• Official press release from RCMP about fraud charges against BIM 
• Full video of the news show, CBC Marketplace that exposed BIM, including interview and analysis by PSA President, Robert FitzPatrick
• Personal Notes from Robert FitzPatrick on attending a BIM recruitment meeting with hidden cameras and microphones
• News that BIM was collapsing due to lack of new recruits 
• Questions about why Canada has become a haven for pyramid schemes

• The pyramid scheme is now seen by millions of people, not as a scourge and a trap, but, in desperation, as maybe, just maybe, their last best chance, if they can just "get in early."
   
• The "money transfer" (my gain, your loss, too bad for you, but that's the way it is now) has replaced "exchange of value", the previous foundation of our business system.
   
• And as billions pour into scam businesses, a huge treasury of ill-gotten gains is siphoned into the government to prevent law enforcement. Regulators are being transformed from representatives of the public to protectors of pyramids. 
   
•  No longer hiding from view, pyramid schemes now advertise on national television, tout their own celebrity spokesmen, and threaten to sue whistle-blowers for "defamation." (the lawsuits are without merit, but they can potentially ruin the whistle-blower with burdensome legal fees.) Virtually every pyramid selling scheme whistle-blower in the USA and Canada has now been sued by MLM schemes.

• The base of investors/participants/salespeople must always expand. This requirement, of course, is impossible to fulfill, so the schemes will either collapse totally all at once or they will churn out the losers in the bottom ranks every year and replace them with new hopefuls, year by year. The pyramid scheme is the ultimate denier of limits of growth and markets. The "opportunity" is said to be always "unlimited." The promise is never qualified by market limits or saturation factors.
   
• All Pyramid Schemes cause harm and loss. Either by total or continuous collapse, the majority of all investor/participants will always fail to gain the promised rewards. The great majority of participants cannot gain the promised rewards because the majority will always be at or near the bottom. The losses will be in money, or wasted time, effort and  hopes, that could have been applied productively. 
   
• Pyramid Schemes must always deceive. Pyramids differ from structured and sustainable enterprises by claiming each new investor can earn what those at the top do, while concealing the impossibility of such a promise. Revenue is, therefore, gained with the use of a false promise. Some financial pyramids claim the promised rewards come from stock trades, which are not made. The actual source is later investors' money. Others claim they are "direct selling" when, in fact, the advertised big incomes depend on recruiting more salespeople, not personal "direct" selling. The vital source of rewards is the new salespeople's investments, including their labor, time, fees and personal purchases. Some pyramids claim the rewards are "gifts" or commissions when in reality the money is a transfer from payments by other investors (salespeople/participants). The "gifts" and "purchases" are made  with an expectation of reward, based on more "givers" and "purchases." 
   

Pyramid Politics 

• The Pyramid Scheme Decade, 2001 - 2010, officially began with an attorney whose law firm represented the Amway Corporation -- Timothy Muris by name -- being appointed by President George W. Bush to the chairmanship of the Federal Trade Commission (FTC). The FTC is the agency that is supposed to keep pyramid schemes,  which are treated as "unfair and deceptive trade practices," out of  the marketplace. Specifically, the FTC is supposed to watch over Amway and other multi-level marketing companies to prevent them from running pyramid schemes. It even posts a warning on its website about all multi-level marketing companies. It warns: "Not all multilevel marketing plans are legitimate. Some are pyramid schemes."
   
• Placing an individual with professional ties to the very company and type of company he is supposed to regulate and enforce the law upon would normally be a conflict of interest. But Amway was among the top contributors to the Bush candidacy and his political party. Pyramid selling schemes are now big business and, using pyramid-based profits, they have purchased a commanding seat at the political table. See how much influence the MLM industry has purchased in Washington.
   

• The pyramid industry even introduced its own bill in Congress in 2003. Called HR 1220, the bill would have eliminated all requirements for retail selling, allowing all MLMs to operate as closed systems unrelated to free market forces and rules. All sponsors of the bill were Republicans - the main recipients of pyramid industry contributions - and some were part of what one writer called the "Amway Caucus," including several Congress members who were Amway distributors and one whose district included Amway headquarters.  Under terms of the bill,  multi-level marketing would be exempt from the definition of a pyramid scheme as long as payments and reward money were laundered through any kind of product, sold at any price. The bill did not make it out of committee, perhaps because of a little diversion called the Iraq War, followed by the Great Recession.
   
• The Amway-related appointment, predictably, was followed by a decade of government silence and inaction regarding pyramid selling schemes. Mr. Muris went on from the FTC chairmanship to do lobbying work for the MLM industry, as did two former FTC Directors of Consumer Protection, one working specifically on behalf of Amway. Pyramid Schemes now control the regulatory agencies, just as we learned that banks, Wall Street and insurance companies do.
   
• Government inaction led, also predictably, to a dramatic growth of pyramid schemes in the direct selling field. MLM "profits" and recruiting soared. Even when the stock market crashed in 2007 and 2008, and the Recession dramatically cut sales, most of the pyramid selling stocks boomed. Wall Street has come to love Pyramid Schemes that plunder Main Street.
   
• Pyramid "sales" also exploded during the Recession. As unemployment worsened, millions more people turned in desperation to MLM's endless chain "income promise." Chasing the income promise meant paying sign up fees, buying more MLM products and subscribing to lead programs and "motivation" tools. Consumers viewed government silence as official endorsement of the MLM schemes' legality and truthfulness. Pyramids are Recession proof - for the promoters - but devastating for those already in financial distress.

• The great majority of all consumers who were lured by MLM promises during this decade lost savings, increased debt and squandered months or years of time chasing the MLM promise of sustainable income to replace lost jobs,  reduced wages or ruined home values. Billions of dollars passed from the hands of millions of consumers into the pockets of the top levels of recruiters and the coffers of MLM companies. Poverty increased; the gap between rich and poor increased; entrepreneurship declined as millions lost money and hope in "home-based business" and "self-employment." Pyramid scheme are a significant factor in our economy now -- all of it negative.
   
• The pyramid-friendly policy in the USA is reflected also in Canada, resulting in an epidemic of frauds in North America, many of which are then exported to other countries.  Canadian anti-fraud laws that cover pyramid schemes are routinely not enforced. Instead, Canada's Competition Bureau oversees

  pyramid schemes, doing  little more than require the schemes to post "average" incomes. The disclosures do little to stop "endless chain" fraud and can misleadingly give the impression that the "average" person actually earns a "income" when, in fact, the vast majority suffer net losses. 

Collapse and Fraud Suits Mark the Pyramid Decade's End
 

On Wall Street, the pyramid scheme decade ended with the tragic collapse of the Bernard Madoff hedge fund and the exposure of many such Ponzi scams. On Main Street, the pyramid decade ended in 2010 with Amway agreeing to pay a historic $150 million fraud settlement, the largest in history against a MLM scheme (agreed upon by Amway, but not yet court approved).  Consumers accused Amway of criminal acts, of running a pyramid scheme, of deceiving and impoverishing hundreds of thousands of people - the very crimes that the FTC was supposed to  have prevented or prosecuted.  During the decade, consumer victims also sued other MLM companies, and another fraud suit has been brought against Amway in Canada. 

Pyramid Nation
 

The role of multi-level marketing in the Pyramid Decade is central and insidious. MLM is  the only "industry" based upon the "endless chain" model and the only one that  openly and aggressively promotes the concept of pyramiding for profit. It is the leading force toward legalizing pyramid schemes as "businesses." It is the major voice seeking to persuade and mold public opinion.  Millions of Americans now attend MLM seminars and rallies to hear about the miracle of "unlimited income" that is based on the "endless chain." Today, after a decade of increasing pyramid corruption, the rest of the economy is looking more and more like MLM, writ even larger.

•  MLMs debased  "direct selling", a once proud and legitimate form of work, into pyramid recruiting. Correspondingly, many of our banks, once trusted keepers of our life's savings, devolved into financial Ponzi schemes. In this decade banks kited up real estate values and then sold off billions in doomed mortgages to their "downline" (investors, foreign banks, pension funds)
   
• MLMs hit the "failing" consumers a second time with even higher losses by selling them expensive marketing and training "tools" that promise success. Correspondingly, Ponzi bankers slammed consumers twice also. After selling them "exploding" mortgages they hit their victims again with foreclosures, gaining fees and profits from "flipping" the properties taken from the "failed" homeowners.
   
• Like MLMs that soared and benefited from unemployment while other legitimate sales businesses declined in the Great Recession, Wall Street has boomed at the expense of its "downline", Main Street. Big Corporate profits are at record high levels, as unemployment remains  at 10% and millions are losing their homes to foreclosures. Bonuses for Wall Street managers reached record levels, while incomes and salaries on Main Street are stagnant or declining.
   
• And just as after Amway's and MLM's influence led to lax regulation and "revolving door" relationships between MLM and the FTC, the SEC, which was supposed to watchdog Wall Street, was revealed as shamefully aligned with Wall Street. SEC ignored repeated whistle-blowing warnings about Bernard Madoff. Madoff's fraudulent "hedge fund" soon  became the nation's largest before it catastrophically collapsed.
   
• MLMs also mirror the "bailout" era.  MLMs are "bailed out" year after year by the government's allowing them to recruit new investors to replace the "losers." The losses caused by the MLM schemes are always transferred or outsourced to the next group of recruits. Similarly, the government's bailouts of Wall Street transferred the costs of those bailouts to a similar "downline", our grandchildren!

Signs of Change

Yet, the era of fraud, cover-ups and disguises, political influence-buying and the corruption of regulators may, like the schemes themselves, be reaching a saturation point.   

• The lawsuit victory of consumers in the Amway fraud case may mean that more suits against similar schemes are coming.
   
• The collapse of the Bernard Madoff's Ponzi scheme (read the shocking story of Madoff whistle-blower Harry Markopolos in his book, "No One Would Listen") has opened eyes.

• The formation of a new consumer "financial" protection bureau being organized by Elizabeth Warren may extend its coverage to MLM as purveyors of bogus financial products, i.e., business opportunity schemes.
   
• Just as satirists Jon Stewart and Steven Colbert have done so much to expose media and marketing flim-flam and political lies, the MLM industry is now becoming a target of humorists and satirists.  See the hilarious treatment MLM received at the hands of world-famous satirists, Penn & Teller, Steven Colbert, and the TV series, The Office and King of Queens. Several movies are also now out that debunk the folly and fraud of multi-level marketing. Ridicule and satire may do even more than investigations and whistle-blowing.

What You Can Do

• Sign the Petition for proper law enforcement
   
• Contact us with your story about MLM scams.
   
• Read the ground-breaking report, "The Main Street Bubble" which documents how MLMs operate and how they have corrupted our Federal Trade Commission. Send an email with the words "Main Street Bubble" in the subject area. It will be emailed back to you promptly at no charge.
   
• Help with our legal defenses by making a donation.

Best wishes to all for a successful 2011. I welcome your comments or questions.

Sincerely,

Robert L. FitzPatrick