In a California case two former IBOs, Jeff Porkony and Larry Blenn, are attempting a class action lawsuit against Quixtar, Britt WorldWide, World Wide DreamBuilders and associated parties, alleging Quixtar is an illegal pyramid scheme in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).
As per most previous litigation, Quixtar’s first step was to claim the whole thing should be sent through Quixtar’s arbitration and dispute resolution procedures. To summarize the courts view –
“The Quixtar arbitration agreement is simply too tainted to be saved through minor adjustments. Therefore, though mindful of the strong state and federal policies favoring arbitration, the Court holds that the entire Quixtar ADR scheme is unconscionable and unenforceable.”
In essence, the court found the whole arbitration procedure unfair for IBOs. It highlighted the fact that IBOs below platinum did not even have the opportunity to vote for representation on the IBOAI board which “negotiated” the agreement, and then Quixtar itself can ignore it if it choses. Interestingly, in this case the court was reviewing the new “updated” dispute resolution procedure, which had been modified following concerns raised in earlier cases. Furthermore, the court also struck down the BSMAA provisions, which should have governed the part of this dispute between IBOs.
I’ve said this before, but I’ll say it again anyway – I agree with the court, Quixtar’s arbitration provisions are unfair. The only proviso I’d add to that is that I’m not sure whether a “rank and file” IBO going up against a multi-national, multi-billion dollar corporate would have a particularly “fair” chance in the normal legal system either. If anyone has some suggestions for a better system, I’m open to hearing it. Having read the original Porkony & Blenn complaint, I suspect they’d be saved much embarassment behind closed doors, it really is a poorly formulated case.
There is one interesting aside in the court documents, and that is that the court struck out the declarations of two “purported experts” on behalf of the plaintiffs. The phrasing implies the court found these “experts”, Stephen Hayford and Robert FitzPatrick, were anything but. Stephen Hayford appears to be a JAMs arbitrator, and I’m guessing his testimony related to the arbitration procedure.
Robert FitzPatrick is a well known anti-mlm zealot who has unilaterally decided all MLMs are illegal pyramids, and then rants against the evils of MLMs, when in fact he’s ranting against the evils of illegal pyramids. Just recently I listened to him in an interview where he attacks Amway and brings up this case as well as the recent TEAM class action case in California claiming Quixtar is an illegal pyramid. To give you an idea of his level of “independence” as an expert – he completely fails to mention the TEAM case had been thrown out!
Update: Many of the court documents are now available at Amway Wiki – Pokorny & Blenn vs Quixtar, Inc. et.al.
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You better check you facts as the following all call MLM legalized pyramid schemes:
Carroll, Robert Todd (2003). The Skeptic’s Dictionary: A Collection of Strange Beliefs, Amusing Deceptions, and Dangerous Delusions. John Wiley & Sons. pp. 235–36. ISBN 0471272426.
Coenen, Tracy (2009). Expert Fraud Investigation: A Step-by-Step Guide. Wiley. pp. 168. ISBN 0470387963.
Ogunjobi, Timi (2008). SCAMS – and how to protect yourself from them. Tee Publishing. pp. 13-19.
Salinger (Editor), Lawrence M. (2005). Encyclopedia of White-Collar & Corporate Crime. 2. Sage Publishing. pp. 880. ISBN 0761930043.
and two of those predate your statement.
Pyramid schemes are illegal. This is made clear by multiple statements by multiple governments around the world. As such a “legalized pyramid scheme” is an oxymoron. Any book claiming otherwise is clearly ignorant of the law and probably shouldn’t be trusted on this topic.
To be a pyramid, you have to make money on those you sign up just by signing them up and/or on what they do business wise without having to do anything yourself. Those “downline” push you up the ladder.
In Amway, you must have a certain amount of personal PV (numbers associated with each product) before being able to receive bonus checks on your entire groups’ PV. The percent goes up as the overall volume goes up.If you don’t have that, your downline could pass you up both in level and income, while you have nothing but the actual profit on what you personally sold if anything ( yet nothing at all on the entire groups business). It is therefore impossible for it to be misconstrued as a pyramid. To earn money you have to not only put work into it, but help others along the way. Believe me I know, in my first few months I had people in my group that I signed up or that they signed up who made hundreds of dollars, while I had nothing, because I found people who wnted to build a business before I found customers myself.