Is it a scheme or not a scheme? Many times, it can be a tough call.
On Thursday, December 4, president and founder of DaBx Demand Side Solutions Rogier Fentener van Vlissingen, along with retired Assistant Attorney General of the Wisconsin Department of Justice Bruce Craig, held a presentation at Kips Bay Boys & Girls Club, 1930 Randall Avenue, as a part of a 43rd Precinct Community Council meeting to discuss multi-level marketing (MLM) companies who they believe are involved in pyramid scheming, and how to tell a pyramid scheme from a real business.
A pyramid scheme (NY Code – Section 359-FFF) is an illegal strategy used by a non-sustainable business involving its promising participants, payments or services, primarily to enroll and recruit other people into the scheme, instead of returning any real investment, sale of product or service to the public.
Signs of a pyramid scheme may be evident whene one’s income is based solely on the number of people a person recruits along with the money those recruits pay to join the company, requirements to buy a large amount of inventory from the company or being forced to buy products from the company that they don’t want or need just to stay in good hands with the company.
According to van Vlissingen, it is very important to warn the average citizen about pyramid schemes so that they can either avoid falling for one or learn how to handle the situation if they are currently a victim.
“It is key that people who have been involved and lost money in a pyramid scheme file complaints, because if they don’t, law enforcement cannot take action,” he said, adding, that victims seldom go to the authorities due to embarrassment..
“Everybody but one person loses in a pyramid scheme,” said Vlissingen. “Ninety-nine percent of people involved lose money, 1% make a little money and .1% make a lot of money.”
Vlissingen believes Herbalife, is basically a pyramid scheme.
“After receiving numerous reports of money lost, including a report from a person who lost $150,000 from Herbalife alone, the New York Legal Assistance Group, is looking closer into the company, which has now been under investigation for over six months.”
Herbalife senior director of Corporate Communications Marco Gonzales, strongly claimed his company is not involved in a pyramid scheme, and is totally legit.
“Pyramid schemes do not offer a product of value or a consumer protection policy; Herbalife offers both – and more,” said Gonzales.
“It costs between $65 – $80 to become a Herbalife member and receive 25% discounts. If a customer is not content within 12 months, they will be fully reimbursed. We also have a gold standard, which means that a customer can return a product within 90 days if they are not satisfied. Pyramid schemes don’t reimburse customers,” he added.
Gonzales also went on to state that the false allegations about Herbalife have greatly injured its reputation.
This may all attributed to Bill Ackman, CEO of hedge fund management company Pershing Square Capital Management LP, who had reportedly bet $1 billion on the collapse of Herbalife, before calling for an investigation of the company.
“Herbalife has been the target of a very irresponsible attack by those who are just trying to bring our company down,” said Gonzales. “Seventy-five percent of our customers never even intended to make money with us, they were just interested in the products, so it’s proven that a majority of our customers want the product, not the ‘millions’.”
