Citizens' Issues
Leading Nowhere: The industry within the MLM

Several Herbalifers took their lead generation businesses with them to other MLMs, including to Vemma, setting up new or revamped sites that critics say can put consumers at financial risk

When Pershing Square hedge fund manager Bill Ackman renewed his push on federal regulators earlier this year to investigate Herbalife — a multilevel marketing (MLM) company that Ackman says is a pyramid scheme — he zeroed in on “lead generation” businesses linked to the company that his website called “fundamentally corrupt.”

Ackman noted that several of Herbalife’s key players, who had reached high levels in the organization, left when the supplement company — which was coming under increased scrutiny by consumer advocates and congressional officials — decided to distance itself from this type of business. As a result, several Herbalifers took their lead generation businesses with them to other MLMs, including to Vemma, setting up new or revamped sites that critics say can put consumers at financial risk.

What is lead generation?

Simply put, in the business community lead generation is a way companies solicit inquiries from customers for the purpose of future sales. But in the MLM industry, lead generation companies can act as revenue generators for upper-level members (called distributors, affiliates and sometimes brand partners) in several ways. Owners of the lead generation companies set up websites offering vague business opportunities to attract potential new recruits. The companies then may sell the names and contact information of these potential recruits to current MLM distributors. The current MLM distributors want those names because they are looking to increase their own revenues by increasing their sales teams, also known as downlines, from whom they earn compensation.

Lead generation sites, which are often advertised on television, the Internet, and in radio ads, may also sell an assortment of business tools, such as “decision packets” that the website promises will help potential recruits decide whether to join the vague business opportunity. If a consumer does end up joining and becoming a distributor for the MLM, the lead generation site may also sell training videos and website platforms to help new distributors grow their own downlines so their compensation will increase. All of this benefits not only the owners of the lead generation sites but the MLMs that are getting the new distributors. It’s an industry within the MLM industry that critics say may drain the pockets of consumers looking to get wealthy, while lining the pockets of the owners of the lead generation sites.

MLM expert Bill Keep, who is dean of the business school of the College of New Jersey and who has investigated Herbalife, said lead generation sites can be troublesome.

“Some top MLM distributors have been accused of using deceptive practices to gather names and contact information of ‘prospects’ that they then sell to newly recruited distributors at considerable profit,’’ he said. “The selling of such unproven ‘leads’ and other business support services can increase the cost of trying to succeed with little documented payoff.”

Herbalife backs away from lead generation

While Herbalife allowed — and Ackman says benefited greatly from — its high-level members’ lead generation efforts, in 2012 it backed away from these businesses. The company, under increased scrutiny, issued an advisory saying it would not allow distributors who used “unregistered business methods” (aka lead generation businesses) to build their teams to advance up the compensation ladder. Herbalife explained its rational for prohibiting such tactics as follows:

It could be misconstrued as supporting and rewarding Distributors with recognition when the methods used to achieve the qualification may involve misleading advertising or other abuses and therefore put the Distributor and Herbalife at risk.

As a result of the new edict, many key players left Herbalife, including Anthony Powell who had been a distributor for the company for 22 years and reached its President’s Team level.

Herbalife spokeswoman Barb Henderson said about Powell’s departure:

Anthony Powell’s stated focus is on creating ‘explosive growth’ fuelled by lead purchases. As he has also stated, this is a ‘difference in philosophy’ not consistent with Herbalife’s focus on building business through daily consumption of our nutrition products.

Vemma welcomes former Herbalifers

Despite Powell’s focus on lead generation, Vemma CEO Benson K Boreyko welcomed Powell and his whole core team with open arms. Powell shortly advanced to the “Royal Ambassador” level at Vemma, which means, according to 2013 Vemma’s income disclosure statement, Powell is earning on average close to $1 million in bonuses.

Powell now runs lead generation sites that not only benefit him but Vemma — through Global Pro Systems (GPS). Global Pro Systems is copyrighted to CRM Logix for which Powell lists himself as CEO on his LinkedIn page. One of his sites, 6FigureFrenzy, promises that for $29.95 a month and a $10 set-up fee, you’ll get “cool things” that will help you “conquer the world.” These cool things include email leads, online training, 24-7 coaching, and mobile apps.

It’s not until you look for the fine print that it discloses that the opportunity is to earn income with Vemma and that will also require purchases.

So, if you chose to participate, Vemma makes money and Powell makes money. Ca-ching! You may make money but are highly unlikely to make anywhere near six frenzied figures. Look closely at Vemma’s income disclosure statement. About 78% of “active affiliates” on average earned less than $1,600 in 2013 – an income that is, one should note, only four figures. And only 0.11% (or about 115 distributors) earned six figures in 2013.

Consumers complain

Consumers who complained to the FTC about Global Pro Systems said the company uses high-pressure tactics to push recruits to purchase additional products, repeatedly charged their credit cards for monthly purchases they did not want, charged for training material that was too vague and unhelpful and that the company would not refund their money when they tried to return the materials.

Said one consumer:

The product was supposed to be FREE! I was misled on information regarding work at home. The man on the site raves about scams and tells you he will give you FREE information and won’t ask for a penny like other websites, only to ask you to pay 9.95 for an express starter package and then I find out that my card will be billed 39.95 within 14 days. So the information is not free nor does he explain what kind of work you will be doing.

Said another:

Global Pro Vemma Nutrition advertised on the radio for a program to work at home. (T)hey advertised you could get started for $40 (but) first of all it turned out to be $50, then (when) you have your phone interview they say it will be $300 to start your training (and then) you have to pay for advertising. (T)hey also say that it is possible to make six figures within a year or two (but) after you sign up they send you a disclaimer which states only 25 percent of the company actually make that …

Powell’s team

When Powell came to Vemma he brought his core team with him and they are featured in testimonials on several other lead generation sites that funnel recruits to Vemma.

Lissa and Mark Munson were pictured endorsing, which had an “F” rating from the BBB (and now is no longer active on the Internet). Lissa, who tells Vemma readers “you need almost blind faith in your leaders,” is a busy woman. Moving on from BusinessSuccessPack, she is also featured on and In fact, Munson, Kairrie McClain and John Beall – all part of Powell’s team –are pictured on, which also funnels recruits to Vemma. McClain, Munson and Beall are also featured on described in the fine print also as an online method of becoming a Vemma brand partner. These sites are run by Kaption Media, or as it describes itself, “kapture prospects.” Capture prospects indeed.

Other Vemma high level distributors with sites

Another distributor of Vemma, Matt Morrow, who also has reached the Royal Ambassador level, runs a lead generation business as well called, which promises to lead Vemma distributors to new recruits “in many cases without you ever having to talk to the prospect.” Costs range from $200 for 500 leads to $2,000 for 10,000 leads.

The site is careful to say in a disclaimer that the program is not affiliated or offered by Vemma and Vemma has no liability in respect to it. But its webpage also notes in large letters: “The simplest and most cost effective way to build your Vemma business.”

Says Morrow on his site:

Our business is simple; make a friend, then make a sale. We offer up to 10,000 potential new “friends” for you to build with who all expressed an interest in a home business for a FRACTION of the cost of competitors.

When asked Boreyko why Vemma was embracing distributors who are running lead generation sites, Boreyko responded via an email from Vemma’s public relations firm. The email said:

We have a compliance department that monitors all third-party lead generation programs. While there are a handful of affiliates that operate third party companies that sell lead services, we monitor all lead generation programs, and take rapid action in the rare cases where we find mistakes are made.

Vemma’s compliance department may want to work extra hard. Earlier this month, the FTC signalled that it is taking a closer look at lead generation in general. Speaking at a consumer conference in Washington, D.C., FTC Bureau of Consumer Protection Director Jessica Rich referred to lead generators as “the artery of the fraud.”

More information about Vemma and MLMs can be found here.

You may also want to read…

Herbalife under FTC lens, finally!

Herbalife is a pyramid scheme worth zero dollars: Bill Ackman
How Herbalife sucks millions into its pyramid scheme
“We're broke, ill and splitting up”: Herbalife distributors tell their sad stories
American financial watchdog launches investigation into Herbalife
Herbalife lures Paralympics medallist HN Girisha as brand ambassador



US Medicaid programs drowning in backlog

With open enrolment over for private health insurance claims, states are struggling to process hundreds of thousands of Medicaid applications

Last week, federal health officials celebrated two milestones related to the Affordable Care Act. The first, which got considerable attention, was that more than 7 million people selected private health plans in state and federal health insurance exchanges. The second, which got less attention, was that some 3 million additional enrollees had signed up for Medicaid and the Children's Health Insurance Program (public health insurance programs for the poor), many as a result of Medicaid's expansion.

But there are growing signs that Obamacare's Medicaid expansion is a victim of its own success, unable to keep up with demand. While about half the states have refused to expand their Medicaid programs' eligibility, among those that have, some can't process applications fast enough.

Media reports from New Jersey, Illinois and California (states that have expanded their Medicaid programs) show that hundreds of thousands of consumers who may qualify for new Medicaid coverage aren't getting it.

So what's happening?

In Illinois, the Chicago Tribune reported last month that there's a backlog of more than 200,000 applications waiting to be processed.

Illinois officials initially expected 200,000 people to sign up for Medicaid under the expansion in 2014. But through last week, more than double that number have applied. And amid a marketing blitz, officials expect a surge of additional applications by the end of the year.

Unlike new commercial insurance products, which consumers can purchase through March 31, there's no deadline to sign up for Medicaid. By the end of the year, state officials expect about 350,000 new users to be enrolled in the program.

The growing backlog is causing concern among health care providers worried about getting paid, and confusion, frustration and anger among consumers, whose coverage was supposed to begin in January.

Much the same thing is happening in New Jersey, the Star-Ledger reported last week.

By all accounts, enrollment in the expanded Medicaid program has gone well in New Jersey. The numbers are robust as the program's expansion under the Affordable Care Act allows single residents and childless couples to get coverage provided their income is low enough. But getting an actual ID card that allows someone to see a doctor? The flood of applicants appears to have resulted in a systemwide backlog, according to applicants and field workers.

"I've heard getting an actual Medicaid card is nearly impossible. It's like getting Willy Wonka's Golden Ticket," said Rena Jordan, director of external affairs for Planned Parenthood of Metropolitan Jersey, which has been helping patients enroll.

"A lot of strange things have been happening, that's the easiest way to say it," said Virginia Nelson, administrative supervisor of the Medicaid Department for Middlesex County.

The flood of phone calls to her office about older cases has taken time away from processing the newest cases, Nelson said.

Federal officials conceded some of the blame for the delay can be put squarely at the feet of the federal website, That website transferred data about applicants whose income looked like they might qualify for Medicaid to the state system, but in a format the state system couldn't use.

And in California, the backlog now numbers 800,000 for Medi-Cal, the state's Medicaid program, the Los Angeles Times reported this week.

One patient wrote The Times to say she has a worrisome growth behind an ovary. She submitted an application in October. County health clinics informed her she won't be able to keep her appointments for blood tests and ultrasound scans until her Medi-Cal coverage is confirmed, she said. Or she can pay full price for the services.

As of Thursday, she was still waiting.

"A lot of good, smart people with good intentions in the state and county are working really hard to fix these problems," said Katie Murphy, managing attorney at Neighborhood Legal Services of Los Angeles County, which has a grant from the state to provide legal assistance to patients with Obamacare enrollment cases. "But until they do, people will fall through the cracks."

A state spokesman told the paper that "the volume of Medi-Cal applications, combined with challenges of new computer systems, hampered the state's ability to complete eligibility reviews in a timely and accurate manner."

Matt Salo, executive director of the National Association of Medicaid Directors, said many of the problems relate to the way transfers information to states about consumers who appear to qualify for Medicaid based on their incomes. But there are state-specific issues, as well.

"It's been the number one issue of concern for our members for the past nine months or so," he said in an email. "The problems are getting fixed, but what worries people is that we're only a few months away from NEXT year's open enrollment, so we have to hurry."



Star Sports angry as Hathway remove its channels from packages

While Star Sports has accused the MSO of violating TRAI regulations by not informing customers in advance before offering its channels on a-la-carte basis, Hathway says it followed all the rules and regulations


A full blown war of words is out between Star Sports and Raheja group-owned multi-system operator (MSO) Hathway. According to Star Sports, the MSO removed signals of sports channels from Hathway packages and offering customers more expensive pick and choose option. Star Sports, in fact even advised its viewers to shift to direct to home (DTH) if they are unable to see its sports channels. The campaign hit a peak during the just concluded T20 World Cup.

"We are of the opinion that they have violated the quality of service regulation framed by Telecom Regulatory Authority of India (TRAI). Especially for Delhi and Mumbai, Hathway failed to inform consumers about change in composition of packs, when they were bound to inform consumer through running of scrolls on its screen and publish a prior notice in leading newspapers," a Star Sports spokesperson said.
While Star Sports accused the MSO of violating TRAI regulations by not informing customers in advance before offering its channels on a-la-carte basis, Hathway hit back by saying it has followed all the rules and regulations of the regulator.

Denying the allegation, Hathway managing director and chief executive Jagdish Kumar G Pillai said, "We have followed all rules and regulations of TRAI...We have removed Star Sports from our existing packages and giving options to consumers to choose a channel or a package."

The dispute started after Hathway, a leading MSO with over 11 million subscription base in 140 cities removed Star Sports bouquet of four channels from its regular package and asked its viewers to pay a-la-carte to subscribe.

When asked the reason for putting Star Sports channels on a-la cart basis, Pillai said: "We have been paying them on a fixed pay basis, which worked out to be a very unreasonable amount on a 'per subscriber' basis".

However the Star Sports spokesperson said: "We were in the midst of negotiations and wanted to understand Hathway's future plans but they unilaterally went ahead and changed the composition of packs".

Star Sports and Hathway had entered into a fixed fee deal to add the broadcaster's channels in a package without any linkage to the subscription base.

According to Star, the parties had signed two separate agreements. While the first contract expired on October 31, 2013 catered to Delhi and Mumbai markets, the second contract expired in March 31, 2014 was for the places where digital addressable system (DAS) were notified by the government in the phase II of the digitalisation and Kolkata region.


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