Excerpts from CNBC's "Selling the American Dream," a Documentary That Goes Inside the World of Multi-level Marketing, Premiering on CNBC.com Today
CNBC's "Selling the American Dream," reported by CNBC's Herb Greenberg, goes inside the world of multi-level marketing, which hawks products like weight-loss shakes, skin creams and vitamins. CNBC's investigation shows how quickly people can find themselves in financial ruin, when investments they are encouraged to make in multi-level marketing (MLM) businesses turn into unmanageable debt.
Following are excerpts from CNBC's "Selling the American Dream," premiering today on CNBC.com: http://www.cnbc.com/id/100359541.
All references must be sourced to CNBC's "Selling the American Dream."
BILL ACKMAN ON HERBALIFE BEING A PYRAMID SCHEME:
Herbalife is a pyramid scheme. It has caused enormous harm not just to people in this country hundreds of thousands of people in this country, millions around the world.
ROBERT FITZPATRICK ON MULTI-LEVEL MARKETING:
Madoff conned a relatively small number of people for-- with investment money. Multilevel marketing is using a different system, instead of taking a million dollars from ten people, you take $10 from a million people.
HERBALIFE CEO MICHAEL JOHNSON ON HERBALIFE BEING UNMATCHED IN THE INDUSTRY:
You mentioned Bernie Madoff in there, for god's sakes. This is a company that is built on individuals who get a great product, who, if they work hard, succeed in the business opportunity. That we have a set of ethics and integrity inside this company that's unmatched in this industry. We're more transparent than anyone in this industry.
MICHAEL JOHNSON ON WHY HERBALIFE KEEPS GETTING QUESTIONED ABOUT BEING A PYRAMID SCHEME:
Because I think there's preponderance in the industry that people love that term. And, you know, I-- again, I go back to any company. You know, you started-- I started in Disney as a-- director. And then I moved up to a vice president. And then I was a senior vice president and then I was a president of a division. And then I went to be executive vice president and then president of-- of the international entity of the company. So I moved up six or seven levels. And at the top was sitting the CEO of the company, Michael Eisner. Is that a pyramid? Is that any different than what we're doing here?
ANGEL PEREZ, HERBALIFE DISTRIBUTOR, ON WHY SHE STAYS AT HERBALIFE:
HERB GREENBERG: So, if it's $24,000 you could be working at a-- store at minimum wage-- at Starbucks, you could be making that. What's the incentive at that point?
ANGEL PEREZ, Herbalife Distributor: Where I can take this. At the coffee shops, I can only go so far, and make so much
DARCY LAPIER, MARK HUGHES'S WIFE, ON MARK'S SELLING PHILOSOPHY:
DARCY LAPIER, MARK HUGHES'S WIFE: He could sell ice to an Eskimo, but in a really nice way. You wouldn't even realize you're being sold.
ROBERT FITZPATRICK ON MULTI-LEVEL MARKETING SCHEMES:
ROBERT FITZPATRICK, MLM CRITIC: Very few people understand the math. It's simple math, but it's elusive
HERB GREENBERG: What is the math?
ROBERT FITZPATRICK: almost all of these schemes tell you that you can make money by just recruiting three or four, five, let's say, five. Then you let the five do their five. That gives you 25. What they don't show you is that you can only do that 13 cycles. And you would exceed the population of the earth. So it can't work.
DAN FALLOW, FORMER HERBALIFE DISTRIBUTOR, ON "GARAGE QUALIFIED":
DAN FALLOW, FORMER HERBALIFE DISTRIBUTOR: we'd call it "garage qualified." They would-- stack as much product as they can in their garage, and at some point they would realize that they have to quit.
HERB GREENBERG: You knew this was going on?
DAN FALLOW: It's common.
HERB GREENBERG: It's-- so-- so people buy product, more than they can-- than they can sell. It sits in the garage. What happens? There's gotta be an end point here at some point.
DAN FALLOW: When they run out of money-- there's an end point.
DAVID VLADECK, FORMER CHIEF OF CONSUMER PROTECTION, FTC, ON MULTI-LEVEL MARKETING FAILURE:
HERB GREENBERG: Well, if 90% of the distributors are failing, what does that say? If--
DAVID VLADECK, former Chief of Consumer Protection, FTC: It doesn't mat--
HERB GREENBERG: What kind of a business is it if 90% of 2.7 million every year-- right now we're talking 2.7 million distributors for one company.
DAVID VLADECK: It doesn't mean that-- that-- that doesn't mean that the company made misrepresentations. And it doesn't mean that the people who-- who bought these-- franchises or participated in these schemes necessarily feel that they were injured. I-- look, I don't know what the failure or success rate of new businesses are in the United States. But it is not high.
And when we get consumers who are willing to tell that story, and the sufficient number of them who are willing to stand up and be counted, then we can do something about it.
And that's the way we work. We work precisely because consumers like that, instead of talking to reporters, come talk to us.
NICOLE LOPEZ, FORMER HERBALIFE DISTRIBUTOR, ON MULTI-LEVEL MARKETING FRAUD:
NICOLE LOPEZ, FORMER HERBALIFE DISTRIBUTOR: yet what they're doing is preying off poor and middle class families—and we are paying for-- all the opportunities that they have. () But I gave $10,000 of my money, and I see them on their videos portraying to be-- you know, this wonderful company who's saving and helping lives. And-- that's not the case. They're-- they're—all the people down-line for them are paying for their lifestyle. And to me, that's fraudulent.
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