Alticor: The pot calling the kettle black

The "P" Word and Alticor Hypocrisy
Yes folks, the ugly "P" word is mentioned on the Alticor media blog on their July 13, 2006 post. At Alticor headquarters the "P" word stands for *pyramid, and they hate it when somebody calls their business a pyramid. It is a dirty and nasty word when you are in the multilevel marketing business. As a defense, Alticor/Quixtar and the DSA doggedly hang on to an incomplete and inaccurate definition that the MLM business is not a pyramid scheme when a "product*" is sold. They seem to believe since a product is sold, even if it were mostly to the distributors themselves, that it can't be a pyramid scheme. I get the impression they think pyramid schemes can only be when a scheme takes in money for the recruitment of others via headhunting fees. The selling of some sort of a product should make a scheme somehow legitimate, according to their arguments. For the detail-itis types, you should research the issue at the FTC rather than at the DSA or Alticor web sites. Alticor and the DSA seem to have deliberately omitted information, which might change a reader's conclusions about what constitutes a prohibited marketing scheme or "pyramid". I think they should use the latest definition of a pyramid scheme from the FTC, and not go around making their own definitions, which leaves out pertinent information.
	"Pyramid" Definition from FTC vs. Equinox April 2000, is the same as FTC vs. Trek Alliance June, 2003 "Pyramid scheme" means a sales scheme, Ponzi scheme, chain marketing scheme, or other marketing plan or program in which participants pay money or valuable consideration to the company in return for which they receive: the right to sell a product or service; and the right to receive in return for recruiting other participants into the program rewards which are unrelated to sale of products or services to ultimate users. For the purposes of this definition, "sale of products or services to ultimate users" does not include sales to other participants or recruits in the multi-level marketing program or to participants' own accounts.
Here is another definition offered by the FTC and approved by the court in FTC v. Five Star Auto Club: 'Prohibited marketing scheme' means a pyramid sales scheme, Ponzi scheme, chain marketing scheme, or other marketing plan or program in which a person participates under a condition that he or she make a payment, directly or indirectly, to receive the right, license or opportunity to derive income as a participant primarily from: (1) the recruitment of additional recruits by the participant, program promoter or others; or (2) non-retail sales made to or by such recruits. 'Retail Sales' means sales of products, services, or Business Ventures by Defendants, their successors, assigns, agents, servants, employees, and those persons in active concert or participation with them to third-party end users. Retail Sales do not include sales made by participants in a prohibited marketing scheme or multi-level marketing program to other participants or recruits in that scheme or program or to such a participants' own accounts. On the Alticor controlled website, www.quixtarresponse.com, they have a quote from Robert T. Stephan saying that a pyramid is a scheme that pays for recruitment and that a legitimate MLM company pays commissions only on selling products. Surely the consultant and former Kansas attorney general has also forgotten to include the bit on primarily selling products to non participants from the FTC v. Five Star Auto Case. Even DSA Executive Vice-President and Legal counsel forgets to highlight the "sales to non participants" in his Quixtar blurb on pyramid schemes and what differentiates a pyramid scheme and legitimate MLM opportunity with sales to non participants. I'm sure if you listen to the above audio clips you too would think that a MLM company could not be a pyramid scheme since they just "sell products" and that you only earn commissions from product sales. All these experts seem to leave out some very key details ignoring the results of key FTC proceedings. It is my opinion that Alticor and the DSA are making claims without a reasonable reporting of the latest FTC precedents and definitions. Their simplistic definition of a pyramid avoids mention of the fact that sales primarily to non participants are needed to comply with the FTC definitions. The Five Star Auto case says income not primarily generated by selling products or services to retail customers who aren't themselves participants in the plan, would be a prohibited marketing scheme. Although Quixtar has the 50PV rule for sales to "customers", it is nothing more than a joke since the distributors themselves can "self report" their 50PV. It is well known to me from former Quixtar distributors that they were coached to self report their 50PV in sales when they did not have retail sales, so that they could earn their performance bonus from their personal product purchases. The 50 PV rule also does not ensure that sales are primarily to non participants. If a distributor has 150PV in sales the 50PV in qualifying retail sales does not meet the requirement of "primarily" or greater than 50%. Quixtar still has rules that give the impression self-consumption of product alone is not an allowable way to do the business. From the Quixtar compendium: 8.3.7. Must not say that a successful IB can be built in the form of a “wholesale buying club,” where the only products bought and sold are those trans-ferred to other IBOs for their personal use. 8.3.8. Must not say that there is no requirement for the retail sale or marketing of products by IBOs. IBOs who improperly require large initial investments in business kits or inventory and do not properly emphasize retail sales of Quixtar’s products may invite scrutiny under various state pyramid laws 4.22. Member/Client Volume: In order to obtain the right to earn a Performance Bonus on down-line volume during a given month, an IBO must: (a) make not less than one sale to each of 10 different retail customers (e.g., Members or Clients); or (b) have at least 50 PV of sales to any number of customers; or (c) have $100 at Member/Client Volume Cost. 4.18. Seventy Percent Rule: An IBO must sell at least 70% of the total amount of products pur-chased during a given month in order to receive the Performance Bonus or recognition due on all the products purchased; if the IBO fails to sell at least 70%, then such IBO may be paid that percentage of Performance Bonus measured by the amount of products actually sold, rather than the amount of products purchased, and recognized accordingly. 4.18.1. Performance Bonuses are intended to be earned on sales volume. The whole topic strikes me as very hypocritical in light of the peppering of e-mails I get from Alticor's attorney James Sobieraj accusing me of being biased, unfair, misleading, and having incomplete and inaccurate statements on my website. This is just one example of Alticor's hypocrisy. I can show many more examples of such Alticor hypocrisy, if they wish to continue to claim my postings are biased, unfair, misleading and inaccurate. Alticor is certainly the pot calling the kettle black. FTC Pages Getting to the bottom of Pyramid Schemes - James Kohm "In pyramids, the emphasis is on recruitment," "and most, if not all, of the sales are to distributors." JewelWay Shut down by FTC. "A pyramid scheme there is almost no emphasis on making retail sales of products to persons who are not participants in the program." BigSmart Shut down by FTC. "the scheme was structured in such a way that realizing continued financial gains would depend on ". . . the continued, successive recruitment of other participants," not on retail sales of products and services to the public" Equinox. "The complaint also alleges that while Equinox purported to link compensation to retail sales, it did not enforce the policies and requirements ostensibly designed to assure such sales. "The result of the structure and operation of the program is that financial gains to Equinox participants are primarily dependent upon the continued, successive recruitment of other participants, and retail sales are not required as a condition precedent to realization of such financial gains," Skybiz: Product Pyramid scheme sold a product but still was deemed a pyramid scheme. From MLM specialists Grimes and Reese, LLP http://www.mlmlaw.com/library/guides/Primer.htm#mlm "Despite the literal language of the Koscot test, courts have interpreted and state Attorneys General are increasingly interpreting the term "ultimate users" to mean persons who are not participants in the program, that is to say persons who are not distributors. The most recent federal decision on this issue was rendered by the Ninth Circuit Court of Appeals on March 4, 1996. In Webster v. Omnitrition International, Inc.(6) the court found that personal consumption by a distributor's downline does not satisfy the Koscot requirement that sales be to the "ultimate user." Therefore, when designing a multilevel marketing plan, the approach presenting the least risk is to institute and enforce a rule that at least 70% of a distributor's purchases result in true retail sales to persons who do not participate in the compensation program." My other pages explaining pyramid schemes for more in depth information and history: Product Pyramids Pyramid Q & A Is it a Pyramid? Pyramid Primer Lawdawg's Pages on Pyramids: Introduction to Pyramid Scheme Math The most important word in MLM