A class-action lawsuit filed against Florida-based MLM Jeunesse Global, which markets anti-aging skin care products and supplements, puts high-level distributors as well as company executives in the crosshairs of pyramid scheme and racketeering allegations.
The suit, filed in July in federal court in Arizona, names the company, three top executives and three top distributors, as well as 100 co-conspirators who it alleges enriched themselves by promoting and participating in a “classic pyramid scheme,” which also included backroom deals and secret compensation packages. The suit, which is seeking at least $250 million in damages, follows an investigation by TINA.org into the company’s recruiting practices and health and income claims that led to a complaint to the FTC.
The defendants named in the suit, which was filed by Arizona resident James J. Aboltin, include Jeunesse CEO Ogale “Randy” Ray and other top executives, as well as high-level distributors, such as Kim Hui, Jason Caramanis, and Alex Morton, a former Vemma affiliate who the complaint alleges signed a secret deal with Jeunesse right before the FTC filed a pyramid lawsuit against Vemma.
Multi-level marketer Herbalife will pay $200 million back to people who were taken in by what the FTC alleges were misleading moneymaking claims. But when it comes to protecting consumers, that may not be the most important part of the just-announced settlement. What could matter more than $200 million? An order that requires Herbalife to restructure its business from top to bottom – and to start complying with the law.
“This settlement will require Herbalife to fundamentally restructure its business so that participants are rewarded for what they sell, not how many people they recruit,” FTC Chairwoman Ramirez said. “Herbalife is going to have to start operating legitimately, making only truthful claims about how much money its members are likely to make, and it will have to compensate consumers for the losses they have suffered as a result of what we charge are unfair and deceptive practices.”
The company will now differentiate between participants who join simply to buy products at a discount and those who join the business opportunity. “Discount buyers” will not be eligible to sell product or earn rewards.
Multi-level compensation that business opportunity participants earn will be driven by retail sales. At least two-thirds of rewards paid by Herbalife to distributors must be based on retail sales of Herbalife products that are tracked and verified. No more than one-third of rewards can be based on other distributors’ limited personal consumption.
Companywide, in order to pay compensation to distributors at current levels, at least 80 percent of Herbalife’s product sales must be comprised of sales to legitimate end-users. Otherwise, rewards to distributors must be reduced.
Herbalife is prohibited from allowing participants to incur the expenses associated with leasing or purchasing premises for “Nutrition Clubs” or other business locations before completing their first year as a distributor and completing a business training program.
Most Multilevel Marketing companies claim that their list of distributors is a proprietary asset of the company. When a departing distributor uses the list to solicit other distributors to follow him or her to a new company, the MLM company cries foul ball. Indeed, many MLM companies include in their Policies & Procedures provisions acknowledging the proprietary nature of the company’s distributor list (i.e. genealogy) and providing restrictions allowing use only in conjunction with the company’s business.
In a crushing defeat for MonaVie, an arbitrator in Utah has ruled that MonaVie must pay a former MonaVie distributor $1,215,000 plus cost for wrongfully terminating the distributor’s contract and for breaching its duty to act fair and in good faith.