### Amway: The Untold Story

Expenses

The typical response of Amway distributors to stories of poeple losing money in Amway is often something like "But how can you lose money in a business that only cost $130?" The following information shows the real expenses involved in "The System," the approach to the Amway business as taught by Britt, Yager and others who rely heavily on the use of motivational "tools." Note not only the actual amounts spent on tapes, rallies, etc., but the pattern of uplines urging distributors to go into debt if necessary in order to buy more tools and attend more rallies. There are only a few examples here, but this is fairly representative of what I've heard from many other ex-distributors. As evidenced by the first quote, even Amway Corp. recognizes that distributors may not show a profit for several years.

From Amway's SA-4400, 1996

> Gross Income: The amount received from retail sales of products, minus the cost of goods sold, plus the amount of Performance Bonus retained. This does not include deductions for business expenses that, of course, will vary according to the manner in which each individual distributor operates his or her own business. There may be significant business expenses, mostly discretionary, that may be greater in relation to income in the first years of operation.

From Organizational Deviance in the Direct Selling Industry: A Case Study of the Amway Corporation, by Carol Juth, Ph.D., 1985

> The Sale of Non-Amway Motivational Materials
> Motivation is a key factor in sales success. Sales people must be motivated to sell their products and themselves. To this end, the direct sales industry and particularly the Amway Corporation have found it advantageous to "utilize various techniques to motivate individual salespersons to devote efforts to maintaining or increasing their sales volume, including but not limited to, the use of meetings, seminars, rallies, tape recorded communications, newsletters, pamphlets and books" (Cairns, et al. v. Amway Corporation, et al. 1984). As noted earlier in this chapter, the Amway Rules of Conduct do not prohibit the use of non-Amway materials by distributors in their lines of sponsorship.

> In 1982 the State of Wisconsin examined the tax returns of the 20,000 Amway distributors in the state and found that "direct distributors who make a gross income on average of over $14,000 wind up losing a thousand dollars after business expenses." (60 Minutes, p. 5). The business expenses of an Amway distributorship include such things as membership in tape and book clubs, attendance at rallies and meetings, and purchase of both Amway and non-Amway produced materials for use in their business. While the Amway Corporation contends that such items are mostly discretionary business expenses, there is evidence to indicate that some lines of sponsorship make such items and their attendant costs mandatory.

> In 1982 Congressional hearings were held on the deductibility of business expenses by self-employed individuals. At these hearings the Internal Revenue Service presented data which "illustrate actual situations in which individuals engaged in direct selling activities have reduced the amount of tax liability shown by them on their returns by using deductions claimed to arise from their selling activities to offset wages and other non-business income" (U.S. Congress, House, Committee on Ways and Means Subcommittee on Select Revenue Measures., 1982a, p. 4). As evidence, composites of 20 tax returns of direct sellers were provided to the Committee. What is of importance here are two of the categories of deducted expenses: Tapes & Recorders and Books & Literature. Of the 20 returns provided to the Committee, 14 had deductions for Tapes & Recorders ranging from $31 to $1,773 with an average deduction of $630; thirteen returns indicated deductions for Books & Literature ranging from a low of $10 to a high of $933 with an average of $271.

> There appears to be hundreds of dollars spent by direct sellers for tapes, recorders, books, and other literature. The researcher obtained from one ex-distributor a collection of tapes and books in excess of 150 items. What the returns do not tell you is who benefits from the sale of such tapes and literature. Earlier is was suggested that high level distributors profit from the sale of such non-Amway products. Clearer evidence to support this thesis come from case documents filed in Ohio.

Following are a number of quotes from current and former distributors:

> Sidney,

> The material presented in the tapes and books was definitely mostly "rah rah" stuff. Yes, there was some practical material there, but you're on the mark. I recently threw away about three hundred tapes and several books. Most of the books that came down through the organization were fine ... no bad material - but it was the VOLUME of material that really started to bother me. We were on "tape of the week", "book of the month", "tape of the month" and of course we all had to have a copy of the "Profiles of Success" and our little pocket calendar. If you didn't listen to at least one tape per day you weren't comitted! "Drawing Circles" as we called it had to be done a minimum of 10 times per month to make it work. 15 times if you wanted to be a Direct. Oh yes ... and you also weren't comitted if you didn't subscribe to the yearly newsletter to the tune of $35.00.

> That's just the "subscription stuff". Then, all aspiring Directs were to make sure and attend the local Seminar and Rally each and EVERY month. (If you didn't do that, you'd starve mentally). Once per quarter, if you want to really tie in to the "power" you had to go to some regional leadership meeting. Let's see, in the spring it was "Spring Leadership". Summer: "Family Reunion" Fall: "Free Enterprise Day" Winter: "Dream Night".

> The smaller Seminar & Rally functions were not particularly expensive, usually about $12 to $15 a head. BUT, if you had kids, you typically had to hire a babysitter and in our case, drive to Greenville or Anderson (2 hours away or so). The S&R's took all day on Saturday so you had to have an all-day babysitter, or take the child with you (which many do). The S&R's could be fun, but it was a long day. After getting back, I was often depressed because I felt that I hadn't performed adequately in my business that month. By the time Saturday was over, I was not only depressed but had spent another $100 I couldn't afford.

> You opened a can of beans, Sidney. It's 5:00AM and I'm on a roll. You asked for it! Maybe all this will help someone else from getting in the trap - I've not put this dissertation on a public forum before.

> The larger functions were more expensive. Typically they ran these as package deals, including the room in the hotel and a couple of meals (which were OK). Normally the cost was right around $500.00 for a weekend function such as this, not including your transportation costs, extra eating (all but the banquets provided) and of course, babysitting if you needed it. (For this we wound up increasing the limit on a credit account somewhere).

> They usually brought in the heavy hitters for these meetings and often ran them until the wee hours of the morning. I hated those functions. By the time 1:00AM rolled around sometimes, I was well past wanting to call it a night and they were still rolling up on stage. Good grief. Then we usually had to be back at it at 8:00 or 9:00 in the morning (after breakfast at 7:30). "Sleep fast" they told us. Boy, it was quite a show.

> By the time the weekend was over, I was usually "motivated" again, but it might last two weeks. Pretty expensive motivation.

> It's funny, now that I look back on it Sidney, that all the time this was going on I would have told you how wonderful it all was. I was digging myself a hole doing something I really didn't want to do thinking that someday, maybe, I would get it right and become successful. (rest of message lost.)

> Seems that nobody wants to post publicly how well they did or are doing in amway. Well, since I am no longer involved, and the reasons why are much to lengthy go into in this thread, I'll post my 1992 earnings from my schedule C. I'm not ashamed to do this. And Amway says I can post my own income. So here goes.

> A couple of qualifying statements. First, I spent many years in this business, in fact, I was involved TWICE. During 1992, my wife and I for one month achieved 4000pv. This was the largest our business ever saw. Our average pv for the year was around 3000 pv. During that month, we had 10 personally sponsored, and paid out 7 pv checks to the downline. There were about 40 people in our business. Many of those were on standing order tape, and were going to the meetings. That year we averaged 3.9 plans per week.

> Bear in mind, these numbers are rounded to the nearest $10, and represent totals for the year.

>     Total PV check profit, after paying downline : $4300
>     Total retail profit:                             800
>     Total profit from books, tapes, functions:      $ 00

>     Total profit for 1992:                         $5100  GROSS.

> Now, for expenses.

>     Major functions:
>     Dream nite                                      $100
>     Leadership                                      $350
>     Family reunion                                  $430
>     FED                                             $120
>     Total                                          $1000 for major functions.

>     Air tickets or travel expenses to
>     major functions, since we live in
>     southern siberia:                               $1200 total

>     Now for the monthlies:
>     minis, regionals, etc:                          $280

>     Tapes, standing orders, extras, etc:            $600

>     Car/gas expenses to show those plans
>     4 nites a week, some at a distance:            $2200

>     Misc other expenses, I-paks, literature,
>     markers, etc:                                   $300

>     NOW.                            Expenses total $5580

>                                     Gross profit = $5100
>                                         Expenses = $5580

>                                 NET PROFIT for 1992,  $ -480

> Thats a negative, for those of you in Rio Linda. Fantastic incomes, eh??

> Aint it great!

> Oh yeah. Did I mention that this was our best year??? I could, if anybody was interested, post ALL previous years NET (LOSS) income if you really want to see pathetic! Our FIRST full year in the business showed a net loss of about $4200 (tapes, functions, rah rah). We just LUVED funneling that kind of money into the tube.

> It really is pathetic. I remember seeing downline distributors on the front row at rallies throwing their fists into the air screaming and crying how they're going diamond someday. Every single one of them TODAY are not in Amway anymore.

> The view changes somewhat when you get a downline and they do the same thing you do....its called "duplication" in the Amway business. You go around chanting and rah rahing about how well you are doing when down deep your sick because you KNOW you aren't making squat. And then do see people in your downline do the same thing when YOU know they aren't making squat either.

> This is why you never will get an Amway person to HONESTLY admit how well they are doing. NET INCOME, usually aint much. You will ALWAYS get the same thing...it's none of your business how much I'm making, or "my mother doesn't even know how much..." If I was doing that poorly, I certainly wouldn't tell MY mother!

> Don -

> (With no business losses this year and an extra $5000 NET to spend!!)

> I can't comment on your business. Howver, in my case over a year's time, I had a net loss at every pv level I was at during the time I was in Amway. I was paying 6 or 7 pv checks at 4000. I had 1 leg at 1500. I had about 35 to 40 people downline. That year we kept $5100 gross after paying downline but before business deductions.

> Our functions obviously were much higher. I'm married, so function costs were double. A couple hundred dollars for leadership. Four hundred dollars for Family reunion. Plus dream night and FED. Our major function expenses were about $1000 per year. The other functions were abot $300 a year average. Travel to and from the major functions (we live in Siberia) were $1200. Tapes, $600. (we wer both on SOT) Etc Etc.

> The year we were 4000 pv we showed a net loss of about $480. And that was our best year. Now before anyone flames me on "any business has expenses", DUH. I know that. But my "conventional business" has never shown a loss. It has ALWAYS made money.

> Also, where do you get that "reduction in tax liability"? If you show ANY profit at all you pay taxes on that profit. It is only if you have a that you would show a deduction in taxes (assuming you are offsetting your job income with that loss). I'm not flaming, I just don't see it.

>     > If Ray Kroc can go six years without a paycheck from his
>     > McDonald's organ- ization, and later become a billionaire,
>     > I can learn from that.

> Ray Kroc had money to live on for six years too! He didn't need to collect a paycheck. Also, it was something he CHOSE to do. No one told him he had to put all his profits back into the business. No one told him he had to go to monthly business meetings to be successful. No one told him he had to be on SOT to be successful. No one told him he HAD to be at Sunday morning church service at his McDonalds board meetings in order to be successful.

> Big difference.

> BTW, I've heard the Ray Kroc tape too.

> Don

> Before your start a business it is a good idea to estimate the monthly cost of running your new business. Make sure that you can offord the final tally. Since there is much discussion going on about the Amway business, I thought I must tell you (with experience from the Britt system) how much you should expect to spend (invest, if you may) every month on an average, if you decide to pursue the Amway business.

> If you are already involved in Amway, you might already know this.

> These charges are for a (core!) couple. For singles that are core, other than cover charges at meetings/rallies/functions and the baby sitting charges (not included in the following) the expenses are essentially the same.

>     $ 32  * Weekly Open Meeting cover charges ($4 x 2 heads x 4 weeks)
>     $ 24  * Monthly Seminar & Rally cover charges ($6 x 2 heads x 2 sessions)
>     $ 25  * Amvox Voice mail
>     $ 40  * Standing Order Tapes ($6.36 x 6)
>     $ 10  * Books (averaged for a month)
>     $  5  * cost of video tapes (averaged for a month)
>     $ 50  * Difference in cost of products you buy that are more
>             expensive than equivalent products in other MLMs (not stores!)
>     $ 50  * Gas expense incurred because of the business
>     $ 30  * Eat-out expense incurred because of the business
>     $ 10  * company product literature
>     $ 50  * Long distance expenses incurred because of the business
>     $165  * Cost of the 4 functions averaged to monthly expense ($500/function)
>     $170  * YOUR TIME, a minimum wage of $4.25/hour (assuming 10 hours/week)
>     ------*----------------------------------------------------------------------
>     $661  * TOTAL. It is $491/month if your spare time is worth nothing ($0/hour)
>     ------*----------------------------------------------------------------------

> This does not include the baby-sitting charges and the cost of the invaluable time that is lost in not spending with your wife, your children, and your friends.

> Just trying to help

(Excerpted from a comprehensive analysis of Amway statistics by an engineer and former Amway distributor of 3.5 years. See Amway Statistics article for the complete analysis.)

> The SA-4400 figures are gross income figures and do not consider expenses, so I must rely here primarily on my personal exposure to Amway. Those with a BV of under $200 are not very active--at most their expenses consist of mileage to one local meeting per month and one tape per week. If their BV is over $200, though, their expenses rise sharply--they are probably rather rigorous followers of "The System." There are a few distributors with large volumes that focus their efforts on retail sales and/or do not spend money on motivational materials and meetings--which IMO is the best approach. I will focus here, though, on the traditional approach and methodology that most prospects and distributors would encounter. The traditional approach will have one believe that the following are necessary minimum monthly expenses:

>     8 tapes/month ($5.50 plus tax & shipping):     $ 48
>     1 book per month                         :     $  7
>     1 "open" meeting                         :     $  5
>     1 "seminar/rally" meeting                :     $ 20
>     0.33 "functions"                         :     $255
>     Misc Sponsoring Supplies                 :     $ 10
>     Telephone costs                          :     $ 25
>     Mileage                                  :     $129

>     TOTAL                                    :     $500

> I have used above actual current prices for books, tapes, and meetings and assumed that a couple is operating the business and both attend the meetings.

> The function cost is based on 4 functions/year, a private room for the couple and $300 per function in transportation costs for the couple. Telephone costs include voicemail fees and about $10 in long distance charges. Mileage is based on the standard 27 cent per mile rate, 30 miles round trip to each activity and includes 2 meetings, 10 "Showing of the Plans", and 4 product pick-ups per month. Obviously, mileage, telephone, and function transportation costs could vary significantly depending on individual circumstances; I have tried to pick what I feel are conservative typical values. Actually, one is supposed to think nothing of driving 90 miles one way to present the plan or attend a meeting. Our actual monthly expenses over a 12 month period in which we followed the traditional methods fairly rigorously averaged $508.81.

> Hi Sidney,

> Here is the copy of the letter I sent to the Hanrahan's I promised you.

> October 2, 1994

> Dear John & Stacey,

> This letter is to inform you of my experience with the Amway Corporation and more specifically with the (Dexter) Yager group. I respectfully submit this story to be used in the Class Action Suit presently underway with the Yager/Britt lines of sponsorship and Amway Corporation as defendants.

> In March 1990 I was approached by a friend who asked me if I were interested in making more money. I excitedly said "Yes" as I was in dire need of more income. My friend * told me he had met a man * who was making $100,000 a year who was looking to help others become successful in their own business with his help.

> I was loaned an audio tape to get some information about the opportunity. Although the tape did not deal in specifics it did sound like something was going on and I wanted to know more. I called my "sponsor to be" * and asked to get involved. He gave me another tape and told me he would be getting back to me soon. I listened to the second tape and got back to "Gabe" as soon as I had done that, wanting to know more. He told me he would come by with a friend who was "successful in the business" to explain to me the details. I know now, that the phrase "successful in the business", was misleading and in fact, a lie as both were just starting and had not made any money.

> We set a meeting time. * and his friend of many years, * *, stopped by and explained the program to me. I was told of a group of major service and manufacturing companies that had come together to form a network operation where I could plug in and move products and services for the likes of MCI long distance phone services, Sony, Panasonic, General Motors and many other (about 2,000) major corporations. Needless to say I was very excited as it seemed a perfect way to move products and for "the average person to add to or, replace their income with"which was what I saw the business as, and way to help others do the same just by buying from "yourself" and teaching others to do the same to add to their incomes.

> Sounded great! A way to succeed by lowering costs (as we were to able to buy "wholesale") and increasing incomes by spreading the "good news".

> It was explained that the only way to do this was to become an Amway distributor. That I would not be working for Amway but using their system of distribution to work for myself. Now the only other exposure I had to Amway was when I was about 18 years old; my cousin sold me a kit and that I was given instructions to sell the contents and I would make money. I never saw him again! I told that to * and *. And they explained to me that was the "old Amway" and that there was now a "new Amway plan" based on "personal consumption" and this was echoed at the open meeting I went to and met Dave * who was showing the plan. In his plan this "guy" Dexter Yager who had been a beer truck driver, and lived in an alley apartment in Rome New York had devised a new plan for Amway. His idea was based on the fact that Dexter learned that people did not like to sell but everyone had to buy, and he devised the "personal consumption" plan and also was responsible for Amway's decision to market other products with other major corporations as mentioned above. Furthermore, Dexter had paved way for others to become very successful by following "his system". It again sounded like the perfect plan. After the open meeting I was given some literature. One part of that literature was a SA4400 that stated on the back a ten customer rule. I again explained that I was not a salesman and that I couldn't get involved if it meant being a salesman. I was consistently assured by everyone (in my upline) not to be concerned about the ten customer rule, as that was there only for the people who were involved in the "old" Amway plan and that there were people that still operated under the "old" plan and retailed. And because Dexter Yager was a "maverick" and was also one half of the Amway Corporations business that the 10 customer rule did not have to be followed and the Amway Corporation would not risk losing the 750,000 people in Yager's organization over the 10 customer rule. Also, it was stated that the "average" distributor made $65.00 a month, but we would not be doing the average plan but following Dexter's lead and making an "above average income", and could become financially free by following "Dexter's Plan"

> This always bothered me. Why was the ten customer rule in the SA4400 and also in the Amway Business Manual if it were not important? I was again reassured (by my upline) even my future Directs Mike and Jackie * who told me they never retailed and "look. . . we are Directs, don't get detailitis" was their response "just trust your upline" they contorted. As in Dexter's tape "How to get Started" he emphasized what to say if someone asked if the business had to do with sales. Whether the prospect said yes or no the answer to give was "then you will love this." Since sales was not emphasized I signed up. After all I was following Dexter's lead and he was proof of how it should be done.

> My next two years were a coagulation of trusting my upline and learning "the system" that was suppose to make me and everyone who "plugged into it" SUCCESSFUL.

> I felt I made many small concessions as well to learn the system. . . . after all the prices weren't even WHOLESALE! But I was again charged as having "detailitis" and that the whole thing would become clear if I "only follow the system!" I was even told by Dave *'s wife Sandy, at a seminar that if we did not attend the "systems" functions "WE/I WOULD FAIL. . . . . PERIOD!!" This really bothered me. I walked out of that function very upset to say the least. Another contradiction and a call for the "faithful" to follow Dexter; as this is one thing the Amway Corporation makes very clear but I did not "get it" till very much later, and that is, that functions were not necessary for success was the Amway Corporations stand. But ONLY DEX had the secret to success. . . . . went "the line" to the distributors.

> In my letter to * that described my decision to resign there is mention of how I felt so much like a Judas Goat for bringing people into this business. Yet it was always put to me as really a lack of discipline when it came to "Success Principles". My wife, by the way, is still a card carrying distributor. We are inactive.

> I had been encouraged by the information on the tapes and by my upline that if it meant using "the plastic" (credit cards) to get to the major functions held out of state at the cost of hundreds and sometimes $1000. . . . . to do so, as these meetings was where the REAL information was. . . . where people make the DECISION to be successful. "Sell your t. v. " was the cry. . . "sell your car" they said, "do anything it takes but get the money to get to this function, YOU'RE SUCCESS DEPENDS ON IT!!" So I did. I mean, after all I "had a discipline problem" right?. I had lived by "Socialistic Ideology" for so long it was "ingrained" into my thinking and by making the commitment to go to the functions I would be learning the way of the "SUCCESSFUL THINKER". Those actions and decisions to follow the advise of my upline. . . . . Don * even, caused me to end up in bankruptcy court, $10,000 in debt. One of the first tapes I was told to study was Tim Foley's "Attitudes and Specifics" on that tape it was stated that the worst that could happen to someone is that they would be able to buy wholesale. I am here to tell you that is not the worst that can happen. . . . . far from it!

> I once asked for my money back from Dave * for a function ticket as I walked out when his wife said "I must go to the major functions or fail". I was met with such intimidation like "how dare I ask for my money back?" (It only states on the ticket you can get your money back if not satisfied!!). Dave was so intense with me about it I dropped the subject. . . . . he made it sound like if I got my money back my name would be dirt in the Yager line. I felt I was so far in now. . . . . I couldn't risk not hearing the "secret" that would make me a success. I backed off. Taking it as a "fault" of mine. "I didn't understand" wasn't capable of knowing enough to make decisions myself as far as my business went. . . . "always check it out with your upline first" "after all, THEY know more about your business than you do" "you need to trust their wisdom or face failure" was the gist of what I was getting from the tapes and my upline. . . . . and I did not want to fail.

> I again decided to trust them since "I didn't know enough to make these decisions". Now I realize what people mean by "Amway Brainwashing" they leave one unable to trust themselves or their capabilities. I have experienced that and has led to a great lack of self esteem and a diminished self image which I have to work on now on a daily basis just to cope. I have become very depressed and have had to seek a doctors care and treatment. I have to take medication to deal with the depression as it is too much to deal with at this time without it. I feel it was a factor to always having to second guess myself and not act without prior "ok" from my upline. I feel I am getting a little better though as I have had discussions with my former upline and have asserted myself with them and it is helping, but not totally of course.

> I feel my dream, ironically, has been destroyed by my association with the Yager group. Before I was associated with them, I had saved $1,300. 00 in the bank and was doing well with some small investments in mutual funds earning double digit returns. Now that I am yet unable to hold a job because of my depression, I realize that it could be some time to just get back to where I was before Dexter Yager.

> I feel also, that Yager's ideas have affected my ability to work. There is so much negative ideology involved in the "Yager University" (as his system is often referred to) when it comes to working for a living, that I have a real problem with identifying myself as a good worker. Terms like "worker mentality" vs. "Success Mentality" and referring to those that work as "slaves" and "losers", "dummies", "Joe sixpack", all add up when you are listening to daily tapes and going to meetings where one listens to a speaker, without being able to question what is being said is, in my humble opinion, a form of PROGRAMMING and when mixed with an emotional desire to succeed can really be a powerful tool to see things Dexter's way. He uses it well, but, I believe, only to line his pockets, and not to help others succeed which was my main motivation to join. . . . to reach success, by helping others to realize theirs.

> The perfect plan, doesn't seem to exist. From what I have seen. My former sponsor is down by about $15,000 I would estimate, as he went to a few more functions than I. And my former Direct, according to my former sponsor, has had to sell his second home to keep up in the Yager System. I know he is down by one home from my experience with him.

> Some information has come to my attention recently, which has prompted my decision to join this class action suit.

> My brother had moved in with my family around April 1994. With him he brought his computer which has modem capability. Why this is relevant is because I started meeting people "online" through "BBSing" and learned a few things. I ran into a person by the name of Sidney Schwartz. Sidney and I got into a conversation about Amway and the 10 Customer Rule. Sidney helped me to realize that there was no "new Amway" and that there was only "one plan" the one designated through the SA4400 and the Amway Business Reference Manual. I argued that indeed Dexter did not enforce the 10 Customer Rule and I was encouraged to check this out with "The Business Conduct and Rules" department with Amway Corporation. As it turned out I was contacted by Ed Postma of the Business Conduct and Rules department, who had received a call from Sidney, who had conveyed the content of the conversation between (Sidney) and myself. Ed Postma had called with the intention to "research Sidney's claim". I had explained to Mr. Postma that indeed the conversation had taken place. I asked Mr. Postma if I were in any potential trouble due to this recent revelation. He assured me I wasn't. I, looking for clarification, asked Mr. Postma about my dilemma and asked him for a ruling of some sorts. Mr. Postma advised me that if my former Direct, Mike * or anyone in my upline was saying that the 10 Customer Rule was not enforced in our group that. . . . that was inappropriate, and he would speak to Mr. *.

> I then spoke to a lawyer on the subject who advised me to get a ruling from Amway Corporation and advice on how to deal with any checks that came my way in the future, since, nobody in my upline was making "ten retail sales" to ten "different" customers as per the Rule page 51, 52, Section D and E of the Business Reference Manual To this date I have not heard from the Amway Corporation concerning this subject, which I feel is a "dodge" since they have had plenty of time to respond. And have acknowledged the receipt of my letter. (Letter 9/15/94) It has also come to my attention that the real money is made in the Yager Organization via the incomes from tapes that the Diamonds put through their businesses. That the Diamonds get the tapes for around $1. 60 each. Resell the tapes for $5. 00 and then you have the real profits for success. Especially if you are a Don Storm with 50,000 plus (as he states) people in his organization x $3. 40 = big bucks. Now we are no longer talking an Amway product business but a business that is really dependent on tape, and seminar sales.

> This is not what I got involved for and I realize I have not only been lied to but taught to lie to others without really knowing what the underlying purpose was for. It was the "secret" I would never learn INSIDE the business but had to learn from people who had been there. Now it all made sense. In fact, Don * had invited me to talk with him and he would explain everything to me in private. I was not able to make that meeting as since I "wasted" three cars by trying to build the business and my former sponsor refused to give me a ride to meet with Don. . . . . even though it was a PEOPLE HELPING PEOPLE BUSINESS???? You see, I was useful to the organization as long as I had money, a car, and people to put in the car to get to meetings . . . . . but when I had no more car, or money, and would not motivate my people to go to functions anymore. . . . . I was no longer useful!!

> In conclusion, I would like to state that I feel it is very important for the Amway Corporation, and Dexter Yager to come clean It is my contention that they have deliberately deceived people for the purpose of making themselves wealthy via depleting the financial assets and resources of those they bring into their business. Especially the newcomer who can not possibly be aware of what is going on behind the scenes. From the "contact" tapes that don't explain that the Amway Corporation is the business that is being referred to in the beginning, to the functions that can bankrupt anyone who just wants to do the best for themselves, their families and to serve others in an honest way, while seeking self employment and some form of self actualization; Dexter Yager does just the opposite to the unsuspecting that are almost forced to follow his path, with the promise that the same "good life" can be achieved by "anyone" who follows his path.

> Thank you for your time and consideration.

> Hi-I've been "lurking" for a while reading all your messages. I thought I would post a problem for anyone's suggestion, but am posting it anon. because I know my upline diamond lurks on here & I don't want the fact that I wrote this to get around.

> I have been a dist for about a year and have 2 people downline with one more getting ready to kit-have shown about 18 people the plan. The problem is, I'm broke-almost bankrupt-due to some things NOT associated with Amway (had to do with medical bills and someone who I co-signed for going bankrupt) and yet my upline keeps insisting we go to functions we can't afford!! There isn't a question of just not budgeting-there is simply no money to budget! We can barely afford groceries. (Yes, I spend $10 a month on this on-line service-about my only "splurge" if you can call it that). I also do get the standing order tape-it was told to me in so many words that it cannot be stopped now. In fact, I'm stuck with a standing order extra each week that a former downline no longer buys and was told that it was a cost of doing business & I just need to find someone else to get in & sign up to take the standing order I have leftover.

> Anyway, I've read a lot of the tools discussions on here, and I must say that I do find them useful. However, I wish I could find a way to get through to people in this business that they are losing people through their insistance that people buy what they can't afford. When I signed up I was given a form to sign stating that I was not required to buy any tools, tapes, or attend functions. I did sign purchase products because for the most part I found them useful. My problem is that when we were unable to go to our first function, our upline suddenly no longer had time to meet with us or our prospects. I don't know if that had anything to do with it, but when we try to explain our problem and lack of $$, we are told "buy a book or a tape on financial management and that will help, attend a function-it will give you hope". When we were going to FED our downline suddenly had to cancel his plans to go after already paying for the trip due to an emergency-it was well within the time applications were still being accepted for the function-and we tried to get the money returned. We were told that we should "encourage" him to "find a way-if he really wants to go he'll find a way". Now we're approaching Leadership and our upline has told us if we really want to build the business we can find a way despite our dire situation-in so many words we were told to not make payments due or not eat a meal a day to pay for it.

> This just seems so extreme!! It is turning off our downline and new prospects and while I think the business can work and WANT to make it work, I want to keep paying my bills, too! I want to make some money on retail sales to pay for this and am working on it, but meanwhile feel so much pressure to pay NOW for this next function, that I tend to avoid attending plans and meetings because I don't want to be pressured into doing something I can't right now. We've discussed this with our upline directs and they either seem to not believe us or don't get it and just suggest more tapes and books!

> Any POSTIVE suggestions on how I can make this business work? I am still showing the plan, but in follow ups our downline tells them to attend a function and pay for it before even getting a kit. The person often gets turned off and never even gets the kit. I want to make this work and know we can, but am wondering if others have this problem.

> Frustrated in wet S. Cal

(response to above message, posted by another Amway distributor)

> You are doing better than I in sponsoring. I have been in 2 years and have shown the plan about as often as you and had similar results. Let it be said that I am pro-Amway. I am very negative to the presentation of The System, though. If this bothers you, don't read further.

> I have also stopped my SOT & GoGetters. I have also lost support from my upline. As a matter of fact, since I am distant from both my Direct and my new downline, my Direct told me point blank, "Don't talk to them anymore. I'll take care of them for you. Good luck with whatever you are trying to do." No tear jerkers here, but I am currently going through lawsuit procedures, and have about $25,000 in debt. My debt seemed to grow, ever since I got in this business, at about $2000 a year. If you figure it out, The System costs about $4000 a year. My calculations are that I could have been getting out of debt about $2000 a year.

> It's funny, but our uplines don't seem to understand this concept.

>     : Anyway, I've read a lot of the tools discussions on here, and I must say
>     : that I do find them useful.  However, I wish I could find a way to get
>     : through to people in this business that they are losing people through
>     : their insistance that people buy what they can't afford.  When I signed up
>     : I was given a form to sign stating that I was not required to buy any
>     : tools, tapes, or attend functions.  I did sign purchase products because
>     : for the most part I found them useful.  My problem is that when we were
>     : unable to go to our first function,  our upline suddenly no longer had
>     : time to meet with us or our prospects.  I don't know if that had anything
>     : to do with it, but when we try to explain our problem and lack of $$, we
>     : are told "buy a book or a tape on financial management and that will help,
>     : attend a function-it will give you hope".    When we were going to FED our
>     : downline suddenly had to cancel his plans to go after already paying for
>     : the trip due to an emergency-it was well within the time applications were
>     : still being accepted for the function-and we tried to get the money
>     : returned.  We were told that we should "encourage" him to "find a way-if
>     : he really wants to go he'll find a way".  Now we're approaching Leadership
>     : and our upline has told us if we really want to build the business we can
>     : find a way despite our dire situation-in so many words we were told to not
>     : make payments due or not eat a meal a day to pay for it.

> It's not only extreme, but ridiculous. I wonder if you have kids. I don't think that in my state (Florida) you could get away with that legally.

>     : This just seems so extreme!! It is turning off our downline and new
>     : prospects and while I think the business can work and WANT to make it
>     : work, I want to keep paying my bills, too!  I want to make some money on
>     : retail sales to pay for this and am working on it, but meanwhile feel so
>     : much pressure to pay NOW for this next function, that I tend to avoid
>     : attending plans and meetings because I don't want to be pressured into
>     : doing something I can't right now.  We've discussed this with our upline
>     : directs and they either seem to not believe us or don't get it and just
>     : suggest more tapes and books!

>     : Any POSTIVE suggestions on how I can make this business work?  I am still
>     : showing the plan, but in follow ups our downline tells them to attend a
>     : function and pay for it before even getting a kit.  The person often gets
>     : turned off and never even gets the kit.  I want to make this work and know
>     : we can, but am wondering if others have this problem.

> I understand what you are going through. There is a class action law suit pending in the Pennsylvania courts naming Yager/Britt/Amway as defendants. I will get you info via snail mail if you wish.

> My suggestion, on a positive note, is DON'T quit Amway! You have a good thing there. The problem is that, while everyone SAYS that The System is optional, every tape points at how you will fail without The System. In Amway's terms, this is COERCION. You need to be strong with your upline and tell him to stop any activities you don't desire. Remember, this is YOUR business. We have done just that, and while you can expect to get no more support from your upline, as we have, there are plenty of distributors, in and out of The System, who will be supportive. I have a friend who is getting support from her upline even though she cannot afford The System.

> You could probably relisten to your stockpile of tapes for motivational support for a while. I know I have built a pile from both of The Systems I have been involved in. You can, as I have, probably find folks who have quit who will be willing to sell cheap or give you their tapes. A $5.50 advertisement, as apposed to a $5.50 tape, will reward you with hundreds of tapes.

> Books found in The System can be bought at used book stores, or borrowed from the library.

> Functions are just a way to associate with those you want to be like. So find successful people you want to be like, and hang out with them. It's free, and you might contact someone. I am planning to join the JayCees.

> The System is good in content, but the use of The System can be perverted. This does not take into account the fact that there are people upline making money off of our situation by keeping us on The System. They don't even tell us that they make money on The System. Use The System to its best advantage. Be honest. Build the business. Go Diamond!

There's been some discussion about the 1982 Wisconsin case in which data from the tax returns of all distributors in the state revealed an average net LOSS of $918 for all that state's Direct Distributors. Some of us, including me, believe that either these distributors actually lost money, or they were tax cheats trying to lower their tax liability by inflating their deductions. Others countered by conjecturing that the deductions were legit but were of a kind that enabled these distributors to live high off the hog while showing a loss on their schedule C. (I'm still not sure how that's supposed to work.)

Anyway, I have copies of some of the depositions that were taken in that case, including copies of the tax returns of a Wayland C. Behnke, one of the named defendant distributors. Behnke signed up with Amway in July of '77 and went Direct in October '78. According to transcripts, Behnke was introduced at one recruitment meeting as "extremely successful at what he does" and "the leader of the Milwaukee World Wide Diamond Association." Behnke and others were charged with using income examples that were "untrue, deceptive and misleading," and that "fail to reflect business expenses..." It was also charged that they "...at public presentations...or in personal contacts with prospective recruits, indicated, expressly or by direct implication, that their personal Amway incomes or the incomes of other Amway distributors were at a level significantly higher tan what was in fact earned." Gosh, what a shocker!

Anyway, here's Behnke's Amway income and expenses for 1978 & 1979. (He seems to have listed income from product sales and perf. bonuses received separately in 1978 but combined them in 1979.)

                                                1978        1979
    ------------------------------------------------------------
    Income
    Gross receipts or sales...............$ 2,584.93....$225,933
    Cost of goods sold....................$ 2,320.15....$177,911
    Gross profit..........................$   264.78....$ 48,022
    Other income.(perf. bonuses rec.).....$11,333.74
    Total income..........................$11,598.52....$ 48,022

    Deductions
    Advertising...........................$    15.00....$    310
    Bad debt..............................$   163.00
    Bank charges..........................$    14.00....$    213
    Car and truck expenses................$ 3,783.80
    Comissions.(perf. bonus paid).........$ 5,807.91....$ 40,533
    Dues and publications.................$    12.00
    Freight...............................$   273.60
    Insurance.............................$    53.00....$    184
    Interest on business indebtedness.....$         ....$    466
    Office supplies.......................$   183.36....$    721
    Postage...............................$    91.44....$    818
    Rent on business property.............$   600.00
    Supplies (not incl. on sched. C)......$         ....$    817
    Taxes.................................$         ....$    698
    Telephone.............................$   347.16....$  1,452
    Travel/entertainment..................$  1529.50....$    826
    Utilities.............................$   225.24....$    520
    Other expenses (specify):
      Meetings............................$   305.05....$  1,438
      Contributions.......................$     7.97
      Sales aids..........................$   310.98
      Prizes & Awards.....................$   275.00
      Sales promotions....................$   469.91
      Tape recorder.......................$    39.95
      Training fees.......................$    60.00
      Gifts...............................$    50.00
      Overnight expenses..................$         ....$    780
      Misc. contractors...................$         ....$  1,225
      Misc................................$         ....$    602
      Auto................................$         ....$  3,373
      Tolls...............................$         ....$      2
      Samples, promo demos................$         ....$    910
                                          ==========    =========
    Total Deductions                      $14,660.87    $ 56,439

    Net Profit or Loss                   ($ 3,031.35)  ($  8,417)

Behnke and his wife seem to have decided that losing money in Amway was the way to live the good life. In 1978 they showed wage/salary income of $22,447, so their adjusted gross income was still $20,143 after their Amway losses of $3,031. In 1979 their wage/salary income was $2,006. They show a tax refund from the previous year of $779 and capital gains of $1,923. They also took $1760 out of their retirement account. Adjusted gross income for 1979 was ($1,949).

The Behnkes finally turned a profit in 1980, their second full year as Directs. They show a gross profit of $129,304 and expenses of $114,240, for a net profit on their Amway business of $15,064. Hardly a full-time income for two people, but a start. Of course, how many people who are attracted to a business that promises a "minimal investment of the price of a distributor kit" can afford to sink $12,000 into it before seeing any profit? And there are those who invest that much and more but simply continue to lose money until they wake up and cut their losses.