understanding of the field would know, downlines are, once again, not pyramid shaped. Yet FitzPatrick states that the "deepest level (will) always consist of 50% of the entire organization" (emphasis mine). This is never even remotely true in actual practice since the organization is more diamond shaped, and due to the limited number of first level positions under most people it tends to form a tall, skinny diamond. Therefore even the widest lever (usually somewhere in the middle levels of your downline) often times doesn't hold 50% of your downline. What's more, FitzPatrick's statement assumes a perfect geometric progression (2 by 2 in this case) which is an absurd assumption. Ironically, our use of such geometric progressions are the target of most Anti-MLM Zealots who also claim it is absurd and will never actually happen. So if this wholly theoretical event will never even come remotely close to occurring in the real world, why offer it as evidence? Once gain, as in his previous book, FitzPatrick spends much time making his case for the "ultimate collapse" of every MLM organization, and "guaranteed" losses to every distributor. But a network marketing company's sales organization is nothing more than a large downline, yes? There are dozens of MLM companies over ten years old. Herbalife is 23 years old. Mary Kay Cosmetics is 41. Amway is 46. Shaklee will celebrate its fiftieth

anniversary in 2006. When is this "ultimate collapse" going to occur, I wonder? Indeed, FitzPatrick later states that "companies using the MLM system... can endure for decades." He actually states that this collapse occurs annually! Which begs the question, if the company's downline continues to endure, why couldn't this same enduring scenario be applied to your downline? And if this perpetual cycling of drop outs and replacements should be considered "cumulatively" as he suggests, then why, after over half-a-century, have we not in fact saturated the entire U.S. market? (not a rhetorical question, and one I'll specifically address in a later installment). And if my losses were "guaranteed" I now feel prouder than ever that I overcame those kinds of odds. I bet a lot of you feel pretty good about defying those "guaranteed" losses. Anti-MLM Zealots love to focus on a few of the baddest bad-boys throughout MLM history in an effort to create the illusion the other 2,100 companies operate the same way (with only their "pyramid" shaped brush to connect them). So naturally, Dr. FitzPatrick spends a lot of time on Equinox. Here are two of his more astonishing statements: "The (Equinox) settlement resulted in shutting down the company, the payment in restitution of about $40 million to victims, and the banning of the company founder from the MLM business forever." "(this case) confirms that pyramid sales schemes are so firmly entrenched that it is now largely beyond the power of the government regulators to control them." There is only one sentence separating these two diametrically opposing statements. His depiction of the Equinox settlement is accurate. And remember, the FTC is "failing" to oversee the MLM industry, and us distributors are "unprotected." Then the very next page he claims the "key factor" that lead to the decision to settle rather than getting a court ruling was "the prohibitively high cost of prosecution." Hmm. I wonder if the fact the founder agreed to a lifetime ban from MLM, to shut down the company, and to pay $40 million in restitution to his "unprotected" distributors, as opposed to tying it up in court for years and eventually paying most of it to lawyers, might have been the "key factor." He then goes on to claim Equinox was "manipulating the media" then provides only one example, the #1 position on Inc. Magazine's 1996 list of fastest growing privately held companies (an audited, financial fact), which was immediately proceeded by a paragraph about how Equinox was "raked over the coals" by ABC's 20/20. Sometimes it almost seems as if several people ghost wrote FitzPatrick's book and never compared notes. FitzPatrick states that "the vast majority of (Equinox) sales reps" suffered "enormous losses." Yet, in the same sentence sites their $195 million is sales in 1995. Equinox's pay plan averaged about a 35% pay out. That would mean Equinox paid out over $68 million to their sales reps in 1995! He later sites the recent sales of Amway, Nu Skin and Herbalife which total almost $6 billion worldwide. Meaning they paid out well over two billion dollars to their distributors – a part of the equation FitzPatrick always seems to forget to calculate. Since the FTC settled with Equinox and never received a "definitive court ruling," FitzPatrick claims the "Equinox model remains shielded." He then informs us that, indeed, its top distributors have already cloned a new company under a new name. He's right. And that company was also shut down by the FTC last year.

Anti-MLM Zealots routinely site how we torture our positive industry data, but have no qualms about making love to their own negative statistics. FitzPatrick is no exception. He states that the U.S. MLM industry moves between $5-10 billion in wholesale product annually, and that less than "one-half of one percent" (.005) ever earns a net profit. Upon reading this I was struck by how he was only able to quantify our annual sales to within $5 billion dollars but somehow managed to calculate our industry's success rate to three decimal places. And since the average compensation plan pays out about 45% of wholesale that would then mean, based in FitzPatrick's figures, this industry also paid back $2.25 billion to $4.5 billion annually in commissions! Furthermore, on the very same page FitzPatrick states that "The MLM business model is not taught or researched at any major business school in the country" and that "No empirical data on its operations are compiled by the government..." then goes on to say "The industry is freely allowed to make outrageously misleading claims" to enroll new distributors. So, if we don't have any actual research to back up our claims, where does FitzPatrick get his, I wonder? And if we are "freely allowed" to make misleading claims, then why was Equinox (and others) cited for "deceptive trade practices"? Such "outrageously misleading claims" have been the crux of many regulatory actions. What's more - we do have the research to back up much of our industry data! There's extensive research done by the DSA, DMA, and MLMIA, as well as this publication. My own company MarketWave has been tracking industry data for 14 years. We're only half way through Dr. FitzPatrick's "Pyramid Nation" and there's still his essay "The 10 Big Lies of Multi-Level Marketing" to cover. I'll wrap up my rebuttal to his works, at least until he cranks out another book, in the next segment. Wait until you hear his depiction of what the FTC thinks about our earning income from our downline's personally consumed product – and what the FTC actually said! I'll be putting this oft-debated issue to bed once and for all. Then the real fun begins as we take on Ruth Carter and her cohorts over at MLMSurvivor.com. I planned on this being a one segment piece, but they've provided me with so much great material we may not be finished with them until 2006! And there'll be so much more after that. Stay tuned!

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Leonard Clements has concentrated his full-time efforts over the last 15 years on researching and analyzing all aspects of MLM and is a court certified expert in the field of Network Marketing. He is the author of the controversial book "Inside Network Marketing" and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." Visit www.MarketWaveInc.com for more information on Len and his generic MLM products. Len is also the co-founder and CEO of Epic Network International, a new MLM company based in Las Vegas, NV. For more information visit www.EpicNetwork.com/LenD02. Anti-MLM Zealots

Me Thinks Doth Protest Too Much! Part IV By Leonard W. Clements © 2004 If you’ve ever read the works of some of the most prolific Anti-MLM Zealots, such as Dean Van Druff (What’s Wrong With Multilevel Marketing), Ruth Carter (Behind the Smoke & Mirrors), Jon Taylor (Product Based Pyramid Schemes) and Robert Fitzpatrick (False Profits), you are surely and profoundly insulted. After all, if you’re failing to reach your income goal, you are a gullible victim of a scam. If you’re succeeding, you are the greedy, heartless perpetrator of a scam. And your success was not due to hard work and perseverance, you were just lucky. And if you succeeded without frontloading anyone, without obnoxiously pestering your friends and family, without making ridiculous income or product claims, and without depleting your bank account on superfluous tools and meetings, some will flat out deny you even exist! And if you succeeded in spite of starting at the bottom of an already mature MLM opportunity? Forget it. You’re just a bold faced liar. I do exist. And I’m profoundly insulted. That’s why I’ve decided to fight back. And thanks to publications like the Network Marketing Business Journal and the MLM Insider I have a forum much larger than theirs to make my case – our case – that they are flat out wrong. I’ll continue to tell you why they're wrong here in the MLM Insider over the next several issues. The subject of Part 1 was Dean Van Druff, the author of the well traveled article "What's Wrong With Multilevel Marketing.” In Part 2 I started in on Dr. Robert FitzPatrick, author of the book "False Profits." Dr. FitzPatrick has got it wrong on multiple levels (pun intended) so it'll take three segments to cover even the highlights. The second segment was last issue. Picking up where we left off, about half way through FitzPatrick’s latest work “Pyramid Nation,” he makes the outlandish claim that the “pyramid scheme industry,” (that’s us) led by the Direct Selling Association, has “turned it’s attention to ridding the country of effective state statutes against pyramid schemes.” Obviously, the DSA is not trying to get the Airplane Game legalized. What he is referring to is the lobbying effort to get states, and the FTC, to formally recognize personally consumed products by distributors as legally commissionable. The Anti-MLM Zealot’s best friend, the 9th Circuit Court of Appeals, declared that only retailed products to non-participants was legally commissionable in the 1994 Webster vs. Omnitrition case, and this is the backbone of Fitzpatrick’s case as well. Forget the fact that this was only dicta (an unsolicited opinion) offered by the most overturned appeals court in the country, that it created no law, that the case only involved dismissing a summary judgment by a lower court (in favor of Omnitrition), or that Omnitrition’s practices were never officially ruled illegal by a jury. Nonetheless, this concept of paying commissions on internal consumption is the basis for FitzPatrick’s claim that virtually all MLM companies are operating illegally in many states. Of course, he looks to other cases and statutes besides Omnitrition to make his case. For example, he also

provides Wisconsin’s statute which “prohibits schemes, in which a person, upon a condition that he or she makes an investment, is granted a license to recruit, for profit, additional investors…”. But, this is why all MLMs are legal in Wisconsin! No MLM company offers the right to enroll others on the “condition” of an investment. Not one. Sure, some require an at-cost distributor kit for around 20 bucks. But a product purchase in never required as a condition to recruit others (to be a distributor). It’s never even a requirement to qualify for commission (personal sales volume is required, but there is never a requirement that you must purchase the required volume yourself). This is a subtle but critical distinction that apparently even a court certified “pyramid scheme expert” can miss. Keeping with the same theme, he next describes how the DSA is lobbying for a federal statute (HR 1220 – “Act to Prohibit Pyramid Schemes”) that would formally declare products purchased by distributors as legally commissionable. Therefore, he declares, this bill as pro-pyramid scheme. In fact, this bill “wipes out a defining characteristic used by prosecutors to identify product-based pyramid schemes.” He even goes so far as to state that this bill would have allowed Equinox and other such schemes to remain in business instead of being shut down. Here’s what he somehow missed (or has chosen to ignore): According to the DSA (see Press release 4/14/03 at www.dsa.org) this bill “would provide an additional federal right of action and would not preempt any state anti-pyramid laws.” Furthermore, the bill itself contains language that clearly defines illegal pyramids as those “that finance returns to participants through sums taken from newly attracted participants” (Sec. 2.1.a); and one “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” (Sec. 3.11). It further defines the illegal act of “Inventory Loading” as encouraging “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” (Sec. 3.7). Even with the provision to include sales to “participants,” this bill obviously would not have protected Equinox, or any successfully prosecuted pyramid. The front loading section alone would have nailed them. Plus, the Illegal Pyramid definition section still addresses what has actually been the “defining characteristic” of an illegal pyramid, which is the motive for distributor purchases, not the existence or amount of distributor purchases. If a significant amount of product is purchased only by new distributors as a token act to qualify in the pay plan (as opposed to their genuine desire for the product) Section 2.1.a above would absolutely still apply. The entire statute is only two pages long. FitzPatrick’s attack on it is longer than the bill itself – yet he seems to have somehow completely missed, or misinterpreted, all three of these pertinent sections. This bill is clearly not designed to protect illegal pyramids. It’s designed to protect MLM companies who have a lot of distributors who genuinely love their products and would be purchasing them regardless of the pay plan (thus have a lot of distributors purchasing the products for their own use), or those companies who have little or no barrier to entry (i.e. free enrollment) where retail customers freely enroll as reps simply to get the products cheaper.

Several states have already adopted statutes based on this model, including Idaho, Texas, Louisiana, Kentucky, South Dakota and Oklahoma. The bill has already passed by a vote of 64-3 in the House and 34-0 in the Senate. FitzPatrick is further emboldened by language within the FTC’s suits against such companies as Equinox and Five Star Auto Club. In these, and other cases, the FTC does clearly state that commissions may only be paid on sales of products to those who are not “participants or recruits in the multilevel marketing program.” In other words, these federally prosecuted companies were, in fact, held to the standard of only paying commissions on sales made to retail customers. If the FTC were to hold every MLM company to the same standard, we’d be in trouble. The only chink in FitzPatrick’s seemingly iron-glad case is – the FTC doesn’t. In an effort to get a definitive and final answer to this murky and ominous question, the DSA did something rather ingenious – they asked the FTC. The FTC responded in a letter signed by the Acting Director of Marketing Practices (www.marketwaveinc.com/FTC_Letter.pdf) as follows:

"The Federal Trade Commission often enters into consent orders with individuals and companies that the Commission has determined have violated the FTC Act. To protect the public from those who have demonstrated an unwillingness to follow the law, 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 and anyone with whom the defendant is acting in concert. THEY DO NOT REPRESENT THE GENERAL STATE OF THE LAW… For example, when the Commission brings a pyramid scheme action, the case often concludes with a consent order. The scope and severity of the order will depend upon the facts of the case; however, 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." (Emphasis is mine).

In their response letter, they also go on to explain that, indeed, they pay more attention to the motive for distributors buying the product, not the number or percentage of distributors buying the product. Case closed. Other benighted comments by FitzPatrick in his book include “The FTC has been shown to have inadequate resources to prosecute the MLM pyramid cases. It is financially forced to settle out of court.” The federal government can’t afford to prosecute MLM companies? The same federal government that spends $500 for hammers and $300,000 to study the mating habits of Amazonian tree frogs? Now I’m even more insulted that he thinks we’re all that ignorant. One of my favorite FitzPatrick leaps-of-logic is his statement “NuSkin only counted the ‘active’ group when reporting average incomes… leaving out the larger group who never earns anything.” Perhaps they never earned anything because they were… inactive? It follows the same illogic as “The vast majority of the losers in MLM drop out within a year.”

But then, this is very likely the reason they lost money – they quit within a year. In fact, most voluntarily quit within weeks. That’s a problem with the commitment level of most distributors, not the MLM model. He also states that “In 1998 NuSkin paid out 2/3rds of its entire commission to just 200 upliners out of more than 63,000 currently active distributors. The money that this .3% received came directly from the unprofitable investments of the 99.7% of the others.” Nu Skin paid out over $330 million in commissions in 1998. This produced at least 200 millionaires, according to Fitzpatrick (that’s a bad thing?). And the remaining $110 million went to the other 62,800 reps, who would have then averaged over $1,750 in earnings that year. Yet, he matter-of-factly claims every one of these 62,800 were “unprofitable.” FitzPatrick has written another popular internet hit piece titled "The 10 Big Lies of Multi-Level Marketing." He kicks this diatribe off by calling MLM a "free market hoax... analogous to calling the purchase of a lottery ticket a ‘business venture.’" Of all the specific accusations made by anti-MLM zealots none offends or insults me more than this one. I’ve put in years of hard work, at great expense and sacrifice, to get to the level of success that I’ve reached in MLM. Now I’m being told by Dr. Robert FitzPatrick that I was just lucky. FitzPatrick again reveals his lack of understanding of even the most basic MLM concepts with observations like, "If a 1,000-person downline is needed to earn a substantial income... those 1,000 will need one million more to duplicate the success." True, if you assume all 1,000 of those under you are on your first level - a wholly absurd assumption. However, if you had 1,000 people under you, wouldn’t the nine people directly upline from you also have at least 1,000 under them? So, right there we have ten people with 1,000 people under them and it only required 10% of the people FitzPatrick is claiming it would. To be fair, I understand and appreciate the point he’s trying to make - yes, the progression obviously can’t go on forever - but let’s not mislead the reader with garbage math. His statement is simply, logically, mathematically untrue. I won’t attempt to defend against each and every one of FitzPatrick’s alleged "big lies" since they all fall into one of three categories. Either they are simply not a lie, such as #7, "You can do MLM in your spare time." In fact, most successful MLMers worked part time in the beginning. Your time investment does take on a bell shaped curve, requiring more than spare time effort eventually, but only as your downline, and income, grows accordingly. Or, the "lie" is overstated, such as #6, "Success in MLM is easy." Sure, many over-zealous, naive or dishonest MLM participants make such claims. But most don’t. The majority understand the obvious folly in using such an approach - if you deceive your prospect into joining this way, they are quickly and inevitably going to discover the truth on their own and quit, making the whole process pointless. Or, the "lie" is entirely fictitious, such as #3, "Eventually ALL products will be sold by MLM" (emphasis mine). Even the mythical "50-60% of all goods will be moved by MLM... according to the Wall Street Journal" claim is accepted as ridiculous today by most MLMers with even a modicum of experience. I have heard some of the most outrageously over hyped MLM presentations of all time, and never, not one single time, have I heard anyone even insinuate that, someday, "all" products will be sold via MLM. So, to wrap up, Robert FitzPatrick acknowledges in his works that MLM is “backed by an ex-president” and “defended by top law firms.” He claims MLM even has its own caucus in

Congress. Inc. Magazine, Forbes, Entrepreneur, and Success Magazine have all published positive articles about this industry. MLM is recognized as a legal business model by all fifty state’s Attorneys General, the FTC, the vast majority of the House and Senate, and many state and federal courts, and has been for decades – not to mention the SEC and the several hundred thousand investors in MLM company stock. Yet, FitzPatrick believes he’s right, and all of them are wrong. He also claims the "great majority" of the three largest U.S. based MLM company’s sales are outside the U.S. - so we're fooling the citizens, courts, and regulators in over 60 other country too! Or, maybe the ex-president, top law firms, business media, our state and federal government – and the several million of you who participate in this industry – are the one’s who get it, and Robert FitzPatrick is wrong. Next issue we begin a series on Ruth Carter, author of “Behind The Smoke & Mirrors” and co-founder of MLMSurvivors.com.

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Leonard Clements has concentrated his full-time efforts over the last 15 years on researching and analyzing all aspects of MLM and is a court certified expert in the field of Network Marketing. He is the author of the controversial book "Inside Network Marketing" and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." Visit www.MarketWaveInc.com for more information on Len and his generic MLM products. Len is also the co-founder and CEO of Epic Network International, a new MLM company based in Las Vegas, NV. For more information visit www.EpicNetwork.com/LenD02.

Anti-MLM Zealots Me Thinks Doth Protest Too Much! Part V By Leonard W. Clements © 2004

If you haven’t been following this series you should really get the back issues and study up on your opponent. Not your opponent who’s trying to enroll your prospect into their opportunity, but your opponent who’s trying hard to make sure no one ever enrolls anyone into their opportunity!

For what ever reason, there are a number of folks out there who are anti-MLM. In my experience, I’ve found most have a negative opinion of this business because they’ve been told to. Someone else they know, usually someone who has failed at it, formed this negative opinion and they’ve chosen to adopt it as their own. And when they gain the strength of mind to form their own opinion, based on their own investigation, the negativity usually evaporates.

Then there are those more passionate Anti-MLM Zealots, like Robert FitzPatrick

(author of the books “False Profits” and “Pyramid Nation”) who at least try to go beyond just anecdotal evidence in making their case against network marketing. I explained why he was wrong in the last three issues. And then there’s guys like Dean Van Druff (author of the article “What’s Wrong With Multilevel Marketing”) who openly admit they’ve performed virtually no investigation into the subject matter at all. His was a “theoretical” analyses. In other words, he guessed at it. I explained why he guessed wrong in the first segment of this series. In a future segment I’ll deconstruct the prolific anti-MLM efforts of Dr. Jon Taylor. Dr. Jon’s case is an odd one. He actually claims he was “successful” in MLM, yet still claims none of you will be. Behind The Smoke & Mirrors – Ruth Carter

So now we come to Ms. Ruth Carter. Ruth is a rare breed of Anti-MLM Zealot in that she not only, God forbid, actually participated in MLM, she was genuinely burned by it. As her story goes, which she’s chronicled in her book “Behind the Smoke & Mirrors,” she joined Amway back in 1982 after being invited to a few meetings. She recounts her feelings of curious apprehension, and how she had wondered why the speaker at one meeting was driving such a beat up old car when he was supposed to be so successful? Why was he serving store bought cookies and drinks in Styrofoam cups? Why was his wife, who was obviously home, never present? Why was there such “ludicrous” passion and excitement over a company that just sold some “basic household and personal care items, and supplied name brand product through a catalog”? However, it was not until about seven years later (of her 13 “core” years in the business) that she finally “neglected to leave my brain at the door” and started to look critically at her experience.

This followed years of doing everything by the book: attending all the meetings (at first a 600 mile round trip), spending thousands of dollars on all the tapes and books she was told to purchase, attending all the major functions, showing the plan, recruiting people, and selling some products. Yet, she also describes her arduous financial struggles, debilitating bouts of depression, and poor social life (one date was “thoroughly appalled” after attending one meeting with her, and another claimed he had just lost his marriage over his wife’s Amway involvement – Ruth doesn’t elaborate, but I suspect that date didn’t go well). Six years into the business, with two children from a previous marriage, her savings depleted, no regular job, and a new husband who had tried in vain to get behind her Amway business, but who was now “questioning everything” about it causing constant arguments, she decided to have another child. Her husband wanted children, and she announced that she wouldn’t even consider having another child unless they were building the business so she could be a stay-at-home mom. He agreed to “do whatever it takes.” She then became pregnant – and their business “ground to a halt.”

Several months later, Ruth’s loyalty and efforts finally attracted the attention of an upline Diamond who wanted her to come to work in his office. Understand, in the Amway world, such an offer is analogous to a real estate agent being asked to intern for Donald Trump, or a Catholic priest being asked to work directly with the Pope. Amway Diamonds

are more than just edified by their downlines, they’re practically deified. However, this is when, as the story goes, Ruth was exposed to the inner workings of an AMO, or “Amway Motivational Organization” (better known as the “tapes & tools” business). She alleges a lucid moment occurred when she discovered that only 5% of the Diamond’s income came from his downline overrides. The rest came from tools and functions. She said she felt sick that she had “helped him steal from his distributors.” Actually, steeling would be offering them motivational tools, taking their money, then not sending motivational tools. Offering them, taking their money, then sending them exactly what they willingly ordered would be the opposite of stealing. But this is Ruth’s story.

So, after seeing this “evidence” that was “right in front of (her) nose” for so long, and after visiting several anti-Amway web sites, she decided to turn hostile witness – and launched her own web site. It’s called MLMSurvivor.com.

This is probably a good time to address a common question I receive regarding this series: Why do I mention the Anti-MLM Zealot’s material by name? Doesn’t that increase the exposure to their work? Fair question. The answer is simple. I have no fear of you being exposed to their side of the story. I firmly believe this industry can stand up to any scrutiny. Only the side with the weakest argument doesn’t want you to compare both sides. Only the side that bases their case on anecdotal, theoretical, sometimes even completely fabricated arguments doesn’t want you to be exposed to all the facts. Like Ruth and her cohorts at MLMSurvivor.com, for example. We’ll get to her web site later.

But first, what about this book? It does seem to paint a pretty compelling, dissuasive story against, well, at last Amway (now operating under the name of Quixtar and their parent company Alticor – however, her book was written in 1999 and she refers to them as Amway throughout, therefore I will as well). Indeed, the subtitle of her book is “Amway Motivational Organizations.” At least 90% of the material and discussions on her web site directly or indirectly pertain to Amway. Robert FitzPatrick, who’s testimonial consumes the entire back cover of her book, congratulates her for her “courage” to put the truth in print regarding the Amway business (an ironic accolade considering “Ruth Carter” hides behind a pseudonym – that’s not her real name).

For the record, I also dislike the manner in which some AMOs operate. I am within the much larger MLM camp that believes you don’t have to spend thousands of dollars on books, tapes, videos and numerous meetings and functions. What is offered to distributors should be sold at, or even below cost. This would allow more distributors access to the material so the producer of the material makes their money by the resulting increased sales activity. That way the seller doesn’t make money by simply selling the tools, they only make money if the tools actually help the buyer make money.

Having said that, let’s be clear about a few things. First, these tools Ruth is referring to are not offered by Amway, but by Diamond distributors (which she does acknowledge), and are not sold on a multilevel basis (in fact, Amway has terminated Diamonds who tried to do this). Amway corporate makes very clear these tools are totally optional and have no barring on any qualification in the compensation plan. Thousands of Amway reps are not involved in an AMO. Also, the Diamond distributor she uses as a case study in her book did, in fact, have gross income from Amway bonuses less than 5% of his total gross income, but this Diamond also incurred $2.6 million in expenses while operating his extensive tools and

training business. His Amway income was actually 30% of his total net income. While I agree it should certainly be more, citing the 5% figure seems disingenuous. Also, Ruth provides a breakdown of the suggested training event costs for a year and it totals $1,040 – for forty-two events! That’s about the same cost as two Tony Robbins seminars. At an average of $24 per event, it’s actually not a bad deal – as long as you don’t go to all of them!

Carter states that the training tapes are repetitive. “After you’ve heard a dozen or so teaching tapes, you’ve pretty much heard all the information they offer. So why subscribe to a Standing Order Tape (SOT) and buy a tape per week?” Good question – so why did she? She tries to make a case that the AMOs are cult-like in their use of brainwashing tactics. She devotes 36 of her 157 pages to a discussion of cults and “mind control”. This explains her devotion for so many years to both a financially and emotionally draining experience. This also explains why, when told to spend thousands on motivational books, tapes, videos, and meetings, she couldn’t simply say, No thanks (a perfectly valid option). This rationalizes her commitment to a program that allegedly encourages the shunning of friends and family who are unsupportive, and so severely damages such relationships. Yet, she paradoxically claims there are “millions of distributors who have walked away” from their Amway business. Millions. By Ruth’s own accounting (based on published data), 59% of all current Amway reps are inactive (that is, somehow found the will power to stop). She refers to “Prisoners of MLM” who have been psychologically manipulated into continuing, in spite of the notoriously high attrition rate throughout the MLM industry. Such statements seem to border on the absurd considering the extreme level of ease so many others seem to have in leaving their MLM program. In fact, it’s often too easy! She describes the many people whom she introduced the business to in much the same way it was introduced to her who immediately rejected it (or even, as described earlier, were “appalled” by their first introduction). What did they see that she failed to see? She does candidly questions her own “stupidity” in the beginning.

While it may seem easy to just dismiss her “I did it because they told me to” explanation with the common Mom line “If they told you to jump off a bridge, would you do it?” (my Mom used “bridge,” yours probably used the more common “cliff”). However, there are a very disproportionate number of folks who get involved in these Amway Motivational Organizations, lose a lot of money and friends, and just can’t seem to stop. I think the alleged use of mind control techniques by these groups deserves consideration and should not be summarily dismissed. Some people are more susceptible to these tactics than others (a sign of emotional weakness and lack of common sense perhaps, but certainly not intelligence), and in my opinion it does appear most AMO leaders are playing to that demographic. But let’s be clear: we are talking about a faction within Amway’s distributor ranks, not all distributor groups within Amway. And we are not talking about Amway corporate, who seem to be going out of their way to inform new reps of the true average income potential of the opportunity, and that the tools and training are completely optional, totally voluntary purchases. In fact, about two years before Ruth wrote her book Amway began requiring renewing reps to sign an agreement stating “I understand that the purchase of Business Support Materials is always optional.” If they choose to purchase such collateral material, they must sign an arbitration agreement. In their policies (which all reps must agree to) they clearly state:

“If you sponsor others, you have an obligation to train and motivate them whether or not they choose to buy Business Support Material. All distributors are free to change their volume of purchase of such items, to cancel standing orders, or to cease such purchases at any time without threats, pressure, or retaliation.”

Ruth completely acknowledges all this, and the provision that anyone who sells such

tools must agree to buy them back within 180 days, yet it appears to have made no impression on her at all. She claims this provision is “completely ignored by distributors in the field.” Her evidence? Two e-mails she received from “disillusioned” ex-distributors.

Ms. Carter also gratuitously, and clumsily, attempts to make a case that Amway is now operating as a pyramid scheme. Like Robert FitzPatrick, she believes a high percentage of personal consumption among distributors is somehow indicative of an illegal pyramid (according to the FTC, it’s not, which was proven in the last installment). But it’s not so much what she’s claiming as how. Here’s her statement, verbatim: “Virtually no product is sold at retail today in North America – actual retail sales comprise only about 18% of all Amway sales.” According to Ruth, 18% = 0%.

She makes the sensationalistic claim later in her book that “As financial and mental-health professionals become more familiar with the devastation that follows in the wake of many MLM opportunities, they are becoming better resources for helping people recover from AMO involvement.” Here in lies the crux of Carter’s ignorant, illogical, campaign against the entire MLM industry – she thinks the experiences of a subset of AMO members, themselves a subset of the entire Amway organization, which is a subset of the entire MLM industry, is indicative of how all MLM programs operate. All this in spite of the easily verifiable fact that such tools & training systems are virtually exclusive to Amway. No other MLM company employs such Motivational Organizations. Not a single one. And the “devastation” she refers to that requires the care of a mental-health professional is overly melodramatic and hyperbole even within Amway (certainly some folks have been devastated, but they are a small, vocal minority who file law suits and build web sites). I’ve known literally thousands of networkers over the last 14 years and can’t think of a single Oxyfresh, New Vision, Freelife or Cell Tech distributors who ever needed psychological counseling due to their experience. Every failed distributor I’ve ever known just quit, moved on, and got over it.

Ruth Carter’s book is not what classifies her as an “Anti-MLM Zealot.” Obviously, she was genuinely traumatized by her experience. If writing a book and starting an on-line “survivor’s” support group for others with similar experiences is cathartic for her and others, more power to her. I sincerely mean that. But her agenda is not so benign. She has, once again it appears, been brainwashed into believing all MLM opportunities are evil, vile, scum. Her experience in this one organization within this one company was horrible, so they all must be as horrible. She is now so blinded by her loathing for all things MLM that she didn’t create AmwaySurvivor.com, she launched MLMSurvivor.com. This web site is where the real fun begins. Don’t miss the next issue!

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Leonard Clements has concentrated his full-time efforts over the last 15 years on researching and analyzing all aspects of MLM and is a court certified expert in the field of Network Marketing. He is the author of the controversial book "Inside Network Marketing" and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." Visit www.MarketWaveInc.com for more information on Len and his generic MLM products. Len is also the co-founder and CEO of Epic Network International, a new MLM company based in Las Vegas, NV. For more information visit www.EpicNetwork.com/LenD02. Anti-MLM Zealots Me Thinks Doth Protest Too Much! Part VI By Leonard W. Clements © 2004

Lots of people are anti-MLM. But few deserve the title of Anti-MLM Zealot. Your average anti-MLMer usually falls into one of two camps: There are those who failed at the business and discovered that there’s scapegoats galore which to assuage their ego – my sponsor didn’t support me, the products were too expensive, the pay plan was too confusing, Mars was in retrograde (no kidding, actually heard that one once), or whatever. No one ever seems to fail at MLM because they just weren’t very good at it. Then there are those who heard that MLM is bad, and instead of forming their own opinion, based on their own evaluation, they choose to adopt the other person’s negative opinion as their own. And the other person’s opinion usually came from someone else who never formed their own opinion – the opinion is rarely passed on unsolicited. So, to answer a common question I’m getting about this series, that’s the key distinction between your run-of-the-mill MLM basher and a full blown Anti-MLM Zealot. The Zealot wants to tell you their opinion of MLM whether you want it or not. They want to warn the world, to save us all from this horrible scam. And when we won’t listen (all ten million of us), they try to save us from ourselves by getting our state and federal government to silence the siren song of MLM that is so violently smashing our dreams into the rocks. When our proverbial ship comes in, the lowly MLM basher will simply tell you not to board it. The Anti-MLM Zealot will try to sink the ship, court-martial the Captain, imprison the crew, burn down the shipyard, and level every port-of-call that allowed it to anchor. zeal·ot n. 1. A fanatically committed person. 2. A fervent and even militant proponent or opponent of something.

There are only four bona-fide Anti-MLM Zealots in the U.S. today (for such an allegedly vile and pervasive business you’d think there would be more). Dean Van Druff is perhaps the least zealous among them, but his disjointed, unresearched article “What’s Wrong With

Multilevel Marketing” is likely the most read piece of anti-MLM propaganda ever created. That’s why I rebutted his work in part one of this series. Robert FitzPatrick’s book “False Profits” seems to be the definitive work within the anti-MLM arena which is why he has been the subject of the last three segments of this series. Jon Taylor’s anti-MLM efforts are by far the most prolific, culminating in his 40,000 word manifesto titled "Product Based Pyramid Schemes." That’s why I’ll be focusing on his work next. MLM Survivors

But let’s get back to our current subject, alias Ruth Carter and her “MLM Survivors” web site. Last issue I related her experience as an Amway distributor which she portrays as a miserable, depressing, and expensive one. A fifteen year relationship culminating in her turning hostile witness and writing a book called “Amway Motivational Organizations: Behind the Smoke & Mirrors.” In her book she suggests that “mind control” techniques were used on her, and that Amway Motivational Organizations (AMOs) were cult-like. When so many people coming from the same MLM support system claim to have lost so much for so long, and just couldn’t stop doing it, I do feel there is reason for genuine concern. So when she started her on line support group in the Fall of 1997 I admit to being a reluctant fan. Reluctant only because I felt she was unfairly stirring all Amway reps (now called Quixtar) into the same pot. Many do not support an AMO, and Amway corporate has clearly declared that their tools and events are not required. And she didn’t call it AmwaySurvivor.com, she called it MLMSurvivor.com. But her failure to recognize the dichotomy between Amway AMOs and the rest of the MLM industry didn’t end there.

In spite of the fact that virtually 90% of her site’s content and message board posts pertain to Amway/Quixtar, she and her co-moderators are quick to attack, viciously, any mentioned MLM company or pro-MLM participant. “Ruth” offers a pull down menu on her home page where you can look up “news” (dirt) about specific “multilevel marketing” programs. Based on a phone verified survey conducted by the Network Marketing Business Journal, there are 2,100 MLM companies operating in the United States. Carter has 21 on her little hit list. Two are Amway and Quixtar (the same company, but hey, it makes the list look longer), another is an expired Amway distributor group made up of terminated Amway Diamonds (which she ironically seems to support in spite of the fact they were terminated because they tried to multilevel market the tapes and tools – which would have violated anti-pyramid law!). Of the remaining 19 one has never operated in the U.S., and ten were blatant illegal pyramids, not MLM companies, which have all been shut down. Then there’s Equinox, of course, it’s spin-off Trek Alliance, and The Tax People – which have also all been shut down. Within the entire content of her MLM survivor web site only six existing, actual MLM companies are even mentioned besides Amway/Quixtar. And even the negative information she provides about most of these six appears to have been scraped from the bottom of the barrel. Herbalife’s listing links to only a press release about founder Mark Hughes’ death. Melaleuca’s links to a law suit filed by some ex-distributors alleging fraud – which Melaleuca won! Nu Skin links to nothing more than a petition to the FTC asking them to examine Nu Skin’s adherence to a 1993 Consent Order – authored by the afore mention Jon Taylor, which the FTC has so far completely ignored.

Most of the action is on their Yahoo message board, which is dictated over by Ruth Carter herself, under the name “nomore_scamz”, and Lindy Mack, as “PW.” One of the most active posters goes by the screen name “freethinker4.” After the Dateline segment on Quixtar and AMOs which aired last October, PW and freethinker4 revealed themselves as the husband and wife featured most prominently on the show. Yes, they too are ex-Amway reps (Ruth was also interviewed by Dateline, but for some reason her segment hit the cutting room floor – perhaps the lady doth protest too much?). The board lists over 3,200 members, but most of the activity seems to come from the same dozen or so people, and the number of posts has been dropping steadily over the last 18 months (from over 1,300 to 337 in February).

It’s fairly common for folks who are considering MLM to join the forum to investigate the opportunity they are considering. Without exception they are told that all MLM companies are scams and should be unilaterally avoided. If a pro-MLMer dare wander into their domain they are immediately swarmed upon like killer bees. And the venom can be disturbingly toxic. And should anyone dare post corrections to the rampant flow of misleading or outright fraudulent anti-MLM information that’s posted there, they are tolerated for only as long as Ruth and PW feel they can win the point. Once undeniable proof is offered, or you simply offer up enough logic to make them look foolish, your post is deleted and you are permanently banned from the forum. Then they gloat over how pro-MLMers never seem to be able to post proof of our claims. Trust me, I know.

Ruth and I first got into it last year when she posted material claiming that the DSA’s anti-Pyramid bill (HR 1220 – “Act to Prohibit Pyramid Schemes”) would actually “legalize product based pyramid schemes” and would have protected companies like Equinox from prosecution. Sound familiar? The term “product based pyramid schemes” is an invention all Jon Taylor’s, and the odd idea that the bill would have protected previously closed down companies originated with Robert FitzPatrick (and was debunked in Part IV of this series). I asked Ruth at the time if she had ever developed any of her own opinions about MLM in general, or was she just parroting FitzPatrick and Taylor? She claimed to have done her own research, of course, yet when pressed to address any issue outside the scope of Amway she continues to routinely reference the work of FitzPatrick and Taylor. I provided a respectful and thorough rebuttal to her erroneous comments as to the DSA bill and to her credit she allowed the response to post (all posts are screened by her and PW). But then, she still thought she had a valid comeback, which she eventually posted several days later. Then due to a death in my immediate family I was taken away from the debate for several days, only to return and find three posts from Ruth rhetorically wondering where I had gone, and challenging me to respond. She was definitely confident in her position in spite of the fact that most of it could be easily, logically, mathematically, and verifiably proven false – and it was in my response. Her follow up was a short comment about a couple of meaningless points, followed by a curt “That’s as far as I’m going with this.” I was then notified that my posting privileges were being revoked. One of her own board members then posted the comment; “Ruth, I would have thought you would have more to say about his response, especially since you asked for it three different times. As I read his response, he appeared to make some valid points.” This poster had obviously not figured out yet that the board moderators don’t respond to “valid points” that support MLM – they censor them.

Before I was blacklisted I was able to answer some attacks by other board members, such as freethinker4’s totally baseless, unprovoked accusation that I sell my company’s products by making wild claims. Now, I’m a pretty calm guy, but I do have my hot buttons. One is an attack on my ethics. Another is wild product claims. Accuse me of being unethical by making wild product claims and watch out! I tried to explain to her as calmly as I could my loathing for such claims, which stemmed from my Dad just dieing from Emphysema, my Mom’s chronic ulcers, my Grandmother’s Alzheimer’s, and my brother’s Crohne’s disease – and all the garbage that’s out there claiming they can all be cured (I once watched a friend die of cancer while chugging every “natural” remedy she could find – for around $40 a bottle). Or worse, the suggestion that my Dad’s death could have been prevented had he (or I) been more “open minded” to all these pseudo-science based alternative treatments. I also directed her to the several articles I’ve written on my web site blasting such practices in MLM, and to a display ad I had running that said “NO! Our products don’t cure every disease known to science!” right in the ad. She also suggested that I “make more money selling (my) success system than selling products.” This is typical “survivor” modus operandi – if someone did it to them, then we all must do it to everybody. I pointed out that I offered my system for free and directed her to the online evidence. But rather than apologizing for misjudging me and showing even a modicum of compassion or empathy for my personal situation (she’s a registered nurse – you’d think it would come naturally), her response was disturbingly vitriolic. This wasn’t someone who was just being defensive or too egotistical to admit she was wrong. This was a person who seemed to be filled with anger and hatred beyond reason. What’s more, other board members were quick to agree with her accusations and supported her horrid retort. The point behind describing the condition of my family’s health was clearly not to gain sympathy, but the fact I received none told me a lot about the type people I was dealing with.

Ruth was never so hateful, just infuriatingly evasive. She has a keen ability to sense when an argument is about to turn against her then lead you light-years away from the point you’re trying to make. For example, I made the claim, imbedded within a much larger more poignant issue, that a high failure rate among participants does not inherently make a profession dishonest, and that the majority of people who attempt to be successful doctors, lawyers, actors, politicians, or baseball players also fail, yet no one claims these occupations are scams. Rather than address the main issue being debated, she responded with her favorite comeback: “Unsubstantiated anecdotal claims. Where’s your evidence?” Countless times Ruth has used this clever “Prove it” response to avoid having to provide a response. Even in cases like this, when asking someone to show evidence that most who attempt to become pro baseball players fail at it makes her look astoundingly foolish and desperate. She later stated that she “might” grant me actors and baseball players, but if I could not support my claim regarding successful doctors and lawyers then “it rather spoils your argument.”

But, couldn’t I have made the same point just as effectively by leaving out doctors and lawyers and using the other three professions? And what do you suppose she did after I went through the tedious, time wasting process of digging up the data to prove my claim about doctors and lawyers? That’s right – she completely ignored my response and dropped the point. To appreciate the silliness of Ruth’s penchant for requiring proof, here are some other statements she demanded “verifiable evidence” of: “You get out of it what you put

into it” (how would one even begin to “verify” this?); “so many people (on the Survivor message board) complain and moan” (she demanded a total count of people involved, and the number who were complaining); and “There are goods and bads in any business” (she actually asked for “facts” to back up that claim!). One pro-MLM poster claimed he made over $100,000 last year at age 30, and Ruth responded by demanding to see his tax return and a copy of his birth certificate! According to the forum’s co-dictator “PW,” only “documentation can serve as evidence.” Yet, when it comes to virtually all of their anti-MLM data, personal testimony and hear-say are entirely acceptable. But then, he openly admits, without the slightest reservation; “There is a double standard with regard to pro-MLMers… argumentation in favor of MLM are not permitted here.” “Fairness is NOT one of the foundations of the MLM Survivors Club.” – Lindy “PW” Mack, Message Board Moderator “There is no requirement of balance in this club, numbskull… Give it up, troll.” – Vicki “Freethinker4” Mack, Message Board participant

Their club rules also state “Rudeness, abusiveness, name calling and the like will not be tolerated.” Guess there’s a “double standard” on that one, too.

Ruth also states that making claims “without verifiable proof” is a violation of “club rules.” But when I ask her to provide evidence of her claims, such as “fewer than 1% of MLM participants ever make a profit,” you’ll hear only crickets chirping. Unless it involves facts that FitzPatrick or Taylor have already published, she’s lost. And often times she’ll cite claims made by these two (such as the 1% claim) which even they don’t have evidence of – they just pulled it out of thin air. A new board member once asked if anyone had any “negative information” on Usana. Ruth responded that if she hadn’t found any, “you haven’t looked very hard.” Yet, in spite of the alleged ease in finding it, Ruth was unable to identify any of it. The standard of proof she requires of pro-MLMers are so high it borders on the absurd, but if it supports her anti-MLM position there seems to be virtually no standards at all. “Unsubstantiated” and “anecdotal” would describe at least 87.364% of the anti-MLM claims made in her message board. Okay, I didn’t really compute that number out – at least not to three decimal places – but I’m sure Ruth would ask for it!

If Ruth’s “Prove it” dodge should ever fail, her Plan B is to play dumb. While debating the requirement that MLM companies sell sales aids “at cost,” which I said was true “based on legal precedent”, she first asked for the precedent, of course (I supplied it, she ignored it) then actually said this: “… ‘at cost’ covers a pretty gray area. If I manufacture a bunch of tapes at a cost of 60 cents apiece, and sell them… for $1.00, what is ‘at cost’?” I contacted three of the top economist in the country and we researched and debated her question for several hours. The consensus was that “at cost” in her example would probably be sixty cents! The “at a cost of 60 cents” part was a big clue. sar·casm n. 1. A mocking or contemptuously ironic remark.

The folly of the MLM Survivor message board is far too extensive to cover in just one segment. Next issue I’ll explain how surviving a bad MLM experience is analogous to surviving

The Holocaust, according to one MLM survivor. And I’ll tell you what facts I posted that got me canned a second time from their board. I saved the best anecdotes for last. We’re going to have some fun, so stick around! ------------------------ Leonard Clements has concentrated his full-time efforts over the last 15 years on researching and analyzing all aspects of MLM and is a court certified expert in the field of Network Marketing. He is the author of the controversial book "Inside Network Marketing" and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." Visit www.MarketWaveInc.com for more information on Len and his generic MLM products. Len is also the co-founder and CEO of Epic Network International, a new MLM company based in Las Vegas, NV. For more information visit www.EpicNetwork.com/LenD02.

Anti-MLM Zealots Me Thinks Doth Protest Too Much! Part VII By Leonard W. Clements © 2004

If you’re just joining this series – too bad. You’ve missed a lot of information that could have helped you enroll that prospect who you just knew would have been fantastic at the business, but was too skeptical of it (we all have them). And you missed out on a lot of fun as well!

Part one described all the reasons why Dean Van Druff’s utterly unresearched, illogical, ten year old article “What’s Wrong With Multilevel Marketing?” was wrong. Then we spent three parts on Robert Fitzpatrick’s two anti-MLM books. Not that it was so hard to refute them, there was just so much to refute! Part five dealt specifically with Ruth Carter’s anti-Amway book “Behind The Smoke and Mirrors” and part six introduced a discussion of her web site MLMSurvivors.com.” That’s where the real fun began.

So let’s continue. The MLMSurvivors.com message board is allegedly suppose to be a safe haven for

“survivors” of MLM to congregate and commiserate. To support and console each other. In reality, it’s a forum for ex-Amway reps to get together and mutually legitimize each other’s excuses for failure – and to carpet bomb the entire MLM landscape. The members, and especially the forum dictators, “PW” and Ruth herself (they call themselves “moderators”) blindly assume that since Amway (now called Quixtar) is a multilevel marketing company, all 2,100 other multilevel marketing companies must operate the same way. The obvious fact that such logic would not even remotely hold true in virtually any other industry seems to carry no weight with them. Their experience in Amway was bad, therefore all companies

within that industry must be as bad. When someone should wander into their forum to do what few of these people obviously did – some research and due-diligence into the business they are considering getting involved with – and ask about various other MLM companies, the result is always the same. They are told the company they are considering is bad and should be avoided. But rarely is any actual evidence, even anecdotal, ever provided as to why the company is bad. They think Amway is bad, Amway is an MLM company, the company in question is an MLM company as well, so it must be bad too. That’s it. Case closed.

Should someone who is pro-MLM enter their domain and, God forbid, try to install a little reason and common sense into the discussion, the flames could melt your firewall (only us computer geeks will get that pun). Every positive portrayal of MLM is arrogantly assumed to be a “trolling” attempt to gather prospects, which the members are quick to point out is utterly ridiculous considering the venue. Indeed it is ridiculous, and rarely is the pro-MLM participant attempting to reconvert anyone. In most cases they are, as I was, simply trying to get them to understand that their personal experiences in this one, albeit largest, MLM company is not indicative of how the other 2,100 MLM companies operate (it’s been suggested more than once that the board should be renamed AmwaySurvivors.com, but to no avail). Either that, or the pro-MLMer is trying to correct a “survivor” who has stated erroneous information pertaining to MLM data, legal precedence, history, or specific company information. The board is chocked full of such bunk.

One regular poster once claimed that not only is there little actual retailing going on in MLM, a common discussion on the board, but many MLM companies actually “forbid retailing.” When I asked him to “name one” he gave me a short list which even included Herbalife – one of the most retail oriented MLM companies in history! I then asked for evidence of this (I would love to see the section of their distributor agreement where it says retailing is forbidden) and questioned him as to why every company on his list had a “suggested retail price” on their product price list if retailing was forbidden? He responded that he never said “retailing” was forbidden, he said “retail marketing” was forbidden (how does one perform “retailing” without “marketing”?). These are the kinds of silly games one plays when dealing with MLM “survivors.” They never admit they’re wrong, no matter how obviously they’ve been busted, and their attempts to avoid appearing so often times becomes ridiculous.

I was kicked out of the MLMSurvivor.com message board last year because I dared to point out errors, and in some cases flat out lies, that were being posted on the board regarding various MLM related issues. I was in the process of debating the DSA bill (HR 1220) and Ruth’s ridiculous claim that this bill was the DSA’s attempt to legalize pyramid schemes, and how it would have protected companies that had previously been shut down by the FTC. I presented my case, she responded, I left for a few days due to a family emergency, then she posted three times gloating about how I had not responded and wondering where I went. I then returned and responded to her response with irrefutable, verifiable proof to support my case. She responded “That’s as far as I’m going with this” and terminated my posting privileges.

About a year later a board participant posted the claim that the FTC had declared the paying of commissions on personally consumed product to be “illegal.” Since this would

essentially make every MLM company an illegal operation, and it was just so easy to prove wrong, I had to try to get back in and refute this silly, but potentially damaging (if left unanswered) claim. To Ruth’s credit (or bad memory), my response was allowed to post. But rather than respond to it herself, she brought in a ringer. The mysterious “kublaikant” suddenly appeared on the board who claimed to be an attorney with extensive knowledge of the MLM industry and the laws pertaining to it. He pompously cited the FTC’s cases against Equinox and Five Star Auto Club, both of which defined legally commissionable sales as being those to non-distributors. Of course, Ruth had to get her two cents in somewhere, so she cherry picked what she must have felt was the safest point to counter. That being a comment I made about the 9th Circuit Court of Appeals – the anti-MLM zealot’s best friend ever since they declared that commissions should only be paid on sales to non-distributors (Webster vs. Omnitrition, 1994). I stated that this was just dicta (legalese for “opinion”) which created no law, only overturned a previous summary judgment (in Omnitrition’s favor) and sent the case back to the lower court for trial, there were only two members of the “class action” (not hundreds like many believe), no jury ever found Omnitrition guilty of being an illegal pyramid, five states have since declared that distributor orders are legally commissionable (Texas, Kentucky, Oklahoma, Louisiana, and Ohio), the 9th Circuit Court was also the court that ruled the Pledge of Allegiance was unconstitutional, and was the most overturned appears court in the land. Ruth’s response to all this? “Percentage-wise, about as many of its decisions are overturned as any of the other appeals courts.” Ruth’s only other contribution to kublaikant’s rebuttal was the remark (in response to the DSA bill’s attempt to formally define personally consumed product by distributors legally commissionable), “Yes, rendering any product-based pyramid scheme ‘legal’ – Great consumer protection legislation!” So before trouncing kublaikant’s case, I made the tactical error of once again proving the forum dictator wrong by citing that from 1992 to 2003 the 9th Circuit Court was overturned 20% more often than the average of all other appeals courts (cfif.org). I then reminded her that we had already debated the DSA Bill the year before when she made the same loony claim, and that after I provided evidence that she was wrong she bowed out of the debate and stopped allowing my posts. I then responded to kublaikant by quoting from a letter straight from the FTC where they clearly and specifically state that the definition of legally commissionable sales in the Equinox and Five Star Auto club cases involved “extra” constraints that “do not apply to the general public… They do not represent the general state of the law.” The FTC letter goes on to specifically say that sales volume produced by distributors is legally commissionable (although the motive for purchasing the products must still be to resell and/or because the distributor genuinely likes the products and isn’t purchasing them just to meet a quota in the compensation plan). Their big shot hired gun, Mr. Kublaikant, was dead wrong. The verifiable proof was right there, in crystal clear unequivocal English. They were wrong, I was right, and this time there was no possible way to deny it. So Ruth and PW had absolutely no choice. There was simply no way they could allow my response to post. And this time I was not only censored, they terminated my board membership and banned me for life! “PW” got to do the honors. He sent me a private e-mail implying I was the one who “bowed out” of the debate a year earlier (he said I was now “changing the truth to suit your argument” by stating that Ruth was the one who quit) but then attached excerpts from my final posts back then that essentially

proved my claim! He then called my post a “personal attack on the forum owner” in spite of the fact my two comments to Ruth made up about 5% of my response to kublaikant, and contained nothing that could have been even remotely construed as a “personal attack”! Of course, none of this had anything to do with why I was banned, and had everything to do with the FTC allegedly disallowing commissions on internal consumption being the backbone of their “product based pyramid scheme” scheme. There primary legal argument against the industry as a whole was a house of cards built on quicksand, and there was no way they could allow proof of that to be revealed to their followers.

So Kublaikant’s rebuttal was left unchallenged. “PW” did post to the board members that I had been banned but I could still read their comments. One of the reasons he gave was that I had broken the board policy of not providing evidence to support my claims! He also openly declared that “argumentation in favor of MLM” is a violation of board rules. Later Ruth posted her own version, saying “All we were doing was asking for verifiable evidence, but apparently he thought he didn’t need to provide it.” In case you missed it, Ruth, here it is again: http://www.marketwaveinc.com/FTC_letter.pdf. Fortunately, Rod Cook (MLMWatchdog.com) reproduced the discussion thread on his board and allowed my rebuttal to Kubliakant to post there. A survivor board member managed to cut and paste my response into his post on the survivor board, and asked for a rebuttal. There was none. Kubliakant never posted in the MLM Survivor message board again.

The anecdotes are endless, and unfortunately I’m not allowed this whole publication to site them (although – wouldn’t this series make a great book? Hmmm). But here’s one I can’t leave out. Remember how Ruth rationalized why she spent 15 years in a business that was so depressing and harmful? Mind control. Brainwashing. We (not just Amway Motivational Organizations, but all of us) are masters of mental manipulation. We make it so you just can’t stop, no matter how abused you are. And those who “survive” the experience can even require counseling, or at the very least, an online support group. Yet, when asked on her message board why the government doesn’t shut us all down if we’re all so bad and illegal, and why some of the companies she and her cohorts claimed were among the “most offending” companies all seem to be in good standing with the Better Business Bureau and Chamber of Commerce, her response was shocking in it’s illogic and hypocrisy. First, she described how we teach our distributors that if your business is not successful, you’re not doing it right, therefore people don’t complain because they are brainwashed into believing their failure was their own fault. Can you imagine? If people try to perform a task and fail at it, we actually suggest that they may be performing the task incorrectly. What logical, rational, common-sense practicing scumbags we are! And, of course, the reality is very few failed MLMers take personal responsibility for their failure. In my 14 years of experience, I’d estimate maybe 5% of them felt they just weren’t good at it. The rest always had an excuse (bad sponsor, bad products, bad weather…). Oh, but there’s more. She went on to explain that after the “brainwashing” wears off “years” later, “most people simply want to move on with their lives.” Most people. Then there are those who spend years writing anti-MLM books and operating anti-MLM web sites. She also explained that the government doesn’t take action because MLM is a “billion dollar industry” (thank you very much), and won’t pursue a case against particular companies unless they “have an ironclad case against them.” It was actually fascinating to watch her try to rationalize how the fact that most MLM companies

have clean BBB and Chamber of Commerce records, we’re a huge billion dollar industry, that most failed reps don’t need online support groups (they just got over it and moved on), and the government doesn’t have a very strong case against the industry, are all negative aspects of MLM.

Most of the anecdotes I collected are silly little examples of “survivor” ignorance of the MLM subjects they expound upon, and the folly of their efforts to avoid looking that way. But some are not funny. They are disturbing. For example, during one of my many attempts to nail Jello to the wall (which is what it’s like when trying to get Ruth to focus on a point she knows she can’t win), she tried to explain to me why my attempts to defend MLM were so inappropriate. She actually said the following:

“Would you go into a rape survivors group and start touting the use of the date rape pill? Would you go into an AA meeting with a bottle of whisky and start offering drinks? Would you go into a support group for holocaust survivors and try to convince them that the Nazis really didn’t make war on Jews, and the holocaust is an invention of anti-German historians? I don’t think so… So why do you come into an MLM Survivor group and start telling them that MLM is a good thing?”

To stay with Ruth’s absurd and profoundly insensitive analogy for a moment (just a moment), what I would do is defend against the equally absurd suggestion that all men are rapists, all drinkers of whisky are alcoholics, and all Germans are Nazis! But let’s not stay with this analogy. Having a bad MLM business experience hardly falls within the same universe as being raped, alcoholic, or a holocaust victim. To even make such an analogy is shameful. What’s more, these are actual victims! No one made voluntarily, conscious decisions to be raped or be Jewish in Nazi Germany. Ruth, and other "MLM Survivors" (which now seems ridiculously petty in light of her analogy) made choices that put them in the positions they were in. No one held a gun to their heads, or drugged them, and forced them to buy a garage full of unwanted products, spend thousands of dollars on tapes and tools they didn't need, join the very first company they were pitched or believe their upline's claims of quick and easy riches. There is not one single thing any of them can point to regarding their MLM experience that could not have been easily avoided with one simple word - No!

I once considered myself a "victim" of MLM. Until I realized the truth. I was naive, gullible, and just didn't do my homework. I made decisions that, looking back, were just dumb. All because someone told me to. But rather than defend my victimhood, I took responsibility for my own actions and set out to thoroughly research this industry and find a company and upline that was operated ethically. I used the power of knowledge against the scam artists that pervert this industry. I didn't walk away wounded and vindictive towards anything remotely resembling MLM.

I totally understand their motives for banning me from their message board. What I present ruins their victimhood. They prefer to believe, and mutually reassure each other, that their failure was forced upon them, and their poor and costly business decisions were not made of free will. They don't like people coming in and killing their scapegoat.

Next month: Dr. Jon Taylor and his 40,000 word manifesto titled "Product Based Pyramid Schemes." He can’t seem to get the FTC to pay any attention to it (sure not for lack of trying), but your prospects might be. So read on, and be ready! ------------------------ Leonard Clements has concentrated his full-time efforts over the last 15 years on researching and analyzing all aspects of MLM and is a court certified expert in the field of Network Marketing. He is the author of the controversial book "Inside Network Marketing" and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." Visit www.MarketWaveInc.com for more information on Len and his generic MLM products. Len is also the co-founder and CEO of Epic Network International, a new MLM company based in Las Vegas, NV. For more information visit www.EpicNetwork.com/LenD02. Anti-MLM Zealots Me Thinks Doth Protest Too Much! Part VIII By Leonard W. Clements © 2004 The Anti-MLM Zealot is a rare breed. Oh sure, there are a lot of people who may be "anti-MLM," likely due to one failed experience, or more likely due to them adopting the negative opinion of someone else as their own, without doing any of their own actual investigation. Then there are those who dismiss our industry as somehow shady due to nothing more than the common geometric misconception that our sales organizations form a pyramid shape (ironically, MLM downlines are the only form of business structure that does not form a pyramid). But the Anti-MLM Zealot is someone who is passionate about exposing their negative beliefs and opinions to others - even to the point of obsession. Someone who spends hundreds, if not thousands of hours of their lives searching for evidence to support their cause, creating prolific amounts of anti-MLM material, and contacting media outlets and state and federal regulators in a vain attempt to get someone to pay attention to them. Someone like Jon Taylor, PhD. There are really only four bona fide Anti-MLM Zealots out there trying to wreck our business, and for many of us, our livelihoods. Arguably the most read is Dean Van Druff. The most prominent, at least at the moment, is Robert FitzPatrick. The most currently active, at least at the moment, is Ruth Carter. All have been discussed in previous editions of this series. But by far the one who has churned out the greatest abundance of anti-MLM material is Jon Taylor.

Product Based Pyramid Schemes – Dr. Jon Taylor The most prolific of the anti-MLM group is Jon Taylor, Ph.D., a graduate of Brigham Young University with an MBA is Applied Psychology, who has over 30 years of sales, marketing, and entrepreneurial experience. Dr. Taylor has spent several years cranking out anti-MLM material, including a 40,000 word manifesto titled "Product Based Pyramid Schemes." Its essentially a 5,000 word thesis with the same points repeated over and over. The basis for Taylor's argument is that he was, in fact, a "successful" distributor who one day had a lucid moment and decided to turn hostile witness. He came to believe that no one else after him could become successful since they were now at the "bottom" of the pyramid Taylor claims he spent two years researching MLM, first as a distributor determined to give it "every chance of proving what it claims to be," then as a researcher determined to find out if everyone had as much trouble as he did making "large amounts of money that were promised to the diligent." First, I'm not sure if a less-then-two-year participation in one particular MLM company (out of hundreds) could be classified as "diligent" nor provides an entire industry "every chance" to prove itself. It seems as if Taylor feels that if it didn't work for him, in this one company, there must be something wrong with the entire industry. Secondly, I thought Taylor was a "successful" distributor? Indeed, he claims to have been among the "top 1% of the distributors." What’s more, the company he was in was Nu Skin. If he genuinely achieved the success he claims to have achieved, in less than two years, with one of the industry's most challenging break-away compensation plans, in an already huge company like Nu Skin, his own experience would seem to completely contradict his own position. The fact that it was unexpectedly "tough" only goes to discredit the manner in which he was presented the opportunity, and his own investigative skills. Surely he does not believe that the way one group of distributors for one company pitched him is indicative of how all seven million of us operate. Does he? In detailing his MLM experience he describes how he "jumped in with both feet" and dropped all of his other business interests. He then later discusses how he "had financially fallen behind to a significant degree" due mainly to "all the product (he) purchased to maintain artificial qualifying standards (quotas) for ever higher bonus and commission levels." Also due to "not having any alternative income during that time." Now he seems to be contradicting his own rebuttal to those who claim his MLM attacks are due to "sour grapes." He responds to such claims by claiming he was "not a failure" and "rose to the top 1% of all those who tried this program." Yet, literally on the same page of his report he claims he "came away empty." The only way to logically reconcile his seemingly contradictory story is to assume he earned a substantial gross income, but due to his excessive expenses earned no net income. This begs the question, who held a gun to Taylor’s head and forced him to quit his other businesses and buy a garage full of products to artificially meet his quotas? Indeed, these were conscious, voluntary decisions made entirely by Taylor. Nu Skin’s "group volume" requirements were to be produced by Taylor - and his group! By buying into the "Executive" position out of his own pocket he allowed himself to earn higher override percentages on his downline, that’s true. But if his downline were large enough to warrant such an action then most or all of the group volume quota

would have been met by his group’s volume. Otherwise, his upfront purchases would have only earned him higher commissions on a downline that didn’t exist yet! How ever you look at it, these were simply poor business decisions, the responsibility for which were entirely Taylor’s. What’s more, MLM income is residual and not dependent on those expenses continuing (other than his personal volume quota which was $100 at the time). Most successful distributors plow much of their income back into their business the first few years, then back off and live off their handsome residual overrides. That’s just how MLM works. For that matter, that’s how business works. The challenge Taylor describes related to his own MLM experience have nothing whatsoever to do with the MLM model or it’s legality and everything to do with his own misguided expectations and those individuals who misguided him. In other words, his problem is really with the packaging, not the content. Yes, many Nu Skin reps back then (very early 90’s) were pushing front loads and stockpiling of product, and the income hype was rampant. In fact, that’s the reason I quit Nu Skin back then! Such actions are indefensible. However, Taylor states that "had a government investigator... gone undercover as a MLM distributor... he/she would have probably come up with similar conclusions." But - they did! Nu Skin was hit hard by various state and federal authorities soon after Taylor and I departed. The catalyst for these actions were the very things he attacks. This was a very high profile case resulting in a lot of media play. Did he completely miss it? For the record, Nu Skin has settled all their legal issues from back then and have since reformed many of their marketing practices. In an effort to prove his contention that very few people ever succeeded in MLM, Taylor sent a survey to 60 prominent MLM companies requesting detailed pay out data (such as the monthly earnings of the "top 1%" of distributors). Today he presents the fact that not a single company responded to his survey as supporting evidence of his position, rather than due to any lack of credibility he had with these companies, or the fact that his survey was grossly flawed in that it did not take into consideration something as simple as the size and age of the company. In Taylor's "Twelve Tests for Evaluating A Network Marketing Opportunity" he stumbled on the very first sentence where he refers to "Gifting Network" among a list of network marketing aliases (such as MLM, Consumer Direct Marketing, etc.). I believe this mistake is due more to his obvious bias towards the negative rather than due to a lack of research on his part. Even the most cursory investigation would have revealed that gifting clubs are patently illegal, cash based operations (there are no products involved) far removed from legal MLM programs, and the terms have never been synonymous within the industry, or at any regulatory level. One of his "evaluation test" questions is "are numerous levels of distributors allowed?" Of course, there are numerous (if we assume that to be more than five) levels in virtually every MLM company. The idea that more than two or three levels of pay out constitutes an illegal pyramid is an invention all Taylor's. No legal authority in U.S. history has ever held the same opinion. Yet another example of surprisingly shallow thinking on Taylor's part (who is otherwise clearly a bright guy) is the statement that "in some programs, quitting merely enhances the income of your upline – because income 'rolls up' to those above you." Okay, let's think

about this. If someone were making any significant amount of income, why would they quit? If they were making very little income, then very little would roll up. As most experienced MLMers would attest, "roll up" is a very overrated income generator. The vast majority of upline reps would benefit more by the commission they earn on their downline’s personal purchases and sales than they would from roll up of their income if they quit. To suggest otherwise demonstrates a gross ignorance of basic MLM theory. In yet another example of loaded questions he advises you to ask (there are many throughout Taylor's work) he suggests prospects ask distributors who have only been working the business two or three months if they are turning a "respectable profit," then goes on to say that if they are not, then they are only "fattening the pockets of their upline." Taylor has a penchant for "set up" lines like this. Very few reps would be making a profit of any amount after just two or three months. Indeed, to suggest significant profits can be earned in that short a time is the very type of hypey, over-stated promise that Taylor warns against! Furthermore, typical income progressions, based on real-world analysis of those who've worked a good opportunity long enough to create one, show a very slow growth pattern in the early stages followed by more rapid growth months later. Inevitably, the rate of increase will begin to increase, creating a "momentum" phase within an individuals own organization. A typical income progression chart would not show a 45º diagonal line, but one that looked more like the path of an airplane taking off from a starting point at the beginning of the runway. This income acceleration may not occur until the second, or even third year. The fact that most distributors choose to drop out long before then is a failure of their own tenacity and ignorance of how incomes truly progress in MLM – not a failure of the MLM concept. So, even after this magnitude of research performed by Taylor, are we to believe he still doesn't understand a typical, common MLM income progression? Another "set up" question he suggests you ask of your MLM company is for net pay out data, after subtracting product purchases, for all distributors who ever signed up! Yes, even those who quit many yeas ago. Is he really so naive to think that such data exists, or even if it does, that any company would provide it? Of course he isn't. He already knows they won't, or can't provide it (based on his own attempts). So why would he suggest you all try to acquire the same information? Besides, can you imagine the accounting nightmare, not to mention the data storage requirements, for major, decades old companies like Amway, Mary Kay, Shaklee or Herbalife to be able to accommodate such a request. Of course they are not going to provide it – and Taylor knew they wouldn't when he wrote his "Income Disclosure Test." It’s just another set up. We're set up again by Taylor's suggested "acid test" as to potential profitability of an MLM distributor. He suggests you ask your sponsor to show you his/her last year's tax return. Again, this is wrong on multiple levels. First, a tax return is a document designed to show the least possible amount of income legally allowed, which factors in a wide variety of common expenses that may still have been incurred but otherwise not be deductible (if they hadn't been running a legitimate MLM business). Also, how does the success of your prospective sponsor in any way effect your potential success? So what if that one individual had a bad year last year? Does that mean you will? Furthermore, asking someone how much money they make is a rude, very personal question to ask, isn't it? It certainly is in

every other profession (its also hypocritical for Taylor to suggest it considering he refused to provide me with any evidence of his own alleged "success" in MLM). And finally, to abide the question can be illegal! Using income claims, especially by showing checks, 1099s, or 1040's, as an inducement to join an MLM program is considered one of the most taboo practices by the MLM industry at large. There is much legal precedent that Taylor's own proposed question could be an act of entrapment. In fact, this very issue was a major part of state and federal actions against Nu Skin back in the early 90’s - the very MLM company Taylor claims to have once been so closely associated with! Taylor suggest you get a copy of your sponsor's genealogy, including upline, giving no regard to the fact that this is tantamount to asking for a company's client list (which, of course, would be a foolish request), or that genealogies that include uplines (other than the sponsor) are rare. What's even worse is that he suggests you get this information for the purpose of polling reps at various levels to see how many of them have achieved "time freedom" with no regard to the fact that, as I described earlier, one's time investment in their MLM business typically takes on a bell shaped curve spread over several years. It would seem obvious that one would be able to quit their job and comfortably live off "residual income" only after months or years of time consuming work. Once again, either Taylor is genuinely oblivious to what is common knowledge to any experienced MLMer, or he's fully aware of this basic, fundamental fact of MLM life and he simply disregards it in a biased attempt to manufacture a negative argument. Taylor continues his string of trap questions by proposing that prospects should check to see if the company offers training, audio and video tapes, and various other sales aids for free, or are you expected to pay for them as another profit center for the company and upline? Are we to believe that he never thought of a third possibility – that the tools are sold at or below cost? Of course, Taylor surely knows that every MLM company charges something for their training and sales tools, so why suggest you even ask? Furthermore, in the vast majority of MLM programs operating today, these tools are indeed sold at or very near cost. To mark up videos and audios significantly would mean the company itself would be making money by recruiting (since only recruits would buy sales aids), which would be a huge red flag to regulators. Companies are just as forbidden from making money from recruitment as distributors are. Also, no legal MLM company pays commissions on training and sales aids (sure, a few do pay on training, but notice I said "legal" MLM companies, which are the vast majority, and which do not pay on training). Furthermore, all but a very few, albeit very large, MLM companies don’t even allow their reps to produce and resell training and sales tools at cost, let alone at a profit. I've only just begun to pick apart the illogic and ignorance of Taylor's anti-MLM material. In coming issues I'll show you his evidence that playing the slots in Vegas provides a greater financial return than an MLM opportunity. He's even got a graph to prove it! And wait to you hear his solution to the non-existent "saturation" dilemma. And you'll find no greater example of "selective memory" than the interview he did of a pro-MLM authority in his alleged attempt to get "all sides" of the issue before presenting his findings. He interviewed me. His portrayal (betrayal?) of my information is so self serving and skewed as to suggest deliberate deception. See ya' next month!

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Leonard Clements has concentrated his full-time efforts over the last 15 years on researching and analyzing all aspects of MLM and is a court certified expert in the field of Network Marketing. He is the author of the controversial book "Inside Network Marketing" and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." Visit www.MarketWaveInc.com for more information on Len and his generic MLM products. Len is also the co-founder and CEO of Epic Network International, a new MLM company based in Las Vegas, NV. For more information visit www.EpicNetwork.com/LenD02. Anti-MLM Zealots Me Thinks Doth Protest Too Much! Part IX By Leonard W. Clements © 2005 I'm sure those of you who have been following this column over the last several months have a pretty clear picture of what I'm defining as an "Anti-MLM Zealot." For the benefit of those readers new to this series, allow me to reiterate – an Anti-MLM Zealot isn't someone who dislikes MLM. Even those who really, really dislike it are not necessarily worthy of the title. There are a lot of people who are "anti-MLM," likely due to one failed experience, or more likely due to them borrowing the negative opinion of someone else and making it their own, without doing any of their own actual research. No, the Anti-MLM Zealot is someone who is borderline obsessive about exposing their negative opinions to others - even those who never asked for it. They are someone who spends hundreds, if not thousands of hours of their lives searching for evidence to rationalize their extremist viewpoint. Then they compile and present their observations, theories and opinions to anyone who will pay attention to them in an effort to rid the nation of all things MLM. The fact that there are thousands of good, honest people supporting their families from their MLM incomes, who's livelihoods would be ruined if their MLM prohibition agenda were successful, is rationalized away by simply denying they exist. Or, creating a dichotomy where all those who do succeed are the "perpetrators." The rest are "victims." There are really only four bona fide Anti-MLM Zealots out there trying to wreck your business, and for many of you, your livelihood. Arguably the most read is Dean Van Druff, the most prominent is Robert FitzPatrick, and the most currently active is Ruth Carter. All have been discussed in previous editions of this series. But by far the one who has churned out the greatest abundance of anti-MLM propaganda is Dr. Jon Taylor, co-founder of the Consumer Awareness Institute, who's work we barely scratched the surface on in last month's edition. Let's dig deeper.

Tall Taxing Tails In an effort to bolster his case that very few network marketers make any money, Taylor relates the testimony of 33 tax preparers and CPAs he interviewed, not one of which could remember an MLM distributor client who made a "substantial" profit. The only challenge in rebutting this hogwash is deciding where to begin! Let's start with the fact that a document in which someone attempts to report the least amount of income legally possible isn’t exactly the best tool to judge how potentially lucrative a profession may be (not to mention all those returns these preparers saw where the client was overly aggressive in reporting business expenses, which I’m sure were more than a few). Putting that obvious point aside, consider this: According to Taylor, these 33 tax preparers had an aggregate total of about 14,400 clients in 2002 (the year Taylor did this "study") and had worked on over 300,000 tax returns in their careers. Yet, amazingly, not only did they remember the "several hundred" that were MLM distributors, but even recalled the amount of their profits and losses! One particular preparer from H&R Block claimed to have prepared over 10,000 returns over 32 years, and not only recalled that all of his MLM clients lost money, he could even cite the average amount they lost! Pretty incredible, isn’t it? And what, exactly, is a "substantial" profit? And how would they know who was a network marketer? I've filed over a dozen 1040s since going full time in this business, and don’t recall once being asked to define my occupation. What’s even more difficult to accept is Taylor’s claim that he then called other tax preparers, accountants, financial planners, bankers, and insurance underwriters, (insurance underwriters?) who all allegedly "relayed similar feedback." What does this mean? Who? Where? When? With such damning evidence you’d think Taylor would have spent some time on this point, and provided specifics. Yet he simply glosses over it in all of three sentences. And get this: Taylor decided to call 33 more tax preparers in Utah county and found that they could recall 38 clients who had made "large profits from a variety of MLMs" in the last year alone, and about 185 throughout there careers. Some, Taylor reports, "were reaping checks ranging from tens of thousands of dollars a month to close to $1 million a month!" How does he explain this? Well, Utah county, you see, has a high concentration of MLM corporate offices, and those most likely to be at the top of the pyramid would reside near their company's home office. I'm not kidding. That's his explanation. Of course, he provides no information as to the level these mega-earners are on, nor does he really have even the slightest clue. He also does not take into consideration that those top earners who do live near the home office (of the very few who actually do) often times moved there after they became successful. The reality is, his first survey was of tax preparers in what he acknowledges are "sparsely populated" areas of Utah, and the second survey was in a densely populated area, and common sense would suggest (and my own MarketWave research has proven) that areas of higher population density are more conducive to successful network marketing. Within the fine print footnotes Taylor mentions that he also called 106 tax preparers from other parts of Utah as well as Michigan, Idaho and California. Curiously, his findings from these surveys are not presented. If it supported his case, you can bet he would have presented them. Taylor concludes this section by asking for the reader’s assistance in gathering "objective" information about MLM, but then declares he is "not interested in anecdotal

material." I see. So, if a tax preparer provides anecdotal material that is negative towards MLM, based entirely on memory, he’ll accept it. If a practicing network marketer provides anecdotal material that's positive towards MLM, it’s unacceptable. Yeah, that’s objective. Odd Odds In yet another example of Taylor's gross lack of objectivity, he states, "It is interesting to compare the odds of success of MLM schemes with legalized gambling in Nevada. It appears that on average one could do better at most any of the gaming tables or slot machines...". Once again we have an anti-MLM zealot (previously it was Robert FitzPatrick) suggesting our successes are somehow a game of chance. It’s interesting to note how one’s "odds" of success in MLM seem to increase the longer they commit to it, the more they study it, and the harder they work at it. Taylor provides charts, graphs and numerous footnotes to create the illusion of substance to his findings. But when held up the light it reveals itself to be nothing more than gussied up garbage math. In one case he provides a chart showing the odds of turning a profit in a "no product" pyramid scheme, a single bet on a roulette wheel, and an MLM opportunity. He claims the percent who lose money in a classic pyramid scheme is 90.4% (9.6% make a profit), but 99.95% lose money in MLM. If we follow the asterisks to the fine print, we discover that his 9.6% figure came from a news report of a scheme called "The Original Dinner Party" and Robert FitzPatrick's experience with the "Airplane Game" over 20 years ago. That's it. Another asterisk leads us to where Taylor arrived at his so often cited "99.9% fail" figure. He picked six MLM companies (out of thousands) and analyzed "internal reports" along with SEC and FTC filings, even though only one is a public company in the United States. He also factored in "reports from ex-distributors." But apparently his findings were still not to his liking, so he had to "correct" what he refers to as "deceptive data." First, he didn't care for the way MLM companies only report the earnings of those who are "active." Adding back in all those who made no money because they didn't do anything to earn it (signed up, bought a kit, and quit) would certainly increase his "failure" percentage. Next, he had to factor in each distributor's average annual expenses. How he arrived at this number is not stated, nor does he even reveal the number he chose to use – because there's only one way he could have arrived at it. He made it up. For someone who demands such statistical facts and verification from us, it’s both ironic and hypocritical of Taylor to pull flimsy, baseless, claims such as this out of thin air. His "99.9% fail" mantra is based on nothing more than a grossly bias guess. At one point in his marathon diatribe, he suggests a prospect ask the spouse of his or her potential sponsor "what problems the family has experienced due to MLM participation?" Notice, he doesn’t suggest you ask "Have there been any problems?" He’s suggesting you just assume there have been. And what does your sponsor’s family life have to do with yours? Taylor doesn’t say. Taylor’s ignorance as to basic MLM law is most glaring in his definition of the proverbial "Seventy Percent Rule." This is a rule that was derived from, and clearly defined by, the FTC vs. Amway decision in 1979. It is, and has always been, a rule that forbids the purchase of more inventory until at least 70% of all previous goods have been sold or consumed (designed to prevent front loading and stock piling). According to Taylor, this

rule demands "distributors must derive at least 70% of their income from retail sales to non-distributors." He’s wrong. Among myriad other examples of Taylor’s asserted effort to fold, spindle and mutilate the facts to conform to his argument, he charges that "MLM apologists typically respond that a pyramid structure is common in all large businesses and their organization." And yes, we do that. But then he states, "I maintain that many significant features (symptoms) separate a pyramid scheme syndrome from normal business organizations. To suggest that ‘all organizations are really pyramid schemes’ is naive." Yes, it would be, except that’s not what we say, and Taylor just confirmed it! The common, if now almost cliche’ assertion we (us "apologists") make is, as Taylor just described, that the "structure" is shaped like a pyramid, nothing more. So, how did we go from an innocent discussion of the shape of a company’s hierarchy chart to us claiming the "symptoms" or "syndrome" of a pyramid scheme are in common with conventional businesses? The bridge between the two totally separate concepts is an invention all Taylor’s. Taylor's illogic and shallow reasoning is never more evident than in his proposed solution to the challenge of local market saturation. Taylor suggests that by MLM companies not applying territorial restrictions (i.e. limiting the number of distributors per area), it is common for local markets to become saturated with reps from the same company, making it extremely difficult to enroll more sales reps in that area (such local market conditions are actually extremely rare). His solution? Restrict the number of reps that can enroll per area. So, his solution for a condition where recruiting more distributors becomes very difficult, is to make it impossible to recruit more distributors in that area! Can you imagine having a neighbor down the street who becomes interested in your business, but your company's policies forbid you from enrolling them? Taylor's proposed cure to this local saturation challenge would actually make it far worse, and cause it occur earlier! Selective Memory In his research, Jon Taylor interviewed me and read my book "Inside Network Marketing." The only evidence of this anywhere in his material is his recounting of a question I have on my MLM survey (www.marketwaveinc.com) related to income goals. Yet, in spite of my crystal clear description of the question itself, and a verbal discussion on the phone where I reiterated my findings, his portrayal (betrayal) of this survey is so self serving and skewed as to suggest deliberate deception. My survey question simply asked at what income level one would consider themselves "successful?" Not their dream goal (of course we all want to be millionaires), but their "primary" income goal, and anything above that is icing on the cake. Eighty-six percent said they would consider themselves successful if they only made enough to quit their job and make a "comfortable living," which they quantified, on average, as being $5,988 per month. According to Taylor, I asked what their "expectations of success" were and that 86% said they "expected a full-time income to result from their (MLM) participation." My survey also found that 6% said they would not feel "successful" unless they made at least $84,000 per month (one million per year). This means, as I state in the survey, my book, and in every other situation when I’ve ever recited these findings, that clearly 6% misunderstood the question on the survey (obviously, they

would likely consider themselves successful if they made only $10,000 per month, or surely $50,000). But Taylor calls it "remarkable" that 6% expected to make $86,000 per month, then asks "What do such expectations tell us about the more aggressive MLM promoters?" A better question is, what does Dr. Taylor’s portrayal of my findings tell us about the more aggressive MLM demoters? Taylor claims he also interviewed a producer of "multiple vitamin" products that had several MLM clients. He alleges the conveniently unnamed producer told him that he sells the vitamin supplements to these MLM companies at a cost of $3 to $4 a bottle, and each of the MLMs sell to their reps for a wholesale price of about $50 a bottle. He goes on to claim that this producer suggested to these MLMs that they could offer a superior product with higher quality ingredients at a cost of $7 a bottle, and all declined because there was "not enough margin." First of all, I’ve not only been a full time participant in this business for over 14 years, I’ve studied it, and it’s companies, extensively that entire time. I’ve never seen a "multiple vitamin" product wholesale for fifty bucks. Not one, ever. Besides that, consider the absurdity of an MLM company selling something that cost them $3 for $50 - a $47 margin, but then deciding they can’t afford a better $7 product because a $43 margin wouldn’t be enough (that’s still over a seven hundred times mark up). Or that a manufacturing company would tattle on their clients like this and risk losing literally millions of dollars in business. Kind of hard to believe, isn’t it? It would be great if we were able to verify Taylor's sensationalistic anecdotes, but unfortunately he does not place the same level of substantiation and verification on his own claims as he demands we do on ours. There are pyramid schemes, and there are legitimate, legal network marketing businesses. There are numerous laws and countless legal precedence spanning several decades supporting this delineation. This dichotomy has been defined and refined by literally hundreds of judges, attorneys, law enforcement personnel, the FTC, Attorney Generals, district attorneys, and various other local, state and federal regulators, as well as the Better Business Bureau and Chamber of Commerce. We are now asked to believe that they are all wrong, and Dr. Jon Taylor is right. At one point in Taylor’s manifesto he rhetorically states, "While researching this subject, I often asked myself why is MLM so pyramidal in concept, motivation, and effects, and yet has been so successful in avoiding the label of ‘pyramid scheme.’" In researching Taylor’s position, I often asked myself why he so utterly fails to accept, or even acknowledge the simplest, most obvious answer - because they’re not. The last two installments of this series will deal with general anti-MLM concepts and accusations, such as market saturation, exploiting relationships, and high distributor failure rates, among others. I'm done with rebutting specific anti-MLM zealots – unless there's another one you think deserves the scrutiny. If so, please let me know. For the record, all those individuals discussed in this column were invited to provide supporting data to defend their expertise of this subject. Jon Taylor did provide a short, general outline of his research, but refused to provide any financial data to support his claim of past "success" in MLM. Dean Van Druff's response was mostly a rude, childish attack on my intelligence. Ruth Carter referred only to here personal experience in Amway several years ago. Robert FitzPatrick never responded at all.

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Leonard Clements has concentrated his full-time efforts over the last 15 years on researching and analyzing all aspects of MLM and is a court certified expert in the field of Network Marketing. He is the author of the controversial book "Inside Network Marketing" and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." Visit www.MarketWaveInc.com for more information on Len and his generic MLM products. Len is also the co-founder and CEO of Epic Network International, a new MLM company based in Las Vegas, NV. For more information visit www.EpicNetwork.com/LenD02. Anti-MLM Zealots Me Thinks Doth Protest Too Much! Part X By Leonard W. Clements © 2005

Anti-MLM Zealots are rare. For an industry that’s been around for over half-a-century, composed of over 2,000 companies and with well over ten million participants in the United States alone, you would think there would be more. Especially considering how many “victims” have been so ruthlessly abused by us, at least according to the Anti-MLM Zealots. But the fact is, there are really only four. Robert FitzPatrick, Ruth Carter, and Jon Taylor have all written books on the subject, and I’ve included Dean Van Druff in this list only because, thanks to the internet, the one little anti-MLM article he wrote fifteen years ago has probably been read by more people than the other three subjects combined. There arguments against MLM, although sometimes well dressed, stand up poorly to scrutiny, and virtually across the board are focused on the same two or three companies (the easiest targets).

Readers of this column have asked why various other anti-MLM types have not been mentioned in this series. First, the four I have featured have, to varying degrees, caused some damage to the standing and credibility of this form of business. The others I’m asked about have not. They are little known outside of MLM circles – and I’d like to keep it that way. No sense giving them more attention than they are already not getting. Not that their case is any stronger. In fact, that’s the better reason why I’ve ignored them – for the most part they just parrot Fitzpatrick, Carter, Taylor and Van Druff. It’s always the same, tired, arguments, over and over. Various Others There is, however, a fifth relatively vocal MLM nay-sayer who does deserve at least some attention – Dr. Stephen Barrett, a prominent medical doctor well known for his anti-quackery campaign. Dr. Barrett's MLM related criticism is the most frustrating to contend

with because it is, for the most part, the most valid. His concerns are well founded and his targets well chosen. The only criticism I would have of his work is that it creates the illusion, perhaps unintentionally, that the entire MLM industry is guilty of outlandish, over-the-top product claims. In fact, you will find a small but vocal minority of MLM participants on Dr. Barrett's hit list. Nonetheless, the list should certainly be smaller, and this is a challenge that does need attention. However, being limited by law as to what we can say about the benefits of our products certainly does not suggest many of those benefits are untrue or overstated. Certainly some are – many are not. There have been numerous negative other articles about MLM in various magazines and newspapers over the years. The vast majority were not written by someone I would classify as an "Anti-MLM Zealot," they were more like one-hit-wonders. They took one hit, and I was left wondering how professional journalists could have been so inept at researching their subject matter. In most cases, it was obvious they just didn’t know what they were talking about. Again, not to say there are not many aspects of MLM that deserve criticism. This industry, or more specifically the way some people practice it, is far from perfect. But the legitimate concerns are rarely the target of the hit. The epitome of this is an article by Rhonda Abrams, a syndicated small business columnist. I’m only picking on her because her views are so typical of the MLM-ignorant journalist. They pretty much all say the same thing. In her article "Don’t Get Taken By MLM" (Nov. 2002) Ms. Abrams suggests we should "Never, and I mean never, sign up for a multi-level marketing (MLM) program." Why? Well, according to Abrams, "All MLM programs share the same fundamental flaws." Which she lists as follows:

1. Recruiting your competitors: If I'm in sales, the last thing I want is more salespeople competing with me. But in MLM, your goal is to get lots and lots of competitors. Why would I want to do that?

About five paragraphs previous to this statement, Ms. Abrams defines MLM as follows: "In a multi-level situation, I make money off my sales and also the sales of those I bring in to the organization." So, did she forget what she just wrote? Does she really have that little understanding of the most basic, fundamental concepts of MLM? Or, is she so desperate for a negative argument that she has to invent one?

2. You pay to be a customer: Overwhelmingly, buyers of MLM products are MLM salespeople. A legal counselor to MLM programs advises that a mere 20% of sales to outside consumers is high enough to avoid legal scrutiny. Can you imagine any other business where 80% of sales are made to employees?

Abrams apparently doesn’t understand that the majority of MLM programs today have distributor enrollment fees so low (many are free) that any wise retail customer will sign up just to save money on their products. If her findings are accurate, that would mean 20% of all customers are voluntarily choosing to pay full retail when they could simply call an 800-

number or visit a web site, sign up as a rep and get 25-40% off. I’m surprised it’s as high as 20%! And Abrams comparison to "employees" is grossly flawed. Imagine if Ford allowed customers to simply fill out an employment application to get a 25% employee discount on their cars. They never actually had to do anything, just apply. I bet over 80% of Fords would suddenly get sold to "employees," wouldn’t they?

3. You'll pay far more: Expect to be required -- or pressured -- to buy samples, marketing materials, training courses and tapes, seminars, etc. You're very likely to spend far more than you'll ever bring in from sales.

She’s just wrong. No MLM company operating in the U.S. today "requires" such purchases as a prerequisite to becoming a rep. Pressured? Well, I suppose that’s true to varying degrees. If someone wanted to start a successful MLM business I would strongly suggest they get marketing materials, product samples, and some training. Is that really unreasonable? Too much pressure can occur, but once again, that’s a problem with the individuals you’re working with, not the MLM model. Note that Abrams doesn’t say that "most" MLM participants spend more than they bring in, she says you very likely will. How could she possibly know that?

4. Your products are priced too high: No matter how good the quality of your products, consumers are likely to be able to find better deals elsewhere. Just think about it – all those middle layers of salespeople and commissions means higher prices to the consumer.

Yet again, Abrams, like so many of her peers, demonstrates an utter lack of even the most basic MLM concepts. MLM companies don’t have advertising budgets. Their products are marketed by word-of-mouth, and the millions they likely would have spent for advertising and promotion is instead used for commissions to pay those who talk up their products. Furthermore, MLM companies greatly reduce the number of "middle layers" between the manufacturer and customer, because the reps are their distribution system. These facts have been among the most openly and widely promoted benefits to the MLM distribution model for more than half a century! Having said that, are some MLMed products priced too high? Are some jacked up just to support a better paying comp plan? Absolutely. Is that a valid reason to avoid "all" MLMs. Absolutely not.

5. You turn your friends and family into "prospects:" MLM programs typically suggest you sell to – and recruit – people you know well. Do you really want to be constantly beseeching those closest to you?

How did we go from selling to those we know well to "beseeching those closest to you?" Not only do you not have to even sell to those you know (there are numerous alternative lead generation systems available to MLMers today), but why not offer your

product or opportunity to those you know, and if they are not interested, don’t beseech them! In fact, most MLM training today advocates exactly the opposite approach. If someone says No thanks, you say "Next!"

6. You face group pressure: One of the positive sides of MLM groups is the support given to those who spend a lot of money or who try hard to succeed. The flip side is that those who don't spend as much or believe as strongly in the program are likely to face strong negative judgments from the group.

It amazes me how those who "investigate network marketing" always seem to assume that the way a minority of those involved with only a few of the largest, oldest MLM companies is the way we all do it. Personally, I encourage and motivate, but I don’t "pressure" anyone to do anything - and I’m not alone. Abrams concludes her article with this: "Personally, I recommend you NEVER sign up for any MLM program. I believe most of them are unethical, many illegal, and all of them a waste of money." There are over 2,000 MLM companies operating in the U.S. today (have I mentioned that?). I admire the years of research she must have put into her article that allowed her to make a sweeping judgment like that about all of them. And I sure wish I had taken her advice 15 years ago. She could have saved me from a life of sleeping in ‘till 9:00 am every morning, taking a week off when ever I feel like it, and paying taxes on a six digit annual income. Jeez, if I had only known they are ALL a waste of money! The common theme throughout most all anti-MLM propaganda centers on six issues. One being the product benefit claims made by over-zealous distributors, which, again, is a valid criticism and deserves no rebuttal. The other five crumble easily under the weight of historical precedent, practical experience, and common sense. The final installment of this series will address these issues head on. They include: Market saturation, exploiting relationships, why “Most distributors fail”, the allegation that success in MLM requires extraordinary talents and skills, and of course, the “Pyramid” issue. I’ve saved the best and most definitive response to these issues for last. Don’t miss part XI!

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Leonard Clements has concentrated his full-time efforts over the last fourteen years on researching and analyzing all aspects of Network Marketing. He is a court certified expert in the field of network marketing. Len is also a professional speaker and trainer, and currently conducts "Inside Network Marketing" seminars throughout the world. He is the author of the controversial book "Inside Network Marketing" and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." To receive additional information about MarketWave and its products, please call 1-800-688-4766, or visit www.MarketWaveInc.com.

Anti-MLM Zealots Me Thinks Doth Protest Too Much! Part XI By Leonard W. Clements © 2005 This is the final installment of this series. The previous ten parts rebutted the writings of the four highest profile MLM antagonists: Dean Van Druff, Robert FitzPatrick, Ruth Carter, and Jon Taylor (get the back issues!). This edition covers the most common, general criticisms made by virtually all those who are anti-MLM. Market Saturation The more naive of the anti-MLM crowd will typically offer a mathematical progression showing five people who get five, and so on, then gloat over their revelation that by level 14 they would have accounted for the entire population of the Earth (Van Druff uses an even more ridiculous "ten sponsor ten" scenario). However, when an MLMer uses such a scenario to demonstrate the income potential of their plan, the anti-MLMer is always quick to jump all over the absurdity of such a scenario ever playing out. So, why use it then as evidence to debunk an industry based on it's theoretical occurrence?

In over 68 years we've managed to involve only about 2.5% of the U.S. population. By the end of this decade over 40 million Americans will turn 18, and another 9 million adults will immigrate to the US. I think there's still some room to grow. John Taylor is critical of the lack of disclosure as it relates to local market saturation. He advocates territorial restrictions, believing that when a certain geographical region has reached a certain number of distributors for a particular company, no more distributors should be allowed to participate in that region. The glaringly obvious flaw in this logic is that by limiting the number who can participate in a given region causes local market saturation! Can you imagine someone wanting to join your MLM program but you can't enroll them – unless they move out of the area? Another common anti-MLM concept suggests that those who get involved too late miss out. As Taylor exclaims, he was at the top, but those after him would be at the bottom, thus be too late to achieve any real possibility of success. But... didn't he start at the bottom? Indeed, has not every single successful MLM distributor in history started at the bottom? There are numerous examples of folks who joined very mature companies, started at the bottom of what was an already large existing hierarchy, and managed to achieve success, like me – and John Taylor! Its happening every day. Exploiting Relationships So, you invite your new neighbor over for dinner under the guise of making a new friend. Once desert is consumed you begin your opportunity spiel. Yes, that's not a cool

way to build your business, and you'll lose more friends than you gain. Fortunately, most MLM distributors don't practice such tactics. Naturally, those who were victims of deception or had their friendships exploited like to tell their story to authors of anti-MLM propaganda. Unfortunately, authors of anti-MLM propaganda never seem to bother to see how the other 99% of us conduct our business. Sure I've offered promotional material to friends. Some were thankful and joined. Most said they were not interested. No problem. I never mentioned it again, and we're all still friends. Its not who you ask, its how you ask. The bulk of my recruiting efforts over the years has been conducted the same way most of those I've recruited, and those throughout the industry, have conducted there's – by seeking out already interested people via various lead generation devices. Those who were not invited to their 20th class reunion because they obnoxiously tried to recruit everybody at their 10th are a very noticeable, but very small minority of MLM distributors. The hundreds of MLM-folk that you've come in contact with over the years who do not practice overly-aggressive recruiting behavior are never recognized – because they don't aggressively try to recruit you! Most Distributors Fail Yes, they do. In fact, this is perhaps the strongest argument of all against the imminent saturation theory (although, most anti-MLM zealots make no attempt to reconcile the two completely contradictory positions). What most nay-sayers would like us to believe is that this high failure rate in due to some inherent flaw in the MLM model. Some at least concede the MLM concept is sound, but the potential for success is grossly overstated. What they fail to appreciate is that "success" doesn't necessarily mean getting rich. For some strange reason, anti-MLM zealots see success in MLM as an all or nothing proposition. Either you achieve wealth, or you failed. I don't agree. Nor, according to a MarketWave survey of over 6,700 distributors and prospect (I base my conclusions on actual research, not theory) do 86% of you who are shooting for a comfortable living income. A nifty $6,000 per month without having to set the alarm in the morning would make most of us quite satisfied. The majority of the rest would be happy with only an extra $200-$300 per month. But, when that person only earns $250 per month, the anti-MLM advocate points to them as an example of MLM's unfulfilled promise. Several years ago a distributor for a large MLM company was profiled as part of a semi-negative article that appeared, of all places, in Good Housekeeping magazine. The distributor lamented over his net profit of $16.45 after his year long effort. Of course, had this been any other form of business, a first year profit of any amount would have been considered a success story. Only in network marketing is this considered, at least by some, as an example of failure. Sure, many of us overplay the income angle, and that's a problem – but not one exclusive to MLM. Hype exists in all industries. Its a flaw in one's marketing technique, not the product or opportunity being marketed. Is it fair to blame the high failure rate on the MLM concept or model? Well, what if ten people were given free memberships to a gym which even included a personal trainer. Five went once or twice, saw no immediate results and quit. Two went several times but never

followed the advice of their trainer and used all the equipment wrong, then quit. Two others never even showed up once. Only one went on a regular basis, followed the prescribed work out regimen, and after a year gained the body and vitality they desired. Then an anti-gym zealot comes along and claims that 90% of all those that signed up for the gym membership and trainer failed to receive any significant benefits. Although technically true, its not the whole story. Anti-MLM zealots are not telling the whole story. A classic example of this is the "Payout Distribution Study" attempted by Jon Taylor. When he requested payout data from 60 MLM companies he required "even those who only bought a starter kit whether or not they have done anything with it... be included in these statistics, including those who have not sold anything or quit, even after one day." My point is, why would Taylor want to include those who didn’t go to the gym in a study about the benefits of going to the gym? The Anti-MLM Zealot can be just as guilty of manipulating data as they often accuse us of being. For example, if ten people join ten MLM programs in succession, then all ten succeed in their tenth company, based on the way Jon Taylor tried to acquired his data, by looking at what percentage failed in each of these ten companies, he could easily show a 90% failure rate (nine of these companies would show these ten people as failures) even though 100% of them are now successful! Certainly some people work their hearts out, do all the right things, and still fail, as is true with any endeavor in life. However, with rare exception, MLM failure is voluntary. No one has ever held anyone at gunpoint and demanded that they buy $5,000 worth of water purifiers or vitamins they didn’t want. That was a choice. No one forces anyone to jump in and out of ten MLM program in a year. One reader of this column wrote me recently to let me know that, indeed, MLM didn't work. He should know. He's been in 50-60 companies over the last nine years. I wrote him back to explain to him the most likely reason for his failure. He's been in 50-60 companies over the last nine years. No one has to exploit their friendships, or make ridiculous product claims to succeed. What defines an illegal pyramid and how to avoid one, and how to sensibly pursue a legal MLM business, is easily accessible information for those that seek it. Most distributors fail because they make very emotional, very poor, but totally voluntary business decisions. One such decision is to quit entirely. Certainly, in some cases, if someone perpetually fails at something they might want to quit and try something else. But the ease of entry into MLM also makes for a way too easy exit, and far too often it is premature. I once met a woman who claimed she was "failing miserably" at her MLM business. After one full year of effort she was making only $250 per month. I took her actual, and very modest net growth figures and projected them forward one more year. She would be earning just over $3,000 per month which, she said, would allow her to reach her goal of quitting her job and living off her MLM income. If she could just "fail miserably" for one more year. What is perhaps the most ironic and hypocritical thing of all about this "failure rate" claim is that the Anti-MLM Zealot's very anti-MLM campaign has, to some degree, increased the failure rate, thus personal and financial harm, of the very people who's relationships and finances they claim to be trying to protect! Success in MLM Requires Extraordinary Talents and Skil ls

Not only is this untrue, it is perhaps the single greatest benefit of the MLM business model. If you don’t have the time, money or skills to build a large downline sales organization you can still achieve great success by finding someone who does! If you were to only get two or three people who are good at MLM to join with you, when they eventually succeed you succeed. They’re downline is your downline. I’ve heard many stories - including ones that are actually true! - where 70, 80, or 90% of one’s downline was build by one talented person. I recall several years ago speaking to the third highest earning rep in a large MLM company who confessed that he understood very little about how to build a downline and had only recruited a "handful" of people. One of them was the number one earning rep. Another popular story, which I have confirmed as true, tells of an opportunity meeting at a Holiday Inn in Dallas where only one person showed up - one of the grounds keepers at the hotel. He was a 19 year old Hispanic man who knew only a few words of English. This man went on to enroll only one person. That one person was the owner of the Holiday Inn - who went on to become one of the top earners in the company. So would have been the young Hispanic man - if he hadn’t quit after only a month. Is MLM for everyone? Absolutely not. Especially those unemployed folks looking for immediate income. And yes, some of us fail to reveal that to our neediest prospects, and that’s a problem. But once again, and for the last time, that’s a challenge with the way some people practice MLM, not with MLM. Pyramids in Disguise Robert FitzPatrick epitomizes this position when he states "MLM is a legal form of business under certain rigid conditions set forth by the FTC and state Attorneys General," but goes on to suggest "Many MLMs are in gross violation of these guidelines and operate only because they have not been prosecuted." This is a bit like saying "Many honest people are liars." Either you're a legal MLM company, or you are an illegal pyramid disguised as an MLM company. And yes, this is unfortunately not uncommon and legitimate MLM companies certainly do suffer a guilt by association. But let's be clear – illegal pyramids try to look like MLM companies because they want to appear legal! Most anti-MLM zealots are surprisingly ignorant as to what legally defines a legitimate MLM company. FitzPatrick’s definition of the "70% rule" is somewhat different than Taylor’s, but just as far off base. He claims this rule requires that, "at least 70% of all goods sold by the MLM company must be purchased by non-distributors." Non-true. The original rule came from the FTC vs. Amway case in the late 1970s, and clearly prohibits a distributor from buying more product until at least 70% of all previous orders have been consumed or sold. It was also simply a suggested guideline, never a law. Yes, subsequent interpretations by state and federal regulators, and even other MLM companies, have been all over the map. Anti-MLM Zealots like to cherry pick the one that best serves them, and ignore the original. FitzPatrick also states that "the very legality of MLM rests tenuously upon a single 1979 court ruling on one company." For us to believe that FitzPatrick actually believes this, we must also believe that he has somehow forgotten the literally hundreds of other state and federal cases since 1979 that have defined and refined the definition of a

legal MLM operation. Or, that the ruling in question involved the aforementioned Federal Trade Commission vs. Amway case (not exactly a minor-league case). Or that, in the very words of the federal court "The Amway sales and marketing plan is not a pyramid plan. In less than 20 years, the respondents have built a substantial and efficient distribution system. Consumers are benefited by this new source of supply and have responded by remarkable brand loyalty." The government's position doesn't sound too "tenuous" to me. Researcher Bias Researcher Bias is a term used to explain why two opposing groups can study the exact same information yet come to completely contrary positions. People see what they want to see. If you have an agenda to debunk the MLM concept the "evidence" is not hard to find, if that's what you're looking for. Its no curiosity that when each of the four anti-MLM zealots mentioned above were asked to identify the number of happy, successful MLMers they surveyed, or to list the pro-MLM books or magazines they read, each refused to provide an answer (although Taylor claims to have interviewed "hundreds" of MLM distributors, he also claims the best information source are distributors who have failed). When Ruth Carter and her MLM Survivor followers are shown evidence of those who honestly succeeded in MLM they are always labeled "perpetrators." Those who fail are always their "victims."

Its also no mystery why Carter, Taylor, FitzPatrick and Van Druff describe in their writings the most notorious examples involving only a handful out of the thousands of MLM companies that have existed. They'll always focus on the most controversial practices employed by Amway/Quixtar (or more specifically, employed by some of their deified Diamond distributors) which tabloid TV shows are quick to back them up on. Then there's Equinox, of course – the poster Bad Boy of the MLM industry. They'll never let us forget the trouble Nu Skin was in over a decade ago, or Herbalife two decades ago (long since resolved). Occasionally they're site Trek Alliance, FundAmerica, SkyBiz, International Heritage and a couple gold & silver deals from 15 years ago, likely because their ammunition was handed to them by state and federal regulators. That's about it. That's 95% of all the companies they're hit by name, which is less than 1% of all MLM companies in existence today, let alone those that have existed since the 1979 FTC vs. Amway decision. The dozens of good, clean, mature MLM programs that have never had any legal challenge, or the thousands of hard working, professional network marketers who practice a conservative, honest approach to their business are completely ignored, as if to create the illusion they do not exist. Some anti-MLM zealots are passionate about their cause, and they've dug themselves into their position far too deep to ever emerge – the obviousness of their folly be damned. Ego is a powerful thing. If someone tries hard enough, long enough, to make a case that the sky is always red by only showing images of desert sunsets, they're stick to their case no matter how many times you force their heads upward in mid-afternoon. MLM has never even approached market saturation in over half a century of existence. Thousands of distributors succeed in reaching their income goals (what ever that may be), many with mature companies that have been around for decades – and all started at the

bottom. The vast majority didn't exploit friendships, or hype their products. Products which they genuinely love, some with a passion. Most that failed did so due to poor, but completely voluntary business decisions. The legality of network marketing is well defined and based on decades of precedent, the model is sound, and to those seeking a home based business, the benefits are substantial. Evidence of this is everywhere, and easily obtainable – assuming you want to find it. To slightly misquote Shakespeare, Me thinks the Anti-MLM Zealot doth protest too much.

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Leonard Clements has concentrated his full-time efforts over the last 15 years on researching and analyzing all aspects of MLM and is a court certified expert in the field of Network Marketing. He is the author of the controversial book "Inside Network Marketing" and the best selling cassette tapes "Case Closed! The Whole Truth About Network Marketing" and "The Coming Network Marketing Boom." Visit www.MarketWaveInc.com for more information on Len and his generic MLM products. Len is also the co-founder and CEO of Epic Network International, a new MLM company based in Las Vegas, NV. For more information visit www.EpicNetwork.com/LenD02.