The Quixtar Plan by a Diamond Distributor
Joe Montana or... to send another person in a foreign land

"The Amway business is built on a foundation of integrity"

Amway Amagram March 1998

"It is our firm belief that unless we clean up our abuses, we won't have to worry about what's next; we won't be here to worry about it." Rich DeVos-directly speaking  Listen to Rich DeVos

In-teg-ri-ty (in-teg'ri-ty), n 1. the state of being complete or whole 2. uprightness; virtue; honesty; soundness.

One must question the knowledge, ethics, and integrity of distributors when misconceptions like those outlined below are told. One might expect such misinformation from a brand new IBO, but not from a Diamond. This Diamond distributor makes many misleading and false statements in his public presentation of the "Plan". I wonder whether this diamonds downline is ignorant of the facts or if they have just checked their integrity and honesty at the door. The diamond's quotes are transcribed below. This was obtained from his January 11, 2001 open meeting in Charleston, SC at the Charleston Place Hotel. Quotes by the diamond are in blue italic print.

"Because it works does not justify it unless it's honest; and we have gross indications of dishonesty in that presentation" Rich DeVos - Co-Founder Amway Corp - Directly Speaking  Listen to Rich DeVos

The Diamond Said -
"I want to share with you for a couple of hundreds dollars, in investing in yourself, how you can make this into a phenomenal business. "

Scott's Opinion -
It is true the Pronet line of sponsorship kit price only costs about $260, but it is six times the cost of the official Quixtar IBO signup cost, which is $46. It is over twice the cost of the old Amway kit. The kit turns out to be the cheapest expense an IBO will have in their Quixtar career. There are many more additional optional but necessary expenses that most active IBOs purchase. These are never highlighted in the Diamond's plan. At the same time the Diamond claims the business only costs a couple of hundred dollars, he is trying to sell you the Pratt Winter Leadership weekend package which costs $429 for single occupancy and $587 for double occupancy. The admission tickets alone were $175 per person. There are normally four such functions per year. Other costs include Amvox $20/month, standing order tape $6/week, and opening meetings at $5 per person. When mileage is included the typical IBO overhead expense could amount to $3,000/year, or $250/month; roughly the cost of a Pronet kit each and every month.

There may be significant business expenses, mostly discretionary, that may be greater in relation to income in the first years of operation.

Quixtar-Achieve Magazine November 2000 page 5

The Diamond failed to mention any of these optional but necessary expenses. The Diamond is being less than informative implying it takes only a few hundred dollars to do the business. If one could examine the expenses listed on the Diamond's tax returns, one would see he has terribly understated the costs to build a "phenomenal business".

The Diamond's upline Crown Direct, Dexter Yager, admits one's business will not grow without employing the "system", and spending money on these items. Click here for Mr. Yager's quote .

Listen to Rich DeVos, co-founder of Amway and his comments on the "System Costs".

The Diamond Said -
"My nephew referred this to me. What is in it for him? Well Quixtar has figured this out pretty cool. They are going to give whoever refers this to you an incentive for helping you be successful. In fact whoever helps you do this will be your biggest cheerleader. My nephew makes a 4% check only when I get to $2,000/month. He's going to make $700 right.......Watch this. Let's just say last month our business did $200,000 in sales volume. Let's say my nephew made 4% bonus check. Now I'm not good on math, can someone help me with that? That's $8,000. Do you think he is glad he showed it to us?

Scott's Opinion -
The Diamond leads the audience to believe that his nephew received an $8,000 leadership bonus (4% bonus) in a single month. It is very improbable that the Diamond's claimed $200,000 business volume resides all in his personal Platinum distributorship so that his nephew can collect the 4% on the complete 200,000 Business Volume. According to 1996 Amway and 1997 Amway data, the highest performing single direct distributorship, EVER, would have generated a monthly leadership bonus of $7,635. The average monthly leadership bonus paid in 1996 was $1,044, and dropped to $821 in1997. These numbers includes payments on multiple qualifying businesses, not just a single business, as is in question here. According to the 1999 Amway SA-4400 approximately 1.5% of the direct distributors who earned a Leadership Bonus in fiscal 1997 received an annual leadership Bonus of $45,504 or more. The arithmetic average of annualized Leadership bonuses earned during fiscal 1997 was $5,974. The Diamond's claim annualizes to $96,000/year. Annualized, the Diamond claimed his nephew earned a leadership bonus exceeding 98.5% of all other distributors who qualified for a Leadership bonus.

If what the Diamond claimed is true, his personal group had to be one to achieve record results that have never been reported by Amway to date.

The 4% leadership bonus is only paid once on sales. In order to qualify for the full 4% leadership bonus, one needs to have 7,500 points of "side" volume. Assuming the Diamond's nephew had a large enough business to even qualify for the bonus, he might earn $800/month for recruiting his uncle. This is 1/10 of what the Diamond claims him to have earned. If his nephew had side volume less than 2,500 points, he earned nothing from his Uncle's business. Certainly a total of $8,000 in leadership bonuses could have been distributed to the Diamond's complete group, if they all did 200,000BV combined. It is just than the Diamond and his downline Platinum's took the majority of these pay-outs for themselves. His nephew received very little, if any of the $8,000.

I called the Diamond's nephew in Mt. Pleasant, SC on a Saturday to talk to him about his business, but his wife said he was at work. Apparently he still needs a job despite his supposed $8,000/month in "residual" Quixtar income.

The Diamond's wife Said on their website -
"You just buy the things you would normally buy in your household, and have them shipped to your door, and then you get paid for doing that...and teach other people to do the same thing. You don't have to sell anything.

The sound clip from their web site was obtained about 1 year after my initial complaint to Quixtar. It was sent to Quixtar as well.

The Diamond was asked in his open meeting -
Question "I knew people who used to do that (Amway) but they had a rule about having to sell. Do you have to sell anymore?"

the Diamond: "No".

Question "Oh, really? No rules at all? Cool"

the Diamond: "I've been in this business five years and haven't sold a thing"

From The Amway/Quixtar Rules of Conduct

8.3.8 Must not say that there is no requirement for the retail sale or marketing of products by IBOs.

The Diamond is caught lying as well as violating Quixtar rules. No where in the presentation does the Diamond mention the Quixtar requirement for retail sales in order to earn a performance bonus.

From The Amway/Quixtar Rules of Conduct

4.22 Retail Sales Rule: In order to obtain the right to earn a Performance Bonus during a given month, an IBO must make not less than one sale TO EACH OF 10 DIFFERENT RETAIL CUSTOMERS (e.g., Clients or Members) OR HAVE AT LEAST 50 PV OF SALES TO ANY NUMBER OF RETAIL CUSTOMERS (e.g., Clients or Members) that month, and upon request, produce proof of such sales.

Rich DeVos, co-founder of Amway comments on the "need to retail products".

The Diamond Said -
"It will pay back 66 2/3% to you and me".

Scott's Opinion -
According to Quixtar's own press release, Quixtar paid out $143 million in bonuses on sales of $518 million. This calculates to be 27.6% of sales and not the 66 2/3% as claimed by the Diamond. The Diamond's estimate is overstated by 140%.

GRAND RAPIDS, Mich., Oct. 26 /PRNewswire/ -- The outstanding efforts of more than 500,000 Independent Business Owners (IBOs) affiliated with Quixtar Inc. resulted in first-year sales of $518 million......Last year, Quixtar IBOs earned $143 million in bonuses and other incentives.

The Diamond should know from his own business that a 66 2/3% pay out is impossible. What he says is not true or credible.

The Diamond Said -
"Let's just say the average household spends $200/month. I'm going to be very conservative. Every time I show you a number I'm going to be very conservative. $200/month on toothpaste, mouthwash, toilet paper, paper... towels, laundry detergent...anything you can think of to run your house."

Scott's Opinion -
While it is true that most products have two BV points per PV point, it is not true that 1 PV is equal to two dollars of United States currency. Most distributors will quote sales in business volume (BV points), which is quite different from the dollars, with which you and I pay. Any active distributor knows they are not earning points in a two-to-one ratio on their dollars. Actual data from Site visitor's Quixtar purchases. Site visitor feedback on over $19,000 worth of Quixtar purchases shows an average of $2.58 per PV point, 28% less favorable than the Diamond claims.

The $200/month number is typically used in the plan as the total purchases need to achieve 100 PV points of volume. 100PV in volume qualifies the IBO for the first performance bonus of 3%, given he has met the Retail Sales Rule, and the 70% rule. The average dollars spent per PV in the SA-13 core-products catalog is $3.21. For the non-Amway catalog items it averages $5.12 per PV. The average payout per PV at partner stores is roughly $7.60. The Diamond misleads prospects with the complex BV/PV system using extremely aggressive, not conservative assumptions. The Diamond stated to me that he buys $1,000 per month in goods from Quixtar. When I confronted him, and asked him if he was able to get 500PV from the $1,000 per month he spent, he said no.

Based upon his own personal shopping habits, he is not being "very conservative", nor honest. He could easily check the numbers from his whole downline. He would discover that $2 per PV is not realistic.

The Diamond Said -
"The thing that attracted me to this was this...here's what attracted me. Microsoft was so cool when they set this up. They said "let's make this a sticky site". Sticky means people are going to come back and shop week after week and month after month. You know how? Because we are going to pay them to shop. ...... And so Microsoft said like frequent flyer miles, like Delta does, we going to pay people points for every product buy. Some things more some things less. If you buy a shirt like this it might not have as many points on it as toothpaste for instance. And so everything has a point value associated with it. And so what happens is you buy the things you been buying anyway except you buy them from you. .....and you get a check back for $6 dollars".

Scott's Opinion -
The Diamond implies that the idea for the business model using a point system on purchases came from Microsoft. The business model, and point system idea came directly from the 41 year old Amway Sales and Marketing Plan. It did not come from Microsoft. The Diamond had been in the Amway business almost 3 1/2 years before Quixtar was launched. He could not have used this supposed comment from Microsoft to aid his decision about getting in the Amway business 3 1/2 years prior to Quixtar. The Diamond is fibbing to prospects about the Microsoft relationship. Microsoft did nothing more than provide computer services for the web site like any vendor-client relationship.

"Quixtar has consistently exaggerated the role of Microsoft's involvement in this project. "

Microsoft spokesperson, August 25, 1999
From The Amway/Quixtar Rules of Conduct

8.3.13. An IBO must not misrepresent the relationship between Quixtar and the other companies affiliated with Quixtar.

The Diamond Said -
"So six people, they are going to make a check for $6. You are going to make about $150...... She said "how much did the products cost?" I said "well we spent $200". She said "no dummy we got a check back for $150. She said "the products cost us $50". That is 75% off".

Scott's Opinion -
The Diamond's example would only generate a check from Quixtar for $90 and not the $150 the Diamond claims. The Amway/Quixtar sales and marketing plan pays a 3% bonus on BV at 100 points, 6% at 300 Points, and 9% at 600 points. The Diamond's example of 6 people and himself buying $200 or 100 points, from their own store generates 700 points, or about 1400 total Business Volume. This falls into the 9% bonus category. According to the Quixtar plan, total bonuses of only $126 are paid. $36 goes to his six recruits, who are paid $6 each. This leaves $90 for the Diamond.

The Diamond's error here is that most likely he included the basic 30% discount from Amway Suggested Retail Price. His line of sponsorship (Pronet) previously used the 30% basic discount on $200/month in purchases to generate $60/month in "savings income". The 30% basic discount is actually a fictitious figure. Very few people actually pay Amway suggested retail price to make the 30% basic discount an item of relevance. A price study, for a diversified basket of goods at a discount store, will most likely reveal that Quixtar products at "wholesale pricing" are not competitively priced, let alone competitive with an additional 30% markup to suggested retail pricing. Anyone wishing to obtain Quixtar wholesale pricing can buy a "Membership" for $20, and renew a "Membership" for $10/year. With the advent of the "Quixtar member" status, the "market price" for Amway core products is essentially IBO cost, not Quixtar suggested retail. At most, the value of the "30% basic discount" is "Member" renewal cost of $10/year, not the $60/month or $720/year as is implied in many plan presentations.

If one factors in the optional, but necessary system costs, and other promotional costs, which can easily amount to $250/month, this IBO will lose about $160 per month. Those he sponsored at the 3% bonus level will start out losing about $244/month. Quixtar even admits this in their magazine. "Achieve", but the Diamond never mentions "net profit".

There may be significant business expenses, mostly discretionary, that may be greater in relation to income in the first years of operation.

Quixtar-Achieve Magazine November 2000 page 5

 

The Diamond Said -
"When you have 45 people shopping this way, 45 people, you are going to make about $2000/month."

Scott's Opinion -
The Amway/Quixtar sales and marketing plan pays a 21% bonus on BV at 4000 PV points, 23% at 6000 Points, 25% at 7500 points. The total bonuses paid on 45 people each doing 100PV, or $200/month is $1890. Assuming still six, 500PV legs are paid $90 each, the gross profit is only $1,350/month.

In this case the Diamond mistakenly jumped straight to the direct distributor level. The Amway/Quixtar sales and marketing plan for a 6-4-2 downline configuration of 78 total IBOs has 7,900 PV or 15,800BV. At the 25% level total bonuses of $3,950 are paid. From the $3,950, six 1300PV legs are each paid $312 leaving $2,078. If IBOs reproduce their upline and spent money on the necessary but optional expenses, as they are told, a total of $19,500 is being spent by IBOs to run their businesses, while having only $3,950 in Quixtar paid bonuses to split up.

In this example the Diamond claims a Platinum distributor will earn $2,000/month. Crown Direct Distributor Dexter Yager admits in a 1983 Pearl Club meeting that most Gold and Silver Direct distributors (various ranks of platinums) are still "broke". In other words, they do not keep enough money from their business to be able to report a net profit. Gold and Silver Directs are broke 22K .mp3 file It is my observation, that most platinum distributors, fully employing the "system", will not report a profit until they earn the Q-12 bonus.

Annualized, 78 IBOs, properly reproducing what their upline has taught them, spend $234,000 on system costs so that they can split up $65,900 in Quixtar bonuses. ($47,400 25% bonus + $18,500 Q-12 bonus). This does not include any compensation for time spent working the business. Successful IBOs with this model are only successful by recruiting other money-losing IBOs.

"They either lose their shirts or begin making money by getting enough people underneath to do the same." Don Gregory, former speechwriter for Amway founder Jay Van Andel Forbes March 25, 1985

The Diamond Said -
"Now if you can help three people be successful, if you can help three (Emerald level) make $2,000/month, I'm going to be very conservative, you are going to make about $150,000/year. If you can help six people (6 to platinum) make $2,000/month, six people, you will make about $250,000/year (at Diamond)"

Scott's Opinion -
According to Quixtar data presented in a slide from Britt-World Wide, the average annual gross income of an Emerald is $73,793. For a Founder's Emerald the average gross income is $87,881, not $150,000 as The Diamond claims. For a Diamond it is $136,322, and a Founder's Diamond it is $173,105. Even for the Founder's level Emeralds and Diamonds not $250,000 as The Diamond claims.

The Diamond's claims are 70%, and 44% higher, respectively, than those released by the Quixtar Corporation. For non-Founders levels, his claims are 100%, 83% higher, respectively, than those released by the Quixtar Corporation. The Diamond also does not disclose the standard boiler plate disclaimer from Amway/Quixtar that the average "active" IBO made an average of $88/month." I requested a confirmation of the Diamond's numbers from Quixtar distributor relations. They refused to confirm the incomes claimed by the Diamond. If one could examine the Diamond's Quixtar 1099, it would be interesting to see if he attained the "average diamond income" of $250,000. I would be willing to bet a month's salary he fell far short of it.

The Amway General Public Inquires line at 616-787-6000 would not confirm the numbers the Diamond claimed. Update: Site visitors have reported the Diamond made a video, selling for $18, that has him showing the plan with Emeralds making $73,000 and Diamonds making $150,000. The change in his plan came about after I had given a recording of his presentation to Quixtar.

The Diamond Said -
"What makes it not a pyramid and what makes it approved by the Federal Trade Commission is you break away from whom referred you to this and you make that 4% bonus check.

Scott's Opinion -
An easy to make telephone call to the FTC (1-877-FTC-HELP) will reveal that the FTC has never approved or endorsed any part of the Amway-Quixtar business. It has only ruled that it is not an illegal pyramid scheme.

Specifically, the rules intended to keep the business free of illegal pyramiding accusations are the same ones the Diamond asserts don't exist anymore.

From The Amway/Quixtar Rules of Conduct

4.22 Retail Sales Rule: In order to obtain the right to earn a Performance Bonus during a given month, an IBO must make not less than one sale TO EACH OF 10 DIFFERENT RETAIL CUSTOMERS (e.g., Clients or Members) OR HAVE AT LEAST 50 PV OF SALES TO ANY NUMBER OF RETAIL CUSTOMERS (e.g., Clients or Members) that month, and upon request, produce proof of such sales.

4.18 Seventy Per Cent Rule: An IBO must sell at least 70% of the total amount of products purchased 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.

Rich DeVos, co-founder of Amway comments on the "why retailing is needed for a legal busienss".

The Diamond Said -
"And so what happened is my nephew asked me, he said "The Diamond do you know anybody who you play ball with who might use toilet paper, toothpaste",....he said" well you think we might could find six people who would do their shopping like this on the internet?"

"But we are only talking about shopping. We aren't selling anything. There is nothing offensive about selling anything. I'm just going to talk to you about buying things you buy in your household."

From The Amway/Quixtar Rules of Conduct

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 transferred to other IBOs for their personal use.

Listen to Rich DeVos, co-founder of Amway comment why retailing is needed for a legal busienss.

The Diamond Said -
"It's so important to go to the convention. (Pratt Winter Leadership-$175 ticket price, package price $429)...In Atlanta there is a guy named Casey Comden...after his 5th year in the business he was making $100,000/month doing this.... Why not you go and get the information from someone who is doing it?"

Scott's Opinion -
The Diamond claims Mr. Comden earned $100,00/month from Quixtar or about $1.2 Million per year after just 5 years in the business. It took Mr. Comden 5 years to achieve Diamond status (1989-1994). Actually when Mr. Comden achieved diamond status, he was an Amway distributor not a Quixtar IBO.. Mr. Comden's upline is none other than Crown Ambassador direct distributor Dexter Yager. Mr. Yager made a habit of giving out copies of his Amway bonus checks at some of his seminars. A site visitor sent me copies he had. The checks show Mr. Yager's 1993 US and Canadian Emerald bonus checks to be $166,419, the US and Canadian Diamond bonus checks to be $360,800, Executive Diamond Bonus to be $153,900, and the Founders Distinguished Service Award to be $150,000. All of these total $831,1100 for 1993. Copies of the checks. Of course we must include Mr. Yager's leadership and depth bonuses. Here we can only estimate them. According to the Amway SA4400 data, if Mr. Yager had earned the maximum ever recorded ruby, leadership and depth bonuses, for all twelve months, there would have been an additional $418,000, for a total of $1.249 Million. Mr. Yager's personal performance bonus is not included as it will be tiny compared to all of these mentioned.

It would seem far-fetched to assume that a diamond distributor, after just 5 years in the business, could earn the same Amway income as a Crown Direct distributor who had been in the business for 33 years. Earlier in the presentation page the Diamond claimed the "average diamond makes $250,000/year". It seems improbable that Mr. Comden would make almost three and one half times the "average Diamond" the same year as qualifying as a diamond. It is even more improbable that Mr. Comden would earn almost seven times the Quixtar Corporation reported average Diamond income. One would think a brand new diamond would actually make an amount less than the average diamond since his business is not as mature as someone who has been in a longer period of time.

If the Diamond has not personally seen Mr. Comden's Amway checks or tax return, his is violating another Quixtar code of conduct rule.

8.3 Registration Guidelines: In seeking participation of a prospective IBO in the IBO Plan, the registering IBO must comply with the following guidelines:

8.3.5 May use only those earnings and/or bonus representations based on their own personal experiences, provided that they at the same time disclose the average profits, earnings, and sales figures and percentages as published from time to time by the Corporation.

The Diamond is no doubt hyping Mr. Comden's income so that the Diamond can personally benefit from commissions on ticket sales ($175, $429 package price) to the Pratt Winter Leadership meeting. the Diamond is not being credible or honest about the income claims.

 The Diamond has been in the business 5 years. Given that he is a Diamond, he should know the rules by now.

"Mind you that all the while, Quixtar/Amway IBOs are throwing the word 'integrity' around like a football. My Webster's dictionary defines 'integrity' as such: "uncompromising adherence to moral and ethical principals; soundness of moral character; honesty". Somehow, I fail to see how misrepresentation and honesty are one and the same." WEB Site - Mad Rants

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"Ain't it great that the Quixtar corporation will suspend a newbie for 6 months for spamming newsgroups, or for putting up an un-reviewed web site and actually submitted the url to search engines, but won't take action against a diamond who lies while showing the plan to hundreds of people. Shows ya' where the corp's priorities are :o)" WEB message Board