TRAINING-EDUCATION IS A BIG RED FLAG = SCAMS AND AMWAY BATTLES
SEC vs. Glenn W. Turner (1973)
SEC sued Glen W. Turner in 1973, two years BEFORE FTC sued Koscot (one of Glen W. Turner's companies) for selling an unregistered investment contract.
Turner had a program called "Dare to be Great", where you buy "adventures" (actually sales courses) at $100, $300, $700, $1000, $2000, or $5000. You receive a cassette player and a dozen different cassette tapes that teaches you how to sell, some group session tickets, and in some packages, a workbook and instructions book. You then recruit people to attend "adventure meetings", where you try to get them to buy the adventures as well. The more and higher level adventures you convince people to buy, the more pay you get.
SEC convinced the court that the $1000, $2000, and $5000 adventures are indeed "investment contracts" (as per the Howey test above) and thus they are not registered with the SEC, indeed, disguised as NOT investment, thus engaged in deliberate securities fraud.
Turner's main defense was against key (4): "solely from the efforts of others". He claimed that because his participants are required to recruit people to attend adventure meetings, they need to exert effort, and thus, it does NOT fit (4). His explanation was rejected, as the Ninth Court of Appeals ruled that they consider only managerial level efforts to be a real counter to part (4). In other words, "recruiting" is not considered to be a "significant" managerial level activity when it comes to the Howey test part 4 to warrant an exception.
This case is significant because Dare to be Great was marketed as an income opportunity, not "investment". The points to take away:
•Any significant amount of money put into the company, other than for some at-cost materials with refund policy, may be considered an "investment". Clearly, $1000 + for a tape player and a couple tapes is excessive. The modern equivalent would be a MP3 player with preloaded audio tracks (worth about $10?) for $200.
•Court interprets "solely" rather loosely. Only managerial efforts, not "busy work", are considered as exceptions to the Howey Test Part 4. This gave the authorities a new tool to fight pyramid schemes and Ponzi schemes. Thus training became a big red flag to Attorney Generals, The FTC and SEC. It was the reason that AMWAY turned training over the Diamond Distributor Mafia. SEE THAT STORY BELOW.
With all the heat on Training and education many regulators take a narrow view YOU CAN'T PAY COMMISSIONS ON TRAING IN AN MLM STRUCTURE. A trainer one person who actually does the training can be paid a fair and reasonable fee.
BIG AMWAY EXPLOSION DIDN'T PAY RENT?
3/17/2013 I missed this when it happened but it was too good to pass up! Amway Arena blown sky high
NINE AMWAY OFFICES RAIDED IN INDIA
Multiple news sources reporting police raids at Amway offices in India the link below is a slow load since the server is in India.
HISTORY OF AMWAY - ALTICOR - QUIXTAR TRAINING SYSTEMS AND HOW AND HOW THEY CAME ABOUT!
AMWAY - QUIXTAR - ALTICOR TERMINATES 6 DIAMONDS -- 12 OTHERS RESIGN
MAY 2002 Last month AMWAY - ALTICOR - Quixstar (AAQ) terminated 6 Diamonds over a dispute on the distribution of money for training tools. In a laudatory move 12 other Diamonds resigned (or threatened to) to protest this action! We salute those 12! This was a magnificent (and we are sure painful) way to protest corporate activity. The “Team In Focus” group that the 15 were in proposed an MLM comp plan for motivational book, CD and rally training materials. This would have gone all the way down to bottom distributors and not be restricted to the Diamond leadership. The other Diamonds went nuts over losing the money. This must be the new generation of leadership at Amway Alticor. Terminations around Amway were at an all time low. To fully understand the history of the Amway Quixtar training system read on!
BACK IN 1982 DeVos RAPS KNUCKLES OF DIAMONDS
Back in 1982 the book, tape and rally Diamond income was secret. New distributors didn’t know about the motivational tool business and it had started to develop into a monster. The program had originally started in 1972. Upline Diamonds got in lawsuits with Downline Diamonds because there were no contracts. Your WatchDog editor had bailed out of Away by 1974 because none of my training material was “good enough.” Why, you might ask? I wasn’t a Diamond! I always say that Amway made me millions of dollars – just not in Amway! Anyhow, by 1982 even Rich DeVos (a hero of mine) told the Diamonds they were on shaky ground in an audio tape “Directly Speaking.” Why? They were not sold to consumers. Over the years the Diamonds countered that it was NOT an MLM system, just millions of dollars of direct sales down the chains of Diamonds.
WHY MLM TRAINING IS A RED FLAG TARGET!
A HISTORICAL STORY ABOUT TRAINING July 2001 - updated May 2007
FOLLOW HOW THE AMWAY - QUIXTAR SYSTEM CAME ABOUT
MLM HORROR STORY
In the 60s, Holiday Magic (HM - a skin care company that believed products were not important) set up a training section called Leadership Dynamics (Zig Ziglar was not part of this, only HM product sales). Leadership Dynamics training consisted of torture, brainwashing, and EST psychology. It cost $5000 to go through it. You had to go through it to get to higher pay levels. The barbwire around testicles, naked dog piles, and suffocation were documented in a book "The Pit." It was made into a film and circulated in MLM trials when the FTC and states hit the company and Glenn Turners's Koscot International.
THAT LED TO
Glenn Turner was a top distributor with Holiday Magic. He revolted at the torture training and started KOSCOT. Turner did ship products and his leadership company, Dare To Be Great, was based on strong positive training at $100 to $5000. Tony Robbins is believed to have attended a course and got his start here. The Big Training was $5000 in 1970, and many today swear it was worth it! However, selling training for 1/3 the price of a new house did not set well with regulators. The state and Federal regulators shut Turner down right and left. The Wonderful Glen Turner ended up the Warden's driver at the Arizona state prison.
THE LAW ARRIVES
When the FTC hit all of them (MLM companies), one of the major thrusts of the FTC attack was training. Was it of value? All MLM training was hit or suspect. You still see that today when the FTC or states hit a company: Training, if too high priced or paid via MLM, is a great big red flag! Companies that specialize in training have hell selling training MLM and stay out of trouble! There have been over 80 MLM training companies in the last 20 years and they are all dead!
AMWAY DODGES MLM TRAINING ISSUE
AMWAY was hit but had pulled a smart diversification (SO IT SEEMED AT THE TIME), and dodged training issues. In 1972, they started letting top distributors create their downline's entire training systems and informally turned loose what could be charged for training. Amway Corporate at first did motivational meetings at the regional levels, then turned these lucrative large training meetings over to the Diamonds. The FTC did not address the training issues when they sued and settled with Amway (thank you Amway), since training did not exist within the corporate structure! P.s. Ur. Ed. left Amway because I had a heck of a good training book. I was an Emerald (fast grower) and the Diamonds told me to screw off they wanted to sell their stuff. I left Amway!
AMWAY CRITICS ARE WRONG
One of the interesting misconceptions, even from Alticor - Amway - Quixtar members, is that the tools and training system is MLM. It is not. Diamonds generate material and sell it at markups thru the levels of their MLM organization. It is a broker relationship from top down. The upline, starting with top Diamonds, push materials on downlines as almost mandatory. There is not a commission structure, but rather a price mark up as motivational books, tapes, CD's and training sessions go down the rank of Diamonds to Emeralds and Pearls.
ALMOST 40 YEARS LATER (SEE UK HIT BELOW)
The distributor training material (and rallies) deals are not within Amway-Alticor - Quixtar corporation. They are Crown Diamond distributor deals, down to the lowest Diamond. There is no formal structure dictated by Alticor - Amway for markups on the tapes and other training material as they travel downline. The worst MLM tape ever was a Diamond out of Colorado Springs bashing every MLM company but his. Others, like Hawkins "Prospecting" (1984), was magnificent (as were some of his other tapes).
ALMOST 40 YEARS LATER, YOUR WATCHDOG OPINION
WatchDog Opinion: The distributor training material (and especially rallies), have gotten too high. Especially the regional training meetings and the big push to get people to them. I am an advocate of MLMer's reading books and listening to tapes. However, I started "The Golden Opportunity" as an MLM with fair pricing for magazines, tapes and tools in the 80's as a kind of personal revolt against the "big wigs" raking in all the money at high prices. Your editor thinks that Amway - Alticor - Quixtar growth in the U.S. has been stunted by too much motovation! Complaints - yes, lots!