Judge: Whistle Blower Can Call Nu Skin a Pyramid Scheme

Posted on Oct 16, 2012 in MLM, News

A state judge in Utah modified an earlier decision and now has ruled that a prominent Nu Skin whistle-blower is legally allowed to call that company an illegal pyramid scheme, based on the whistle-blower’s analysis, direct experience and knowledge of the Nu Skin business. The ruling is a victory for free speech and a setback for Nu Skin. An earlier court ruling had imposed a prohibition on virtually any critical statements made about the company by the writer.

According to a report in the Salt Lake City Tribune, “(the judge) admitted his previous order was overly broad… Van Nederveen Meerkerk’s attorney, Mark Stubbs of Provo, filed a petition with the Utah Supreme Court to appeal the previous restrictions, which Stubbs argued violated free speech rights.”

In published remarks after modifying his earlier ruling, the judge was quoted, “If he (Van Nederveen) wants to talk about Nu Skin being a pyramid scheme or he thinks it’s a big criminal enterprise, he’s allowed to do that.”

The revised ruling may have significance beyond the Tillotson lawsuit. Other MLMs have sought to suppress views or research that indicate they are operating illegally and conning people out of their savings with misleading income promises. The lawsuits against whistle-blowers, also called SLAPP (Strategic Lawsuit Against Public Participation) seek to bankrupt critics with legal fees, discredit their statements and ruin their reputations.

Diederik Van Nederveen, ex-husband of Nu Skin co-founder Sandie Tillotson, is currently writing a book about his life, includuing the period when he was married to Tillotson, attended insider meetings of Nu Skin officials, participated in major recruitment events all over the world and worked as a Nu Skin distributor himself.

On his website and in the soon-to-be-published book Van Nederveen  asserts that Nu Skin is operating a pyramid scheme, based upon deceptively inducing consumers to pay money when they sign up as salespeople, buy inventory and then recruit others to do the same. He charges that almost no Nu Skin salespeople earn a profit from legitimately selling goods to actual customers and that without Nu Skin’s MLM rewards tied to recruiting new salespeople, the company will collapse.

Consistent federal court rulings require that multi-level marketing schemes must base rewards tied to recruiting on retail sales revenue (sales to non-distributors), not on purchases of newly recruited salespeople themselves. Recent questions about the income sources of Herbalife, an MLM almost identical to Nu Skin, by hedge fund manager David Einhorn led to a huge sell off of Nu Skin stock by shareholders. And a recent article by pyramid legal expert and former Wisconsin Asst. Attorney General, Bruce Craig, raised direct challenges to the legal foundation of Herbalife and related companies such as Nu Skin.

Van Nederveen also cited research showing that 99% of consumers who join Nu Skin lose money and that Nu Skin’s recruitment claims about the “income opportunity” are false.  He also raised questions about the validity of Nu Skin’s claims that its products “reset youth gene clusters.”

Tillotson filed a $60 million lawsuit against Van Nederveen in an attempt to halt the whistle-blowing. In an earlier ruling on the suit, the state judge in Utah, where Nu Skin is based and is a major employer and contributor to political campaigns and the Mormon church, supported her suit with a prohibition against virtually any statements critical of Tillotson or Nu Skin. The ban even prevented the defendant from publicizing the suit itself. The new ruling lifts the “overly broad” ban and limits it only to defamatory statements about Tillotson personally. Van Nederveen’s book and website are almost totally focused on the Nu Skin business model, its political connections (with Mitt Romney), it false income claims and challenges to its claims about “anti-aging” products, not on Tillotson personally.

In addition to the burdens of the lawsuit, Van Nederveen has been subjected to website attacks on his character and other attempts to suppress his views.

Official website of Diederik Van Nederveen and previews of his book: http://diederikvannederveen.com/

Supporters have set up  a site to gather financial support for his legal defense: http://legalteamdonation.blogspot.com/

 

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