CAI

Consumer Awareness Institute

Non-profit Corporation

Six reasons for silence of the victims of product-based pyramid schemes (MLM's*) 

     In law enforcement, the squeaky wheel generally gets the grease. No complaints – no action. So one of the most insidious features of product-based pyramid schemes is the silence of victims and the resulting inaction by officials.   
     In Utah, for example, based on years of research and work with victims of product-based pyramid schemes (recruiting MLM’s*), less than one in 30,000 victims ever file complaints with law enforcement. While most MLM (a.k.a. multi-level or network marketing) recruits merely buy a few products and quit the program, those who seriously pursue the “dream” nearly always suffer losses – often heavy losses. But law enforcement rarely hears from them, regardless of damages.     
     We have learned of countless victims who have lost their homes, credit, jobs, life savings, mental stability, marriage, and years or even decades of precious family time as a result of participation in a variety of MLM programs. Primarily as a result of his heavy involvement in Amway, a teacher in a nearby city even committed suicide. Another suffered deep depression following his broken trust in the promises of Nu Skin promoters. One of the author's relatives lost $90,000, and another $60,000 from participation in NSA, yet neither filed formal complaints. World wide, millions of victims are defrauded of billions of dollars every year. Why their silence? From communications with thousands of victims and their families, we have identified several explanations.

SELF-BLAME – Having been conditioned to believe that the MLM is legal and viable, and that success comes with “working the program,” they accept failure as their fault. They believe they have no one to blame but themselves if they don't make money. The people who fail are just  "losers" or "quitters."  
     The leaders are portrayed as people to emulate - enlightened winners in life. People who quit - and most quit within a year – may still insist the company and its leaders were above reproach. Who wants to admit they have been duped?

 FEAR – Fear may be the primary reason victims who discover they have been defrauded fail to speak out against an MLM. They don’t want to face up to having contributed to the losses of friends and family members who trusted them – and who may still be actively recruiting. If they turn whistle blower, they may incriminate close associates and loved ones. They prefer to let sleeping dogs lie.  
     Self-incrimination is a big factor. In MLM, every major victim is of necessity a perpetrator. MLM compensation plans are set up so that one must recruit a lot of new purchasing participants just in order to recover costs of participation - which rarely happens.
     Also, MLM leaders have been known to vilify, bully, and intimidate whistle blowers, and even to sue them. And a former federal auditor who rose high in the Amway hierarchy, saw the many deceptions, and then turned whistleblower, actually received death threats.  

SELF-INCRIMINATION – Blowing the whistle may be legally self-incriminating. In any endless chain selling scheme, major victims must of necessity become perpetrators. MLM compensation plans are set up such that one must sell (or buy) ten times as much as they bought in order to recover (via commissions) their investment and to advance in the scheme. They don't dare file a complaint against the MLM for fear of self-incrimination; they themselves may be prosecuted for having defrauded others.

 IGNORANCE AND SELF-DECEPTION – They suffer from lack of true information about the scheme itself, which has been promoted on the bases of a whole set of misrepresentations. If they understood how blatantly they have been deceived, they might be more willing to file a complaint. For a list of 30 typical MLM misrepresentations, go to the link on the law enforcement page of my site at – http://www.mlm-thetruth.com/law_enforcement.htm.  
     For persons to be successful in a recruiting MLM, one must first be deceived, then maintain a high level of self-deception, and finally go about aggressively deceiving others.

CONVOLUTED THINKING PATTERNS – Even faced with the facts regarding the fraud that has been foisted upon them, many MLM victims will continue to rationalize and defend the system. They cannot accept the fallacies behind the “residual income” potential of the MLM they espoused. They fail to see the mathematical trick that has been played on them – that endless chain recruitment eventually leads to market or de facto saturation. Their core values may also become distorted, believing their worth to be tied to a very large income – by “leveraging” the efforts of others.

REACTIVE OR PASSIVE LAW ENFORCEMENT – These schemes set in motion a dysfunctional cycle of victimization and inaction by authorities. Since victims don’t complain, law enforcement does not act. And because law enforcement fails to act, MLM promoters are emboldened to defraud more recruits. In MLM opportunity meetings, recruiters often assert, “If this program were illegal, it would have been shut down by authorities long ago.”  
     Thus - MLM is the perfect con game. The very people who are being victimized are out promoting the program – until they run out of money and drop out. Since they don’t file complaints, authorities do nothing to stop it. And the game goes on.  
     In short, recruiting MLM's are scams ladened with deception and self-deception – and ultimately fear and denial. Rare is the person who, like the child in the "Emperor's New Clothes," shouts for all to hear, "He's stark naked!" Those of us who have had personal experience with MLM, have unmasked the deceptions, and have mustered the courage to speak out, feel like that child. 
     * A recruiting MLM is a multi-level or network marketing program that rewards primarily those who build a downline, rather than those who sell products to end users.

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