Two ex-distributors filed a class action suit this month against Advocare, a leading MLM company based in Plano, Texas.
Lisa Ranieri of Virginia and Megan Cornelius of California said they each “lost thousands of dollars trying to be a successful distributor”, which is not unusual according to experts who have studied loss rates for large MLMs such as Advocare.
In a complaint filed in the U.S. District Court for the Northern District of Texas, compelling evidence is provided that Advocare is a pyramid scheme that recruits new distributors to pay money into the scheme, which is used to pay others in the scheme, as well as the scheme promoter.
The complaint gives an interesting explanation of why Advocare is promoting a pyramid scheme and not just products to be sold directly:
Some MLMs (like AdvoCare) are pyramid schemes with a twistrather than simply selling participants a right to share in the money paid in by other participants, the MLM sells participants a product and the right to share in the money paid in by other participants. The sale of the product is just a mask to obfuscate the true nature of the scheme.
The complaint goes on to provide a detailed description of Advocares bogus direct selling opportunity, when in fact it primarilyy incentivizes the recruitment of a downline. Impressive evidence is presented of income misrepresentations and high loss rates, limited retail sales, encouragement of inventory loading, and smokescreen policies to give the appearance that retail requirements are followed.
The company claims that complaints must be settled by arbitration. But the complaint makes clear that causes of action preclude arbitration, including racketeering, effects on interstate commerce, mail and wire fraue, federal securities fraud, and unjust enrichment.
The complaint is extremely well-documented and deserves the attention of consumer advocates who are working to expose and prevent MLM/pyramid scheme fraud.
You may find interesting the article about the case that appeared in the the Dallas Morning News. You can also view a special ESPN report on how Advocare has used endorsements by athletes such as New Orleans Saints quarterback Drew Brees to glamorize its program and its products.
For more information about the case, contact Adam Swick 0r Ben King of Reid, Collins, and Tsai, LLP. Telephone: 512-647-6100. Email: [email protected]. For information about this award-winning law firm, go to http://www.rctlegal.com
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