Happy Halloween everyone. Just like last year's Beachbody article, I've got a tale of a scary MLM to share.*
I was minding my own business on Wednesday night, when I decided to watch the Republican debate. I've only become interested in politics over the last 5 years or so. Before then, I had the opinion that politicians are going to lie, cheat, and philander. I can't stop it, so I might as well focus my energy on what I can control... my businesses.
I've changed my mind though. It's not that I feel that politicians are generally better. It's that I'm taking the George Carlin approach (video with adult language) of looking for someone who is "full of [poop]."
For example, I could write a whole blog post about Jeb Bush's answer on daily fantasy sports. He essentially said that if there's a failure in regulating themselves, someone should do it. (Let's watch a bank robber regulate himself inside a bank vault.) The NFL, but curiously none of the other sports, should move away from daily fantasy sports. Finally his instinct is that it shouldn't be regulated by the federal government. (So essentially, his plan would be to have 50 states have 50 regulations for the same nation-wide entity. That should work out well.)
I'm not here to talk about politics though. This is a bipartisan blog. I could probably find the same things to say about the democrats. However, the democrats weren't on television last night, and in this case the moderator hit on one of my favorite topics, MLM.
You should have seen me when I heard the word "Mannatech." It was a little something like this:
The moderator, Carl Quintilla asked:
"There's a company called Mannatech, a maker of nutritional supplements, with which you had a ten-year relationship. They offered claims that they could cure autism and cancer. They paid $7 million to settle a deceptive-marketing lawsuit in Texas and yet your involvement continued. Why?"
Boom goes the dynamite, right?
The illegal health claims coming from MLM nutrition companies just don't stop. I guess I need to add Mannatech to my list of the dozen MLM companies here: No, Your MLM Health Product Doesn’t “Work.”
The question appears to be based on this Wall Street Journal article, which unfortunately requires a subscription to read. However, WSJ had a follow-up piece here, which includes a video of Ben Carson saying, "Three years ago I had an endowed chair bestowed upon me. And uh, it requires $2.5 million to do an endowed chair and I’m proud to say that part of that $2.5 million came from Mannatech."
When I read that there's little doubt in my mind that he's a paid spokesperson for the company. Being a paid spokesperson is not terrible in and of itself. However, if there are illegal medical claims like curing autism and cancer surrounding the company, it certainly looks VERY BAD to speak on their behalf.
The Wall Street Journal had another eye-popping quote:
"Mr. Carson has said he has taken Mannatech supplements for more than a decade. Shortly after he started on the supplements, Mr. Carson told Mannatech associates in a 2004 speech now posted on YouTube, some symptoms associated with his prostate cancer 'went away, and I was really quite amazed.'"
It certainly looked a lot worse for Ben Carson to connect Mannatech supplements with "cancer" and being "amazed." This isn't just being a spokesperson, but this sounds like it could be considered an illegal medical claim by the FDA... especially considering that a doctor should know enough to rely on scientific studies instead of Mannatech paying for the words. It also looked like an FTC Endorsement Guideline violation to me. For example, there is this section on Using Testimonials That Don’t Reflect the Typical Consumer Experience:
"Testimonials claiming specific results usually will be interpreted to mean that the endorser’s experience reflects what others can also expect. Statements like “Results not typical” or “Individual results may vary” won’t change that interpretation. That leaves advertisers with two choices:
- Have adequate proof to back up the claim that the results shown in the ad are typical, or
- Clearly and conspicuously disclose the generally expected performance in the circumstances shown in the ad."
In fairness, these FTC Endorsement Guidelines weren't around when Ben Carson made his testimonial to Mannatech distributors. However, I think these guidelines are simply common sense if you want to be an honest person. In short, if Ben Carson were educated he'd know that he was using the Anecdotal Logical Fallacy:
"You used a personal experience or an isolated example instead of a sound argument or compelling evidence.
It’s often much easier for people to believe someone’s testimony as opposed to understanding complex data and variation across a continuum. Quantitative scientific measures are almost always more accurate than personal perceptions and experiences, but our inclination is to believe that which is tangible to us, and/or the word of someone we trust over a more ‘abstract’ statistical reality."
So going back to my George Carlin bit at the beginning, I this makes me think that either Ben Carson is "[bleeping] stupid" or he's "full of [poop]." I'm going to go with "full of [poop]", because his intelligence has been well-documented.
But it gets worse for Carson. His response to the question contradicted itself. As The Atlantic said, "Presidential candidates frequently stretch the truth. Some of them have made fantastical claims about President Obama’s birth certificate, for example, or their ability to construct a giant wall on the Mexican border that Mexico will pay for. But Carson's outright denial seems egregious even by that standard. His relationship with the company is lengthy and well-documented, which makes his response even more bizarre."
So what was Ben Carson's "bizarre" response? It was this:
"Well, it’s easy to answer. I didn’t have an involvement with them. That is total propaganda and this is what happens in our society. Total propaganda. I did a couple of speeches for them. I did speeches for other people, they were paid speeches. It is absolutely absurd to say that I had any kind of relationship with them. Do I take the product? Yes, I think it’s a good product."
So he didn't have an involvement with them. A quick look says the definition of involvement is "participating in something." And I believe giving paid speeches such as a keynote address in Mannatech's 2011 convention (as reported by WSJ) qualifies as involvement and participating in something. How can it be propaganda when he admits to doing it... in the very next two sentences?
Then the very next sentence says that it is absolutely absurd to have a relationship with them... when he reported in the previous two sentences he did.
I won't even get into the last two sentences where he endorses them again saying that he takes the product and it is a good product. Oops, too late, I went there. Still, it is worth noting that Mannatech is a company with many products. We are left to guess which product Ben Carson is referring to.
"Mannatech wanted to improve its image and happily paid Carson... to appear at their events and to appear in the company videos. They put his face all over their web site (sometime between my story and now, those images were taken down). Carson’s lack of due diligence before working with the company is forgivable. His blatant lying about it now is much harder to forgive."
I'm less forgiving about Carson's lack of due diligence before working with Mannatech. The public's expectation is that a doctor, especially one of some fame, is going to probably vet a company before praising the products.
Let's Look at Mannatech
I'm going to say one more thing about Ben Carson and move on. Why is he denying involvement with Mannatech now? We touched it above. With unapproved FDA claims that it can cure autism and cancer surrounding it, it certainly doesn't look good for the doctor.
With Mannatech choosing to pay $7 million to settle the case it certainly doesn't look very innocent. That settlement included banning founder Samuel Castor from working at the company for 5 years.
Why did Texas Attorney General Greg Abbott hit Castor so harshly? The WSJ quotes, Abbott, "He’s a repeat offender."
What were those previous two offenses? I think Dallas News covers them well:
His first run-in came in the late 1980s when Caster’s original company, Eagle Shield, sold a radiant barrier described as a breakthrough product that would cut energy costs.
The attorney general got a court order against the company on the grounds that the product was not new and energy savings were dubious. Caster agreed not to make future false statements, according to newspaper reports.
"His second run-in came in 1991 when Caster’s company marketed Electracat, a device that repelled insects and other pests with high-frequency vibrations.
One assistant attorney general called the device “a hoax.” Caster agreed to stop selling the product and to refrain from making claims about products that were not supported by science. His company, Eagle Shield, paid $125,000 for investigation costs."
It was interesting to note that the Dallas News article cited that Castor created a consulting company to work with Mannatech and thus legally circumvent the 5 year ban. In this capacity he helped introduce a skin cream that could work in 6 to 8 weeks or even two minutes.
Is this where you think the cure for cancer is going to come from? If so, I've got a bridge to sell you.
But what about those health claims. Mannatech, like all MLM companies, probably says that they can't control what their independent distributors do. They may claim to do their best to train them not to make claims, but these are usually window dressing. As Dr. Bowden wrote years ago for the Huffington Post:
"No More Claiming Mona Vie Cures Cancer! Nor, for that matter, AIDS. Nor lupus, GERD, acne, age spots, arthritis, a balding scalp or sagging libido... And lest you think I'm picking on poor MonaVie, the same is true of Xango, Mangosteen, Xocai, Tahitian Noni, and all the other ridiculously overpriced and oversold juices promoted by scientifically illiterate multi-level marketing 'distributors' who repeat these claims with the sincerity and earnestness of a Kucinich volunteer."
MonaVie found that preventing its sales force from making illegal claims is like "herding cats... next to impossible" according to its CEO.
Usually these claims are verbal or spread around internet forums with very little traffic. They typically fly under the radar of the big media. So it's notable that the Wall Street Journal had a page one story on Mannatech's. Unfortunately that article requires a subscription that I don't have to read it.
However, ABC's 20/20 spent 3 months doing a hidden camera investigation which caught numerous illegal medical claims for Mannatech's Ambrotose product. They found two reputable doctors to speak about it. And one said, "There are authentic, scientific studies that have looked at people drinking these kinds of materials. And it doesn't really do anything except increase flatulence." (Yes, it makes you fart.)
The other said, "All of the sugar building blocks that we need in our body are made from the most common foods we eat." And he followed that by saying, there is little or no proof that these sugars, if swallowed, can be absorbed and broken down by the human body.
ABC's 20/20 said that "Mannatech strongly contests these conclusions, citing a large number of studies and research papers that can be found on the Web at www.glycoscience.org. But articles, published in the Fort Worth Star Telegram, have linked some of those studies to a research institute that Mannatech funds." If you have the money, you can create bad science that purposely fools millions into thinking eating chocolate helps you lose weight.
ABC's 20/20 found Mannatech distributors making many health that they weren't allowed to. Mannatech responded that they don't condone or support any such claims. It's similar to what the MonaVie CEO said about herding cats.
My problem with this is that these companies created the system that lets the cats loose. They profit from the cats. They rile up the cats by getting Ben Carson to talk about his prostate cancer and make a connection with the product.
There's an extremely simple solution... eliminate the cats. Mannatech is not required to sell its products through independent distributors.
It's a similar situation to what Napster discovered when its unpaid users were trading music illegally... Napster was responsible. In that case, music companies with a lot of money were able to fix the situation by suing Napster. Their entire business model depended upon it. In this case, only the FTC and state Attorneys General offices care... and they've got a lot of their plates. They aren't going to drop everything and put all their resources behind it like the music companies were willing to do to stop Napster.
Is Mannatech a Pyramid Scheme?
Sounds like an easy question, but it's extremely difficult to answer.
"Not all multilevel marketing plans are legitimate. If the money you make is based on your sales to the public, it may be a legitimate multilevel marketing plan. If the money you make is based on the number of people you recruit and your sales to them, it’s not. It’s a pyramid scheme. Pyramid schemes are illegal, and the vast majority of participants lose money."
However as NY Times' Joe Nocera points out:
"In one of those letters, he quoted from a 2010 F.T.C. staff report that said that identifying pyramid schemes entails a complex economic analysis.” The report added that 'there is no bright line disclosure that would help consumers identify a fraudulent pyramid from a legitimate [multilevel marketing company].' Really?
On Friday afternoon, I called the agency and asked what distinguished an illegal pyramid scheme from a legal direct-selling company. Even having talked to Craig, I found it hard to believe that it wouldn’t have some kind of definition.
A few hours later, I received an email from an F.T.C. public relations staffer. 'I’m sorry,' it began, 'but we won’t be able to offer you any on (or off) record assistance.'"
So as a consumer or a potential independent distributor, there's no easy way to tell if you are getting in a legal or illegal business. The one thing we do know is that when money is rewarded from people you recruit and sales to them (commonly referred to as a downline) it appears to be a pyramid scheme according the official FTC website.
"'Unless a great deal of care is taken by the leadership of a multilevel marketing company, it is possible to allow even a well-intentioned structure to devolve into a pyramid scheme, where payment depends on recruitment,' says Bill Keep, dean of the School of Business at the College of New Jersey."
Yes, Rodan and Fields is a different company, but the point made is about MLM companies in general. I don't get the feeling that Mannatech is taking a great of deal of care to prevent the company from devolving into a pyramid scheme. I just don't get that vibe from their leadership considering the health claims, resulting lawsuits, and positioning of Ben Carson. Let's just say that they don't earn the benefit of the doubt in my eyes.
If you are still confused about whether Mannatech is a pyramid scheme this video may help you:
I particularly like the point around 2:50 with doctor showing a degree and hiding money behind his back. I feel it is fitting with the Ben Carson/Mannatech controversy.
As if all this wasn't enough information on pyramid schemes, I found a site Mannatech Scams that has extensive information on the topic. It caught my attention that 99.4% of people lose money.
I also find it interesting that the points out that Bo Short of other MLM/pyramid schemes such as Amway, Shaklee was allowed to join Mannatech. That's sugar-coating it because they actually appointment him as President of Business and Field Development, North America in May 2013. Of course Bo Short chose to jump to Jeunesse in December 2014. I've covered Jeunesse before and readers of that article may think to question Mannatech's management decisions now.
I know what my opinion is, but I'll leave it to the reader to make their own conclusions based on the disclosed information. And as always, I welcome more information, please use the comments below to add anything that you think is relevant and I'll consider updating this article. (That offer extends to Mannatech corporate as well who can contact me here.)
Mannatech is a publicly traded company. That means we can look up the Mannatech's market capitalization, which is the value of the company. As I write this part of this article on 11/1/2015, the company has a value of $66 million dollars. That's a little more than what Major League Baseball's Alex Rodriquez made in two seasons. Clayton Kershaw's $30+ million dollar salary this year alone could almost buy the entire company at its current valuation.
Does that sound like a company that has a cure to autism or cancer? There are so many companies and people with a spare $30M to invest. Why wouldn't any of those thousands of entities invest that money to own half of a company that cure autism and/or cancer?
Maybe it's because Mannatech is simply selling sugar pills as ABC News claimed in 2007?
I'm nearing 3000 words, which is the equivalent of about 6 of my typical articles. I would have loved to carve the time to proofread this, but I've spent a lot of hours on it, and at some point, I have to hit the publish button. Because of the Ben Carson controversy it needs to be timely.
I think you know where I stand on Mannatech.
* I tried to get this out for Halloween, but it didn't happen. As I started to look into Mannatech, the number of red flags that I found overwhelmed me. As for the Beachbody article that I referenced at the beginning, it is 7000 words and took me a week to write it. That's the equivalent of 14 of my regular articles!
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