The "Air Filtration” products of two MLM companies were recently reviewed in the October 1992 issue of Consumer Reports Magazine. Unfortunately, the NSA (Models 1200a and 71OOa) and ALPINE AIR (Model 150) Air Cleaners were declared to be three of the worst and ineffective made. The Alpine Air unit was also considered to be dangerous due to its uncontrolled, potentially toxic emissions of Ozone. lsn't it great to know that two fairly well-known MLM companies are at the forefront of Air cleaner technology.
NSA can now lay claim to having both its 50c water purifier and 1200a and 7100a air cleaners make Consumer Reports' bottom of the bucket list in their respective categories. And to think that this company does over $300 million worth of business year wholesale. Wake up, People!!!
OMNITRITION and Jerry Rubin are defendants in a class action "Boilerplate" lawsuit brought against them (on behalf of distributors) by a San Francisco law firm that seems to specialize in suing MLM companies. This particular firm already has in its suits portfolio NuSkin, Diamite, and FundAmerica. The suit charges the defendants with operating an illegal pyramid investment scheme. Please see the NOTWORK MARKETING “Class Acts" article in this issue for commentary on these lawsuits.
The State of Arkansas has settled its suit against CBI. CBI was found to be in violation of Arkansas Pyramid statutes. CBI has agreed to make changes in a number of areas principally dealing with how it pays s affiliates for promotion of the membership and the opportunity. It reads like a death sentence for CBI affiliates doing business in Arkansas. For a copy of the final judgment please write: Same County Court address as Direct Access case above. Case # 92-63 I.
The State of Arkansas is charging DIRECT ACCESS, INC. (DA) with operating an illegal pyramid investment scheme. Direct Access is a popular one among the numerous MLM Benefit and Service (B&S) companies. Also named in the suit is Consumer Benefit Services, Inc. (CBS) CBS is the B&S provider to DA and acts as DA' s application and order processing center. If you don't recall, DLN reported in our June/July issue on the potential for DA to run into exactly the same legal problems that CBI is having. This is now occurring in Arkansas and will probably extend into other states as well. Be on guard. Best to avoid DA at this point in time not only because of the legal headaches, but because the opportunity (comp plan) really stinks. For a copy of the suit please contact: Pulaski County Court of Arkansas, County Court House, Little Rock, AR 72201. Case # 92-6829. DLN is quite certain that DA will settle in much the same fashion as CBI did. See below.
DLN has received an updated edition of a book called "MLM FRAUD" (originally published in March 199\). The book primarily focuses on the various individual s involved in Consumer Express (CE) which merged with Nutrition for Life (NFL) in 1989 create what is now called NUTRITION EXPRESS (NE), a nutritional, health' (homeopathic), personal care and environmental product MLM company. To say the least, the book is a chilling account of alleged stock, credit card and tax fraud ; deceit; embezzlement; wiretapping; unsubstantiated product claims; false and misleading advertising; stealing of distributor downlines; and computer manipulation of distributor commissions.
The following are accused in MLM FRAUD of one or more of the aforementioned allegations:
David Bertrand - Co-Founder and President of CE & NE
Judy Bertrand - David's wife
Greg Caton - Co-Founder CE
Dayle Maloney- CE/NE Distributor
Ronnie Meaux - CE Comptroller and Bertrand's nephew’
Jana Mitcham - Co-Founder and EVP of CE & NE
Tom Schreiter - Co-Founder CE. Author of Big Al books
Bill Taylor - Tom Schreiter’s brother-in-law
Kevin Trudeau - Mega Memory lnfocommercial promoter, CE Director of Marketing
DLN cautions its readers that MLM FRAUD was written by and is based on the experiences and investigations of Greg Caton who was one of the founders of Consumer Express. Even though the book focuses primarily on Consumer Express, Mr. Caton contends that many of the individuals that were involved with both CE and NFL are the same as those now involved with NE and this should send red flags a-flying. Caton also says that there is evidence that that some of the aforementioned unethical and illegal activities are still occurring in NE and this is alluded to in the updated edition.
In the book, Mr. Caton supports his allegations with generally scant but credible documentation along with testimonials and affidavits by individuals who serve to corroborate Mr. Caton's allegations. However, Mr. Caton also submitted himself to and passed what is called a Psychological Stress Evaluation or PSE. The PSE is similar to a polygraph but has been considered to be equal to and/or more accurate than a polygraph in determining if a person is being truthful. This is the conclusion of different case studies conducted during the 1970s.
Caton also told us that he had accepted $12,000 from and signed a contract with David Bertrand, Jana Mitcham and Tom Schreiter agreeing to stop distribution of the March 1991 (first edition) printing of MLM FRAUD (Caton supplied DLN with a copy of that contract and the $12,000 money wire) and this should strongly give support to the truth of his allegations. Now, over 1-1/2 years later, Caton also suggests that it was wrong to accept the money and that he cannot hold back any longer and must bring forward the truth at any cost. Caton also suggests that he has been offered more recently, over $100,000 to stop the release of the 162 page updated edition of MLM FRAUD.
After reading this book, one would have to agree that it would take a wallop of an Imagination to make it up (maybe Caton has one!). Also, if there isn't any truth to the book, why did Bertrand, Mitcham and Schreiter pay Caton to stop the 1991 first edition. More important1y, one should ask why Mr. Caton would undertake all this time , expense and pain to publish such a book considering that Mr. Caton (with extreme reservations) admitted to DLN that he was, in fact, a major participant in and witness to many of the illegal and/or unethical activities cited in the book and this could create enormous problems for himself. This, Caton says should put to rest any doubts about the book’s accuracy.
Even with all this in mind please consider that no, REPEAT no criminal charges have ever been leveled against the individuals Mr. Caton makes allegations about, relative to Consumer Express.
And the truth is, DLN has had a very difficult time getting supporting confirmation by people whom Caton says were witnesses to the various illegal activities. In fact, one of the pieces of evidence against CE is through an affidavit submitted by Lee Colson. Unfortunately, Mr. Colson is nowhere to be found. This certainly raises questions of Caton's credibility but , this doesn't suggest that DLN doubts what Caton alleges in MLM FRAUD-it's just that we haven't able to definitively prove it. Caton goes on to suggest that these witnesses he's named in the book are just afraid to talk or get involved while other witnesses, he maintains, are still receiving residual income from CE and their coming forward could jeopardize that Income. Also, the written documentation DLN received seems to stand on its own. In any event, this book is a very serious matter, not to be taken lightly or discounted.
One of Caton's other witnesses to fraudulent activities who appears to be credible (due to his being chairman of the distributor board for CE and is now on the board of directors of the MLMIA) is Ken Pontious. In the book , Mr. Pontious is referred to as Mr. P.K . When DLN politely contacted Mr. Pontious and mentioned we were going to do an article on MLM FRAUD and then asked him about his being this Mr. P.K. and about his experiences with CE, he went ballistic. First, he totally and vehemently denied being Mr. P.K. and then went on to deny being a witness to any of Caton' s allegations. Then on top of that, he threatened to sue DLN if we were to claim in this article that he was Mr. P.K., a witness to CE fraud, or even insinuate that he has any negative opinions at all about CE. Pontious' lawyer confirmed that threat in a call to us on November 12, 1992.
However, in a conversation which Caton later had with Pontious with DLN as a telephone witness , Mr. Pontious confirmed he was Mr. P.K., but then went on to say he would still deny knew anything negative regarding CE. He even went on to deny he knew what a DPS report was, which is all but impossible for him not to and goes to seriously jeopardize this man's integrity. He told Caton the reason he had to do this was because he is making a lot of money with his present ENRICH INTERNATIONAL opportunity and didn't want to jeopardize that through any publicity that might come with his name being brought up (good or bad) relative to the DLN article. This came a complete shock to Caton as Pontious had been a staunch supporter of Caton' s cause up to this point and more importantly because of the very credible written documentation Caton has contradicting this.
DLN has a copy of a letter that Mr. Pontious wrote on June 27, 1987 to the Lake Charles District Attorney 's Office claiming and formally charging CE Management with Fraud and Misrepresentation.
Grow up Pontious! Stop playing politics! Your reputation in MLM is getting worse by the day!
The following is response by David Bertrand, President of Nutrition Express:
These accusations are, of course false. They are the creation of an embittered ex-consultant and have resurfaced over the years under various names, with a number of "enhancements" to the original claims. Their source has a history of deceit and treachery: he even has a felony conviction for conspiracy to counterfeit! Clearly his story cannot be taken at face value.
You will be interested to learn that this manuscript, a fanciful fabrication based on the limited experience of its author some five to seven years ago, has a habit of appearing whenever our company is experiencing phenomenal growth or when other MLM groups are targeting our distributors. So you see, these charges are simply a part of a strategy aimed at attacking us and recruiting our people. As an advocate of ethics in this industry, you are in a unique position to expose his activity.
Common sense is all that is required to refute these tall tales. We have always been a publicly -audited company, and our status as a public company places our actions under intense scrutiny . Nevertheless, no findings such as the ones described in this manuscript have ever been made! And could an organization run in the manner described by this source over the years as we have? Experience leads us to conclude it could not.
Ours is an open opportunity for those who would seek financial independence and better health. We have always maintained a policy of avoiding the dirty tactics used against us, and we will not now stoop to their level in refuting them. The facts speak for themselves.
Any thorough investigation of the claims made in this manuscript will demonstrate them to be categorically false.
I am committed to network marketing and I firmly believe it holds the promise of the future! Thousands across our country and abroad have experienced success and happiness through our efforts, and there is nothing that a bitter liar can do to change that. We are rocketing ahead, and have no time to worry about those who insist on being left behind.
I hope that in reviewing the material presented to your publication, you will see its falsehood and decide not to publish it. And if you do publish it, I hope that you will take the time to do a thorough and critical analysis of the facts, so that those who would terrorize our industry in this manner will for once be reproved.
Even though most of the events the book covers took place over four years ago, DLN still feels that it must be reported . Not to, would be amount to gross negligence of our journalistic duty.
DOWN-LINE NEWS has conducted the best due-diligence within our means to ferret out the facts. This has not been easy as much of the information we have collected from the numerous parties on both sides has been mostly of a testimonial nature. Mr. Bertrand says that Mr. Caton's manuscript is full of lies and falsehoods and that he is willing to back that up with the actual facts through a formal comprehensive rebuttal.
On the other hand Mr. Caton says the book speaks for itself and if that's not enough, he is willing to challenge Mr. Bertrand to a lie detector face-off.
DLN recognizes that a lot of negative publicity will probably be generated for Nutrition Express and for the individuals accused of the various allegations and DLN is sorry for how this may affect the distributors of NE. Keep in mind that DLN has no personal vendetta against NE, Jana Mitcham, David Bertrand, Tom Schreiter, etc. In fact DLN has had a very cordial relationship with these people over the past year. For the record, NE is a subscriber to DLN as are a few of their distributors.
To those of you who might think that DLN gets some kind of pleasure out of reporting this kind of stuff, nothing could be farther from the truth. It's not easy bringing this sort of news to light and we don't relish this one bit. We only seek the truth and nothing but the truth. The truth must come out, and DLN has now provided a forum for that to happen.
After the dust settles, DL N is hopeful this book will instigate a movement to better MLM by putting more pressure on both companies and distributors alike to live by a higher standard of behavior. MLM Companies have to stop their power trips over distributors and distributors have to stop bad mouthing companies and each other. It's time for the MLM industry to grow up and take responsibility for its behavior. We've got to pull together as an industry if MLM is going to be taken seriously . Time's running out.
Please be aware that there are numerous mentions and endorsements of DL N in MLM FRAUD. Mr. Caton took this initiative on his own. In fact, when we got an advance look at the book, we were surprised at this. UNDERSTAND! There were no deals, conditions, nothing whatsoever, between DLN and Mr. Caton. Regardless, this in no way will inhibit us from making the book available and leaving it up to you, the reader to decide on its merits.
LITE & RITE is pursuing legal action against Marvin Rude (a former distributor who is now involved with Teamup International ) for Unlawful Disparagement; Unlawful Misrepresentations; Breach of Confidential Information; and Consumer Protection Acts Violations. Mr. Rude told DLN that the aforementioned charges he is accused of did not occur until after he severed his ties with L&R and that he feels justified in making his claims in any case.
Some of Mr. Rude's claims about L&R are as follows:
1.Over $ 1,000.000 in commissions are still owed to distributors and suppliers dating back almost one year. 2.Dr. Miller (owner of L&R) promotes in-company literature that his Formula #1 Herbal product contains 100% Herbal ingredients, yet in a lab test it was determined that over 60 % of the weight of each capsule is comprised of the filler calcium carbonate (chalk). 3.L&R has not paid any Sales Tax to the various states for which they have collected taxes. 4.L&R has not paid any Federal Income Tax for tax year 1991. 5.Many terminated employees of the L &R office are unable to collect unemployment benefits due to Dr. Miller's failure to keep a record of their hours or the intentional loss of their records. 6.L&R has not honored over $50,000 in legitimate refund requests. 7.L&R has not honored $275,000 in credits due to distributors from commission adjustments. 8.Marvin Rude claims L&R owes Marvin Rude over $42,000 in back commissions. 9.L&R changed the compensation plan without warning in the summer r of 1992 to the detriment of directors.
L&R' s responses to these, point by point, are:
1.L&R debt is much less than the one million dollars quoted, but it is hundreds of thousands of dollars. It is a result of the theft of the L&R computer in early 1992, a run of bad checks and illegal credit card charge backs. The debt owing has been restructured and is being systematically paid back. 2.L&R did in fact publish advertising copy that said "100% herbal product" when the advertising copy was supposed to have said "100% natural ingredients with the following herbs". Our mistake.
When the FDA objected to the L&R label for the old Thinergy and requested that L&R change the label and modify the product, L&R complied with that request by introducing Formula #1.
Dr. Miller had been formulating and testing his Formula #1 for some time before it was introduced in early 1992. While the exact processes and excipients of the L&R formulas are proprietary, we can tell you that nutritional calcium in its carbonate form (i.e. calcium carbonate) is a part of the formula even though FDA rules do not require it to be listed on the label. There are no "fillers" in any of the L&R products. Every ingredient is there for a reason. As a matter of fact Formula #1 cost more to manufacture and distribute than the old Thinergy product did.
(Contrary to Mr. Rude's lab test claims that over 60% weight of the Formula #1 product was calcium carbonate, L&R ran tests in two different reputable labs where tests showed the weight of nutritional calcium carbonate averaged only 34%.)
3.L&R is a wholesale company and does not sell retail. As noted in our most recent news update to marketers, the company computer had inadvertently collected sales tax in some states. Our computer program is being modified to stop doing that, and in the meantime the sales tax amounts are being recapped and will be returned to the marketers directly. 4.L&R does not owe any Federal income tax for 1991. 5.The company knows of no form employees laid off as part of the¬ organizational improvements who were denied unemployment if they were otherwise eligible. 6.In early 1992 the company fell behind with the processing of refund requests. This was in part the result of the confusion that followed the theft of the company computer and problems resulting from mismanagement of data entries by a former computer manager. We can't verify the maximum historical amount, but the problem is being taken care of and refunds are going out. 7.Reference question 1; part of our debt is in unpaid commissions to marketers.
It appears that the debt figure is not as large as we thought. Improper entries by a former computer manager made the ¬debt artificially large. A compliance computer audit is now in progress.
8.Mr. Rude is currently the defendant in litigation started by L&R. As a result, it is not appropriate to discuss specific amounts, but you can be certain that L&R's claims against him are many times what he thinks he is owed. 9.A small number of directors purchased product in the names of marketers without their permission in order to generate extra commissions from the L&R compensation plan.
Those purchases generated I.R.S. 1099 forms for individuals without their prior knowledge. These persons took great exception to having income and tax liability generated without their permission and they brought this to the attention of the company.
The I.R.S. and legal counsel advised us that this was not a practice that L&R could allow to continue and the company therefore had to stop it.
DLN previously reported that RE-VITA (a nutritional MLM company) and its president, Robert Weatherly failed to comply with a consent judgment ordering the company to pay $32,000 to Betty Mandass, Ro-Vira' s former president. ReVita claims that it would be rendered insolvent if it paid Mandass. This may be true, but only because of the elaborate Money Game that appears to exist between a company called Natural Vitality and Re-Vita. Natural Vitality is the supplier of product to Re-Vita. (Both companies are owned by Robert Weatherly).
The beauty of this setup is that the relationship between the two companies lends itself to massive money manipulation through sophisticated accounting methods and this can keep Re-Vita from showing a profit which most likely ends up in Natural Vitality's coffers. Robert Weatherly wins out no matter what.
Realizing this, Mandass is now suing Natural Vitality and Robert Weatherly. DLN will keep you informed.