“Are network marketers really this dumb?” – Ouch!

by louabbott on August 30, 2012

Final thoughts and important lessons on the closing of ZeekRewards

From time to time a subscriber to this site will post a comment something like this, “Why all this talk about pyramids and Ponzi’s on your site? Everyone knows the difference!”

Ponzi schemes are illegalWell, obviously NOT!

And it contributes significantly to the single largest challenge that all network marketers face. I will explain the challenge in just a bit.

But first . . .

Look at this recent headline and article that ran all over the financial news and blogs:

“How can 1 million people be this dumb?”

Commentary: Even after Madoff and Stanford, greed overcomes all
August 22, 2012|Al Lewis

DENVER (MarketWatch) — Ponzi scheme news was everywhere by January 2011.

Bernie Madoff and R. Allen Stanford were behind bars. Regulators had uncovered so many similar financial frauds it was starting to look like a pandemic. Even celebrities, including actor Kevin Bacon and former Denver Broncos quarterback John Elway, were fleeced.

How is it, then, that beginning in January 2011 an old multilevel marketing hack named Paul Burks of Lexington, N.C., was able to lure 1 million investors into what regulators now call a $600 million Ponzi scheme?

According to a civil fraud complaint that the Securities and Exchange Commission filed on Friday, Burks was able to accomplish all this in less than 20 months. This is nothing short of mind-blowing in an era when people should have known to keep their guard up.

— See whole article at: http://articles.marketwatch.com/2012-08-22/commentary/33311988_1_ponzi-scheme-penny-auction-website-civil-fraud-complaint

[Red emphasis is mine.]

Yes.  It is most certainly “mind-blowing.” Particularly when you consider that some of the top promoters of this “Ponzi” were Network Marketing leaders, spokespersons, and professionals!

Len Clements just published his Zeek Reward “review” which I highly recommend you read if you plan any kind of serious work in the industry.  It’s not short, but you will learn a LOT that may save you time, money, your reputation, your friends, etc. in the future. Len has long been a commentator on the Network Marketing industry – with a particular focus on the legal issues. I have found his work to consistently be the most insightful, exhaustive, thoughtful and balanced writing in his area of expertise.

Among other things that Len discusses in detail, being right in the area of these three legal issues was of critical importance to Zeek’s future:

 There are a number of legal issues to consider here involving a lot of legal theory and
precedent. Obviously the big three are, is ZeekRewards a Ponzi scheme, a pyramid scheme
(which is technically and legally different than a Ponzi) and/or an unregistered security? — Len’s ZEEKREWARDS REVIEW

The red flag warnings of possible violations of law in the above areas were flying everywhere. For example, virtually every person who contacted me to invite me to look at Zeek Rewards said something like this actual email I received (whom I will not name):

 A friend of ours … stopped by tonight to talk to us about Zeekler/ZeekRewards, a penny auction MLM. I was wondering if you had heard anything about it?

He started with $10,000 on May 11th and has “made”  $1600+ in the past 10 days. Apparently you need to wait 60 or 90 days to start to cash out so I suppose we will wait and see if he actually gets all the “money” he’s building up. At the rate he’s going it should double his $10k in sixty days. He says it takes him only a few minutes a day to place a classified ad to give away free bids. (That he purchased with his 10k.)  He walked us through exactly what he does to place the ad and showed us his account. If he is actually able to get cash out after that wait period, I’m interested! Anyhow, I was just wondering if you had any insight… good or bad. –May 23rd, 2012 email

As the first time I was aggressively prospected for Zeek was back in November, 2011, and I was getting barraged with invitations, I already had written my stock response:

I have read a lot about Zeek. Just my opinion, but I don’t like Zeek Rewards for 2 reasons:

  1. I don’t like penny auctions. I think they take advantage of people in exactly the same ways that the gambling industry does.
  2. From every description of the MLM comp plan, it looks and smells like a Ponzi scheme – a slick one for sure – but you know what they say about it, if it walks and quacks like a duck . . .

“started with $10,000 on May 11th and has “made”  $1600+ in the past 10 days. Apparently you need to wait 60 or 90 days to start to cash out ” sounds just like a Ponzi. — email from me May 23rd, 2012

But remarkably many people who arguably should have know better, misled everyone else that probably should have known better also. Even more “mind-blowing” was the caliber of the people who supported Zeek in one way or another which, according to Len, argues for non-judgement of the rank and file ZeekRewards affliates who may have looked to them for guidance:

There’s been some online chatter over the last 24 hours about bashing Zeek affiliates for their ignorance and greed, and the inevitable vultures who are already trying to recruit them. Normally I’d have little sympathy for the victims/perpetrators of such schemes (and, by the way, exactly how many levels down from the company do you stop becoming a perpetrator and become a victim?). But in this case even if they did do a due-diligence of ZR, which we tend to chastise such victims for not doing, they likely would not have been dissuaded from participating – they would have been encouraged to! The educated, experienced and trusted sources many of them would seek such guidance from were reassuring them it was safe! The ANMP, a trade association whose focus is distributor education and protection, showcased ZeekRewards at their last event as a model of corporate compliance, and their Executive Vice President, Peter Mingles, was a staunch supporter, promoter, and participant. They were featured twice as “Company of the Month” in Network Marketing Business Journal, where they were touted as a safe, “long term” opportunity. Well respected industry authorities such as Troy Dooly was at times somewhat critical, but generally defended and supported them (and much to his credit has publicly apologized). Ted Nuyten’s popular BusinessForHome.org site lists ZeekRewards as the #3 “Top Direct Selling Company” in 2012, and Dawn Wright-Olivares as the #1 “Field Leader” (with 45% of 47,760 votes cast), along with a favorable review of ZR, and an interview with Ms. Wright-Olivares that includes not a single challenging question.

With this stable of enablers, and ZR’s promotion of their all-star legal & consulting team, Zeek affiliates and prospects didn’t stand a chance. –Epilogue of Len’s ZEEKREWARDS REVIEW

Interestingly, most people seem to believe that no one had bad intentions, from Paul Burks, founder and CEO of Zeek, to every one of the esteemed Network Marketing pros and experts named above.  Len calls the whole fiasco an “M.L.M. experiment gone awry.” (Though on this point, I disagree with Len.  I believe ZeekRewards program was NEVER an MLM. It was always an illegal pyramid scheme and Ponzi scheme and money game no matter the name applied.  We need to be very clear about the difference.  MLMs are legal by definition.)

Unfortunately, intentions or motivations make no difference as to the number of people who got hurt.  Just like “Ignorantia juris non excusat or ignorantia legis neminem excusat.” (Latin for “ignorance of the law does not excuse” or “ignorance of the law excuses no one.”)

However, the number of people who will be harmed by the almost irreparable damage done to the reputation of our industry will never be known.

You see, the single largest challenge that all network marketers face is this.  If they do as they are taught, they make a list, go to their friends, family and associates, and enthusiastically invite them to look at their incredible home-based business opportunity. But their friends, perhaps even one after another, say, “Oh. You’re doing one of those things are you?!”

With that response, caused by the bad reputation that Network Marking has in most of the world today, many new networkers simply give up. In fact, I believe that the bad reputation of our industry is the single biggest challenge that we have to deal with to build a business today.

So how do I feel about the failure of Zeek?

Yes of course, I am happy I have been right this time on this issue for a long time. Being right always feels good.  But let me hasten to add, I don’t think I am any smarter than those who were wrong. I have had to correct my beliefs on some of the largest issues in life – more than once!  And, there were a lot of other people who recognized Zeek for what it was well ahead of its failure. See: ZeekRewards – a Full Range of Biases and Conclusions and the Related Posts below.  Frankly, I am still puzzled by how so many smart people were deceived.  Perhaps the author of the “How can 1 million people be this dumb?” article, Al Lewis has a clue:

 I know it is impolitic to poke fun at fraud victims. And I don’t mean to point a finger of blame at anyone in particular. But there is something about this case that makes me want to scream, “How can 1 million people be this dumb?”

The answer seems to be a toxic combination of financial desperation, greed, sales-culture brainwashing, misplaced faith and the power of positive thinking.

But also, with Len and others, I feel sad for those hurt.  I feel angry that the whole thing happened.

Most uncomfortably, I feel embarrassed!  Why do we have to endure this kind of press? . . . and not for the first time!!!

“Are network marketers really this dumb?”

And finally, I feel that in my work, at least to some degree, I have failed. This is what my Mission page itemizes for my book and this site:

  •  to help people sort through the maze of offers and the deluge of exaggerations,
  •  to bypass the plethora of scams and schemes,
  •  to learn how to identify the truly credible, proven, businesses where an average person can create a reliable, long-term,  leveraged residual income.

Friends, we can do better.

We must do better!  With legal, well-designed Network Marketing or MLM companies, there is real opportunity.  There are lots of them.  And they range from OK, to Better, to Great.

But first and foremost we need to be able to recognize what is highly vulnerable to legal action.  Every time we promote one of those and the “opportunity” fails, we hurt people.  We hurt the reputation of the industry. We hurt ourselves and our family and friends.

After we are sure a company passes thorough legal scrutiny, we still need to go further.  Does the opportunity really have a chance of creating for many the ultimate financial reward available to those successful in good network marketing companies, the kind of income I describe in my book as ” reliable, long-term, leveraged residual income.”

To do that, an “opportunity” needs to go well beyond passing merely the legal tests.  That’s just the beginning, the venture also needs to match up well to the “12 Critical Success Factors” I describe in my book. (Look for the one way you can download the eBook version free.)

Please also see the Related Posts below.

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{ 9 comments… read them below or add one }

JosephJYoung October 20, 2012 at 10:29 pm Thumb up 0 Thumb down 0

Hi Lou,
Well-written and well said. A powerful question to those in the MLM industry. It is true hype and excitement clouds judgement and ignorance destroys the simple.

Best,
Joe

Reply

Gil Mirkovic September 6, 2012 at 6:31 pm Thumb up 2 Thumb down 1

Hello Everyone,

I am not in Zeek, but I have been invited and decided not to join because of a gut feeling. That being said, I do not know whether Zeek is good or bad. But I do find something amusing. Maybe someone can help me with my questions. The government, with their fancy logos and names, are suppose to protect us from private businesses running Ponzi schemes, right? Fine, that’s nice. So who protects us from government running Ponzi schemes like Social Security and Medicare? Is it the opposite way? Do private businesses take the government to court for this? At least in a private Ponzi we have a choice to participate or not. In a government Ponzi we are automatically opted-in. So that’s the amusement. Anyone want to go sue the government? By the way, they have an endless supply of money (it comes from us; you and me).

Thank you for your time,
Gil

Reply

Alan Eames September 4, 2012 at 1:51 am Thumb up 1 Thumb down 0

Hi Lou,

Great article, as usual. Enough friends, family, and acquaintances know me for being a promoter of network marketing that I frequently receive emails from people asking me to look at or join this or that, somehow no one tried to recruit me for Zeek.

They would not have succeeded. I always ask “what, exactly, are we being paid for with this company?” Too often, it’s not for helping people by supplying them with a great product that improves their life.

If you wouldn’t buy the product without the business attached, don’t buy it with the business attached. (If there is a product, of course… )

All the best,
Alan

Reply

Bob Ward September 3, 2012 at 9:20 pm Thumb up 0 Thumb down 0

Programs will be developed to take advantage of people for as long as people continue to look to “hit a home run” with little or no time, effort or money. Network Marketing done right is certainly a wholesome and rewarding way to build a significant income. However, while it is a simple process, it is not easy, and the masses want easy! Even leaders in some of the upstanding companies in the industry often lead with the “its easy” approach. Therefore, it is sometimes difficult to tell who the good guys really are. Take Lou’s advise. There are good companies out there….that will be here for the long run.

Reply

David W Johnson September 3, 2012 at 9:03 pm Thumb up 3 Thumb down 0

Even if every MLM company was stellar, you will never end the scam.

The one thing any great country, company, or person can not combat with is the desperation of another person.

Most who get caught up in scams do so because they are desperate. They have worked all their life with nothing to show for it. Regardless of how professional network marketers behave, the desperate are tired and can not emotionally handle a 3 to 5 year plan. The hucksters know this and pander to this desperation.

Most likely it will be 2 generations before MLM will be a new concept to the masses. Most over 30 have been culturally poisoned with MLM and no amount of professionalism will change that. It doesn’t mean you can’t be successful, but you (the average person, not the superstar) will have to go through many more people to build an organization worth retiring on.

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Roberto September 3, 2012 at 8:14 pm Thumb up 0 Thumb down 0

I am really amazed how many people fell for Zeek. For me, it was VERY obvious that their system was just ripe for the regulators to shut down. This article makes me understand how so many people were lured in. Keep on informing.
God Bless
Roberto

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Maggie Kress September 3, 2012 at 7:19 pm Thumb up 2 Thumb down 0

Lou I have not posted for awhile but always love to hear from you. I feel this is the desperation of people today. They want to get rich quick. Someone introduces them to an opportunity and sounds convincing they fall for it and usually they will lose in the end.

There are no get rich quick opportunities that usually work. If there is no product connected then it has to be a Ponzi scheme. I have no clue how these type auctions work but they would not interest me no matter how much they tell me they make. One of the give always you wrote is you NEVER tell anyone how much you are making or show your check. That is a tip off to the authorities that are lieing in wait to pounce. I would never join a company without a product that I am interested in using. After I use it and am convinced it will do what is said , then I will promote it. That is how I can get passionate about a company and no other way.

I do not think they are dumb but desperate, Our economy today is sad and money is the object so does not matter how to get it but get it.

Lou, keep doing what you do best and that is educate, educate and educate. Network Marketing is a great way to make money but it must be done the right way and ethical way. It cuts out the middle man and if done right, the reps can make as much as they want doing it correctly but you MUST have a product. Some services are frowned on. Just do your homework and find a reliable company with a comp plan that fits you.
God Bless
Maggie Kress

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AmericaMotorClub.com September 3, 2012 at 7:10 pm Thumb up 0 Thumb down 0

ROFLMAO !!! I love your style of writing, as your opinions we very similar to mine. I told be forever it was a scam. Hell, My friend was at the millionaire big business convention crap they hold every year or whatever and me them and when he had it explained to him he told THEM it was a scam and asked how they get away with it. What did they do? They laughed and said they don’t know how they get away with it either!!! WOW!? Really?

When he got back he told me stay away from it and tell all my people, and I did. But did they listen? NOPE. I know one person that tried to coax me into joining for months, trying to get me to join under her so she could benefit from my spending, and I explained to her constantly what was going to happen, but she kept coming with soooOOOOO many explanations on how it’s real, no issues, etc.

It amazes me how I come to people with a real offer, something WORKING for me that I’m SEEING money from constantly, but yet they rather ignore what I say, see I’m right everytime, but yet they keep chasing the false stuff. I just laugh on the way to the bank. I would invite them, but they don’t have anything to take out. Why? Cause Zeek never paid them. LMAO.

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Dayo September 3, 2012 at 6:34 pm Thumb up 2 Thumb down 0

The effect of ponzi’s and pyramids is truly deep and can make the work of a committed, passionate MLM person in any part of the world seem like pouring water into a basket. Then again, this is where those who truly want an extraordinary life step up: they don’t do ‘Average’ and they succeed. Thanks for your blog Lou, lots of sense and true guidance for rookies and old hands alike. And you are upfront about your opinions. Takes courage.

Reply

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