Quatloos! Scams, Schemes, and Cons Revealed

Sounds Familiar...

2011-12-08T11:41:00.001-08:00

Image credit: Monty Python's Life of Brian

From wikipedia, about zealots: "The zealots were a... sect... founded against Qurinius' tax reform... [they] say that God is to be their only Ruler and Lord".

...some things never change. Of course there are differences: the Roman taxes really were highly oppressive and the Romans, who famously did nothing for us, really were a government which, as far as Judea was concerned at any rate, was a government of "taxation without representation".

Is attachment to liberty a bad thing? Certainly not. But the problem is that love of liberty all too often is used merely as an excuse for sheer narcissism. The zealots, as is well known, didn't only fight the Romans; they were also terrorists who assassinated any Jew who they saw as a "traitor", which meant any Jew who considered war against Rome a bad idea. It wasn't "love of liberty" that was their motivation, it seems -- but love of themselves and intoleration to any opposite view. The result was as one would have expected: the zealots brought on the Jews an unmitigated disaster -- a war against the Roman empire, due to the belief that God is on their side and therefore they cannot lose, no matter what the objective facts are.

This sort of magical thinking -- common to many fanatical people throughout history, sometimes resulting in victory due to higher morale but, all too often, leading to catastrophe -- is typical of tax protesters, as well. Neither are real patriots, but narcissists who usually bring disaster on themselves and others, when reality stubbornly refuses to fit their ego-inflating fantasy of being one of the chosen.

Compare both groups to some real patriots, like the American founding fathers. First of all their goal was, however daring, realistic: they could, and did, actually defeat Britain. Second, their goal was liberty, not self-important revenge: no American was ever killed for being a British sympathizer, and after independence a general forgiveness of all those who were neutral or even wanted to remain part of the British Empire was declared. Just because they were relaistic moderates (well, compared to the zealots...) hardly means the American founding fathers were not lovers of liberty!

Penn and Teller do it again.

2011-09-10T12:55:00.000-07:00

Image credit: wikipedia .

Behind MLM blog notes that Penn and Teller see right through MLMs in the "Easy Money" episode of their scam-exposing show, titled, ahem, Bullsh*t!.

Highly recommended -- but slightly NSFW: language and, surpirsingly, sexual content.

You see, one of the MLMs they investigate is "pure romance", a company specializing in what their web site calls (wink wink, nudge nudge) "bedroom accessories".

Is Social Security a "Pyramid Scheme"?

2011-09-10T12:36:00.000-07:00

Image Credit: http://abovethelaw.com/

Recently, there has been much talk in the news -- including by potential candidates for the presidency -- about whether social security is a pyramid scheme. The SSA's official response is here; numerous folks on the internet say it is lying.

The readers of this blog should be able to tell the answer. There are similarities between pyramid schemes and social security: the main one being that money is paid to those who are earlier in the system from those who are latecomers. But this in itself, however, is not enough to make something a pyramid scheme! Consider a private medical insurance company: on the whole, it pays those who joined years ago (and are now older and need more medical care) from the income (the premiums) of those who joined later (and are thus still younger and need less medical care). Does this mean medical insurance is a pyramid scheme? No.

Why? because, like social security and unlike MLMs, there is no need for the number of insurers to grow exponentially. There is no need for the number of young insured every generation to double for the medical insurance company to remain viable. If the ratio of workers to retirees -- or older to younger medically insured -- remained constant, or at least didn't rise above a certain level, then both social security or the medical insurance company could continue to go on indefinitely.

Does this mean there's nothing to worry about? Not quite.

Again, imagine, if you will, a medical insurance company founded in 1935 (like social security) with the motto, "we insure everybody!". Assume there were 10% of the population that was sick at the time. In theory it is quite possible for them to have charged enough premiums to cover the expenses of treating those who are sick. There is no logical necessity for the number of sick people in the population to increase. So long as it remains the same, or decreases, the company will remain viable.

But suppose the number of sick people, for some reason, rises a lot. That instead of 10% who are sick, you have 20% or 30% of the population who are sick. Naturally in this case the company might well go bankrupt if it continues to charge the same premiums and give the same benefits. But would that mean it's a pyramid scheme? No.

Replace "sick people" with "retirees" and "healthy people" with "workers" you see social security's problem: the constant growth of the ratio of retirees to workers. The reason? The increasing life expectancy. So, yes, social security cannot be funded in its current form indefinitely. It will probably have to increase premiums, or cut benefits, much like a private insurance company might. Or, perhaps more reasonably, it might raise the eligibility age for benefits -- after all, in 1935, the average life expectancy was barely above 60, so the number of those getting benefits was quite small.

Will Social Security reform in such a manner? Maybe. A further problem -- not applicable to a private medical company -- is that this might be politically difficult to do; unlike a private company, where the stock holders have an interest in maintaining long-term viability, with social security, anybody suggesting reform of social security will be crucified, no matter how reasonable the suggestion is. Imagine, if you will, a private insurance company which, for religious or other reasons, considers it an unshakable dogma that the premiums must not be raised and benefits must not be cut under any circumstances.

But if social security eventually fails, it will not be due to its pyramid structure (it is not a pyramid in that sense), but due to these problems -- much like a medical company might well fail if it continues to charge the same premiums and give the same benefits when 30% of those it insures are sick, as it did when 10% were.

The American Economy and Pyramid Schemes

2011-08-23T13:20:00.000-07:00

Photo credit: www.theluxuryhub.com

Is the American Economy a pyramid scheme? The answer is, of course, "no". Nevertheless, there are some elements of a "pyramid" in it -- as in any economy -- and its viability depends on fighting them.

1). First of all there must be people interested in actually buying what Americans make. There are, of course -- but not enough, apparently, which is one of the reasons for the recession. The American economy cannot survive by everybody selling to everybody; something must be produced.

2). Second, one must not build one's "prosperity" on the sand of the "greater fool" theory, like the internet or housing bubble. Real estate prices, as well as internet companies' stock prices, were built on people buying something one knows is terribly overpriced with the expectation that someone else will buy from you.

3). One should, as far as possible, live within one's means (yeah, I know, I know -- none of us do, but you know what I mean...) Do not spend your money on shiny gadgets in order to impress people if it gets you into debt. It is hard enough to pay legitimate debt (like mortages or bills for food, medicine, education, etc.) without adding to it that extra payment for the hot car or big-screen TV you really want.

The list could be extended. But does this seem to have a familiar ring? Why, yes -- this is precisely the MLM business model. The weaknesses and problems of the American economy (or of any advanced economy): overspending, buying overpriced useless stuff so that others will buy it knowing it is overpriced useless stuff but hoping others will buy from them, a proportion of about 1:100 between the number of salesmen in the MLM in relation to the number of people who actually produce their product, etc., etc. -- is what MLMs are all about.

Even if there was no problem at all with MLMs legally or morally speaking, they would be economically worthless.

Vote For Me Yourself, and Bring 80 Others Who Will Do the Same...

2011-06-04T10:06:00.000-07:00

Credit: Wikipedia

You know the political party you founded is in trouble when, in the founding ceremony, you have to resort to MLM BS mathematics to encourage the faithful.

Israeli politician Ehud Barak had recently founded a new political party, Atzmaut [Independence]. In the founding ceremony [link in Hebrew], he said (my translation):

In this room there are only 80 people... but if each one of them brings 80 people, and so on, we will get 20 mandates [out of 120 in the Israeli Parliament].

Barak's math is slightly off. If things do in fact go "and so on" four times, they will have not 20 mandates -- about 1,000,000 votes in Israel -- but 40,000,000+ votes. Unfortunately Israel's entire population is about 7,500,000.

Clown... er, MLM College

2011-06-04T09:42:00.000-07:00

Credit: the Simpson Wiki

Well, it had to happen. A college is now offering a degree in Multi-Level Marketing. (Hat tip: Doc Bunkum on the Quatloos! forum).

From the article:

Will this new program boost enrollment at Bethany? The college currently enrolls just 592 students. But if 10 percent of those students enroll in the network marketing major — and they recruit 10 of their friends, and each of those friends recruits 10 of their friends … move over Harvard?

Wrapping Yourself in the Flag

2011-05-20T09:49:00.000-07:00

There is the old saying that "wrapping yourself in the flag" is the way to get suckers to believe you are doing something for unselfish, patriotic reasons, when in reality you're just promoting yourself.

One example is this man -- who moved from homeless taxi driver to multi-millionaire, according to the stories (hey, and he wouldn't lie about that, now would he?). Now he wants to help you succeed, and achieve the American dream. Of course the way to do this is the usual "magical nostrums" MLM company, among other things. By the way -- a 60-capsule box of these magical pills (Omega-3 oil) costs somewhere between one and a half to two and a half times as much as competing non-MLM brands -- depending if you have the distributor's "special discount" or not.

No wonder he recommends, as a selling point, to tell people not "how much it costs, but how much it is worth -- after which the price will look very low!". But if he is such a succesful millionaire, why does he need to keep giving motivational seminars and recommend that people hawk overpriced MLM products as a road to riches?

Can't Prove a Negative...

2011-04-15T04:20:00.000-07:00

Can you prove fairies and dragons don't exist? Huh?! Can you?!?! (Photo source here)

In one of the replies to my previous post, I was asked by a conspiracy theorists where is my evidence that the Israeli mossad was not involved in 9/11. The mistake in thinking here -- very common among conspiracy theorists, including tax protestors -- is that they don't have to prove the mossad was involved in 9/11, it's enough for others to fail to prove it wasn't, in order for their view to be taken seriously.

This mistake is known as 'proving a negative'. It is by definition impossible to prove something does not exist. It is always possible there is some place you haven't looked. I can't prove dragons and fairies don't exist somehow, somewhere (perhaps on some other planet, or in a parallel universe). But that's no reason to take seriously the claim that they do.

Sorry, folks, it doesn't work that way. Carl Sagan said it best: 'extraordinary claims require extraordinary evidence'. You make the positive claim, you provide the evidence. Nobody has any requirement to prove you are wrong; you have to prove you are right.

If you claim dragons and fairies exist, or that the mossad is behind 9/11, or that the income tax is a gigantic fraud by tens of thousands of people, it's not for me to prove these things are false and that no fairies, mossad conspiracy, or massive government fraud that has been going on for 100+ years. It's for you to prove these thing do exist. There is no point taking your claim seriously, otherwise.

The reason conspiracy theorists, from 9/11 "truthers" to tax deniers, constantly demand that someone prove to them 9/11 was not a conspiracy, or that the income tax is real, instread of defending their position by providing evidence it is correct, is simple: they can't do the latter, and thus presume that 'attack is the best defense'.

Dammit, Where is MY Part of the Action?

2011-02-24T23:52:00.000-08:00

Many conspiracy theorists, tax protestors, etc., claim that "the zionists" or "the Jews" or someone similar rules the world. All this tax money illegally stolen is going to finance Israel, you see.

Well, here I am, living in Israel, Jewish, and so on -- and all I get from all this international Jewish conspriacy, which first was responsible for 9/11 and then for the ground zero mosque, not to mention controlling all of the world's money, is a big fat zero.

Where are the nubile gentile women to be my slaves? The oodles of money we are stealing from the gentiles? The power and glory?!

Somebody in the international Jewish conspiracy is holding on to my part of the stuff, I'm telling you.

MLM Income Disclosure

2011-01-15T04:57:00.000-08:00

Ouch!

(Hat tip: "wserra").

One Thing I Don't Understand...

2011-01-15T04:53:00.000-08:00

...is why the MLM promoters keep insisting that their particular MLM is perfectly legal, and not an illegal pyramid scheme like all those other MLMs.

Let's say they are 100% correct.

So what?

It's also 100% legal to take all your money and throw it into the sea, or to bang your head against a wall repeatedly, or to watch paint dry. Whether MLMs are legal or not is a red herring. What matters is whether they're a good investment of one's time and effort.

They aren't.

Money and Philosophy and Movies -- who is really to blame in MLMs

2011-01-08T10:06:00.000-08:00

Here are two good movies about the things people would do for money -- including making a more or less dishonest buck:

The difference between the two movies?

In the first, back-to-the-wall generally honest real-estate agents will do anything to sell real estate, including getting good "leads" by more or less dishonest means. But their inter-office fights and hard-sale techniques, after all, result (at most) at a client getting real estate he doesn't really want at a price he doesn't really want to pay. In the second, a group of scammers deliberately inflate stock prices, unload it on unsuspecting people in a pump-and-dump scheme, and care not one bit about their "investors"' ruined lives.

We all met Glengarry Glen Ross like people in real life -- perhaps we are them in real life -- and it wasn't the end of the world. But touch the scammers from Boiler Room with a ten-foot pole and you're dead. The difference is that the Glengarry Glen Ross real-estate agents do it to survive and keep their job; those in Boiler Room do it to make as much money as they can. Aristotle's dictum holds true: 'The worst offences are made by those driven by greed, not by those driven by necessity'.

What does this have to do with MLMs? It illustrates the moral difference between those lower on the MLM pyramid and those at the top. The folks on the bottom do it under the delusional view that it's a small business. We already discovered why this is false, but still, at least their goal is to make some money because they need it. They might lie to you about the earning potential or how great it is to be in Amway (or whatever company), but they won't do serious wrong -- yet.

Those at the top, on the other hand, are different. They are sharks who are driven, not by necessity, but by greed. Many MLM "heads" are nothing more than professional scammers, setting up one MLM after another -- with themselves at the top, of course -- in order to squeeze as much money as possible from the gullible before moving on to the next MLM. They care nothing at all for their downline, let alone the MLM's (non-existent) customers.

So one of the risks of joining an MLM is not that you will fail, but that you will succeed: that you will become one of those at the top, and, for money, move from being someone who does a little wrong out of necessity to someone who does a lot of wrong, voluntarily, out of greed. For what will it profit a man, if he shall gain the whole world, and lose his own soul? (Mark 8:36).

On the other hand, perhaps you shouldn't worry. Chances of becoming one of the "top" when starting at the "bottom" at an MLM are 0.01% or so in the best case scenario, and de facto 0% in most case.

MLMs as a cult

2010-12-11T23:46:00.000-08:00

Image credit: "How they Change your Mind" web site.

Are MLMs cults? We have the idea of cults as nutty folks who believe in the end of the world, UFOs, the end of the world by UFOs, and similar things. But in reality what makes a cult a cult is not so much what it believes, but its social structure and the interplay between members and leaders.

"Weird" beliefs alone are neither necessary nor sufficient to make a group a cult. E.g., Christian dogma might seem extremely odd to (say) Zen Buddhists and vice versa, but that in itself doesn't mean either Christianity or Buddhism are cults. On the other hand, groups that have core beliefs that are, in themselves, not necessarily odd, are sometimes cultic.

One often-ignore field of cultic behavior is that of economic cults. As a very informative web site notes, Amway in particular (and many MLMs) are cultic. The include thought control, dividing the world into "us" (in the MLM) and "them (all those who are not part of the MLM world), special jargon, etc. The point is to seperate the member from the world, so that he can be better exploited by the cult's leaders, in this case, the upline.

An example of what can happens when MLMs become a cult, as they often do, is found in the article "Shaking the Money Tree" by Amy Mills.

To be fair, certainly not all MLMs are cults; e.g., Avon or Tupperware are not, as -- however silly they might be as a way to make money -- they at least concentrate on actually selling products and do not require the seller to turn over their lives to the corporation. But it is a significant risk one should consider before one joins an MLM, in addition to the economic unfeasability of it.

Tax Protestors Abusing Language: Latin Edition

2010-09-18T11:18:00.000-07:00

www.cafepress.com

Tax protestors love to abuse the language. For example, they love to claim nobody is liable to pay income tax because they tax code doesn't use the word "liable" or "taxpayer" exactly the way they think it should (that is, in a way that would exclude them).

An amusing example of this is how tax protestors, whom I suspect are usually not fluent in Latin, abuse the term "sui juris" (or, as the Romans would have written it, SUI IURIS). "Sui" is the genitive reflexive pronoun -- that is, "of his (her, its, their) own". "Juris" means "laws". So, literally, "(of) his (her, its, their) own laws".

Tax protestors think that this means the legal concept of "sui juris" means that if one is legally "sui juris", one is only subject to one's own laws. Whoa! Not so fast. "Sui Juris" is something much simpler: it means, in Latin, precisely what is meant by the Greek (and English, from the Greek) word "autonomous" (autos - self, nomos - law).

It merely means, in other words, that a person has independent standing in the law -- that is, that the person is legally an adult and need not get a parent's or guardian's permission to sue (and can, equivalently, be sued directly and not through a guardian). It doesn't mean one is independent of the law and can do what one wishes without concern to what the law says.

So, yes, most tax protestors are in fact "sui juris" (although most of them would surely benefit from being declared incompetent and having a guardian appointed to them). They, and not their parents, can be sued for their non-payment of taxes. As usual, the tax protestors are ranting and foaming in the mouth -- and proving exactly the opposite of what they think they're proving.

False Profits

2010-07-23T06:14:00.000-07:00

Christ driving the Money Changers from the Temple, by El Greco. Image credit: Augusta State University.

MLMers like to cloak themselves in religion almost as much as they like to wrap themselves in the flag. They claim their business is a great one for religious (especially Christian) families and individuals. As Athena Dean notes in All the Glitters is not God, this claim is very far from the truth.

In fact, it is hard to think of anything less religious, indeed less Christian in particular, than the worship of money and profits in the MLM circuit, and the way they see worldly poverty as a sign of God's curse. That is even before going into the enormous deceit and misuse of others in one's "downline" that is endemic to MLMs.

Had Jesus, Isaiah, or Moses suddenly showed up in an MLM meeting, they would be seen as dreamy, unrealistic, crypto-communist weirdos for saying things about rich men finding it hard to get into heaven, or on the need to take care of the poor. Surely these folks should know that those who don't have money just had other people steal their dreams and are therefore broke losers like they deserve to be? So much for "blessed are the poor".

But one can ask: how can MLMers even think that what they are doing is what religion in general, or Christianity in particular, commands? The answer to that comes from a particularly annoying type of (pseudo-)religion known as prosperity theology. It was promoted in the USA first mostly by the aptly-named Oral Roberts and Jimmy Swaggart. The idea behind it is that God will give material riches to those he loved, based on such verses as John 10:10.

"Prosperity theology" makes it far easier for people to become MLMers, for two reasons. First, if you believe God himself wants you to be rich, you are less bothered with the deception, lying, and exploitation of others that is inherent to the MLM business. After all, you're just doing God's will -- trying to get rich -- and therefore, all is forgiven. (We have, alas, seen just this behavior by many other religious fanatics throughout history). Second, you don't need to actually check the economic feasibility of the MLM "plan" -- after all, with God, all things are possible. If you will just want to be rich strongly enough, He will find a way.

Orwellian Language

2010-06-12T02:39:00.000-07:00

Image credit: "Thinking about it..." blog.

Many so-called "tax protesters" claim they live in an "1984" world, where words mean the opposite of what they're supposed to. That true! The problem is, it's a world of their own making.

One of the problem with the "tax protesters" is that they love using words to mean the opposite of what they really mean. Let us start with "tax protester". There are real tax protesters -- people who refuse to pay taxes to protest something, such as the Vietnam war, or Ghandi refusing to pay the salt tax.

Real tax protesters do not argue the legality of the tax. They think that a certain tax is immoral, but that's something else. They are quite willing to pay the penalty, including jail time, to make a point about the immorality of the tax.

So-called "tax protesters" are in reality tax deniers. They believe that they found some magic word ("freeman on the land", "admiralty court", "sovereign citizen", "writ of mandumbass... er, mandamus", "non-federal citizen", etc.) that makes them magically tax-free. They think that if they merely call themselves "protesters" it makes them so, just like they think that if they call themselves "sovereign citizens" they are tax free.

This is precisely what Orwell was speaking about in Politics and the English Language (1946): the use of terms, not to clarify, but to deceive:

[M]odern writing at its worst does not consist in picking out words for the sake of their meaning and inventing images in order to make the meaning clearer. It consists in gumming together long strips of words which have already been set in order by someone else, and making the results presentable by sheer humbug.

Read any so-called tax "protester" "legal" "argument" and see for yourself. Or go to one of their conferences, and notice how, as Orwell writes:

When one watches some tired hack on the platform mechanically repeating the familiar phrases -- bestial atrocities, iron heel, bloodstained tyranny, free peoples of the world, stand shoulder to shoulder -- one often has a curious feeling that one is not watching a live human being but some kind of dummy: a feeling which suddenly becomes stronger at moments when the light catches the speaker's spectacles and turns them into blank discs which seem to have no eyes behind them. And this is not altogether fanciful. A speaker who uses that kind of phraseology has gone some distance toward turning himself into a machine. The appropriate noises are coming out of his larynx, but his brain is not involved as it would be if he were choosing his words for himself. If the speech he is making is one that he is accustomed to make over and over again, he may be almost unconscious of what he is saying, as one is when one utters the responses in church. And this reduced state of consciousness, if not indispensable, is at any rate favorable to political conformity.

How correct he was, more than 60 years ago! Far from being "rebels", the tax "protesters" merely conform to the same dogma everybody in their social circle agrees with, and the "truth" of the dogma is reinforced by repetition, by A telling B it's true and B telling A it's true in return. The only difference is that in their case the dogma is more absurd than most.

"Rebels"? "Protesters"? HA!

MLM Harassment

2010-05-01T11:47:00.000-07:00

Image credit: www.amazon.com.

We all know MLMs are lousy business opportunities. But, as Robert Carroll's Skeptic Dictionary notes, MLMs can hurt, not only the MLMers' job, but that of those below them. This phenomenon, "MLM harassment", happens when a superior tries to force those below him at work to join the MLM -- or else.

This blog has moved

2010-04-30T23:10:00.001-07:00

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More Book Recommendations

2010-04-02T23:16:00.000-07:00

A few more interesting books about MLMs:

Merchants of Deception, by Eric Scheibeler.

All that Glitters is not God, by Athena Dean.

Spellbound, by Robert Styler.

I have not read all of those books, and they need to be taken with a grain of salt as all "tell-all" books should. Nevertheless, they are recommended by a reliable source -- the Millenium Project ("Offending the Offensive since 1999") -- which, quite apart from its general trustworthiness, also is good on the book recommendation front: many of the books it recommends together with these three books are book that I have read and are quite good.

MLM Watch

2010-02-27T10:33:00.000-08:00

"The Charlatan", by Pietro Longhi. Credit: Wikipedia.

MLM watch is an excellent web site with many, many links showing the fraud inherent in MLMs. MLM watch is a sister site of Quackwatch.

But aren't these two different things? MLMs are an economic scam, Quackery is a medical scam.

Not at all! MLMs, as the pathetic earning of 99%+ of MLMers shows, are de facto pyramid schemes: only a few at the very top make money, by getting it from the "downline" -- those at the bottom of the pyramid. But how can the upline get the suckers in the downline to give the upline money for nothing, without running afoul of anti-pyramid-scheme laws?

Well, one must have a product -- officially -- and one of the most common products in MLMs are all kinds of quack-based lotions and potions, which cost almost nothing to produce and can be sold for a huge markup to the suckers, as long as one claims all sorts of non-specific "health benefits".

Conversely, many quacks who want to sell worthless nostrums try selling it through the MLM route -- this allows them both to dump the stock on the suckers by telling them that it is a product "everybody wants", as well as avoid the publicity or scrutiny that would occur if they sold the product in regular retail stores.

Among others, quack medicines sold the MLM way include Herbalife, Privatest, Seasilver, and numerous others. When not actually worthless, the product sold -- such as Quixtar's Nutrilite's vitamins and minerals -- are almost invariably (as always with MLMs) far, far more expensive than the generic brand would be -- often ten times as much.

MLMers like to claim that, sure, their products are ten times more expensive -- but that's because it's "natural" and "special" and "unique". Nonsense. It's ten times more expensive because it's an MLM scam. Gotta pay that upline!

If someone offers you any sort of vitamin / medicine / food supplement / treatment through MLM, run. If the product isn't actually quack medicine, it's the same vitamins or supplements you can get elsewhere -- at ten times the price.

MLMs, Magical Thinking, and Parasites

2010-01-27T22:26:00.000-08:00

Quite apart from being the sure road to losing money quickly, MLMs are also dangerous for philosophical and moral reasons. They encourage magical thinking: the belief that the all-important thing for success is optimism, drive, and "being a go-getter", and that this is more important and will overcome all stubborn facts.

What's more, contrary to their claims that they are "independent" and "businessmen" unlike those nasty ol' Just-Over-Broke losers, in reality MLMers are parasites: they exploit natural feelings of friendship, kinship and trust for monetary gain (which is usually nonexistent in any case). They use their family's and friends' trust in them to sell them worthless stuff at high prices and get them into their "downline", and if any when they ever make it into the top, they make money mostly from the abuse of the trust of the people in their "downline": promising them that if only they keep giving them money, they will eventually "make it".

The magical thinking aspect of the MLM cults, their worship of 'success', has never been better exposed than in G. K. Chesterton's 'The Fallacy of Success' (in All Things Considered). The fallacy is that there is no such thing as 'success' in general: there is only success in some particular thing, from chess to carpentry. Those -- MLMers in particular -- who worship 'success' and go to workshops about how to be 'successful' always fail, since they never learn how to be successful in anything in particular, and are only there to learn how to act like people who are successful in something act. As Chesterton says (he was a very entertaining writer, so worth quoting in length):

These writers profess to tell the ordinary man how he may succeed in his trade or speculation—how, if he is a builder, he may succeed as a builder; how, if he is a stockbroker, he may succeed as a stockbroker. They profess to show him how, if he is a grocer, he may become a sporting yachtsman; how, if he is a tenth-rate journalist, he may become a peer; and how, if he is a German Jew, he may become an Anglo-Saxon. This is a definite and business-like proposal, and I really think that the people who buy these books (if any people do buy them) have a moral, if not a legal, right to ask for their money back.

If you are in for the high jump, either jump higher than any one else, or manage somehow to pretend that you have done so. If you want to succeed at whist, either be a good whist-player, or play with marked cards. You may want a book about jumping; you may want a book about whist; you may want a book about cheating at whist. But you cannot want a book about Success. Especially you cannot want a book about Success such as those which you can now find scattered by the hundred about the book-market.

You may want to jump or to play cards; but you do not want to read wandering statements to the effect that jumping is jumping, or that games are won by winners. If these writers, for instance, said anything about success in jumping it would be something like this: "The jumper must have a clear aim before him. He must desire definitely to jump higher than the other men who are in for the same competition. He must let no feeble feelings of mercy (sneaked from the sickening Little Englanders and Pro-Boers) prevent him from trying to do his best. He must remember that a competition in jumping is distinctly competitive, and that, as Darwin has gloriously demonstrated, THE WEAKEST GO TO THE WALL."

Quite true. What these books do -- and what MLM or other 'success seminars' do -- is, as Chesterton says:

In such strange utterances we see quite clearly what is really at the bottom of all these articles and books. It is not mere business; it is not even mere cynicism. It is mysticism; the horrible mysticism of money. The writer of that passage did not really have the remotest notion of how Vanderbilt made his money, or of how anybody else is to make his. He does, indeed, conclude his remarks by advocating some scheme; but it has nothing in the world to do with Vanderbilt. He merely wished to prostrate himself before the mystery of a millionaire.

Indeed so. Anybody who had ever been to one of those seminars can tells us how they are all about worshiping success -- either of the "big pin" in Amway or of a similar person -- not because those people tell them anything worthwhile about how to make money, but merely because those people made money.

Never mind that, as in the case of most such authors, the author himself made the money not in business, but in selling books and ridiculously overpriced "training programs" about success; never mind that the books and seminars are worthless, giving nothing more than rah-rah positive thinking and trite advice (like in the book above); all that matters is to attach oneself in some way to the millionaire, the "big pin", the "top upline", etc., out of the belief that if you try to act like them, you'll be like them -- a belief on par with the primitive tribesman's belief that if they eat lion's meat, they will be as strong as a lion.

As for the parasitic, trust-destroying nature of MLMs, their raising of selfishness to a positive good, their looking-out-for-number-one attitude, Andrew Oldenquist noted, in his book The non-Suicidal Society:

Running through most of these books is the idea that there is a quick and simple secret to success, a psychological gimmick that will bring you affection, sex, the esteem of others, and power over them. They are books for failures, for mice who would be supermen, and who want to be respected, obeted, and caressed without having to posses the character that makes one worthy of respect, obedience, or caresses. They parallel, in the realm of psychology and the spirit, the books whose gimmick for financial success is optimism, selling from your home, or buying a Cadillac for image before making your first detergent sale.

If everyone were to try to follow the advice in these books our society could not existed. A life wholly dedicated to dissimulation or manipulation can only exist within an environment in which the rest of us most of the time believe what we are earnestly told, act on principle and from group loyalties, and try to do our fair share... The manipulator must be carried on a sea of people who themselves to not lead that kind of life. The advice of the selfishness manuals is like a pyramid club or chain letter scheme in which only those who get in early are able to profit.

For MLMers, like for used-car salesmen, honesty, caring, and trust are merely instrumental, all sacrificed to the moloch of non-existent 'success'. It is better, if one is an MLMer, to appear honest, fair and non-exploitive than to actually be honest, fair, and non-exploitive. Hence, notes Oldenquist, the frenzied attempt in 'success' seminars and MLMs about marketing yourself, public relations, 'dressing for success', appearing to be making money as one loses one's shirt (so that it is easier to "sponsor" potential victims), and so on.

There is nothing new here, of course. 2500 years ago, there were already men who thought this way:

For what men say is that, if I am really just and am not also thought just, profit there is none, but the pain and loss on the other hand are umistakakable. But if, though unjust, I acquire the rputation of justice, a heavenly life is promised to me. Since then, as philosophers prove, appearance tyrannizes over truth and is lord of happiness, to appearances I must devote myself. I will describe around me a picture and shadow of virtue to be the vestibule and exterior of my house; bnehind I will trail [like] the subtle and crafty fox...

This is Adeimantus, in his challenge to Socrates in Plato's Republic.

Does this not describe perfectly the average MLM "big pin" and "go-getter" -- speaking of virtue, success, "family", etc., while demanding the downline miss another car payment as they go broke fast to enrich him?

Wingnuts on the Air

2010-01-21T11:21:00.001-08:00

Listening to online talk radio is like trying to navigate the Los Angeles freeway system at the peak of rush hour while hitting your forehead repeatedly with a hammer. Even if you make it to your final destination without shooting anyone, you worry that you'll emerge from the car just a little bit dumber than when you climbed in.

The typical right-wing extremist show goes something like this: The host introduces himself and describes in titillating detail his most recent victimization at the hands of the evil feds - the US government apparently has an endless supply of silent, black helicopters and wastes billions of dollar annually bugging the homes and phones of small-time radio hosts - all because he's determined to share "The Truth" with his vast army of listeners. His fans, all 42 of them, are thrilled to think that they're in on some secret truthiness, and are therefore more than happy to overlook the obvious lies and exaggerations the show host slips in next. Just when you think the fibs about the topic du jour are so outrageous that the listeners will have to slap their knees and admit that the whoppers being told are truly funny stinkers, the show breaks for commercials.

And for pure entertainment value, there's nothing better than the advertisers who peddle their goods on the extremist talk show circuit.

Worried about the impending apocalypse? Just buy gold coins, freeze-dried food, and a few dozen cases of ammunition from us and you'll be the king of your county when the world economy collapses. Have the Jews rigged the Federal Reserve to ensure your financial failure? Here's a $3,000 debt elimination package that guarantees you'll never have to pay off your mortgage and credit card debt to those evil Jew bankers again. Cash only, please. Feeling like you're coming down with the flu? A little colloidal silver in your water will make you right as rain again. Just because your skin turns permanently blue, it's a small price to pay for thwarting the government's plan to kill you with those sinister flu vaccinations. Angry with Uncle Sam for taking 191.4% of your hard-earned money each week? Quick, buy our detax toolkit and you can be a tax-free hero, just like the founding fathers, Ross Perot, and the Kennedy clan. Call now and we'll throw in an offshore Ponzi scheme for free!

After the break, the host continues his lengthy rant on whatever news event or paranoid fantasy pissed him off that day, punctuated with occasional calls from supporters who tell him that he is obviously correct because they can't find anything on the topic in the Illuminati-controlled, mainstream media.

The show invariably ends with an impassioned request for donations. Taking on the entire US government ain't cheap, you know.

The topics may be racist and hate-filled, and the medical and financial advice may land the listener in a god-awful mess, but in general, most online talk radio shows are relatively harmless. Few of the hosts openly advocate violence, and even fewer have more than a couple dozen scattered listeners, many of whom are too paranoid to leave their homes because the black helicopters are hovering in the shadows and the airplanes overhead are spreading mind-control chemicals through their condensation trails. A host's success is measured in terms of donations with the ultimate goal of having enough money come in to avoid that depressing get-a-real-job alternative.

After all, it's easier to collect unemployment or disability if you don't have an employer reporting your earnings to those jack-booted thugs at the IRS.

But then there are the rare birds - the hosts that manage to gain a significant following measured in the thousands rather than dozens - who believe that the only solution to their paranoid problems is to hunt and kill the perceived enemy. Primary targets may include Jews, blacks, immigrants, UFOs cleverly disguised as famous people, gays, state and federal employees, and even strategic government buildings.

While gathering donations is still a fundamental objective, these gurus have an ultimate goal of inciting others to do their dirty wet work for them, for free.

They're not as funny as the other guys.

The Madness of Crowds

2010-01-08T14:30:00.000-08:00

This book is a classic, but still deserves a plug. Perhaps the best book ever about economic hysteria -- the .com bubble, the housing bubble, the Madoff bubble, the "MLMs are sweeping America!" bubble, etc., etc., -- is still Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds. Not only is it extremely informative, it is fun to read.

Amway UK Earnings: Pathetic, as Expected

2009-12-04T10:40:00.000-08:00

Amway UK had released their earning statement on November 2nd.

Needless to say, it's beyond pathetic.

Out of 14,000 folks or so, we have:

1). about 10,000 earning an average 47 Euros (about 60 bucks) a month -- before expenses.

2). about 3,000 earning an average of 139 Euros a month -- before expenses.

3). 36 folks earning about 2000 (2076) Euros a month -- again, before expenses.

Even if all those 36 were really successful -- if it was all pure profit, not including time spent, fuel, inventory bought for "personal consumption", what have you -- that's a success rate of, er, about 0.3%. And that's using the best case scenario.

What an opportunity!

More on MLM Scams...

2009-11-21T10:19:00.000-08:00

These folks' page nails it. They seem, by the way, to be quite clever people, as can be seen in their other pages.

Elaine Brown to Die in Prison

2009-10-10T10:12:00.000-07:00

Elaine and Ed Brown's home during the standoff.

Ed and Elaine Brown.

Elaine Brown, the infamous tax protester who, together with her husband Ed, defied the government for nine months in an armed stand-off while booby-trapping her home with explosives, got sentenced to 35 years in prison.

Of course, heavy punishment in itself is not necessarily proof that one is wrong. But in this case, as usual with tax protesters, the heavy punishment has little to do with the original tax evasion charges, and everything to do with with rigging one's home with explosives while filling it to the brim with weapons. The mandatory minimum for the explosives charge and the plot to kill federal agents is 30 years.

If they had protested against the government in other ways, such as speaking to the press for example, then the worst-case scenario for their tax evasion charges would be a few years in prison. Certainly not de facto life in prison. Even if they were 100% correct -- and they are not -- about the government "illegally" making them pay taxes, protesting in this way would still be guilty of the explosive and plotting charges and still be sent to prison for the rest of their days.

That Ed and Elaine practically sent themselves to prison, due to their own violent, dangerous, and downright bone-headed behavior that (again) had nothing to do with the original tax issue, does not, of course, stop the usual gang of idiots from claiming it is all a huge government conspiracy to silence them, punishing them for 'a plot to defend themselves'.

I know! Next time a cop stops me for driving 40 in a 35-MPH zone, when I was clearly only going 32, I'll shoot him dead on the spot! I'd just be defending myself against evil government coercion, right? We all know that if you think the government wronged you, every possible act of violence is justified in retaliation. Just ask Ed and Elaine!

As I said: idiots.
Ah well.

You can't make this stuff up

2009-09-05T02:33:00.000-07:00

Image credit: Southern Poverty Law Center.

You've got to give it to Mr. NotHaus: he has the perfect name for his job, that of a 'Liberty Dollar' promoter. Now, the Southern Poverty Law Center reports, he has a new job: he is promoting a Marijuana church, where he is -- waaaaaaaaaaaaaait for it -- the 'high priest'.

Yes, Virginia, we finally have an answer to the eternal 'what are they smoking?' question about tax protesters, although, to be fair, it wasn't hard to guess.

As I said, you can't make this stuff up.

If "Freedom Daily" doesn't agree with you...

2009-08-22T14:12:00.000-07:00

"Freedom Daily" is the organ of the Future of Freedom Foundation ('advancing freedom and free markets since 1989 -- has it really been 20 years?! but I digress.) There is nothing these folks hate -- and I do mean hate -- more than 'liberals', as their web site shows. To give an idea of the kind of politics they support, it should be noted that they gave a positive review to Buchanan's anti-WWII book.

Now, if those folks cannot find a shred of truth in the tax-denial movement's claims, it shows you just how far out there the tax-denial folks are.

More on Conspiracy Theories

2009-07-10T09:38:00.000-07:00

Image credit: Chris Madden.

While we're on the subjects of conspiracies -- including IRS conspiracies (or, more accurately, conspiracy theories) -- for good academic-level (but accessible) articles about conspiracy theories, Michael Shermer's latest is a good start. Also, try Wikipedia's rather comprehensive view of IRS conspiracy theories.

The problem with conspiracy theorists is that they rarely believe in only one conspiracy. If you believe that, say, the US government is ruled by reptile-like aliens, it is not a big deal to believe the moon landing was faked -- and if "they" can do that, surely you can believe "they" can convince everybody to pay taxes despite the fact that there is no law requiring it.

Ah well.

Why People Believe Weird Things (Book Recommendation)

2009-05-29T14:09:00.000-07:00

An outsider often wonders: how can anybody believe what the tax protestors, NESARA promoters, MLM pushers, and so believe? Do these folks really think that (for instance) pointing at the flag in the courtroom and shouting, "admirality flag!" will stop the trial? Or that shape-shifting reptilians are out to stop them from getting trillions of dollars? Or that losing money fast by recruiting one's own competitors, as one works for free for one's upline, is the way to success?

Well, yes, they do. And not, they are not necessarily clinically insane -- or even stupid. The truth is, human nature makes us believe things, especially things we want (or, worse, need) to be true. For a fascinating look at what makes people believe such stuff, read Michael Shermer's book, Why People Believe Weird Things.

Conspiracy Theories

2009-04-05T21:18:00.000-07:00

Those who follow the "tax protestor" -- actually, tax denial -- movement know they are deeply conspiratorial. Everything is part of an awful conspiracy, including the exact typeface used on letters they receive. In the immortal words of Aldous Huxley, paranoids live "in a world of terrifying significance."

While it is possible that some of the people who believe in conspiracy theory are actually paranoid (in the clinical sense), for most it fills some other psychological need -- in paricular, the need to explain away the inevitable failures and disappointments of life as a nefarious plot against them, and the need to feel important for being "in on the secret".

For this, any conspiracy theory will do. It is no surprise that tax protestors often believe in many other conspiracies -- such as in The Protocols of the Learned Elders of Zion (or its modern equivalents, replacing "Jews control the world" with "Zionists control the USA"), 9/11 conspiracy theories (decisively exploded here, for example), and so on.

Ponzi Revisited

2009-03-07T09:11:00.000-08:00

Every issue of "Skeptic" magazine (Altadena, California, ed. Michael Shermer) is dedicated to some popular delusion -- from holocaust denial and 9/11 conspiracy theories to "Theraputic Touch" and ancient UFOs. The latest issue (vol. 14 no. 3, see www.skeptic.com for details) deals with Ponzi schemes and, in particular, with Madoff's scam. Pick it up!

Another Quick Note about Madoff

2009-02-10T09:22:00.000-08:00

Madoff's portrait was on the cover of Shiv'ah Yamim ("Seven Days"), the weekly magazine of Israel's most popular daily newspaper, Yediot Aharonot ("Latest News"), this past weekend. The title on the cover, in huge red letters: "The Traitor". Inside the tale of woe of Madoff's victims in the Jewish community.

In a sense, the fact that Madoff scammed so many Jews is a blessing. It gives the lie to the "Jews scamming the goyim [gentiles]" antisemitic routine. The last time the ethnicity of both parties in an event was so important to the American public's perception of the relationship between Jews and gentiles was probably during the Rosenbergs' trial in the 1950s. Then, that both the judge and the prosecutor were Jews went a long way toward stopping the trial from becoming, however unintentionally, a "Christians hanging the Jews" spectacle in the view of some people.

Girls Gone Wild creator Joe Francis nabbed for tax evasion

2009-02-05T20:08:00.000-08:00

Joe Francis, who created the Girls Gone Wild videos, is accused of pocketing some $20 million in business expenses that were claimed as deductions. He faces up to 10 years in prison if convicted.

Source: Click Here

Proskauer Rose law firm dismissed from tax shelter case

2009-02-05T20:01:00.000-08:00

Prominent Houston trial attorney brought a lawsuit against many parties, including the Proskauer Rose law firm, relating to a tax shelter sold by Ernst & Young.

The action filed by Fleming and his company, Pelican Trading, alleged that the Personal Investment Corporation (PICO) tax shelters, which Ernst & Young developed -- and which Proskauer Rose allegedly said were more likely than not permissible under the federal tax code -- resulted in huge losses when an audit by the Internal Revenue Service found them unlawful.

However, the Texas judge granted the dismissal of the law firm, on the grounds that the court had no personal jurisdiction over the firm.

Source: Click Here

Son of BOSS Tax Shelter Flops

2009-02-05T19:56:00.000-08:00

Two California real estate investors went down the tube in the defense of their Son of BOSS tax shelter, involving options sold by AIG.

Thomas, a former Internal Revenue Service (IRS) attorney, and Fox owned real estate, including interests in the Library Tower, the Gas Company Tower and the Wells Fargo Center, all located in Los Angeles. In 2001 they sought out an abusive tax shelter that has become known as "Son of BOSS." In the Son of BOSS scheme used by Thomas and Fox, they purchased an exotic form of a financial option that they claim would have protected them against a catastrophic decline in real estate values, which they feared in the immediate aftermath of the terrorist attacks of September 11.

Source: Click Here

Tax Protestor Daniel Benham Convicted

2009-02-05T19:53:00.000-08:00

Tax protestor and promoter Daniel Benham of Twin Lakes, Michigan, was convicted of tax evasion for failing to file tax returns from 2000 to 2003. Benham gave seminars on how to use bankruptcy and various legal entities to avoid paying taxes. Now he can give seminars on how to survive federal prison camp.

Source: Click Here

Many Hedge Funds Are Just Pyramid Schemes -- Arthur Nadal's Valhalla Just the Latest

2009-01-19T15:26:00.000-08:00

How many hedge funds are actually just pyramid schemes? How many hedge funds that aren't hedge funds are seriously cooking their books?

Nobody knows, but as the financial bust continues the shakeout among hedge funds continues. The investors in Valhalla Investment Partners woke up this weekend to discover that their high-return hedge fund was just another pyramid scheme. Arthur Nadel, the owner of Scoop Management has disappeared and apparently taken investors' remaining moneys with him according to various news reports. The FBI is investigating.

The Valhalla fund reported annual returns of 32 percent from 2000 through 2006 -- yeah, right. But as Warren Buffet says, when the tide goes out you can see who is swimming naked, and it is pretty clear that Valhalla's returns were bogus all along.

Another philanthropist (it's easy to be a philanthropist when you are giving away somebody else's money), Arthur G. Nadel did not let being disbarred for fraud, dishonesty, and misrepresentation keep him from becoming a high-flying hedge fund manager. Even minimal due diligence by investors would have picked up this enormous red flag, but apparently no investors took the time to do so and now they've lost their money.

The problem with hedge funds is that they are opaque, nobody knows what is going on with them in any given moment, and probably many of them are just pyramid schemes. If you have money in a hedge fund, now is a good time to think about taking it out, as the hedge fund shakeout may last some years.

Source: Bloomberg click here

Quatloos!

A Schande for the Goyim

2009-01-19T10:20:00.000-08:00

The Yiddish expression in the title -- "A shame in front of the gentiles" -- describes the general reaction of those in the Jewish community and/or Israel to the whole affair. The Jerusalem Post, for example, had an editorial noting that Madoff being a Jew will surely increase antisemitism; and, indeed, the usual gang of idiots on the Internet already sees Madoff as "proof" of the evil nature of the money-grubbing Jews, out to cheat the gentiles.

The truth is a bit different, to say the least, and more interesting. Madoff actually scammed many more Jews (proportionally, at least) than gentiles. The Israeli papers in the last two months or so since the scam was exposed are full of reports of one Jewish bank owner, fund manager, or investor after another, both in Israel and in Jewish communities abroad, being "burned" by Madoff.

Why did Madoff scam Jews? Trust. Like all scam artists, he built on the natural level of trust that exists between members of a community -- religious, national, or other. You are less likely to believe a Zulu is out to scam you if you are another Zulu; especially if both of you live in the USA and therefore are a small minority among a large number of non-Zulus.

In the Israeli papers, this is seen in detail. Repeatedly, people said with a sigh: "Oy, that one Jew will do that to another Jew..." -- and one who is known as a supporter of Israel, to boot. Surely someone like that won't deliberately set out to scam other Jews?

Guess again.

P.S.

Speaking of the naive belief that people of one's own group will tend not to hurt you, Isaac Asimov tells the following story (in "Asimov Laughs Again"): once, he asked Ben Bova, the science writer, to give a lecture in his stead, since he was sick. Bova told him he could not do it -- his Catholic upbringing does not allow him to profit from another person's misfortune.

--"What are you talking about, Ben?" asked Asimov. "The Mafia--"

--"If you cause the misfortune, things are different."

National Heritage Foundation (NHF) it with $6.5 million civil jury award for abusive charitable split-dollar plan

2009-01-18T08:38:00.000-08:00

According to this News Update dated October 15, 2008, in The Chronicle of Philanthropy, a jury in Texas awarded $6.5 million against The National Heritage Foundation (NHF) for a charitable tax shelter gone astray.

The NHF allegedly talked a Texas family into establishing a charitable split-dollar plan and funding it with life insurance to benefit the family's private charitable foundation. Later, the lawsuit alleges, the NHF changed itself to the beneficiary and allowed one of the policies to lapse. The NHF claimed that it later changed the beneficiaries to a convent, and claimed that the lawsuit and award was attributable to actions of the plaintiff's other advisors.

The IRS had ruled that charitable split-dollar plans such as were involved here are abusive tax shelters.

To go to the new update please Click Here

Quatloos!

Land Patent Scam Returns

2009-01-11T17:36:00.000-08:00

An oldie but a goodie from the late 1980s is the so-called "land patent" fraud. This is where scam artists concoct a theory that the land under the house was never covered by the mortgage, and thus it can somehow be protected by purchasing (from the scam artists, of course) a totally bogus "land patent" that claims that the house is owned by some sovereign, such as an indian tribe or something.

The land patent scam went around in the late 1980s where farmers were desperate to try any theory to save the family farm. Scam artists took the opportunity to lighten the farmer's wallet of their final bucks before foreclosure.

New scams are actually rare: Most scams have been around at least once before, if not many times over the last half-dozen or so generations. The land patent scam is one of these, perpetually re-cycling itself with each real estate bust.

Read more about the latest version in this
Article.

Texas Attorney General Fighting Foreclosure Fraud

2009-01-11T16:09:00.000-08:00

The Texas Attorney General is also going after foreclosure fraud, see Article.

Calfornia Takes Action Against Foreclosure Consultants

2009-01-11T15:48:00.000-08:00

There are few things lower than taking advantage of somebody going through financially hard times, but scam artists have been known to prey upon desperation to fleece new victims. With foreclosures at epidemic levels, the State of California has acted against some of the worst of such slime, known as a "foreclosure consultant". These scammers take money from people who are being foreclosed on while providing nothing of value to the debtors.

California Civil Code Section 2945 provides:

(a) The Legislature finds and declares that homeowners whose residences are in foreclosure are subject to fraud, deception, harassment, and unfair dealing by foreclosure consultants from the time a Notice of Default is recorded …until [the property is foreclosed]. Foreclosure consultants represent that they can assist homeowners who have defaulted on obligations secured by their residences. These foreclosure consultants, however, often charge high fees, the payment of which is often secured by a deed of trust on the residence to be saved, and perform no service or essentially a worthless service. Homeowners, relying on the foreclosure consultants’ promises of help, take no other action, are diverted from lawful businesses which could render beneficial services, and often lose their homes, sometimes to the foreclosure consultants who purchase homes at a fraction of their value before the sale. Vulnerable homeowners are increasingly relying on the services of foreclosure consultants who advise the homeowner that the foreclosure consultant can obtain the remaining funds from the foreclosure sale if the homeowner executes an assignment of the surplus, a deed, or a power of attorney in favor of the foreclosure consultant. This results in the homeowner paying an exorbitant fee for a service when the homeowner could have obtained the remaining funds from the trustee’s sale from the trustee directly for minimal cost if the homeowner had consulted legal counsel or had sufficient time to receive notices from the trustee pursuant to
Section 2924j regarding how and where to make a claim for excess proceeds.

(b) The Legislature further finds and declares that foreclosure consultants have a significant impact on the economy of this state and on the welfare of its citizens.

(c) The intent and purposes of this article are the following:

(1) To require that foreclosure consultant service agreements be expressed in writing; to safeguard the public against deceit and financial hardship; to permit rescission of foreclosure consultation contracts; to prohibit representations that tend to mislead; and to encourage fair dealing in the rendition of foreclosure services.

(2) The provisions of this article shall be liberally construed to effectuate this intent and to achieve these purposes.

Why do People Fall for Ponzi Schemes?

2009-01-10T11:02:00.000-08:00

Why do people fall for Ponzi schemes? Michael Shermer, editor of "Skeptic" magazine (well worth reading in its own right -- http://www.skeptic.com -- but not usually dealing with financial scams) explains in the following link:

http://www.skeptic.com/eskeptic/08-12-23.html

(Scroll down a bit in that web page to get to the relevant article).

Shermer notes that there are four major factors -- situation, emotion, gullibility, and personality -- that effect who is likely to be scammed in what manner by whom. Yes, gullibility -- which is not exactly stupidity -- is to blame, as is greed; but the social and emotional "trappings" of the scam are very important.

Shermer agrees that the big mistake people made was not that they invested in Madoff's scheme: "the lie perpetrated by Madoff was not all that obvious or easy to recognize (in fact, it is very likely that Madoff's operation was legitimate initially but took the Ponzi route when he began to suffer losses that he was too proud to acknowledge)."

The real problem, as quatloos! warns over and over again, was "throwing all caution to the wind, as in the stories of many people (some quite elderly) who invested every last dollar with Madoff or one of his feeder funds". Such blind fate, notes Shermer, has an almost "religious quality" to it.

Read the whole thing.

The Unlucky Lucky Madoff Investors

2009-01-06T07:59:00.000-08:00

So you were lucky enough to receive money back from Bernie Madoff before his pyramid scheme collapsed? Think again.

The usual process in pyramid scheme recoveries is for the court-appointed Receiver to obtain all the financial records of the scamster, including bank accounts. Then, disbursements are traced to each recipient, who receive a friendly letter telling that they must send all the money they received back to the Receiver, so that the Receiver can pool the moneys together for distribution to all victims. Oh, and by the way, if the moneys are not returned then the Receiver will either sue the victim or obtain an order to hold the victim in contempt of court.

Upon receiving such a letter, the scam victim yells "Bloody Murder!" and immediately complains that they put more money into the scheme than they ever got back, and are still in the hole.

The Receiver just doesn't care. The money is not that of the victim, the money is that of ALL victims. The Receiver's job is to husband all the remaining assets of the scheme into the pool, and the assets include those that were paid out of the "lucky" victims before the scheme collapsed.

But what if the victim who received money doesn't have any ready cash on hand? Tough. The receiver can bring a lawsuit against the victim, obtain a judgment, and then liquidate the victim's other assets, such as houses, IRAs, etc., until the Receiver gets back all the money received from Madoff.

Brutal? Yes, but necessary to protect all victims. It doesn't make any sense than an investor who received money from Madoff a month ago should be in a better position than one who didn't. The strong powers of the Receiver to claw money out of "lucky" investors is also why there is actually the possibility of some recovery by all victims. In the Reed Slatkin scam, for instance, victims received upwards of 40% of their original investments back. In the Cash-For-Titles scam of the late 1990s, victims received over 70% of their money back.

Quatloos!

Some Good Books...

2009-01-03T12:09:00.000-08:00

Hello folks!

For those of you who want something to read about con games in general and MLMs in particular, I can heartily recommend the following (all of whom I've read myself):

Carter's account of her trip in and out of the Amway cult is probably the best no-nonsense financial analysis on how MLMs are just a way to go broke slowly. What's more, even the "top" folks in Amway, faced with a constant need to show their "wealth and success" with all kinds of expensive knickknacks, are often in worse financial shape than the suckers they fleece. You thought Amway (Quixtar) "diamonds" are wealthy? Guess again.

Nash's work is history, not financial advice, but -- quite apart from being inherently fascinating and containing many rare photos and documents -- shows how there's nothing new under the sun. The same scams that worked 100 years ago (and more) work now. There's a sucker born every minute, after all.

Fitzpartick's book is more philosophical in nature. It concentrates on how MLMs, their promises to the contrary notwithstanding, are ruinous to friendships, spirituality, and religion. MLMs, a "business opportunity for Christians"? Not really.

Scammers, con men, and MLMers (is there a difference?) do not come with a business card saying, "Hello, if you want to be scammed, call...". They try to hide their illegitimacy in many ways. Like Quatloos!, Henderson's book -- written with verve -- is extremely helpful for those who would like to recognize the warning signs that say "SCAM!" ahead of time. The chapter on MLMs is especially interesting.

Cash Value Life Insurance -vs- Term Life Insurance

2009-01-02T05:31:00.000-08:00

Question: PLEASE tell me your opinion about Whole Life / CV Life Insurance. I have seen [some idiot on TV] call cv policies ' terrible wastes of Money ' along with other Economic authorities. Of course there are the Career Life agents that say buy Whole Life as a ' Best Buy ' because the CV can become the foundation of a Retirement Plan , plus the death benefit . I am sooo Lost ,...and have been searching for the ' Truth ' for years !

Many thanks in advance !

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Whole life is "the insurance agent's best friend" because whole life policies usually have a "commissionable premium" in the 70% range, as opposed to universal life policies that pay the agents in the 30% range. With a big policy, it can be a huge difference for the agent.

For the owner, it can be a bid deal too. The problem with whole life is that it requires level funding. While sometimes this makes sense -- when the life insurance policy is part of some benefit plan requiring levelized funding, for instance -- it often doesn't make any sense at all for ordinary insurance purchases, where the owner doesn't know if he will really have the cash flow to fund the policy for whatever required period of time. So, universal life will almost always beat Whole in the "what is best for the client" competition.

Having said that, both Whole and universal life usually makes more long-term sense than just buying Term, which gets more expensive as you get older and doesn't build up any cash value to cover future payments. Usually, the critics of cash value life insurance and pundits of term insurance can only point to the current-year premium advantage of Term, as opposed to the total long-term cost which favors universal life and Whole.

But the bigger question is whether to buy life insurance at all. If your survivors will need life insurance, then buy it. If your estate will need life insurance to cover estate taxes, then buy it. Otherwise, you probably don't want to buy it.

While life insurance is certainly an "investment" in the same sense that buying a piece of property is an investment, it has to be measured in the long-term against other investments, including the fact that the CV grows basically tax-free against the death-benefit cost that other investments do not have.

Most of the time, the "other investments" will make more sense depending on a gazillion factors. There are a lot of really happy investors in equity-indexed annuities and life insurance right now, who have watched their friends and colleagues lose 30%+ while they will simply credit 0% for 2008. But equity-indexed strategies can be replicated outside of the life insurance or annuity context.

So, the answer is -- which will NOT clear up your confusion -- that it "depends" on the gazillion circumstances. Those who use a shallow analysis and say never buy cash value life insurance are wrong, and those who say buy nothing but cash value life insurance are wrong. In other words, the sound-bite extremists on both sides are wrong. What will make sense for YOU will depend on YOUR particular circumstances and needs. Maybe you need it, maybe you don't. Maybe it will make sense for you, and maybe it will not. But this is why good financial planners are worth their weight in gold.

Closed End Managed Buy/Sell Program Is A Scam

2009-01-02T05:21:00.000-08:00

Question: Are closed end managed buy/sell programs legitimate? I've made introductions to parties claiming they can produce 30% gains per trade as the buyer is under contract to perform. I think it could be a scam.

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It is a scam of the type known as a pyramid scheme. The term buy/sell programs is a term often used by scam artists to try to impress investors into thinking they are putting money into a sophisticated hedge fund (many and possibly most hedge funds are scams in our opinion, but that's another matter entirely), where the fund can generate big returns without any risk of loss.

In fact, the risk-reward correlation is as absolute as the earth-gravity correlation: You just can't get away from it. You cannot have big returns without big risks. Nobody can promise 30% gains per trade without extraordinary risk. But this is just a pyramid scheme where old investors are being paid with new investors' money, but no traders are actually occurring. Like the Bernie Madoff scam, they are just making up statements showing trades out of thin air. Run!

Rent Scam Where Check Covers Rent In Full

2009-01-02T05:12:00.000-08:00

Question: I have recently posted a home for rent on Craigslist and have received several requests from emails claiming to be out of the country and they are ready to rent sight unseen. When I insist they fill out an application they do not respond. Initially they were offering to mail me a check to cover rent in full. How does this scam work. I cannot figure out how they can be scamming when they are only asking for my name and address to mail me a check? Have you heard of this?

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This is a variation of the Nigerian 4-1-9 scam. Here is what will happen: The renters will send you a cashier's check for the full amount, and may even overpay. Then, they will want you to wire-transfer some of the money back or remit their overpayment. You will wire them money, and only 30 days later find out that the cashier's check is bogus. You will then go to your bank to try to get the wire-transfer reversed, only to find out (1) the bank cannot do it and you, and not the bank, are responsible for your loss; and (2) authorities outside the U.S. don't care that you've been scammed.

This is a very common scam, often run with the sale of automobiles. Same thing: Scammers send a cashier's check that overpays for your clunker, you wire the difference back, and then find out that the cashier's check is bogus.

Anytime somebody outside the country offers you a payment for something, be very suspicious because it is more likely a scam than anything real.

Nigerian Date Wants Travel Money

2009-01-02T05:06:00.000-08:00

Question: I sent a girl money to fly from logas to portland,and she told me that they wouldn't let her board the plane because she didn't have enough travel money,they told her she need 1200 doller's travel money to beable to board plane,is this true ??
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This is another version of a dating scam a/k/a Nigerian dating scam a/k/a advance fee fraud. You are probably not even corresponding with a girl, but a 60-year old fat guy sitting in a cybercafe somewhere in Africa. If you send the $1,200 you'll be scammed instantly.

Reader Question About Dating Scam

2009-01-02T04:53:00.000-08:00

READER QUESTION:

Have you ever heard of a scam involving a dating site. Guy looking for lady. Story when contact is made that he in Africa prospecting diamonds. After a couple of week's diamonds found, guy coming home but has problem paying royalties on diamonds. Can lady send him money as he doesn't have enough with him?

I am experiencing something like this now. Could be legit and I certainly am not sending anyone any money but if it's a scam I sure would like to know and that others are warned.

Thanks

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This is a common scam, known variously as a "dating scam" or a "Nigerian dating scam". It is a version of the Nigerian 4-1-9 scheme, which is technically known as "advance fee fraud".

You've been corresponding with a scam artist, which might not even be a guy, but is very likely to be sitting in a warehouse in Nigeria spamming and scamming for people to fall for this scam. There are no diamonds, and no royalties to be paid on the diamonds -- they've just made this up to get your money.

Unfortunately, there will be a number of suckers every DAY who fall for this scam, which is why running scams is the third largest business in Nigeria. Stay safe, and just refuse to deal with anybody in Africa, or anybody who wants your money.

UBS Depositors Looking To Bank For Protection

2008-12-31T10:30:00.000-08:00

Clients of Swiss banking giant UBS are trying to get the bank to continue to hide their names from disclosure to tax authorities in the United States.

UBS has been using the names of a few hundred UBS depositors (read: tax evaders) as a bargaining chip to avoid the bank's indictment in the U.S. for assisting with tax evasion. UBS claims, apparently with a straight face, that these depositors mislead the bank about whether they were correctly reporting their U.S. taxes. The depositors are claiming, apparently also with a straight face, that UBS mislead them into believing that UBS would report their taxes for them.

In fact, both UBS and these depositors knew what was going on: The depositors were using UBS to commit tax evasion, and UBS was actively assisting them with it by setting up bogus corporations so that the accounts could be held in corporate, not individual, name.

The IRS has estimated that UBS has assisted 17,000+ U.S. citizens to evade taxes. UBS has offered to turn over a few hundred names. But it is unlikely that the IRS will stop there, especially with an incoming Obama Administration that promises to be tough on offshore tax evasion.

Article

Madoff Scheme Investors Will Have To Give Back Even If Less Than Original Investment

2008-12-27T09:27:00.000-08:00

Some of the victims of the Madoff pyramid scheme are about to receive more bad news -- If they received any money back from Madoff, the Receiver will want it back.

When a pyramid scheme collapses, the Court appoints a Receiver to husband and sequester all the assets of the scheme for the benefit of all investors. The Receiver will create a Victim's Fund, and all victims will receive a percentage of the Victim's Fund based on the size of their original investment.

The assets of the scheme include payments that the scheme made to others, including payments back to investors. If a Madoff investor received anything back from Madoff -- even if it was less than their original investment -- they will have to give that amount of money back to the Receiver, to be pooled with any other money and assets that the Receiver can find, and then these investors will get their percentage of the Victim's Fund.

If a Madoff investor refuses to pay the Receiver back, the Receiver can sue the investor and make the investor pay the costs and attorney fees of recovery, in addition to getting the money back. In some situations, the Court may also issue order to hold a recalcitrant investor in jail for contempt. "Resistance," as one might hear in a sci-fi B-movie, "is futile." It can also be very costly.

Charities are not exempt from disgorgement. If a charity received money from Madoff, it had better be prepared to give the money back. Charities may have exemption from income taxes from the IRS, but charities have no special exemption at all from Receiver-ordered disgorgement of what amounts to criminal proceeds. This will hit a lot of charities hard at this time when the economy is sharply down and charitable inflows have slowed from a mighty river to a miserly trickle.

Receivers and disgorgement are one of the more unpleasant things about pyramid schemes, and have the effect of re-victimizing the victims, sort of like having a rape victim testify at trial. But it is necessary to protect the rights of all investors, and not just those who received redemptions from Madoff.

The Madoff Scheme Isn't New -- Just Bigger

2008-12-26T06:05:00.000-08:00

So people lost $50-plus billion to Bernie Madoff, so what? The only difference this time is that a few institutional investors, charities, and celebrities were caught up in this particular pyramid scheme.

Every year, pyramid schemes divest literally thousands of people of their life savings and put seniors on the street. Whether the victims are attracted through internet chat rooms or because the scam artist hoodwinked the local pastor into arranging investments for the benefit of the church, at any given time there are probably hundreds of pyramid schemes running somewhere in the U.S., and thousands more throughout the world.

Here at Quatloos! we have see and tracked many of these scams. For years, we tracked the Omega Trust & Trading scam, where people sent in $100 to buy "units" that were initially promised to give a $2,500 return, which eventually grew to where each unit was alleged to be worth $100,000. Indeed, even when the Omega scammers weren't paying off on the original scam, they ran a subsequent scam to sell "refund units", i.e., the units from other investors who had obtained refunds (although there were not any of these in actuality), and fleeced even more money out of their already-jilted investors.

Perhaps what makes the Madoff scam is the reputation of the main crook. Most pyramid schemes are run by those with no real financial education, background, or experience. Clyde Hood, who ran the Omega scam by contrast, was simply a retired electrician in Mattoon, Illinois. Madoff was the chairman of the NASDAQ from 1990 to 1993 -- no pyramid schemer has ever had such stellar credentials.

All the signs of a scam were there. The high but steady returns, the lack of transparency in how money was being made, and obscure auditors all raised red flags to those interested in knowing. And, indeed, it has since come out that there were at least one significant whistleblower, and maybe several.

But at the end of the day, the investors who lost everything have their own stupidity to blame. Sure, it is always easy to "blame the victim" for not discovering a scam, but this isn't why these investors were stupid. The reason the Madoff investors who lost everything were stupid is that they did not diversify their investments. There is simply no reason why any sane person -- or charity -- would have more than a small part of their investment with an obscure hedge fund like Madoff's. By following even minimal diversification rules, there is absolutely no reason why any Madoff investor should have lost more than 10% of their portfolio.

So why did investors throw caution to the wind and put everything with Madoff: Some combination of laziness and greed. These investors were getting a higher (albeit, paper) return with Madoff than on anything else they were investing in. So, instead of putting in the hard work to find other good investments, or accepting a lower return on their other investments for the sake of diversity, they instead put all their money with Madoff.

Mark Twain once wrote, "put all your eggs into one basket, and then watch it mightily." It's that second part that the Madoff investors missed, and if they weren't going to watch their investments like a hawk, they should have put them into one basket.

The way to avoid being scammed out of your portfolio is the same that it has always been: Diversify, diversify, and diversify. Decide how much is the most that you can lose on any particular investment, and then limit the investment to that percentage. It should be very rare that any particular investment, other than cash or government-backed bonds, should be more than 10% of a portfolio.

And that's not any sophisticated financial strategy; that's just common sense.

Talk about the Madoff scam on our new Madoff Scam discussion forum at http://quatloos.com/Q-Forum/viewforum.php?f=36

Welcome to Quatloos! Version 3.0

2008-12-15T18:40:00.000-08:00

In the beginning and somewhere around 1997, there was an Oklahoma attorney (Yours Truly) who just happen to mention something on his legal website about offshore investment scams. The inquiries that the Oklahoma attorney received and his time in responding was driving him batty, so he decided to create a small website to give plain information on these scams in the hopes that people would leave him alone and not ask stupid questions, such as "Is that deal in Grenada where I can make a 40% weekly guaranteed return on my mone for real?"

Thus begat Quatloos! Version 1.0. The first version was pretty bland, but after a few tries a pirate theme was adopted that persists to this day. The website became a niche favorite, and won some awards. The Oklahoma attorney was even invited to testify before Congress about schemes, scams, and cons.

Just forward to 2002, and the questions and comments had gone from a few a day to a deluge. It was frankly impossible for any one person to keep up. Thus, a discussion forum was created where some folks could ask questions, and other folks could answer them. Scam artists even made it to the board to argue that was they were doing was legal, and sometimes even try to pitch their investments to others. A small army of volunteers arose to ridicule them. And, thus, Quatloos! Version 2.0 became popular as a discussion board.

But now it is 2008, and the main Quatloos! board has fallen into disrepair for the simple reason that it is TOO BIG and has far too many pages to be manageable on anything like a day-to-day basis without the sizeable staff that our paltry non-profit organization totally lacks. Just figuring out where a single new .html page should go, and creating basic links to it, now takes a couple of hours.

Therefore, be it resolved that the following changes will take place:

(1) The existing Quatloos main pages will be moved into the background, into a section called Ye Olde Quatloos! These pages will stil be on the server for research and archival purposes.

(2) Quatloos! main pages will convert to Blog pages, and volunteers will be sought to daily add stories and commentaries on various scams and related topics.

(3) The Discussion boards will be expanded to include forums for specific large scams, for instance, the Madoff hedge fund/pyramid scheme will be given its own forum.

As always, your comments are greatly welcomed to me at jayadkisson >[at]< gmail.com

Your most humble and obedient servant,

~ Jay