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Hot on the heels of sweeping reforms to the MLM landscape and talks of banning the industry altogether in India, news broke yesterday that Amway India’s CEO William Scott Pinckney has been arrested on charges of “financial irregularities”.

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Pinckney (right) was arrested by police officers from Meppadi police station in the Indian state of Kerala, along with Amway India Directors Sanjay Malhotra and Anshu Budhraja.

The trio are expected to be presented in court today, being formally charged under India’s Prize Chits and Money Circulation Act (1972), following an investigation into a First Information (FIR) report filed back in 2011.

A top official of Economic Affairs Wing (EOW), Kerala, who was part of the operation that led to the arrests, said:

“With the call of easy money, they have been luring people to invest.

The new members in turn had to get more people and this was leading to illegal money circulation. We had received several complaints against the company.”

Since then, a number of other FIRs have been registered against the compny, including one filed just last year by a distributor named Vishalakshi:

Assistant Sub-Inspector of Police N K Jaganivasan told Mirror that the distributor, Vishalakshi, alleged that she was forced to purchase Amway products worth Rs 1 lakh.

Vishalakshi also alleged that she was made to invest Rs 1 lakh in Am-Sure, the insurance arm of Amway, but she lost the money. Following the complaint, crime branch took over the case.

As the trio appeared before the police with anticipatory bail obtained from the Kerala High Court, they were released. However, Waynad police arrested them in connection with four similar complaints.

During their investigation following the 2012 Vishalakshi FIR,

police found that goods were being sold at overpriced rates. A product worth Rs37 was being sold to consumers at Rs395.

Four complaints plus Vishalakshi puts the total number of known FIRs filed against Amway at five.

The EOW had also conducted raids at Amway’s godown in Kozhikode, Thrissur and Kannur and seized goods worth Rs2.14 crore last year.

Shortly after Pinckney was arrested, Amyway put out its own statement:

A company spokesperson said the trio were “taken into custody by the Wayanad police, Kerala, for another case filed in 2011.

We would like to clarify that with respect to (the) case, the company or its officials were not issued any summons to join the investigation, nor was any information sought by the police.

The company management would have cooperated with respect to the 2011 matter as well, as we always have, as law- abiding corporate citizens.”

Through their involvement in India’s Direct Selling Association, Amway India, the largest operating MLM company in the country, have been pushing for explicit clarification and guidelines for legitimate MLM companies to follow.

As it stands now there’s nothing official for MLM companies to follow or cite in their efforts to differentiate themselves from the plague of scams that have popped up under the MLM banner over the past few years.

As reported last week, things took somewhat of a drastic turn with reports that the Indian government were looking to just ban MLM completely.

The status of those talks and the MLM ban proposal is not currently clear, but I imagine is still being debated and discussed within the Department of Consumer Affairs, the Department of Financial Services and the Indian parliament.

I don’t have a formal review of Amway up on BehindMLM but as I understand it revenues are generated via the sale of Amway’s extensive product lines.

Looking at that inflated price figure quoted above and allegations of investment by affiliates, it appears that a culture of affiliate recruitment and “investment” in products might have become the primary revenue generator for the Amway India, rather than sales to retail customers.

Otherwise I’m not really seeing what the Indian police might have taken objection to, or why former distributors would be lodging FIRs against the company.

If that’s the case well, Amway deserve to be treated no different to any other affiliate-funded scheme operating in India.

Looking at the bigger picture if any of the charges stick, the arrest of the CEO and top Director’s of what is widely seen as a heralding example of a “legitimate” MLM company, probably isn’t going to help the Indian MLM industry’s cause.

If anything it’ll probably guarantee the industry is banned outright with any company using an MLM business model deemed illegal.

Stay tuned…