The text of a new lawsuit filed against the MLM, Visalus, paints a vivid picture complete with video links and color photos. The suit was filed by the law firms, Sommers Schwartz in Southfield Michigan, Prebeg, Faucett & Abbott in Houston and Wexler Wallace in Chicago, which are also suing the “engergy” MLM, Stream/Ignite.
The text of the lawsuit declares “racketeering” to be the basis of the suit’s claims against Visalus and its promoters:
“This Racketeer Influenced Corrupt Organizations, 18 U.S.C. §§1961 – 1968, (“RICO”) action arises out of a pyramid scheme perpetrated by modern, Internet-savvy company peddling powdered weight-loss shakes. Well over 100,000 innocent people paid the scheme up to $999 for the “business opportunity” to become distributors, or Independent Promoters (“IPs”), for a soy protein and sucralose concoction. The vast majority lost their money… All of the Defendants have acted as an “association-in-fact” for a common purpose…- – the unlawful pyramid scheme.”
Visalus Is Mainstream MLM
Visalus is a subsidiary of Blyth Inc., a publicly traded company on the New York Stock Exchange whose other subsidiary, PartyLite, is a member of the Direct Selling Association. Robert Goergen Jr., the son of the CEO of Blyth and president of PartyLite, is on the Board of Directors of the Direct Selling Association (DSA). In January 2013 Visalus itself applied for membership in the DSA.
For a time, Visalus, was the fastest growing MLM in America and perhaps the world. In early 2012, the company reported that in 2011 it had achieved net sales of $231 million, seven times its 2010 volume of $34 million. Revenue in the first six months of 2012 continued to spike upward, 450 percent to $326 million. The skyrocketing volume boosted the Blyth stock to the high 20s at the start of 2012 to an astonishing high of $45 a share by August 2012. Apparently seizing the momentum, Blyth, the parent company sought a spin-off of Visalus with a $175 million initial public offering of stock (IPO).
While Visalus was climbing, it was all the rage in MLM world. Yet, according the class action lawsuit, Visalus’ fast growth was itself a feat of deception. The suit offers evidence that the extraordinary rapid growth was achieved by pirating top recruiters from other MLMs who had existing and large “downlines” which they brought with them over to Visalus. Currently, Visalus announced it is focusing on the Latino community for recruits.
Another MLM for Wall Street
When Blyth attempted to spin off Visalus with its $175 million stock offering, during the time of spectacular growth figures and a ever-rising stock price, businesswriter and analyst, Herb Greenberg of CNBC was alone in sounding alarms of suspicious maneuverings and a house of cards, noting, “In its simplest form, ViSalus is in the business of selling product to distributors.”
Then, at the end of September, 2012, Blyth abruptly and inexplicably withdrew the public stock offer. Blyth stock plunged 20% in one day. In the following quarters, reported sales, distributor recruiting and revenue of Visalus declined dramatically, which they have been doing to the present. The stock price has plummeted to below $6.
As the stock fiasco was unfolding, the company was also profiled in an extensive investigative report authored by journalist, Roddy Boyd of the Southern Investigative Reporting Foundation, which detailed stock maneuverings and the pyramid recruiting program.
As an example of deception claimed in the lawsuit, consider the section describing a classic MLM event, the “ritual of check waving.” The lawsuit states:
It is well-established in the network marketing business that one hook to get new recruits in the door is the check-waving ritual. The ritual is typically performed before a large crowd, videotaped and photographed, and images of the happy recipient shown to potential recruits in printed materials, on the Internet and wherever they can be spread. The defendants all participate in this show.
While ViSalus has staged the check ritual countless times it adds a twist to the ritual: the checks are not actually paid. The company does not explain that the distributors waving the giant check were brought on board through special deals. Nor does it explain, except in very small print, that it will pay the check in 10 years and only if the recipient continues to be “active” with the company, and if, and only if, it chooses to do so.