Meet Troy Dooly The Beachside CEO In Dallas At The Association Of Network Marketing Professionals Annual Convention March 1st, 2nd, & 3rd 2013.
In this week’s network marketing news, I am covering the purported evidence that Pershing Square founder, Bill Ackman states proves regulators from the SEC to the FTC have turned a blind eye. Could such a successful and educated man be so hell-bent on profits and greed that he refused to fully investigate the facts of his team? Or is there something even more personal going on that is yet to be uncovered?
Bill Ackman is a well-respected and very successful Wall Street Advocate Investor. He is the founder of Pershing Square Capital Management. In December of 2012, Ackman publicly stated “I am 100% confident that Herbalife is a pyramid scheme.” He backed up his claim with a 334 page presentation and several T.V. appearances.
However… although Mr. Bill Ackman is a very well-educated investor, it seems he and his team relied heavily on supposition, supported by half-true, misrepresented facts, and in at least one case, the reports of a well-known convicted short seller and stock manipulator Barry Minkow.
I find it somewhat humorous, that Bill Ackman, who is so educated, does not seem to have studied much on what could happen to him and his firm if the SEC or other regulators, decide his report is correct, and Herbalife is a pyramid or worse yet a Ponzi. In that case, Mr. Ackman could find himself facing the same clawback situations as the promoters of Zeek Rewards are now facing.
I am not sure, the regulators will look kindly on Mr. Ackman and Pershing Square earning billions in “Blood Money” (Mr. Ackman’s term) off the backs of Herbalife distributors.
Here is the interview Mr. Bill Ackman did with Bloomberg TV, where he made it clear “I am 100% confident Herbalife is a pyramid scheme.” Click Here
I want to look at some specific points raised by Mr. Ackman.
1. He is clear that Pershing Square Capital Management stands to earn close to $1 billion dollars if he can drive the price of the stock down at Herbalife, and he will personally earn $25 million in driving down the stock.
Although, it is mentioned that he is donating $25 million to Pediatric Cancer Research, based on the presentation and the reporter at Bloomberg Mr. Ackman was giving the $25 million anyway.
2. Mr. Ackman profiles the Herbalife distributors as follows…
“Low income or unemployed people who are losing their homes. Later he adds, these people could not even qualify for a sub-prime loan.”
I was somewhat surprised that an “Advocate Investor” such as Bill Ackman, would profile people he had never met in such a vile manner. First of all he either ignorant to the facts, or has decided to let the lure of easy money blind him to the facts.
According to the DSA Fact Sheet for 2011, the following are the demographics of their member companies which includes Herbalife.
PERCENT OF DIRECT SELLERS BY RACE 2010
White non-Hispanic 73.5
Black or African American 7.1
Asian or Pacific Islander 3.1
American Indian/Alaska Native 0.5
PERCENT OF DIRECT SELLERS BY GENDER 2011
PERCENT OF DIRECT SELLERS BY TIME WORKED 2011
Now although, Herbalife doesn’t profile its distributors, based on the facts above, and the facts surrounding the weight loss industry, we can come to a logical conclusion that Herbalife distributors are going to fall very close to the above figures (not including specific Race.)
Mr. Ackman’s argument about low or unemployed people joining Herbalife, doesn’t seem to be based on conclusive evidence based on what he states throughout the presentation below and the interview above.
If the prospects had low or unemployed, then a new question is raised… How can they afford to become a distributor, and pay for the autoship order? Especially when we see Mr. Ackman claims that his team estimates that each Herbalife distributor loses $2,000 each. Although, he states these people are too embarrassed to make a stink about the purported Herbalife pyramid scheme, in other areas he states thousands of former “losing sales leaders” have sued Herbalife. These sure seem to be contradictory statements, to an already invalid argument.
Without a doubt, there are those who promote Herbalife, that may be doing it outside of the compliance policy of the company. However, this does not mean that Herbalife promotes unethical marketing to those who should not be in business or can;t afford their products. If this was a policy taught by the company, then sales would not be up in the USA around 20% for 2012 or 17% worldwide.
3. Mr. Ackman claims people “invest” in the herbalife business opportunity. Need I say more?
As educated as Bill Ackman is, he does not seem to understand the basic laws surrounding Direct Sales. When an independent distributor decides to join a network marketing company at any level, they do NOT invest anything.
They will purchase a distributor kit, and may even decide to purchase a specific pack of products and marketing collateral from the company. But all of this is seen by the IRS and regulators as an expense, not an investment.
Again, if Bill Ackman, doesn’t understand even the basic laws govern direct sales, then how ca he with “100% confidence” know that Herbalife is a pyramid?
4. Mr. Ackman claims that a distributor must be in the top fraction of 1% at Herbalife to earn over $90,000 annually.
Again, Bill Ackman and his team seem to have this desire to blow off the published facts. Although there is no law in place that demands a company to produce an Income Disclosure Statement, Herbalife does for all to see. By publishing an IDS, the company does away with the income claims and hype that does come with some companies. And it provides anyone in the public the chance to see the real numbers.
So does Mr. Ackman’s claim have any merit? I do not believe so, but we need to review the stats to get the real picture. First let’s look at the most current breakdown of why folks join any network marketing company.
According to the DSA, the following statistics were published in 2009.
Based on the above we can see that 20.1% of those who join are currently building a business. And to fall on a more critical side of the equation, if I add back in the 30.9% non-purchasers, and assume that they at one time ALL wanted to build a business, that would still show that 49% of all who join a network marketing company did so for reasons other than building a business. But what are the Herbalife figures? And do Ackman’s figure come close?
According to the Morgan Stanley 3rd quarter Herbalife Report, 80% of those who join as distributors, never build a sales team. In other words, they are consumers of the products. So, we can take them out of the math for determining the real net figure of who is earning money in Herbalife.
Now, let’s look at some other figures as reported by Herbalife in the above mentioned Morgan Stanley Report. (These figures do exclude China due to different laws and marketing plan.)
52% Retention of Sales Leaders (2011)
56% Sales Leaders Activity Rate (2012)
24% Sales Leaders Advancing to 5K (2012)
So, of the 20% of Herbalife distributors who are builders (which is in line with the DSA stats), we can see that 56% are active and 24% are growing.
And according to the latest Income Disclosure Statement we can also see the following:
“Over 25% of Distributors reach the rank of Supervisor and above (“Leader”), qualifying them for additional compensation which is paid by Herbalife based upon their activities and those they have sponsored directly and indirectly. The annual gross compensation paid by Herbalife to all Leaders during 2011 averaged $2,900 (with a median level of $741). Over 39% of Supervisors are “Active” (defined as those who generated at least 2,500 points of volume in 2011 after becoming Supervisor). The annual gross compensation paid by Herbalife to Active Leaders during 2011 averaged $7,354 (with a median level of $637).
The amounts above do not include the income Distributors can earn from their retail or wholesale income, so the actual compensation can be somewhat higher, depending upon each Distributor’s personal-selling efforts. Also, the figures above are gross, not net income.”
But, what about the “fraction of 1%” making all the money as Mr. Ackman claims? False! Of the 20% of distributors who are actively building a Herbalife sales force 2.3% earn $97,000 or more. (see the IDS linked above)
5. Mr. Ackman, feels the regulators, specifically the FTC does not like Herbalife, and he claims that the information he has accumulated in the above presentation and at the website Facts About Herbalife will provide the FTC the information they need to bring action against Herbalife as a pyramid.
Well, I am not sure if Mr. Bill Ackman and his team realize that the FTC hates Barry Minkow far more than they do, anyone at Herbalife. I say this, because Mr. Ackman uses convicted short seller, and securities fraud felon Barry Minkow and his failed Fraud Discovery Institute as part of their evidence that Herbalife is a pyramid. Their other “expert is Robert L. FitzPatrick, who was a friend of Barry Minkow, and who MLM Advocate Len Clements has already proven is clueless about direct sales.
Then let’s not leave out the guess blogger over at MLM Attorney, Kevin Thompson’s blog, Robert Chapman. Chapman is the founder of Chapman Capital LLC. He totally disagrees with what Mr. Ackman is claiming all the way around. And of all folks he should know. In 2000 Mr. Chapman was an Advocate Investor against Herbalife.
6. Mr. Ackman states the reason he released the presentation and made the rounds at all the business news outlets was so he could save the Herbalife distributors who would be re-qualifying before January 31st for the new year.
Well, this doesn;t seem consistent with his above statement where he was clear that the target market for Herbalife distributors were low-income or unemployed people. In reviewing the demographics of the financial news outlets once again doesn’t seem consistent with Mr. Ackman’s statements:
48.3 – Medium Age
43% – Attended College
76% – Own Home
$70K – Medium Income
Bloomberg TV Viewer Profile
Income Level $150,000 and above
Education Level Bachelor’s and above
Occupation Level Top Management & C-Suite
57.1 Medium Age
$75,000 Medium Income
95% Own Home
55.1 Medium Age
43% Attended College
70% Own Home
$55,000 Medium Income
(Stats come from Nation TV Spots)
So once again we see that Bill Ackman’s words do not seem to line up with the facts. But, many of people have been lured away from seeing the facts, with the payout is $1 billion dollars.
7. Mr. Ackman is in fear of his life because Herbalife CEO Michael Johnson stated “The world would be better off without Bill Ackman! Well let’s put that in context by watching the below interview…
So we can see that when heard within the context of the statement, Mr. Ackman doesn;t have to fear for his life. Well maybe his career life, if this stock play doesn’t bring him a home run!
You can review Mr. Bill Ackman’s full presentation by clicking here. Which might be good as I cover some of the slides…
Here are some additional resources you can review on the subject at hand.
This has been an exciting year in the direct selling industry and the network marketing community. Although not all of it was what we would call the post positive, we sure learned something we can take into 2013 and grow from.
SHOPPING SHERLOCK SPONSORS MIRACLE ON 1ST STREET
Santa Monica, California (December 18,2012) — Shopping Sherlock is proud to announce their sponsorship of the 31st annual Miracle on 1st street toy giveaway.
The event, Los Angeles’s largest toy giveaway for inner-city kids is at the Hollenbeck Youth Center in East Los Angeles.
Daniel Hernandez, President of the Hollenbeck Youth Center, says the event has been taking place for 31 years. “For 31 years, we’ve been building into a stage of this magnitude. We’re going to actually give out 10,000 toys to these kids,” Hernandez said. “These kids understand that our inner-city community sometimes needs someone to champion them… someone to put the toys out there for them so that they can have a really nice miracle on 1st Street,” he said.
Michael Wiedder, CEO of Shopping Sherlock has a history with the Hollenbeck Youth Center going back 20 years. He founded the Inner City Games Expo as part of the Inner City Games in 1992. The Inner City games expanded to over 15 major cities and have served over 1 million youth. “The Hollenbeck Youth Center has served Inner City Youth for over 30 years,” said Wiedder. “Their relationships with the community, the business community and the police department are a model for inner cities around the world. We are honored and blessed to sponsor this wonderful event and organization.”
For more information on the Miracle on 1st Street, The Inner City Games or The Hollenbeck Youth Center contact Danny Hernandez(323) 881-6565
For information on Shopping Sherlock, contact Michael Wiedder (310) 405-0011
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This has been an interesting week in Direct Selling, Bill Ackman, activist investor and founder of Pershing Square Capital Management, decided to short 20,000 shares of the company. I have found Mr. Ackman to be very educated and informed. However, even he did not explain on international TV, how network marketing works. After Christmas, I will address those statements which are not accurate of MLM. In other International Direct Selling News, 2013 looks very promising.
Seldia EU Exhibition on Women Entrepreneurship
On 19 to 21 February 2013, Seldia organizes a three-day Exhibition on Women Entrepreneurs at the European Parliament building in Brussels. The aim of the exhibition is to underline the importance of women entrepreneurs and the need to tackle remaining barriers which create extra difficulties for women when starting their own businesses.
Seldia will exhibit best practices in the direct selling sector, which employs 4.5 million direct sellers in the EU, 85% of whom are women. The exhibition will also gather a multitude of partnering organisations with similar interests. Seldia’s exhibition is kindly hosted by the Members of the European Parliament Mrs. Malgorzata Handzlik (EPP) and Mrs. Lidia Geringer de Oedenberg (S&D) and will allow participating organizations to showcase their best practices, research or their activities related to women entrepreneurship. (Learn more here)
Swedish DSA Academic and Female Entrepreneurship Awards
The Swedish DSA (DF) had its Annual Meeting and Gala Dinner at Grand Hotel in Stockholm on 17 November 2012. More than 150 direct sellers and leaders took part in the event and eleven of those were honoured with the DF Award for Excellency in Direct Selling.
Guest of honour was Wonna I de Jong (www.wonna.se) the face of successful female entrepreneurs. She came to Sweden 18 years old with the dream of becoming a business woman. Some decades later she is a billionaire in real estate. She even has her own castle (www.yxtaholmsslott.se), something she dreamt of having since she was a six year old selling vegetables in the local market of her home village of Przasnysz in Poland.
Wonna presented the Academic Award (SEK 50,000) to Josefine Blom and Kristin Rudenstam for their thesis titled: “Corporate Social Responsibility, a hot subject”. DF had also introduced a new award for 2012, called the Female Entrepreneurship Award of SEK 50,000. Invitations for nominations were made through social media and after lengthy considerations the jury decided to award this price to Veronika Hedenmark. Veronika suffers from a serious handicap and at the age of 19 authorities wished her to go on lifelong sick leave. Instead, she started the company VH Assistans, which provides personal assistance to people with serious handicaps. After almost twenty years she has a 1,000 employees and a yearly turnover of more than EUR 24 million.
French DSA signs a new partnership with French University
The French DSA signed on 7th of December a three year partnership program with the University of Paris Est Créteil. The partnership will focus on several themes: recruitment, students’ professional integration, vocational training, and establishment of new training programs including direct selling.
With 32 000 students and 12 faculties, the UPEC is the largest multidisciplinary and vocational university within the Paris area (www.en.u-pec.fr). For more information contact Jean-Laurent Rodriguez (email@example.com)
French DSA elects new Chairman
The French DSA’ General Assembly meeting of 7th of December elected Philippe Jacquelinet, CEO of Captain Tortue Group and former Chairman of Seldia as Chairman of the association.
Year of Direct Selling in Review
Cindy Juncaj—President & CEO, Demarle at Home: “People will continue to look for ways to create, supplement or build their income through non-traditional means such as direct selling, but, it is imperative to simplify the business so that anyone can do it and anyone can afford it.”
AJ Deeds—President, Loving Works, LLC: “I believe one of the most significant issues for direct selling companies—and for all of us as an industry—is that the jobs we create aren’t counted in national employment statistics. One of the underlying barriers to direct sales is that we’re not often acknowledged as a major contributor or even seen as a real player in the economy, and that’s something that needs to change…By bringing the stories of our industry forward in 2012 to a national stage, we, the direct sales channel, can represent part of the economic solution.”
Jay Rudman—CEO, Paperly: “Nationally, one of the biggest challenges for direct selling in 2012 is consumer behavior. Businesses have truly trained consumers to look for and wait for a deal, either through online deals or extreme discounting… I still believe that direct selling far trumps a website or even a traditional retail experience because nothing compares to the one-to-one social interaction that the direct selling experience provides. Direct selling will continue to thrive in 2012 and beyond because there will always be a need for that consultative relationship.”
Lori Bush—President & General Manager, Rodan + Fields: “As the need to derive an income from the direct selling plan becomes more imperative, our sales organizations may have a tendency to become more aggressive and more creative in ways that could impact ongoing interests of the industry at large. Thus, as responsible companies, there can be no compromise on integrity of the program; there can be no looking the other way to trade off long-term sustainability for shorter-term gains.” (Read the full report here)
- Doug Hekking is stepping down as USANA’s Chief Financial Officer but will remain with the company to support its finance and operations groups. Paul Jones, who is currently serving as the company’s Vice President of Human Resources, has been named as interim CFO.
- Rick Stambaugh has been named Chief Information Officer.
- Roy Truett has resigned as the company’s Chief Operating Officer; Jim Brown, who was recently promoted to Chief Production Officer for his expertise in operations and production, will direct operations and report directly to the CEO.
- Lori Truman has been promoted to Vice President of U.S. Field Development. She was previously the company’s Executive Director of U.S. Field Development.
After 14 years, Direct Selling Education Foundation Program Director Robin Diamondis leaving the Foundation to pursue other opportunities. All of us at DSEF and DSA wish Robin much success in her future endeavors.
USANA recently announced it signed the following U.S. Ski and Snowboard Association (USSA) athletes as its newest brand ambassadors: freeskier Grete Eliassen and Nordic combined skiers Billy Demong, Bryan Fletcher and Taylor Fletcher. The company provides nutritional supplements to more than 600 elite athletes worldwide and is the Official Health Supplement Supplier of the USSA.
I announced last week that over the next few weeks I was going to post some of the work from men and women who have become my personal mentors over the last couple of years. My first guest post was by Richard Brooke. Today I cover two mentors at once. First is Orrin Woodward a co-founder of T.E.A.M & L.I.F.E. and co-author of the best-selling book Launching A Leadership Revolution. Second is Tim Marks, top income earner in T.E.A.M. and co-founder of L.I.F.E., and author of Voyage of a Viking.
I also want to give a shout out and special thanks to Tony Cannuli (VP of MLMIA Distributor Board) for leading the charge at creating some of the best interviews at the Leadership Factory.
Tony is first and foremost a Servant Leader. A Serial Entrepreneur since the old age of 12 he started in Direct Sales @ 18 and never looked back. Most recently he was Master IBO and VP of Training and Leadership Development for a Financial Product Direct Sales Company. Tony has started a Professional Training & Development Company. One of his passions & future focus is helping organizations with a worthy cause become self-sufficient through creative Entrepreneurialism.
I have done several series on the Beachside CEO Radio Sow over the last few years on the books that both Woodward and Marks have written. If you want to listen to these series, you can go to BeachSide CEO Radio
Listen below and hear first hand how Tim Marks has changed from a Viking to a Servant Leader. You can also listen to Orrin & Tony over at the Home Business Radio Network on a daily basis.
The network marketing community has clocked in 14,458 votes between 534 blogs over the past 3 contests.
That’s serious traffic and serious publicity…
…and it’s YOURS for the taking! With out a doubt, the Top 50 MLM Blogs contest is the fastest way to boost your blog on ALL levels…
…traffic, social proof, authority, publicity… Which all leads to…
…new subscribers, new relationships, new signups and more sales!
Here’s important dates to diarise:
Pre-registration – Now open
Registration opens – 8pm EST, Thursday 6 December
Contest starts – 7pm EST, Tuesday 11 December
Contest closes – Midnight, Friday 21 December
Winners Announced – Sunday 23 December
Let’s rock this.
PS: I’ve added Facebook comments to the registration
page, head over their and kickstart the conversation or
throw in any requests you might have…