Amway Breaks Payment Covenant
Forces Emerald IBO into Bankruptcy

Amway Amagram November, 1994


Rich DeVos and the Scheibelers

In the Superior Court of Washington for Pierce County I found a suit against James B. Mead, an attorney who has represented clients in suits against Amway. Mr. Mead had represented the Heckart's, the Taylors, Sidney Schwartz and Eric Scheibeler in cases pitted against Amway.

Mr. Meade was accused of releasing sealed information from the Heckart case to other clients. In the case Mr. Scheibeler was deposed to see if he had received confidential information from the Heckart case. (Link to deposition excerpts filed in the case). Although Mr. Scheibeler filed a suit against his upline Fred Harteis few details of his personal story have been made public. This is no doubt to the gag agreement in the BSMAA. However his story is now out via his deposition in the publicly available court documents.

Mr. Scheibeler notes how Amway subsequently worked with his upline to squeeze them into bankruptcy by cutting off legitimately earned commissions.

The following excerpts come from Mr. Scheibeler's testimony:

In the deposition Mr. Scheibeler noted a death threat he had received by a Diamond distributor.

"I had a death threat at the time personally. I was
told what - by an Amway diamond what gun will be
used to kill me if I messed with our.."

Mr. Scheibeler notes the fraud he witnessed in the business as an Emerald.

"So the fraud that I referred to is the fact that people
are brought in based on this incredible life-style and
economic success of the Amway distributors, diamond
level distributors, when, in fact, a lot of them don't make
a net income of one dollar on Amway. Almost all
their profits come from recruiting - using Amway as a
shell corporation to recruit people into their secret motivational organization, which is where all their
income has come from."

Mr. Scheibeler noted the unrealistic income claims in the business.

"We were led to believe at the emerald level, we would
make a six figure income, and were led to divest
ourselves of any other investments or - that we have.
Retire from my job - "retired", sold any other assets
that we had because they were diversions from our
success in the Amway business, or so we were lead
to believe, and we went - emerald, we were
making under $30,000.00 a year."

Mr. Scheibeler notes the effort and lack of rewards.

"And we were led to believe for years that somehow we had failed morally or in our - in our faith
or belief or effort, even though I was working over a hundred hours a week and traveled from here
to - we went to South America, we went to the Philippines. We had business in Europe. We
recruited thousands into the organization, including our own family members and still lived at
almost a poverty level income, after taxes, for a family of five."

Mr. Scheibeler noted the cult aspects of the motivational organizations.

"Yeah, it took a while. I had to get off the tapes for several months to be able to even to begin to
think clearly. An experience we had was very cultish in nature. It's what was reported in
Forbes,
you know, a decade and half prior to that. I actually had to see a cult exit programmer for two
days, his name's Steven Hassen, and he's the number one exit programmer in the nation in Boston,
to begin to think clearly after being immersed in this motivational success organization."

"It's a cult. Not Amway itself, but the motivational organization that Amway supports and financially
rewards is run with the same cult principles that Scienctology uses or the Unification church uses."

Mr. Scheibeler notes how he was a pawn used to market his upline's tools.

"We didn't realize that there was two separate - we thought we were just getting in Amway.
What we didn't realize is that we were in an Amway motivational organization and we used
to consume personally and to promote, market and retail the system to our organization.
And we personally were used to somewhere - to extract somewhere between three and
four million dollars, I'm estimating, of good people's money that went to books, tapes and
seminars, which is really the real secret income source that our upline Amway diamond was
making money from."

Mr. Scheibeler noted his surprise that Amway was a part of the scheme and had known about the abuses since a 1981 complaint.

"That was the most heartbreaking for me, was not to discover we had been defrauded. That
was very difficult. The hardest part to accept was that Amway itself knew about this, that it
wasn't, in fact, something that our upline Amway distributors had done independently."

"Again, I learned about it right when I was beginning to come out and learn the truth about
the whole business, the fraud, the tool system and all that, but it didn't have - I really didn't
get that Amway was part of the whole effort until they really started to put screws to us and put
the pressure on us. I actually sent them many letters by certified mail to Dan Bailey, who's the
head of business rules and conduct, and to the president, Dick DeVos himself, spelling out the
entire fraud; and they never took action against Fred Harteis, Amway double diamond, or Dexter
Yager, the people that I gave them clear documentation of fraud about. But they had had it
already internally for years, again since -a minimum of '82, but it looks to me from what Rich
says in directly speaking, 1979, the founder had personal knowledge of fraud."

Mr. Scheibeler then notes how Amway subsequently worked with his upline to squeeze them into financial ruin by cutting off legitimately earned commissions.

A: When we came out of Amway and made public the fraud we had discovered and we actually printed some of the lawsuits and some real specific documentation and sent it to our management level people, our key distributors, Amway postured to shut our income off and told us we couldn't have contact with downline distributors. We received cease and desist letters almost identical to the one Hayden received in Connecticut from our distributor saying, if you have contact with - after they had a meeting. If you have contact with us, we'll sue you because you could hurt our financial future.

Q: This is Amway or your boss within the sales network, is -

A: They had our own distributor force do it, and it looks like it was a collaborative effort with both - between Amway and the upline diamond that we were dealing with. And the odd thing was, the ones that Gerry Hayden
received years ago in Connecticut were worded almost identically to the ones we got in Pennsylvania. So this wasn't a spontaneous act.

Q: It wasn't the local people at all, it was really Amway saying these - MR. KUGELE: Objection to the characterization.BY MR. SHAFFER:
Q: But you feel like you learned enough about what happened to Mr. Hayden and you knew enough about your
situation and the way Amway did business that it's - you think you have a basis for the opinion that it was Amway that was actually attempting to -

A: or collaboratative - collaborating with it. Because when Amway called me, they started with deceit initially. I sent a copy of all the fraud I discovered to them because, again, I didn't think they were complicit when I first came out. And I - and Dan Bailey got it and Bob Leatherman called me, who was the head of distributor relations for us. And he called me and introduced a gentleman named Dan Bailey, who I assume was from legal, because I sent some pretty scary documentation to them. And they started out with deceit right off the bat. They said, hey, we just heard that you may go inactive in Amway and we don't know why, we'd just like to talk to you about that. And I knew that they had been - I had mailed them copy of that but they hadn't received it yet, so I knew they had to have someone fax it to them. And they went around and around, and I said, well, I sent you a package and you'll receive it shortly and I'll discuss the details with you then. They said, well, we - we don't understand why you would go inactive, being an emerald, and it went on and on and on. And they finally acknowledged that they had
received it, thy had the information, they had read it. And I said, stop right there. I said, tell me you received
this documentation it was probably 50 pages, and you didn't discuss it prior to this. And they said, well, yes,
we did receive it. We just want to give you an opportunity to speak on your own. But it started right from the bat with deceit, and from there on it went - it went downhill where they postured to take disciplinary action against us if we contacted anyone in our organization to reveal fraud. And they eventually did cut off our income. And it was - the further it went, the more it was - became painfully obvious it that it was a collaborative effort with our
upline diamond and Amway to cut off our income, just to choke us to silence.

Q: Okay. And Amway could have prevented that from happening, but instead they acted to collaborate with your
superior in the -

A: right. I provided information of fraud, global fraud, to Amway regarding Dexter Yager and both Fred Harteis, forced participation in the tool business, fraudulent income representations, and they took no action against Mr. .Harteis or Yager. I provided that also to Dick DeVos, the president of Amway, personally in both fax and certified letter, and the action they took was cut my income off.

Q: Okay. Because they owed you sales commissions?

A: They were coming in monthly from the organization that we had developed, yes And it - they put somewhere
total about $20,000.00 in escrow We went bankrupt, lost everything in the process. Barely were able to keep the house.

Q: Almost lost your home?

A: Still struggling to keep it.

Q: Okay. And just to recap here. The money that Amway is holding is a sales commission, jus like a lot of sales people get -

A: Right.

Q: -- a commission after the sale?

A: Right. Based on the goods and services that the entire organization that we recruited globally is - was still moving.

(Link to deposition excerpts filed in the case).

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