The Zombies?

 Amway Zombies? Sometimes it happens to the very nicest of people and it often happens slowly and subtly. These are the signs that you are becoming indoctrinated, and you are likely annoying your loved ones at this point. One thing Amway uplines are good at is indoctrinating their downline. They use clever psychology and get you to agree with them on small things.  For example, they'll get you to agree that taxes are too high, and inflation and other expenses such as taxes eat away at your income.  In doing this, they are building up your trust and then when a degree of trust is installed, then they toss in some of the crazy teaching. Many folks quit after seeing through the scam but some bite hard and follow blindly. My former sponsor is still in Amway after 25+ years and while he was once upon a time a platinum, he is no longer close to that level. I hope this helps someone:

*You're driven to recruit everyone you know.  You call all your friends and family. You may even resort to deception or outright lies to get people to meetings to "see the plan". Before you know it, your family and friends avoid you like the plague. You do this because it's the only way to achieve "diamond" and "residual income". Very little matters to you other than getting people to see the plan or to register as a downline.

*You're encouraged to develop an unreasonable, irrational zeal for the products. Even so far as to justify the quality of toilet paper or to call the household products prestigious. You may even argue the quality of energy drinks or about phyto nutrients, something you may not even know about. You'll justify the higher prices of Amway products by talks of concentration or some other means.  Even when faced with the simple math, you'll continue to believe your upline instead of your own eyes.

*A whole bunch of demands, promises, subtle threats of failure if you don't try hard enough are made in the promotional material and motivational seminars. i.e. If you quit, you are a loser destined to die broke and unhappy.  

*Because the system is touted as the way you're going to make yourself fantastically rich, you're under pressure to drop any conflicting or competing interests such as your bowling league or golf club. Nothing else in life has importance except for the quest of financial freedom. All activities in your life must enhance your Amway business and have an effect on your financial future.  Even friends and family are shunned.  IBOs who skip their brother's wedding is touted as a hero doing "whatever it takes" to achieve the Amway dream.  Eventually, these missed and/or skipped family events become a source of regret for many IBOs.

*Your upline soon becomes your most trusted friend. Your thoughts and feelings are shaped in part by the cds, meetings and functions. You ask upline permission for many personal decisions such as buying a new laptop, a new car, having kids, getting married, etc. As if someone who signed up in in Amway before you is suddenly qualified to counsel you on these decisions.  And what is the basis for this nonsensical hierarchy?  That person signed up for Amway before you, regardless of past experiences or education. 

Do you recognize these behaviors? Hopefully you aren't displaying these behaviors.

Compelling Evidence?

 It is my observation that people who join Amway usually end up losing money in the end. They may get involved to make a few bucks or because they are mistakenly led to believe that they will become millionaires in Amway in 2-5 years. I know my sponsor convinced me that we would be millionaires in a few years. These folks who recruit new IBOs into Amway are often associated with a "system" such as Worldwide Dream builders (WWDB)or Network 21 (N21). These system promoters, often diamonds, may mislead the recruits by showing them pictures of mansions or other luxuries, implying that they attained these goods with their Amway business. In many cases, it is a deception, especially when we know for a fact that some diamond leaders who proclaimed that they only make cash purchases, had their homes foreclosed. Without the hype, I am sure there would be fewer sign ups. But what is the evidence?

It is simple. Amway reports that the average active IBO earns about $115 a month in gross income. This average includes diamonds and other higher end IBOs. I believe if you calculated the median, the average would be much lower.

But what makes IBOs operate at a loss is the system expenses. The system generally consists of voicemail, standing orders, cds, functions, books and other materials. An average business building IBO might spend an average of $250 a month (possibly more, depending on the level of commitment) or so on these expenses. Amway defenders like to decry the amount, but there are couples who would likely spend more and IBOs who must travel by air to functions would spend more. Single IBOs who buy only the minimum might spend a bit less. Some IBOs with abusive uplines might spend much much more than $250 a month on tools. I believe my former sponsor probably spent easily an average of $1000 a month on average. (I am from Hawaii, so the average cost of functions is much greater due to long distance air travel)

Thus, if the average IBO earns $115 a month but the same average IBO spends $250 a month on tools, the average active IBO is losing $135 a month, with lower level IBOs (i.e. 100 PV) would lose more.

Look at a group of 100 IBOs at 100 PV. (This is just a model). If a 100-business building IBOs average $250 a month on tools, they as a group would expend $25,000 a month on tools. Their volume would be 10,000 PV, or about 30,000 BV. This would generate about $7500 in bonuses per month. Thus, this group spent $25,000 to learn and be motivated while the group splits up $7500 a month in bonuses. The platinum would get the lion's share of the bonus but most of the rest of the group will suffer net losses. As the group grows, the bonus may grow, but so will their expenditures on tools.

The only way the group can make money as a whole is to avoid participation in the tools altogether. The evidence is right here with simple math. The systems do not work because the cost of the system is likely to consume all of the Amway generated bonuses and more. I gladly challenge anyone to explain in detail how this post is not reflective of the reality of being in Amway and a system such as WWDB or Network21.

The facts speak for themselves.

Can You Overcome The Name Amway?

 Over the years, I believe that Amway has earned a bad reputation with the general public in the US. It is because IBOs have lied, IBOs had deceived and tricked people into attending recruitment meetings, and IBOs have done zany thing that have turned people off about the Amway opportunity. Factor in the bad experiences some people have had because of the "tools scam" and it's easy to understand why just mentioning the name "Amway" can result in funny looks from others.

While certainly, the blame is not entirely because of Amway the corporation. But certainly, I cannot give Amway the corporation a pass because I believe they have known about the tools "kingpins" and allowed them to operate without resistance. As a result, many IBOs suffered bad experiences such as bankruptcy, homes lost, and other financial devastation as uplines would advise downline to "do whatever it takes" to attend more functions and to buy more tools. While the tools are optional by the letter of the law, the uplines operate from a position of trust, or a position of a trusted friend or mentor. Thus, bad self-serving financial advice was disbursed by many uplines and they apparently helped fund their diamond lifestyles with the proceeds from tool sales (voicemail, websites, standing orders, functions, book of the month, open meetings).

I believe when I was a WWDB IBO in the later 1990's, the tool kingpins were in their heyday. The internet wasn't as readily available with information for prospects. IBOs didn't use the internet to place orders, thus the kingpins ran their unethical businesses unbridled and unchecked. I believe Amway's efforts (if any) to suppress these kingpin's efforts were ineffective, and I believe it is because the kingpins and indoctrinated IBOs were the ones recruiting new members for Amway and taught them the 100 PV (defacto) quota, along with Amway product loyalty.

I remember a meeting in our group where our upline platinum told us that the key to Amway success was the ability to overcome the name "Amway". For the very reasons I have cited here, our group was taught to avoid mentioning the name Amway and to use the term private franchise and other catchy names to avoid detection from prospects. Some people in our group must have outright lied because I attended more than a handful of smaller meetings where guests walked out ticked off, muttering something about being tricked or wasting their time for the meeting.

When I finally quit Amway in 1998 or so, I went on with my life and things were great, having left Amway, which left me with more time and money than previously. It wasn't until I later discovered the blatant upline lies (such as there are ZERO profits from tools) and that IBOs were still subjected to such lies. Having learned that the same uplines were still teaching basically the same things with many of the same lies, I began my blogging career. While Amway apologists claim that my experience is old, I keep running into evidence that suggests that things are more the same than not, save for the internet ordering and automated issuance of downline bonuses.

Many of the leaders who deceived and lied, are still in leadership roles and teaching many of the same abusive advice. Why I keep blogging, is because these leaders continue to profit at downline's expense, and they have never been held accountable for bad advice or for their lies. I hope this blog provides enough information so prospects and IBOs can make informed choices.

The Fallacy?

 (Reprint of a popular article)

There has been much debate by both critics and Amway IBOs and supporters over an issue regarding a WWDB Dream Night function. The issue was an honest question over the cost of a Dream Night Ticket. Well, needless to say, the IBO in question ended up deciding that his blog will no longer accept comments. And while that is certainly his right, he made a statement that IBOs may be told, but makes no sense. Here is the statement:

"Here is a tip when doing research, if you have a question about a company why not give the actual company a call? Wow what a concept."

While on the surface, that might seem logical. If you have a question about how a company works, that might make perfect sense. But the Amway opportunity, along with the attached motivational tools companies, make that a touchy situation. What are you supposed to do? Call WWDB and ask if they are a good company? Call WWDB and ask if they scam downline? What if you call and ask WWDB if most IBOs on their system make money or lose money? If you look at the average income of the majority of IBOs and factor in expenses such as voicemail, standing orders and functions, I can only conclude that the vast majority of IBOs on the system have to be losing money. The longer you stay in the system, the more you lose. Furthermore, I believe there are more people winning the power ball lottery in the US than the number of new WWDB diamonds emerging in the US in the last dozen years ago or so.

Imagine if you had questions and simply asked the person? Hello? Mr. Al Capone, I heard you were a gangster in charge of organized crime. But I thought it would only be fair if I got the answer directly from you. What's that? You're not a gangster and you go to church? Okay, I see. Well, that clears that up. Mr. Capone is not a gangster, I confirmed that by asking him. Do you see the ridiculous justification of just asking the person in question? Isn't a better way to ask a neutral third party?

Many IBOs will also suggest that you check the better business bureau. Well, Amway has a good mark from the better business bureau. But Amway isn't selling you voicemail and other support materials, right? That would be WWDB or some other motivational group, or a particular double or triple diamond, whose business may not have been registered or known to the better business bureau.

I believe IBOs, information seekers, and prospects can find a ton of information on the internet using google. Upline leaders discourage this because too much frank and disparaging information exists about the Amway opportunity. But much of that information is real life true experiences. I was an up and coming "mover and shaker" in WWDB. This blog reflects much of my real experiences and the realizations I came to after having left Amway and WWDB. Sadly, my experience was not a good one, but more and more I see evidence that what I was taught many years ago is still taught today, and by some of the same leaders. I hope my experience can help others.

Amway IBOs In Tax Court?

 A sight visitor posted this link which I found interesting and humorous. I did not post the entire link, so there is more material. Check it out.  It's a bit dated now but I doubt that much has changed over the years.  The business is fundamentally the same.

http://riles52.blogspot.com/2011/06/selling-soap-as-hobby-amway-ibos-in-tax.html

Selling Soap as a Hobby - Amway IBO's in Tax Court
Roger S. Campbell, et ux. v. Commissioner, TC Memo 2011-42

The Amway distributorship system is well known to respondent and this Court
Friscia Construction, Inc., et al. v. Commissioner, TC Memo 2000-192

Quote:  "I included the Campbell case in one of my group posts. It concerned someone whose Amway activities were considered a hobby by the Tax Court denying them deductions for losses. That portion of the post was picked up by someone who calls himself Joecool and posted on his blog under the title "Do IBO's have a clue about business?". I found that there are quite a few blogs dedicated to pointing out the downside of the Amway experience including Married To An Ambot by Anna Banana :

The other attraction of Amway to some people is that it might allow them to deduct as business expenses things like cars, part of their home or entertainment that they would have spent anyway. That's probably the aspect of Amway that the IRS finds most interesting. Joecool did a post on how some IBO's think of their income tax refunds (generated by Amway losses sheltering other income) as profit."  End Quote 

To me the most interesting thing that I found in my search is this excerpt from the Internal Revenue Manual for examiners who are doing information requests:

.4.4.3.39 — Amway Corporation
[Last Revised: 12-10-2007]
(1) Amway Corporation has waived the hand delivery requirements of 26 USC §7603 and will accept summonses by personal service, mail, or overnight service at Amway Corporation, 7575 E. Fulton, Ada, MI 49355, Attn.: Director, Legal Division. Direct distributors who further qualify for profit sharing bonuses receive the non-cash part of that bonus through a mutual fund account administered by Amway Mutual Fund, Inc., 7575 E. Fulton, Ada, MI 49355, which requires a separate summons

Now I am subject to the AICPA Statements of Standards on Tax Practice, which among other things forbids me from giving clients advice based on what I believe the audit selection process of a taxing authority is. I wouldn't do it anyway, because I think most people who give that type of advice are guessing. Even if you happen to be one of my clients, I'm speaking to you purely as a reader here when I give you this advice:

You don't tug on Superman's cape
You don't spit into the wind
You don't pull the mask off that old Lone Ranger

And you don't take no Schedule C losses from an arrangement with a company that IRS examiners have on speed-dial.

I found 23 cases of IBO's who fought the IRS in Court. (A couple appealed, but I only counted them once)They pretty much all lost. In these type of cases there are really three ways you are denied deductions. The first is substantiation. You didn't prove it. Next is that the expenses are not really ordinary and necessary expenses of the business. When you are talking about cars and business use of the home, those two issues can get blurred together. The third is that there really isn't any business there. Taxpayers fight the IRS and win on that issue frequently even a Vietnamese couple whose "business" was playing slot machines using the principles of Feng Shui. Amway IBO's who take on the IRS on the Section 183 "hobby loss" issue almost always lose.

One of the most common themes is that IBO's seek advice generally only from their "uplines", who of course are not disinterested. They also do not seem to put any energy into trying to control their expenses. I'm going to give you a little snippet from each of the cases and comment a bit on some of them.

LOPEZ v. COMM., Cite as 94 AFTR 2d 2004-7075
Jorge N. Lopez, et ux. v. Commissioner , TC Memo 2003-142

Tax Court properly determined that engineer and wife weren't entitled to business deduction for expenses incurred in connection with their Amway products distribution activity because they didn't engage in activity for profit: although taxpayers showed proof of profit motive, such wasn't sufficient to override govt.'s evidence that included their failure to keep businesslike records, their failure to alter unprofitable methods, their non-dependence on activity income, and their use of activity to socialize with friends and family.

In their own Amway activities, which began in 1996, the Lopezes sold products at cost to both their downline distributors and their customers, which practice eliminated retail sales as a source of gross income. They chose instead to focus their efforts on developing a network of downline distributors to generate performance bonuses. Relying on Amway brochures, the Lopezes concluded that they would need to achieve and maintain a monthly point value of 4,000 for their Amway activities to be profitable. In 1998 and 1999, the Lopezes' point value did not exceed 372 points in any month.


The only advice they sought for their Amway activities was from upline distributors, and when they received unsolicited advice from their accountant, they disregarded it. During the years in question, Mr. Lopez was employed full-time as a petroleum engineer, and Mrs. Lopez was a homemaker.

The tax court ultimately was not persuaded that the Lopezes' primary motive for conducting their Amway activities was for income or profit. It found that the conduct of their Amway activity “virtually precluded any possibility of realizing a profit.” The Lopezes' lack of a business plan for recouping losses and achieving profitable levels of activity indicated the absence of a profit motive. In the face of four consecutive years of losses, the Lopezes still did not change their approach to increase the likelihood of earning a profit. The tax court further found that the Lopezes did not conduct market research to help them assess the potential profitability of their activities. It also noted that, although the Lopezes had no prior business experience, they accepted the advice of upline distributors rather than seeking advice from unbiased, independent business sources.

Since the Mr and Mrs Lopez appealed, they got to lose twice.

OGDEN v. COMM., Cite as 87 AFTR 2d 2001-1299
Michael A. Ogden, et ux. v. Commissioner, TC Memo 1999-397
Contrary to the Ogdens' contention, evidence of profit is not determinative of whether a profit motive exists. See id. at 876 (no single tax regulation factor, nor the existence of a majority of factors, is determinative of whether a profit motive exists). There is overwhelming evidence in the record that, if believed, supports a conclusion that the Ogdens maintained their Amway activity for deductions, personal pleasure and to offset wages. The tax court did not abuse its discretion in denying the motion for reconsideration.

Amway does not have a quota for sales, its products do not have to be sold above cost, and its distributors are not required to sponsor downline distributors. An Amway brochure, The Amway Business Review, states that the potential for earning income increases as the number of distributors in a sponsor's group grows and as sales increase. Distributors devote as little or as much of their time to Amway activities as they desire. The eight page Amway Business Review in large blocks on four of its pages highlights the fact that “The Average Monthly Gross Income for “Active” Distributors was $88.”

We believe Amway distributors may be biased when discussing Amway because they have a natural desire to advance the organization and/or obtain income from a downliner.


ELLIOTT v. COMMISSIONER, 90 TC 960

Deductions denied for business expenses and depreciation connected with Amway distributorship. Activities were conducted in unbusinesslike manner, taxpayers maintained full-time jobs, and little distinction was made between Amway activities and personal social activities. Also, IRS properly imposed penalties for failure to timely file and negligent or intentional disregard of rules.

A further indication of the unbusinesslike fashion in which petitioners conducted their Amway activity was the thin line dividing business activities from personal and [pg. 973]recreational activities. Petitioners offered scant evidence that their Amway activity required them to do anything other than to maintain an active social life. Although they occasionally attended seminars, most of their activity involved giving parties and taking people out to restaurants. While there is no requirement that profit-oriented work be onerous and unpleasant, the evidence presented by petitioners does not indicate activity motivated by a profit objective. On the contrary, the evidence shows that petitioners made some small modifications in their routine social life, kept cursory notes about their activities, and claimed deductions for the cost of nearly everything they owned or did. On this record, we find as a fact that petitioners' activities were motivated by a desire to avoid tax rather than a desire to generate income.

Roger S. Campbell, et ux. v. Commissioner, TC Memo 2011-42

Activities not for profit—profit objective—distributorship and direct marketing activities. Code Sec. 183 deduction limits applied to expenses pro se married real estate and construction business operators claimed in connection with Amway distributorship activity that they engaged in without requisite profit objective. Lack of profit objective was shown by facts that taxpayers commingled expenses, had no idea if they were making profit for any given year until they filed that year's return, didn't keep complete records, and otherwise didn't conduct activity in businesslike manner. It was also telling that taxpayers didn't have experience in this type of activity, didn't seek out independent advice, used activity losses to offset their real estate and construction business income, and stated that they would continue with activity regardless of whether it ever turned profit. Countervailing facts that they spent significant time on activity and increased gross receipts during years at issue weren't dispositive considering overall record

Why Not Have A Job?

 One of the things that Amway IBO leaders do quite often in their recruitment pitch for Amway, is to put down people's jobs. They criticize people's bosses and the fact that an employee needs to report somewhere to earn a living. They try to paint the picture of a job being compared to slavery. They do this apparently to make people feel uncomfortable with their present situation so they will be open to looking at the Amway opportunity as a means to make a living. They may call a job "just over broke" or "jackass of the boss".   Jobs are made to look unappealing as a means to pitch Amway as an alternate to a job.

So, I will ask - What's wrong with a job? A job is not slavery. People apply for their jobs, and they agree to a wage or salary in exchange for their services. Certainly, you can leverage a higher wage or salary if you have an education or a skill, such as being able to work in the construction field. A job usually offers more than just a wage. A job often allows one to have benefits such as medical insurance, a 401K retirement plan, and some other benefits such as paid vacation and/or sick leave. 

A recent site visitor bemoans concept of working for minimum wage, where a husband and wife would earn in the neighborhood of 30K if they both work full time at minimum wage. Of course, a high school student can earn minimum wage so two adults only able to generate that kind of income makes me think my site visitor is speaking of people with very little to offer an employer. Most people may start out as entry level but earn more and more as they gain experience and can offer more to their employer. An employee might also be able to promote themselves if they can prove to the employer that they can manage more responsibility.  

What does the average Amway business owner experience? Approximately $200 a month income (which is probably way above average)? Most IBOs as outlined in "the plan" earn about $10 a month and may have expenses such as standing order which will take away from that tiny profit. Thus, an average business building IBO stands to net a loss. It is very easy to look at the math and make that conclusion. A dedicated IBO attending meetings and functions and buying the other tools will likely spend more than $200 a month on average to be on the system. Couples will spend more. 

So, I ask again. What's wrong with a job? You have a net gain each and every month, be able to pay for your living expenses, and allow you to contribute to society by paying taxes. The average CORE IBO is a drain on the US tax paying society by spending money on standing orders and functions and then deducting these as business expenses when filing their taxes. The only beneficiary is the upline leaders who sell standing orders and function tickets. If the IRS actually took IBOs to task, I'd be interested to see what kinds of deductions would be not allowed? I bet it would help the US treasury to recover all that money.

Total BS?

 Amway supporters keep claiming that Amway has changed and that things are different today. But I keep seeing posts like the one I will attach and you have to wonder. This was posted on July 14, 2011.  It's dated but the humor factor makes it worth a read:

http://lukehimself.net/?p=135&cpage=19#comment-3587

Tim on July 14th, 2011
Hi,
I think that some facts that are in support of Amway should be recognised:

* They are one of the largest debt free companies in the world.

* They have made more millionaires than almost any other company.

* The books provide are all written by established business owners and entrepreneurs, most of who have made their money in traditional businesses, why wouldn’t read a book about success written by a successful person? It’s like reading a book about law, written by a lawyer?

* The company has been audited and analysed thousands of times because good for nothing people who just want to sit around and complain rather than get off their fat arses and do something with their lives try and knock a perfectly legitimate business model because they don’t have what it takes to succeed, and the company is still one of the largest in the world.

* Amway has been around for more than 50 years? How long do scams last, honestly?

So take these facts into account before you try and criticize a way of making money that has helped millions of people achieve their goals,.

====================================

Joe's commentary: It sure looks like the same old same old that upline leaders have been teaching for years now. This sounds like something you might have heard 12 years ago. Those who claim things are different must just see the world through rose colored glasses or something.  It's humorous when you know the truth and see this happening.