Multi-Level Marketing vemma

Published on September 17th, 2013

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Pyramid Scheme Expert Issues Warning about Vemma

The dean of a New Jersey business school has issued a warning to his students and to other college deans about the Vemma Nutrition Company, an Arizona-based business that actively recruits new distributors on college campuses nationwide to sell a line of supplement drinks.

William Keep, dean of the business school at The College of New Jersey (TCNJ) and an expert on pyramid schemes, sent the warning to fellow academic leaders on campus and to deans of the Middle Atlantic Association of College of Business Administration.

Keep, a marketing professor, has been tapped as an expert consultant in the Wall Street battle over allegations by activist investor William Ackman that Herbalife is a pyramid scheme. In December, Ackman, head of Pershing Square Capital Management, cited an article by Keep about pyramid schemes when making the charges against Herbalife and requesting regulators take action.

(In January, a key Herbalife distributor, Anthony Powell left to join Vemma.)

In a statement to TINA.org — which has posted several stories on Vemma including one noting that the FTC has received more than 150 complaints about the company — Keep said the company resembles those that have been found to be pyramid schemes:

Vemma presents itself as an exciting new opportunity for college students. Yet, when compared to previous companies that have been found to be pyramid schemes, there are too many similarities to ignore. Essentially, Vemma invites students into a competitive free-for-all where an increasing number of Vemma “Brand Partners’’ chase a decreasing number of potential customers. The financial return on a student’s investment of time and money will be negative for an overwhelming percentage of participants.

Vemma sells a line of supplements and drinks, including an energy drink product line called Verve, that it promotes heavily through brand partners who join the company to earn compensation and rewards. The international company brings in $20 million in monthly sales, according to CEO Benson K. Boreyko. He credits much of the line’s success to young adult distributors who are part of a “Young People Revolution.”

Students spread word of warning

TCNJ student Kevin Garoian said he alerted Dean Keep to Vemma after a freshman on campus was posting Facebook messages actively recruiting students. Garoian said he had become familiar with Vemma after visiting a friend at Rutgers whose dorm room was packed with cases of unsold Verve that the friend’s roommate had been storing. Garoian, a senior studying finance, said he was concerned students looking to earn money may be drawn into a company that promises all sorts of financial rewards and perks when the reality may be very different for most students. He said:

If we can get the message out that other kids who may have gotten involved may have had good experiences, but the majority had bad experiences. …You won’t get the BMW, but you’ll be saddled up with a bunch of products you won’t be able to move.

James Tomasullo, another TCNJ student, said he quit the company after losing $1,000. Tomasullo, who was quoted in TCNJ’s student newspaper, The Signal, said that while he learned some skills, he had concerns that not enough profit was coming from sales of the Vemma products themselves.

Eric Muldoon, a senior at SUNY Oswego, said he lost about $400-$500 after signing up with Vemma for four months. He said he was unable to get enough fellow students to sign up. When he first heard about the company, he was working at McDonalds and was very unhappy. He said he was excited at the prospect of being told he could be the CEO of his own business, have employees below him and earn “as much money as you could possibly imagine” that he wouldn’t have been able to at his minimum wage job.

“I just thought that for our age group, it was a way of making money that I’ve never seen before,” he said.

But Muldoon said he couldn’t afford to keep paying $150 a month to purchase the shipments of Verve that he initially didn’t realize he’d have to spend. And he said he found no way to sell it retail. In fact, according to Vemma’s own 2012 income disclosure statement, 97% of people who join Vemma will not make a living wage, and about 86% will make less than $3,000 (gross) a year.

Payton Carlucci, a finance major at Grove City College outside of Pittsburgh, said he was introduced to Vemma’s energy drink, Verve, through a friend on campus. Vemma affiliates told him Verve was a great product for college students who could use it as a chaser for alcohol. Carlucci bought a builder pack for $500 and signed up for auto shipments so he could be fully eligible for bonuses. But Carlucci said he never made any real profits from being an affiliate, having signed up just four people, who all also dropped out of the company.  Instead, he spent close to $1,500 and split his commission check with team members who were struggling to pay for the products to become affiliates.  While he was able to return some unused product, he had to pay for shipping and handling.  He had to give away or toss out shipments of Verve that were piling up in his room. Said Carlucci:

I decided to get out when my bank account was drained…I felt very deceived. I felt completely duped. They promised you the world and they say they help you but not once was I shown how to market the product.

Carlucci said after leaving the company, he was insulted on Facebook and in texts by Vemma affiliates who called him a failure. What he didn’t know is that a very small percentage of Vemma affiliates actually make any money. He said,

Whenever you are in the company you become brainwashed…The only way to be a success in life is through Vemma. You become so used to it and accustomed to hearing it you believe the lies they tell you.

Differences between MLMs and pyramid schemes

In his warning to students, Keep wrote, “I hear there is a relatively new multilevel marketing (MLM) company called Vemma that is active on college campuses. You should know that some MLM companies have been identified as illegal pyramid schemes where almost everyone who joins loses money.”

Vemma CEO Benson K. Boreyko had defended his company’s business structure, saying it is just a different way of doing business that critics don’t understand. He said that instead of spending money on traditional advertising, his company pays people to promote the brand:

…(I)f I think outside the box by rewarding the number one form of advertising, word of mouth advertising, and pay people that fall in love with these products to promote them, I’m running a scam. How much sense does that make?

But Keep warns that Vemma’s marketing structure sends the wrong message to young adults. He said:

Business school deans should be concerned that not only does Vemma resemble companies found to be pyramid schemes, it teaches students all the wrong lessons when it comes to business. Students are taught to disregard business fundamentals — understanding markets, competition, the cost of doing business, and accountability — in pursuit of short-term selling based on quickly attracting other students who are then encouraged to quickly attract other students in an apparent endless chain.

UPDATE: In October, Vemma announced it was going to offer college cash bonuses of up to $9,800 per year for distributors who qualify. (Vemma later dropped the maximum amount to $9,600 per year.) The company said students could choose the cash bonuses as part of its Platinum Club program in lieu of putting the money toward leasing a car. But TINA.org wants students to know that 92 percent of active distributors did not qualify for that level of bonus in 2012. And about 75 percent on average earned less than $1,400 a year — hardly enough to pay for college textbooks each year.

More about TINA.org’s investigation of Vemma here:

For more information on the complaints received by the FTC regarding Vemma, click here.

TINA.org debunks Boreyko’s claims regarding NBA endorsement of its business structure here.

Reality check on whether the statements the company makes about why it is not a pyramid scheme are relevant.

Click here for more information on whether Vemma should be calling its energy drink healthy.

If you would like to submit a complaint to TINA.org about Vemma, use this form.

This story was updated several times, most recently on 5/5/2014.

CORRECTION: This story misstated the income for 75 percent of active distributors. It  was updated on 1/ 31/ 2014 to reflect the accurate information. 

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Vemma Nutrition Company is a privately held multi-level marketing company that sells energy drinks, nutritional beverages and weight management products. Vemma, which calls itself an affiliate marketing company, is based in Tempe, Arizona. It was founded in 2004 by Benson K. Boreyko and his sisters. Vemma is an acronym for vitamins, essential minerals, mangosteen and aloe.

An inherently deceptive form of multi-level marketing where participants are told they’ll get paid for recruiting other participants, and not necessarily for selling products or services. Typically, participants must pay some sort of initial investment in order to join, and will then earn a commission for each participant they recruit. Unfortunately for the unsuspecting consumers, pyramid schemes are doomed to collapse because the number of potential participants is limited.

Multi-Level Marketing – a way of distributing products or services in which the distributors earn income from their own retail sales and from retail sales made by their direct and indirect recruits.

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12 Responses to Pyramid Scheme Expert Issues Warning about Vemma

  1. K C. says:

    MacDowell, another well known Herbalife high flyer has moved to Vemma, along with Shawn Dahl (another Founder’s Club member”. MacDowell was quoted saying that she felt “handcuffed” at Herbalife with the changes at Herbalife since Ackman’s allegation that Herbalife is a pyramid scheme. Clearly, this means Vemma allows its members far more leeway when it comes to marketing talk. Given CEO Boyenko’s penchant to make up **** at times, this does NOT bode well for the public.

  2. truthbyfacts says:

    It’s funny. I been.reading and.loughing I been in.the vemma family for.months and.so many ppl try and put it under a scheme and.such why don’t you.go ask the people.that had the life changing expierance with this.the help the support and best of.all u better ya self thru it. So many people are just jealouse for one simple.fact there to stupid for network marketing so they.fail.in.this bussines and they bad mouth it they like to play the blame game well guess what people. It’s all on you who ever joined and failed.its all you fault not vemma if I ever had a problem.it.got sorted instantly. No put on.hold.for hours or Breen ripped off. Some people.need to get.there facts right instead of bad mouthing something.they failed in.its funny.it.really is. Cuz this.changed.my.whole.life and.future. and to all who is trying to convince everyone this is a.scam.please keeep.going you are the ones who.motivate me.to.jewel becoming.successfull in.this.as proof that its not a scam.the only scam.is that people are to.stupid to take.action.and.controll.of.there life.so.blame.everyone.but them.self .
    #truthbyfacts

  3. Paul S. says:

    In the warning PDF you reference I didn’t see Vemma named specifically. Was Vemma mentioned in the email he sent out with the attachment?

  4. KenStewartMLMexpert says:

    Oh brother! First of all, notice the wording in this article! “Resembles,” “some companies,” “I hear,” and other nebulous statements.

    Basically, here we have a so called “expert” who is really saying, It looks like, it might be, it may be, it could be, but never actually says “it is!” I just loved the quote “I hear.” You hear? Oh, so we’re jumping to conclusions based on what you heard? LOL!

    Obviously he didn’t bother to do any extensive research, and even if he had or did, that doesn’t make him right! Dr. Charles King, considered the world’s #1 academic expert on network marketing, and a professor of marketing at the University of Illinois at Chicago, who instituted the first college accredited course on network marketing, would disagree with Dean Keep!

    Proof that he didn’t bother to do any extensive research is found in his erroneous and laughable comment that “VEMMA teaches students all the wrong lessons when it comes to business. Students are taught to disregard business fundamentals — understanding markets, competition, the cost of doing business, and accountability.” Huh? Where does he come up with this? Obviously he’s never been to a training or advanced training!

    Keep’s uninformed, misinformed comments are nothing more than guilt by association! “Some companies have been identified as illegal pyramid schemes.” Yes, just like 500+ teachers in New York have been convicted of crimes ranging from drunken driving to assault to sex related to manslaughter in the past 5 years. Does that mean that all teachers are therefore criminals? Hey Professor, I hear that a lot of teachers commit crimes, you resemble a teacher and since some teachers have been convicted of crimes-using your logic, that makes you a criminal! See how that logic works! LOL!

    Regarding leeway at VEMMA, the company has stringent policies in place, and they do enforce them, so this notion that BK allows distributors to say and do what they want is laughable!

    Regarding the students, first, most of them quit after just a few months! They didn’t fail-they quit! What person in their right mind starts a business and quits after a few months? You can’t possibly learn what you need to learn and develop the skills you’ll need to develop in your first few months!

    And one of them said he found no way he could sell the product? He must be a lousy salesperson! Most college campuses are loaded with students who drink Red Bull, Monster, Throttle, and others like its going out of style! It’s not like there’s not any potential customers walking around. He could have also marketed the product online! No, he quit after a few months-no wonder he failed!

    Finally, the conclusions this article reaches on the income earning aspect of VEMMA remind me of a quote from Mark Twain: “Statistics are like hookers. Once you get them down, you can do anything with them!” Case in point: “97% of people who join Vemma will not make a living wage, and about 86% will make less than $3,000 (gross) a year.” First, we get no definition of what is considered a living wage. Second, the vast majority of people aren’t in it to make a living wage! They’re part time, and most signed up just to buy the products direct from the company and make enough each month to pay for their product, and perhaps make a few hundred bucks. They’re not looking to build a business in the normal sense of the word. For those that are, look at the average income from the mid to top levels of achievement. It averages out to around $68,000 a year, which is more than the average household income in the U.S. of $50,000, and more than the average income of around $25,000 a year!

    Furthermore, for the full time employee, even if they didn’t earn a significant income in VEMMA on a part time basis, the tax benefits alone are easily worth upwards of $5,000 a year or more!
    Of course articles like this never put things into context, especially when it comes to statistics and the numbers! They’ve got their agenda.
    Is everybody going to succeed and make money? NO! That doesn’t happen in any business! Besides, most people don’t fail-they quit! There’s a difference!

  5. William K. says:

    Let’s begin with the “quitters.” The commenter claims the distributors did not fail; they quit. A “quitter” is, apparently, a distributor who stopped trying. The implication being that had they not stopped trying they surely would have succeeded, which is simply nonsense. I know it is nonsense because we have decades of data from MLMs to show the extremely high percentage of distributors who year-in-and-year-out quickly become inactive, earning no compensation. Even among those who become eligible for compensation, a small percentage of the total, most make very little income (and that excludes their expenses). I also know it is nonsense because mathematically they all cannot succeed (a result not likely part of the recruiting message).

    The more serious concerns are the extent to which VEMMA relies on a high percentage of “quitters” in order to compensate those who recruited them. Each quitter who made a purchase generated income to those above them. Had our commenter any familiarity with pyramid scheme case law he would know the consistency with which the FTC and the courts have focused on rewards to MLM participants that are unrelated to retail sales, where retail sales are defined as sales to non-distributors (i.e., customers outside of the marketing program). The SEC takes a similar position. An over-reliance on “quitters” can be a signal of insufficient retail sales. I am not aware of any public, verifiable information from VEMMA regarding their retail sales. Happy to look at that data. To brush up what constitutes a pyramid scheme, as surely the commenter would not want to foist such a fraud on friends, I recommend he become familiar with these cases: FTC v. Koscot, Webster v. Omnitrition, FTC v. BurnLounge, and FTC v. Fortune Hi-Tech Marketing.

    As to the quality of the training, the commenter answers his own question. If training is so good, so effective, then why so many quitters? Could it be that training actually does not teach skills important to building a career in business? How many people will build a career inside of a company that loses the vast majority of its customers and/or potential sales people year in and year out? How many people will build a career inside a company that takes no responsibility for the success of those it recruits and “trains”? Oh, and who pays for training? Notice how the commenter places all responsibility on the recruit, none on the firm. If a recruit fails or quits, it is the recruits fault, conveniently forgetting the improbably success in an all-against-all competition that lacks transparency. Yes, these are independent contractors. Actually, so were the millions of sales people who worked in traditional direct selling. Yet, under that model (which is different from the MLM model) company interests aligned with those of their independent sales people and training was chosen and paid for by the company to support the success of the sales force.

    Then the commenter wants to quibble about language commonly used, such as, a living wage. Actually, there are living wage calculators for each state available on the MIT website so our commenter does not need to wonder what the term means. I suspect that VEMMA recruits know what constitutes a living wage, which may be why they quit. As to the “tax benefit,” I will leave to tax accountants.

    While the commenter points to the success of those very few, he does not mention is that every recruit who “quit” helped line the pockets of those very few at the top. Oh, I also question his quote attributed to Mark Twain.

  6. Realtour77 says:

    “Well William K, have you ever heard of Success Magazine? If you would take the time to watch some of the advanced training on Ustream under Verve Leadership Academy, San Diego, you would hear Darren Hardy talk about the bleak job market that awaits the college graduates of today who are not making the money they were promised and are saddled with thousands of dollars of DEBT from student loans! Didn’t YOU benefit from those kids signing up for student loans? Now there’s a perfect pyramid scheme! YOU benefit by students, and their parents going into debt to attend your classes in which they learn nothing but how to commit to DEBT with no guarantees of any income whatsoever! How dare you! Here’s the link for your post-graduate benefit:”

    http://www.ustream.tv/search?q=Verve+leadership+training

  7. Samson says:

    Just to be fair to Mlm companies (including Vemma), can someone provide some data on the failure rate of individuals who start their own personal business without joining any Mlm company? For example, what is the failure rate of people who become retailers for national and multinational companies? How many of them are still in business retailing the same products 1-3yrs after starting? What Is also the failure rate of sole proprietors / entrepreneurs who have a dream starting a business and achieving financial freedom through that business. if you have data on failure rate of retailers for traditional companies and small business people, pls share.

  8. Vemma G. says:

    Samson, thank you for that question.

    A study done by Inc. magazine and the National Business Incubator Association (NBIA) revealed that 80
    percent of new businesses fail within the first five years.   If you consider failure rates to determine
    something is a scam, then any business someone may look at opening is a scam.  (If someone you knew
    was looking into starting another kind of business would you say it is a scam because ALL business have
    a high rate of unsuccessful people?

    Starting a business is a risk and and most people will lose money when doing so. That is a statistical
    fact that applies to ALL businesses.

    It is people thinking that can get rich tomorrow with no work and no effort that quit and call
    Vemma a scam.

    • Brainwashed F. says:

      The difference is that as a brand partner with Vemma, YOU DON’T OWN A BUSINESS. In any business, there are assets and expenses. What are your assets and your expenses? Do you have any control over the product line? How much equity do you have in Vemma? If you were to invest money into starting a real business, you would actually have ownership in the business. Or, what if Vemma’s acquired by another company – how much will your business be worth? Can you sell your business if you so choose? If Vemma goes away, your “business” goes away. To call yourself a “business owner” is an insult to those people out there who have actually started a real business. Also, you’re delusional.

  9. Alan B. says:

    By definition a business is the practice of making one’s living by engaging in commerce. I started a real business that I ran for 32 years and I had real employees and sold real products and services and paid real taxes. We worked together and made honest livings. We didn’t get rich quick and we didn’t get all gooey about a “Six Figure Frenzy” convention, or spend our time idolizing some greedy fat ass posing next to his car and his jet. After watching this training video (http://www.youtube.com/watch?v=jgJFCVBhuq4&feature=share) from Vemma Ambassador and self proclaimed business coach Heidi Craig, I came away with the question: what form of commerce are Vemma associates engaged in? The product Vemma is mentioned only once at the very beginning. Instead it’s all about incessantly working your leads (for which you pay $140 each – wow!) to recruit new associates who in turn work there leads to recruit new associates ad infinitum. The money goes upline, downline, left , right and wherever else the creators of this elaborate pyramid scheme decide it should go. Vemma Nutrition products, which is nothing more than grossly overpriced vitamin water, are just a cover because Anthony Powell and BK Boreyko are aware that a business model based solely on human trafficking might land them in jail. All of you cretins foolish enough to defend these shysters probably wept the day Kevin Trudeau was sentenced to 10 years in prison. There are many fools and dupes in the world, and these guys are laughing all the way to the bank with your money.

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