Lazy Man and Money

Lazy Man’s Scam Scale

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When I was writing about why you shouldn’t trust the Better Business Bureau (BBB), I got an interesting comment from Contrarian about something else consumers should know: city specific magazines hire sales people to contact companies directly and sell their “Best of” rankings for a price.

I didn’t know that was true, and I don’t have any evidence to back it up, but Contrarian has been spot on with his analysis on any of things in the past. More important than that though, it simply makes sense. There are a lot of consumers that use those those “Best of” rankings to make their purchasing decision. It wouldn’t surprise me if Boston magazine realized that space in its Best of Boston was a valuable commodity and tried to capitalize on it as such. I’m not saying that they do that and again, I have no evidence, but I’m just saying that it isn’t just plausible, it seems probable to me.

Similar to that though, I heard two separate people who don’t know each either, tell me of businesses that have gotten what seems to amount to extortion from Yelp. They said that their bad reviews were at the top of the page and that for a fee (perhaps combined with an advertisement, I can’t remember), the company would feature some of the better reviews ahead. One person told me that they her friend wrote a $3000 check on the spot. The other business owner declined. One of the stories is at least a few years old now and I can’t say that Yelp as a publicly traded still works that way. Yelp’s site today says the default sort doesn’t take into account advertising.

I took Contrarian’s Best of [City X] example and applied it to the advertisements that you see in the airplane magazines for the best steakhouses and best doctors. It’s very clear to me that they are advertisements, they even have the advertisement size box on the page instead of a full article written by someone reputable. Rational Therapeutics has an article about being approached to be featured in such an advertisement. This is an obvious advertisement to me, even though the magazines claim to vet the paying doctors and steakhouses, but Energi Gal mentions that she falls for it occasionally and as a very successful pharmacist she’s pretty bright.

My argument was that this the airplane magazine/best steakhouse scam was pretty easy to spot and the BBB being untrustworthy was not. Then Contrarian suggested that MLM is a pretty obvious scam. I personally don’t believe it is quite obvious. If it were, I wouldn’t have 6,000 comments on my MonaVie article with people claiming that the fruit juice cured every medical condition under the sun. If it were such an obvious scam, you’d think there wouldn’t be 15 million Americans caught up in it.

This gave me an idea: we need to have a scam scale. I’m thinking something along the Mohs scale of mineral hardness, but it would clearly be more subjective and less objective. Maybe I could make it scientific by allowing people to vote. I get the feeling that it wouldn’t work, because people with a vested interest in MLM say that it isn’t a scam at all.

In developing this scam scale idea, I determined there are two main factors going into the scam:

  1. How devious / cleaverly disguised the scam is…
  2. … and how much the scam is going to harm you

While I’m personally very interested in the more devious scams, I have to admit that if they aren’t going to hurt you, they aren’t that bad. For example, if you go to one of steakhouses listed in the airline magazine as one of the best, you are most likely to still get a decent steak for your money. On the other end of the spectrum, if you gave your life savings to Bernie Madoff to invest, you may find that you lost it all. That’s a pretty harmful scam. (It’s devious too, since most people had no way of really knowing he was running a pyramid scheme.)

With that in mind, I’ve decided to rate a scam on a scale of 1 to 10 in deviousness and harmfulness. I take the deviousness score and add it to twice the harmfulness score and divide by three. This gives extra weight to the scams that are more harmful. I took a few of things that I consider scams and put a subjective ranking to them and put them in a nice table sorted by Scam Score:

Lazy Man Scam Scale
ScamDeviousnessHarmfulnessScam Score
X-Ray Specs111.0
Airplane Magazine/Best Steakhouses3.511.8
Male Enhancement Pills232.7
Best of [City X]612.7
Better Business Bureau723.7
Visalus787.7
One247.57.87.7
Jusuru7.58.28.0
Bidding Fee Auction8.588.2
MonaVie88.28.1
Bernie Madoff9.59.59.5

I put the old-fashion X-Ray specs that kids bought in the 1950’s as very small scam. I hope few adults actually thought they were getting glasses that could see through things. In the worst case you were out a few dollars and moved on with your life. I view male enhancement pills in the mold, I hope most adults know better than to expect them to work, but at least you aren’t typically out too much money. I thought the Best of [City X] is a little more devious, because it isn’t obvious to the consumer that sales reps may or may not have sold off the position for best BBQ restaurant in town.

You’ll see that in the 7.5 – 9 range, I have various multi-level marketing companies. I think they are particularly devious as they often pitch themselves as legit business opportunities when over 99% of people lose money in them and their products are often claimed to be of a higher quality than they are. Some of them like ViSalus will give people an incentive to take out a big BMW lease in their own name and then stick them with that burden if their sales drop… a very devious scam in my view. MonaVie is particularly devious in trying to convince consumers that two ounces of their juice is equal to eating 13 fruits and vegetables – I can’t tell you how many distributors fall for that.

All these MLMs are fairly harmful because month after month you lose money buying overpriced product in hopes of business opportunity that isn’t there. In the case of MonaVie, it is $1600 a year in just juice… and this doesn’t factor in other costs of running the business which can run 5 times that. In the case of MonaVie some people actually stop taking their medication, which is harmful in more than just a monetary sense.

Now it’s your turn. What other scams should I include on the scale? Do you agree with my ratings or not? Finally, feel free to point me to scam scale that already exists. That’s par for the course as most of my good ideas are already implemented elsewhere.

Burzynski Cancer Clinic Scam

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Today, I’d like to spread awareness about the Burzynski Cancer Clinic scam. Unlike my other scam articles, this one doesn’t involve a multi-level marketing (MLM) scheme and it is already starting to get extensive coverage on the Internet. Nonetheless, I think much can be learned from the story and I find it so interesting on so many levels that I feel I have to try to write about it. I emphasize the word “try” there, because there are so many angles to cover, I’m likely to not do it justice.

Basic Background on the Burzynski Cancer Clinic Scam

The Burzynski Clinic is a cancer clinic in Texas started by Dr. Stanislaw R. Burzynski in 1977. This “doctor” came up with some alternative method of treating cancer. (I put “doctor” in quotes Stanislaw Burzynski may not actually be a doctor.) The thing is that it hasn’t been shown to work. In fact, there are articles that suggest that it has been shown not to work. No other scientists or doctors seem to be able to replicate some of early results he claimed.

You might ask how this clinic is allowed to operate if it doesn’t work. Glad you asked. Turns out that for decades Burzynski has been using a loophole – conducting clinical trials in hopes of getting FDA approval. Since the 90’s he’s done 61 trials that are of the phase II variety (most with “unknown” status – only one “completed”) and only 1 that is phase III. At this point, he should get all the necessary trials done by around 2468… that is if any of them actually show any positive results.

So why do care about these trials? It turns out that price for a treatment at the clinic (i.e. to be a victim participant in one of the clinical trials) is around $120,000 a year. Though one recent trial’s cost was pegged at $312,000. Insurances won’t cover it, because the treatment is considered somewhere between “unproven” and “disproven” depending on who you talk to.

I could go into more extensive detail about the lawsuits with the FDA or the “science” and the clinic, but I have nothing to add that oncologist David H. Gorski didn’t already write on Burzynski here. He has 7,000 words on the clinic – this section represents the smallest fraction of that story.

“How Much Would Pay for Hope?”

“How much would you pay for hope? £75,000? How about $140,000? Given a life-threatening illness, or a chance to completely change your circumstances, I’d guess that most people would say that hope is priceless, and that they would pay anything, and indeed, everything, for that chance at hope.” – Jennifer Keane at Zen Buffy

Ms. Keane is one of two people who I’m adding to my hero list today… and it’s not just because I have thing for martial arts experts who call themselves Buffy. I’m adding her because she wrote the personal finance component to the story that I was going to write.

I had seen this logic used many times on my previous MLM articles. One early commenter on my MonaVie article said that he read online that the fruit juice helps with autism. So he bought it at a cost of around $1500 per year for his son. His logic was just that, “How can I not try? I have to try something!” My response back was that if he was truly going to use that logic, he’d have to try every product at GNC and every food known to man, “Perhaps a $5,000 bottle of rare French wine is the cure.” Months later he’d come back and comment that I was right, that MonaVie was a scam.

Ms. Keane even addresses potential critics:

“Whenever skeptics debunk pseudo-science, nonsense treatments, or other questionable beliefs, there is always someone who will say ‘what’s the harm’ or ‘why does it matter if someone believes that will cure them.’… What becomes of those people who spend their last months receiving IV urine derivatives, or forcing down juices while receiving coffee enemas, all while their life savings dwindle away? They die, and often, their families are left in severe debt, paying for the treatment that ‘big pharma’ doesn’t want you to know about.”

Clearly the Burzynski scam of $120,000 a year does a lot more financial harm than MonaVie’s $1500 or Protanim’s $600. However, these MLMs just bleed people dry of their money slowly. Spending $1000 in product costs is just a start, because they suck into you a “business” where you are urged to buy tools and go to conferences which can cost a thousand or two more a year. The business is designed so that 99% of people must fail, but that’s not exactly clear because it is hidden by a complex compensation plan. However, when it comes to selling tools and conferences, it’s a lot easier to say, “You are failing because you aren’t investing in yourself… so spend more money on these learning tools and events.”

The Burzynski scam and the MLMs have one thing common and Ms. Keane does it justice:

“Pedalling false hope is a charlatans game, practised by the lowest of the low. They prey on people who have found themselves in desperate situations, and who have found themselves low on hope. They take advantage of vulnerable people, and leave them financially destitute, and once again, hopeless. Sometimes, the nonsense they sell (whether it is a physical product, or the promise of the metaphysical divine) is so laughable that it’s easy to forget that it’s not a victimless crime.”

She concludes the article in a beautiful way, but since I already quoted her thrice, I imlore you to just read How much does hope cost?

I would love to to write another 500 words about follow up post as it may even be better than the one that I gushed about here, but I don’t have the space. The article, Burzynski in Ireland; arguing with believers, summarizes a Twitter argument with an aspiring politician, Kate Bopp. Every argument that Kate Bopp used is one that I’ve seen an MLM scam artist use – simply lacking logic. She accuses Ms. Keane of being negative and being closed-minded. Years ago, I wrote two articles about those very accusations with regard to MonaVie: MonaVie and Negativity and Being Open-Minded About MonaVie.

Burzynski’s “Lawyer”, Marc Stephens, Bullies Critics with Threats of Defamation

I found out about the Burzynski Clinic because their lawyer decided to bully bloggers for writing their opinion on Burzynski. A better example of the Streisand effect would be tough to find. This “lawyer” (like Burzynski being a doctor, it isn’t exactly clear whether he is a lawyer), a gentleman by the name of Marc Stephens has sent out a number of cease of desist letters in an attempt to get the criticism removed from the Internet. Here are three bloggers who have received and publicly posted the letters. If you enjoy reading other people’s nonsensical logic as much as I do you’ll find them quite entertaining:

I almost feel bad for calling these letters entertaining. In reality it quite sad that these bloggers have to deal with such crap. In all letters the blogger conducted himself more professionally than the “lawyer.” In the first and third letter, the blogger did what I would say is the right thing and asked for the specific details even bringing up the point that in their country there is a “pre-action defamation protocol” which requires the lawyer to specifically state the offending content in the article rather than just make a wide-sweeping statement that the entire article is false.

For me the highlight in the second article was the bringing up of Munchausen Syndrome and the sexist quote that it is usually attributed to females. He gives a link to the Mayo Clinic that mentions nothing of it being gender-related in any way. Wikipedia also has no mention of any relation to gender. In addition, the person in the second article didn’t pretend to be sick or injured at all. It would be difficult to be more mistaken than Marc Stephens was here.

The third bullet point above is the one that a trusted friend emailed me about. That’s what got me interested in the story. A 17 year old blogger conducting himself amazingly when this lawyer tried to bully him inappropriately. I always thought that I matured at a young age, but this Rhys Morgan is ridiculously mature and brilliant to stand up to this. It was only in reading that article that I found the other articles that were equally bad.

I’ve been when these bloggers are before. MonaVie has sent me two legal threats in an attempt to get me to take down my post about how they are scamming people. Also, One24 Threatened to Sue Me for Defamation. In each case, I responded publicly to such threats as each of these bloggers did. It’s become clear to me the game of these “lawyers” is to bully people with legal threats rather than address carefully constructed criticism. When One24 failed with their bullying tactic, they at least attempted to respond to such criticism with a podcast – unfortunately the the podcast failed to appropriately address any of the criticism and only further proved my point that One24 is a scam and I’m willing to go to court to prove that it is a pyramid scheme if they want (I have the FTC’s guidelines on my side.)

If you’ve read this far, I applaud you. I know it’s a lot to digest, but I hope you find it as entertaining and educational as I have. I hope that together we can spread the word and put an end to these scams – it will save people billions of dollars if we do.

P.S.

If I didn’t give you enough to read on the Burzynski scam, here’s one more that I couldn’t really fit into the article: Stanislaw Burzynski and the great peptide cancer debacle.

One24 Scam?

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[The article below has garnered the attention of One24 and their lawyers. They are trying to whitewash this information. For more details see One24 Threatens to Sue Me for Defamation.

Update: One24 has put together a podcast for its distributors in response to this article. I respond to One24’s “The Scam” Podcast. For those considering whether One24 is a scam or not this is a MUST read.]

Ever since I started writing about MLM scams such as Monavie, Nerium, and iJango, I have received lots of email asking my opinion on new MLM scams. In the past couple of days I’ve received a couple of emails about One24:

Love your website, would you review One24 for me. I got sucked into Monavie and love the juice but hate the business and just recently heard about Protandim and am glad to read your comments. Just started with One24 a protein powder/superfood. Not a get rich quick scheme, at least I don’t think so…would just like your opinion.

…

You’re supposed to build your business slowly by recruiting one new member a month but the problem is once a month they have a “Gold Rush” when you can take people off your waiting list and put them in the business and I think a few people have gone too crazy and the company was not ready for the growth. The concept is one member a month for 24 months (One24), then retire. Of course though people want to grow their business too fast and the site keeps crashing. Still a little skeptical about the whole concept, I hope they decide to limit the amount of people allowed in the Gold Rush. I’m just looking for a home based business that is not a scam or where I have to chase family and friends. I do like Monavie but it is so expensive for one bottle of juice. I was on autoship for about $140 a month and I don’t feel right asking anyone for that amount of money with this economy. I’m going to take some time to read more articles on your site, I found it very interesting, thanks!

I got in a conversation with this person and gave her much of the information that will be in this post. I had decided it wasn’t worth writing an article about. If I wrote about every MLM scam that comes across my email inbox, this site would be really boring. Plus, I didn’t start Lazy Man and Money to write about MLM scams – I wrote it to catalog my journey with money.

However, as I like to say, “Sometimes your destiny chooses you.” The very next day, Saturday, I received the following email:

“Hey There, You probably haven’t heard of One24. It’s a brand new company that is allowing people to retire after 24 months. I began in October of 2010 and have been documenting my progress on YouTube. Check it out.”

Why I Believe One24 is a Pyramid Scheme (Using the FTC’s Words)

One of the biggest misconceptions in multi-level marketing is that if there is a product involved it isn’t a pyramid scheme. I truly wish there was a way to get people to understand how false this is. I usually offer a couple of quotes straight from the FTC website:

“Pyramid schemes now come in so many forms that they may be difficult to recognize immediately. However, they all share one overriding characteristic. They promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure.”

“Not all multilevel marketing plans are legitimate. Some are pyramid schemes. It’s best not to get involved in plans where the money you make is based primarily on the number of distributors you recruit and your sales to them, rather than on your sales to people outside the plan who intend to use the products.”

The links to those quotes are here and here respectively.

For those who are not aware, pyramid schemes are illegal in the United States.

Perhaps at this point, you see where I’m going with this. I was shocked at the audacity of this company. They have specifically named their company in such a way as to promote recruitment as a way to retire. It makes me wonder if One24 was their second choice after they realized they couldn’t get the domain PyramidScheme.com. This flies in the face of the FTC’s quotes of “[Pyramid Schemes] promise consumers or investors large profits based primarily on recruiting others to join their program.” and, well, just the whole second quote in general.

Of course there’s a far easier reason to explain why I believe this to be a pyramid scheme. The concept of having to recruit 24 more people is simply unsustainable like all pyramid schemes. Let’s start off with a company of 4 founders. They each recruit their 24 people to retire. That leaves 96 (24*4) looking for another 24 people to recruit. Let’s pretend that they each find their 24 people. Now you have some 2304 looking for 24 people. If they find their 24, then you have 55,296 looking for 24 people. If they have the amazing fortune to find their 24, then 1,327,104 people are left looking for their 24. In three more iterations you have 18 billion people – 3 times the population of the earth. As you can see it doesn’t take too many iterations before it reaches saturation. People already involved in pyramid schemes ignore this detail and suggest that there is no such thing as saturation. They ignore not only the math, but also the fact that few people are really looking to become distributors or salespeople for these products. These distributors erroneously claim that it due to lack of effort on the part of the distributors. One of my readers disputed that wonderfully with his article: It’s Not a Matter of Effort, it’s a Mathematical Certainty.

One24’s NatraBurst Product

Since it seems that One24 considers its product, NatraBurst, an afterthought to what appears to be a pyramid scheme from the FTC definition, I thought I would treat it as an afterthought in the article. However, this website is about personal finance and thus it does make sense to evaluate the value of the product. Before I get started, I’m going to entice you to read through by letting you know that I can save you 50% on NatraBurst (hint: look on Ebay). No matter how slice it, that’s a better value than paying the company’s suggested price.

Back to NatraBurst, it turns out that I had someone ask me about the product back in October. Here’s a little of what I found:

The promotional materials claim that each serving of NatraBurst contains the equivalent of 6 servings of fruits and vegetables.

natraBurst

Those who follow MonaVie know that this is a common lie in these MLM programs use. See: Drinking MonaVie is Not Equal to Eating 13 Fruits. In reality, it turns out 4 Ounces of MonaVie is 1 Serving of Fruit. The same is true of NatraBurst – except that it isn’t even a serving a fruit, since it contains no actual fruit or fruit juice.

Most of the seller pages make a mention of a “Protein Blend”, a “Greens Blend”, a “Antioxidant Blend”, and a “Digestive Blend”. Each of these blends has some ingredients that one may recognize such as Tomato/Lycopene, Broccoli, Tumeric, etc. Here’s the catch though: They don’t mention how much of these ingredients is in a serving. I could take water from the Pacific Ocean that would surely contain a blend of all these things. The problem is that unless you know how much you are getting, it’s not worth mentioning at all. What you are left with is a bunch of marketing, which of course makes sense, because it looks like the product is being used to hide the pyramid structure.

Some people have come here to defend the product as a worthwhile product. At $70, I believe the product is much more expensive than similar products. However, if you feel that NatraBurst is a great product, I can save you money. As of May 7, 2011, there appears to be many people selling NatraBurst on Ebay for between $30 and $40 as a Buy It Now price. Now take that $30 savings and invest it towards a reputable retirement plan.

Update: One24’s Finances Reveal it is a Pyramid Scheme

A tipster got me some very credible and detailed information on One24’s finances. I’ve chosen not to publish too much of it to protect individual distributors’ privacy, but here are two notable pieces:

Update: Other One24 Scandals