### Amway: The Untold Story

News & Info

Cowardly Soap Company Continues Campaign of Harassment and Intimidation Against Internet Critics in Desperate Attempt to Coerce Silence, Bury Embarrassing and Incriminating Facts.

AUS web site owner and three others served with subpoenas in frivolous lawsuit filed by Amway against Procter & Gamble. Has Amway's continuing financial hemorrhaging prompted this last ditch attempt to salvage its chances for survival?

[UPDATE: Amway has posted on its web site the expected weasly excuses for its latest deplorable efforts to bury the truth. Since Amway simply rehashes the same tired lies and distortions that I've already rebutted, I'm not going to waste my time doing so again. Instead, I'll refer you to Ruth Carter's excellent response posted on her site. 2/27/99]

| WARNING: AMWAY (perhaps "KGBway" would be more appropriate) HAS AS LITTLE REGARD FOR YOUR RIGHT TO PRIVACY AS IS DOES FOR YOUR RIGHT TO SPEAK FREELY AND TO ASSOCIATE WITH WHOM YOU WISH (or your right to seek justice in our court system). THEREFORE, I CANNOT GUARANTEE THE CONFIDENTIALITY OF ANY EMAILS SENT TO ME.

Since January of 1996 I have maintained this web site devoted to providing information about the Amway Corporation. I have done considerable research, and the majority of the information on my site is compiled from court documents, articles, books, and other verifiable, publicly available sources. In all this time, Amway has never filed any cause of action against me. They have never named me as an actionable party in any lawsuit. They have never so much as contacted me to request or demand that I change or remove any of the information on my site. The reason for this is plain: Amway cannot refute this information, and in fact has never even attempted to do so. They have, however, publicly attacked and defamed me, and used their considerable resources to try and harass and intimidate me into silence.

In October of 1996 I was contacted by attorneys for Procter & Gamble, who had filed a lawsuit in Utah against Amway. I agreed to provide them with copies of documents and other materials. In return they paid me a consulting fee, and also agreed to provide me with court documents pertaining to their case and other cases involving Amway. (All of these documents were publicly available; I could have obtained them on my own, but not without considerable expense and time.) Amway counter sued P&G, charging them, among other things, with paying me to set up my web site for the purpose of defaming Amway. Amway subpoenaed me in that case, and in September of 1997 I underwent a lengthy deposition by Amway's attorneys and also provided them with copies of any documents that had been provided to me by P&G. Amway had sought far more in their subpoena, but a judge ruled that they were entitled only to see only what P&G had given me, since that was the basis of their counter suit. The judge also allowed Amway to copy the contents of my computer hard drive, but to see only those files that related directly to P&G and its attorneys. Once Amway had my hard drive data, it tried unsuccessfully to gain unlimited access to the rest of it. Amway's counter suit against P&G was ultimately dismissed in its entirety.

In February of 1998 I was served with a second subpoena by Amway, this time in the case of Touchton v. Amway, a case completely unrelated to P&G. In deposing me in the P&G case, Amway learned that I had been in touch with Don Touchton, a former distributor living in Georgia who had filed a lawsuit against Amway. Amway's pretext for serving me in this case was that 1) I had spoken to Touchton on at least one occasion, and 2) I had sent him copies of publicly available court documents. On this flimsy basis, Amway was again asking for unrestricted access to all information on my hard drive. I filed a motion to quash this subpoena. Being unable to afford representation, I represented myself. Frankly, I thought it very unlikely that a judge would grant Amway's outrageous request. One of the objections I raised in my motion was that I was protected by Oregon's reporter shield law, which is deliberately inclusive and states that ANY person engaged in providing information to the public in ANY media is protected from exactly what Amway was trying to do. I appeared in court, opposed by four Amway attorneys, and my motion was denied. I was shocked that the judge did not even mention the shield law in making his decision. Shortly thereafter, Amway made yet another copy of my hard drive. Their purpose, ostensibly, was to search for evidence they could use in the Touchton case. Any such evidence was supposed to have been first shown to me so I would have the opportunity to raise any objections I might have to its being used.

In my hearing concerning the Touchton subpoena, I expressed to the judge my belief that Amway' s true purpose in seeking this information was to find out who I have been in contact with--in other words the sources of my information--so that Amway could subject them also to harassment. I think this most recent subpoena shows that this was indeed the case. Since the Touchton hearing I have never been contacted by Amway's attorneys regarding the supposed evidence they were looking for. [Scant days after I posted this, Amway's attorneys mailed to me print outs of approximately 1000 emails taken from my hard drive, supposedly to be used as evidence in the Touchton case. Gosh, what a "coincidence." As far as I can tell at this point, these emails have nothing whatsoever to do with the Touchton case. Thank you, Amway, for making it even more obvious what you're really up to. 2/27/99] However, in this latest subpoena Amway asks specifically for communications relating to two private mailing lists, "stc" and "blc." It is my belief that Amway learned of these lists when they copied and examine my hard drive in the Touchton case.

Amway is now not only demanding the same information they've already gotten from me twice before, but are basically seeking to know everything I've communicated to anyone about Amway, and anything anyone that has communicated with me. Amway has also so far served subpoenas on the owners of three other web sites that contain information about Amway (Dave Midgett, John Hoagland and Ashley Wilkes). These other web site owners have no connection with P&G.

It is clear to me that Amway is embarking on a vicious campaign to intimidate and silence us. Amway knows that it has no basis on which to sue any of us. Isn't is odd that Amway sues P&G, accusing them of damaging Amway through the use of my web site, but does not sue me as well? It's not odd at all if you understand that Amway's suit against P&G is just a flimsy legalistic ruse, something to provide Amway with an excuse to harass and silence their internet critics.

There are important First Amendment issues at stake here. I am expressing my opinion concerning Amway, as is my right. I am associated (via email) with others who share my interest in Amway, as is my right. Amway has never shown anything on my site to be actionable in any way. Amway has never sued me or named me as a party in any lawsuit. Oregon's shield law is supposed to protect me from having to provide Amway with the information they are seeking. If Amway is successful in its campaign of harassment, it will obviously have a devastating--not just chilling--effect on the willingness of others to express any public criticism of Amway (which of course is just what Amway wants to accomplish).

The internet represents perhaps the most powerful way of sharing information ever devised. It is said that freedom of the press belongs to those who own one. Now anyone who can afford a computer and a modem can own a web based "press" and publish whatever information they choose. Likewise, anyone who can afford a computer and modem has access to that information. Those of us who have chosen to use this new media to exercise our right to provide information to our fellow citizens should not be exempt from the protections provided to journalists and activists who use more traditional media. Amway's actions are nothing more than legalistic bullying and attempted censorship by intimidation, and should be strongly opposed. If they are not, a precedent will be set that will make it that much easier for those who have money and power to silence those of us who don't; the equalizing effect of the internet will be minimized or lost.

(On a related note, Amway has also instituted policies to strip distributors of their rights to free speech and to seek justice through our court system. All distributors must now give up their right to file a lawsuit against Amway and must instead agree to binding arbitration, a process largely controlled by Amway. This "agreement" applies not only to new distributors, but to all existing distributors as well, regardless of how long ago they signed up. This "agreement" also prohibits distributors who go through the arbitration process from publicly discussing any aspect of their cases.)

I don't think it's any coincidence that Amway's latest attack on free speech comes at this particular moment. It would be putting it mildly to say that Amway's current situation is not a good one.

- Amway's revenues are plummeting in key markets and the distributor force is shrinking.

- Amway's much anticipated China operation was a bust due to the Chinese govt. prohibiting direct sales.

- Amway and other MLM companies are under investigation in India, posing a threat to Amway's operations there as well.

- Amway has recently had to lay off employees due to plunging profits.

- The number of new U.S. Emerald and Diamond distributors is also on a steady decline.

- Amway is threatened by potentially devastating lawsuits, both from P&G and it's own high level distributors. (Not to mention the usual steady parade of other distributor lawsuits.)

- With the advent of the web, information that Amway could once count on to remain secret is now available to millions of net users all over the world. We are now even seeing highly critical sites put up by high level distributors (Probandt and Roberts).

Amway has so far managed to avoid collapse by continually finding new population groups to exploit (Amway's "Global Pillage"). It would seem, though, that Amway is finally running out of new territories and is trying to reinvent itself as a web-based "I-mall." Even though Amway's I-mall is not even scheduled to open until September of 1999, the hype started months ago. It's no coincidence, I believe, that Amway seems so anxious to promote this "new" idea—it may very well be the company's last chance for survival. And, not surprisingly, the Amway name will be hidden away where it won't scare people off. Check out these sites promoting Amway's I-mall and see if you can find the Amway name anywhere: Countdown 9199 and MT Cart (password 00696rwh). With perhaps its very survival at stake, Amway just can't afford to have people like us pointing out that the emperor still doesn't have any clothes...and he'd like to talk you out of yours. But, unable to refute the facts or to pursue a legitimate complaint in the courts, Amway has instead resorted to legalistic bullying and thuggery.

You can help defend our freedoms from attack by corrupt and greedy corporations like Amway. Contact your local chapter of the ACLU and alert them to Amway's latest attack on the 1st amendment. Contact organizations like the Electronic Frontier Foundation and Cyberlaw. Write to or email your local and national newspapers. Post the address of this site on newsgroups and forums devoted to 1st amendment issues. Otherwise, you may someday find the Amway KGB (or some other company with lots of lawyers and money and no regard for your rights) at your door, demanding to know who you've been associating with and what's on your hard drive and in your filing cabinets.

AUS Exclusive! God's own words on Amway!
Birdie Yager speaks to God about Amway and reveals His word to us. This is NOT a joke or a satire...this is a transcript that Yager herself handed out at Emerald Club 1994, Heritage USA. According to Yager, God revealed that:

- The Church has failed God because it "has been too religious to reach the lost."
- God "created the Amway business for my children .... as a tool to reach the lost."
- God has "put my anointing on you Both [Dexter and Birdie Yager, presumably] to be leaders in the Amway business."
- Not surprisingly, it is God's wish that distributors "...forget your circumstances and build this business like you never have before. Your time is running out and there is much to be done for my Kingdom." [And, of course, much money for Dexter and Birdie to make off the distributors who believe this bizarre, cultic drivel.]

Posted 3/14/99

Triple Diamond Rick Setzer on Amway:
"The scheme and artifice to defraud, among other things, was devised to fraudulently lure millions of persons, including Plaintiffs, throughout the United States to leave their previous employment, invest money, purchase products and services and incur expenses under false pretenses from Amway Corporation and spend an enormous amount of time recruiting, training and motivating other distributors and reselling the Amway Products. The scheme, among other things, was devised to intentionally and fraudulently mislead persons, including Plaintiffs who were willing to sign contracts as distributors..."

"...falsely represent[s] to millions of people, including Plaintiffs that large and lucrative incomes could and were being earned by Amway Distributors through the resale of Amway Products and the recruitment of distributors, when in fact and in truth knew that only a minute percentage of less than 1% if that much, could enjoy such incomes by such activities."
—Rick Setzer and Sue Lynn Setzer v. Amway Corporation, Richard M. Devos and Jay VanAndel, U.S. District Court, District of South Carolina, Greenville Division, 7/17/86

Also, Rich DeVos states under oath that Amway failed to put an end to tools abuses, and that some of Amway's promotional materials are deceptive.

Yes, this is what it's really about, folks. Not Sidney Schwartz, not P&G, not Amway's paranoid conspiracy theories. That's all a sideshow put on by Amway to try and distract you from the real issue: the FACTS (like the above lawsuit) that Amway cannot refute, and that expose Amway to the world for what it is.

Posted 3/6/99

The Gospel Films Connection. "Non-profit" group may be very profitable for a few high-level Amway distributors. Also, Chairman of the Board Rich DeVos looks other way while GF president Zeoli violates Amway's professed policy against promoting religious/political agendas at business meetings. Get the details here.

Posted 3/8/99

Two more distributor lawsuits filed. Filed in Alabama and New Hampshire, these latest lawsuits (that we know about, anyway) tell the now familiar tales of greed, deception and the betrayal of trust. (Be sure to check out the AUS lawsuits section for more of what "KGBway" is so desperate to hide.)

Posted 3/7/99

DeVos heart transplant controversy.Billionaire credits God for "miracle" of new heart, but others charge that he used his wealth to buy what should have gone to someone else.

Posted 3/6/99

The Gospel According to Amway. Don't let your thinkin' be stinkin'. Dexter Yager, Bill Britt and other Amway luminaries enlighten us on wimps, womens libbers, and why moose are bad for the environment.

Posted 3/8/99

Amway Japan profits continue to drop.
Amway Japan limited has announced a 1st quarter net income for 1999 of $22.7 million, down 40% from the same quarter the previous year. As previously reported here, expert observers attribute Amway's troubles in Japan to more than just the falling yen. Amway, as expected, continues to claim that the continuing negative publicity in Japan is "unwarranted," despite the company's disreputable image in the U.S. and elsewhere.

Posted 1/19/99

Amway buries significant risk information in obscure SEC filing. Company continues habit of telling the truth only when compelled to do so by law.
The law requires that when a company offers stock for sale to the public, it must file a lengthy document with the Security and Exchange Commission in which it discloses a wide variety of information about the company and its officers. The company must divulge in this document any risks involved with making an investment in the company.

Amway U.S./Canada is a privately held company and is therefore not required to publicly disclose this kind of information. Amway Japan Ltd., however, is a publicly traded company, and the disclosure document filed with the SEC contains some interesting admissions concerning the risks involved in investing in that company, risks which I believe apply equally as well to investing one's time and money in an Amway distributorship. Amway distributors have long claimed, for example, that distributor saturation in any particular geographic area is not only unlikely, but impossible. How interesting, then, to discover Amway admitting that distributor saturation may indeed occur:

> "There can be no assurance that the number or productivity of distributors will be sustained at current levels or increased. In addition, the number of distributors as a percent of the population may reach levels that become difficult to exceed due to the finite number of persons inclined to pursue an independent direct selling business opportunity."

"It works if you work it" is one of the most oft repeated Amway slogans, the implication being that the only impediment to success is your own lack of effort. It should be obvious to anyone, however, that trying to build an Amway business in an area that's already reached saturation would be like trying to swim laps in a pool with no water in it...you can stroke like an Olympic swimmer, but you're not going anywhere.

Further admissions by Amway include:

- Amway relies on a small number of distributors for its survival, but hedges when it comes to the question of whether the defection of Dexter Yager or Bill Britt would be fatal to the company:

> > "Because the Sales Plan provides incentives for distributors to develop larger businesses by sponsoring new distributors into their organizations, the Company's sales are concentrated within, and dependent upon, a relatively small number of distributor lines of sponsorship ... Although there can be no assurances, the Company believes that the loss of a leader of a distributor line would not necessarily result in the loss of a significant number of that leader's downline distributors because of the Company's close relationship with the significant downline distributors."

> While we can only speculate on the impact of such an event, I don't think we need to speculate on the power and influence wielded by this small group of distributors over Amway Corp.

- Amway's much touted Rules of Conduct are difficult (if not impossible) to enforce:

> > "Although the Company has a Code of Ethics and Rules of Conduct (the "Code of Ethics and Rules of Conduct"), patterned on Amway's Code of Ethics and Rules of Conduct, governing distributor conduct, because of the large number of distributors and their independent status, as well as the impact of certain resale price maintenance and certain other regulations that limit the ability of the Company to monitor and control the sales practices of its distributors, it can be difficult to enforce those rules. At times distributor actions have given rise and may in the future give rise to negative publicity for the Company and Amway."

> Thus the protections supposedly afforded to each distributor by the Rules of Conduct, rules which prohibit powerful distributors (like the small number on whom Amway depends for its very survival) from abusing their downline, may be meaningless.

- Despite Amway rules regarding the manufacture and sale of tools, "distributor leaders" may produce and sell tools in violation of those rules:

> > "Also, distributor leaders and downline distributors, without prior review or approval by the Company or Amway, might prepare and sell their own audio and video tapes and written materials. Sales of these tapes and materials could be inconsistent with the Sales Plan or the Code of Ethics and Rules of Conduct, which, among other things, prohibits unfounded claims and actions which improperly influence the purchase of such materials."

> - Amazingly, Amway even admits that getting rid of distributors who violate the rules could be bad for business:
> "Actions by the Company terminating distributors for violations of the Sales Plan or the Code of Ethics and Rules of Conduct could negatively impact the Company's business."

So let's see...Amway is dependent on a small number of powerful distributors who produce and sell tools that violate Amway's rules, but the rules are difficult to enforce and Amway is motivated not to enforce them anyway. Gee, does any of this sound familiar? It should...it's what this and other Amway Information sites have been saying for years. It's also corroborated by lawsuit after lawsuit that distributors have had to file because Amway can't or won't enforce its rules.

We have no way of knowing how many distributors or potential distributors would think to check Amway Japan's SEC filing for information on which to base an informed decision regarding the Amway business. Very few, I would guess. Amway has long hidden behind its position as a privately held company when it comes to divulging the data that would reveal how successful its distributors really are, as opposed to the feel-good, pie-in-the-sky hype the company and its distributors regularly pump out. When directly asked, for example, Amway has consistently refused to divulge how many distributors have achieved specific pin levels. The latest example I'm aware of was in the Baton Rouge Advocate's in-depth series on the Amway business:

> "Amway officials would not disclose the number of distributors at the different pin levels, or reveal the average amount the company pays them."

They never have, to my knowledge. Amway is correct in claiming, as they invariably do, that they are under no legal obligation to divulge this kind of information. This is evasive and somewhat disingenuous, as they are also not legally prohibited from doing so, either. The choice is Amway's: they can be forthright concerning this kind of important information, or they can conceal it, and it makes no sense to me that they'd bother to conceal such information if it was at all advantageous to them to make it public. They've certainly shown no hesitation to publicize any other information that puts Amway in a positive light, so why conceal data that would prove or disprove Amway's claims regarding their supposed business opportunity?

(Some of this information, at least, can be culled by those with the time and patience to do so. Amway publishes in the Amagrams the number of distributors who have qualified for certain pin levels, so those with access to the Amagrams can tally those numbers. This has in fact been done by Charles Midgett of "The Other Side Of The Plan", and the data shows that the number of new Emerald and Diamond distributors in the U.S. each year is steadily declining.)

Perhaps the most glaring example of what it takes to get Amway to tell the truth is the average earnings data published in the "Amway Sales and Marketing Plan", or SA4400, a copy of which is supposed to be given to every prospect who is "shown the plan." The FTC in 1979 determined that the hypothetical examples of earnings published by Amway in the SA4400 constituted a significant misrepresentation of distributor incomes. ("The $200 Business Volume figure overstates the true average Business Volume by more than 500 percent. And the often unqualified claims regarding actual incomes are even more removed from
reality, at least as far as reality exists for the vast majority of Amway distributors.") Accordingly, the FTC ordered Amway to cease such misrepresentation. In 1986 the FTC determined that Amway had not complied with that order. Amway was fined $100,000 and ordered to publish in the SA4400 actual earnings data to offset the deceptive hypothetical examples that Amway employs. ("Respondents shall disclose the average monthly gross income of active Amway distributors in the "Amway
Distributor Application" in the manner and form of the application contained in Appendix C.") It was also ordered that every prospect be given a copy of the SA4400 and/or verbally informed of the true average monthly distributor income; I've often been told that this rule is widely ignored, or that prospects are told to ignore the information in the SA4400 as it was only put in to "appease the FTC."

Posted 1/19/99

Amway, other MLM companies in India to be investigated.
According to an Indian Express article, India's Foreign Investment Promotion Board will be "reviewing the approvals granted to direct-marketing companies following reports that many of them were violating the policy guidelines regarding domestic retail trading." Amway, Avon and Tupperware are among the MLM companies to be investigated as a result of complaints that they are violating govt. policies. Amway was recently given a serious setback when the government of China decided to ban direct sales in that country, a move that contributed to massive financial losses for Amway Asia Pacific.

Posted 1/19/99