Fleecing the Flock

I have been reading a number of stories in the news lately about individuals fleecing the flock. Take, for example, the fraud at Church of the Open Door. A number of Canadians were involved in this particular fraud.

McNaughton was a former youth assistant at Church of the Open Door. The 51-year-old Canadian was charged with fraud and tax evasion, accused of selling $17 million in bogus securities. He conned over 200 people. He pled guilty to ten counts of fraud. The SEC report can be found here.

Scams in churches are among the fastest-growing frauds in America. In 1989, the North American Securities Administrators Association found that 15,000 people lost $450 million over five years in schemes centered at church. Those numbers have ballooned. The association found that 80,000 people were victimized between 1998 and 2001, losing nearly $2 billion.

Sometimes the scams come in the form of Multi-level marketing schemes. At least the tele-evangelists usually don’t make it a secret that they are really scamming the money for their own personal enrichment.

I have major issues with MLM companies that simply act as sophisticated pyramid schemes. Quixtar, formerly Amway, is one such example. And it is exceptionally difficult to bring these types of companies to account.

Boies, Schiller and Flexner, a high-profile legal firm, have raised a class action lawsuit against Quixtar. The suit charges that the Quixtar program ”“ based upon selling products to recruits “for personal use”, then authorizing them to recruit others to do the same while requiring or incentivizing them to maintain quota levels of monthly purchases, and then rewarding them in a multi-level compensation system ”“ is a fraud. The suit also attacks Quixtar’s tools business as a second pyramid scheme perpetrated on new recruits. I hope the lawsuit is successful. Virtually all of the people who get involved in Quixtar end up with little or no money to show for their experience. The average gross monthly income for people active in Quixtar was $115. Before expenses.

At least most con artists who take advantage of individuals through investment schemes eventually get caught. Brian Anderson was a former British Columbia pastor and member of the Peace Portal Alliance Church. He was a fundraiser with Trinity Western before he began conning people with investments and MLMs. The MLM he favoured featured the marketing of vitamins and supplements. Some of the folks he conned with his investment fraud are so upset that they put up a website to warn others about this man. If you want some interesting insight into his character, you can read more at the Anderson Fraud website here.

So sad.

3 replies
  1. david
    david says:

    You said:
    I have major issues with MLM companies that simply act as sophisticated pyramid schemes. Quixtar, formerly Amway, is one such example. And it is exceptionally difficult to bring these types of companies to account

    I agree with most of what you said in the article, but are you in the habit of making overgeneralizing statements?

    1) Amway has never been a pyramid. All other MLM’s are measured against Amway by the landmark FTC ruling.

    2) Quixtar is part of Amway, the internet aspect of it.

    3) No I am not a distributor, was at one time, but I have researched it and know that it is legal.

  2. Richard Cleaver
    Richard Cleaver says:

    Hello David. I’m not sure what statements are overgeneralized as they seem quite specific to me. Regardless, the following might help someone to think more clearly about a pyramid scheme whether “legal” or not (sourced from Wikipedia).

    The key identifiers of a pyramid scheme include the following:

    – A highly excited sales pitch.
    – A reassurance that it is not, in fact, a pyramid scheme, possibly with a false account of what a pyramid scheme is.
    – Little to no information offered about the company unless an investor purchases the products and becomes a participant.
    – Vaguely phrased promises of limitless income potential.
    – No product, or a product being sold at a price ridiculously in excess of its real market value, or a product with minimal or unrealistic market potential. As with the company, the product is vaguely described.
    – An income stream that chiefly depends on the commissions earned by enrolling new members or the purchase by members of products for their own use rather than sales to customers who are not participants in the scheme.
    – A tendency for only the early investors/joiners to make any real income.
    – Assurances that it is perfectly legal to participate.
    – The insistence they are not here to pressure you but merely to guide you.
    – The idea that there are no bosses, only coaches and mentors.

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