Lyoness CEO: “It’s all about positions!”
Earlier this month news broke that Lyoness had begun to actively go after uploaded multimedia footage that made the company look bad.
Falsely claiming copyright infringement, Lyoness filed multiple copyright infringement notices with YouTube who then took the videos down (they have a “no questions asked” policy on copyright infringement complaints, however the complaints can be challenged) .
The two videos in question?
The first is the classic Dragon’s Den appearance by Andy Nyakas, who tries to pitch Lyoness to three “dragons” (venture capital investors).
Painfully awkward to watch at times, Nyakas’ attempt to pitch Lyoness is nonetheless an interesting example of what happens when the often buried Accounting Unit investment scheme within Lyoness is brought out into the open (fast forward to [25:00] for the Lyoness pitch):
The footage above is from Dragon’s Den Canada, with copyright of the show owned by the Canadian Broadcasting Corporation. Curiously, after being previously available the footage also now appears to have been removed from the CBC website itself.
The second is an investigative report from ORF, the Austrian national public service broadcaster.
Following the airing of the report earlier this year, it appeared on YouTube. Shortly after the report was exposed to a wider global audience, once again Lyoness filed copyright infringement notices with YouTube.
Needless to say the ORF report belongs to the ORF broadcasting network, with any claims of copyright infringement from Lyoness being false.
Whereas the Dragon’s Den episode is more like a critical review of your typical Lyoness investor presentation, the ORF report took on an investigative approach and is far more damning.
It should be noted that I had been aware of the report for some time now, but it was only recently that I was able to track down an English subtitled version of the report and thus understand it.
The report begins with some background information on Lyoness’ attempts to whitewash the Austrian media of criticism.
Following critical Austrian media coverage late last year about Lyoness investors losing money and media coverage of the Austrian Corruption Prosecutor suspecting an “illegal pyramid scheme” being operated by Lyoness, the company raised a complaint with the Austrian Media Authority.
Lyoness lost the case.
The report then delves into an expose on Lyoness’ CEO and founder, Herbert Freidl.
Of course when you see Friedl’s messiah like appearance at events that fascinates.
One cannot deny the man has charisma and is a very talented salesman. This influences people’s decision making.
Following a brief explanation of the merchant shopping network cashback scheme bundled with Lyoness affiliate membership, the report then examines the often buried Lyoness accounting unit investment scheme.
An “internally-spread Lyoness video from Switzerland” states
For 3000 Swiss Francs (or 2000 EUR) you can buy into the system.
The more you pay, and the more paying people you bring in, the better. A miraculous multiplication process commences.
What happens if you can’t find people to bring in and invest after you?
“Mr F.”, who does not want to be filmed, has paid Lyoness 6400 EUR for the promise of 60,000.
According to his own administration, Mr F has received about 73 Euros from Lyoness over the last three years.
Mr F. was participating in an “American Billing System”. Through his investments in vouchers (Ozedit: Lyoness loyalty credit), he would benefit from the US market.
When the money never came, Mr. F wanted to consume the value of the vouchers he purchased from Lyoness. However, he finds out that in order to do so, he would need to invest another 120,000 EUR to get the actual vouchers.
The above scenario is the option of Mr F. investing in additional account units in order to satisfy the required number of new investments to trigger a ROI payout on his existing unit investments.
Naturally this makes no sense, as the additional investments will outweigh the ROI paid out. Lyoness affiliates have to find new investor affiliates to put money into account units for the scheme to make sense to an affiliate financially.
And it’s not just affiliates not getting paid, with some in Lyoness management not faring any better: (Bernard Wagner)
I have been laying the ground work for Mr. Friedl. That means that I have increased the sales until they could work independently.
“Work independently” of course means drive enough new investors such that their affiliate recruitment efforts mean that official Lyoness marketing efforts are no longer required to perpetuate the scheme.
When it was time for me to benefit from this work, I was simply removed from the company.
The above is from former Lyoness management, Bernard Wagner, whose payments were withheld by the company in 2008.
The ORF report claims that Wagner has known Friedl ‘from previous companies operating similar systems for a few years. That is, to profit from the payments of subsequent participants’.
I believe it was in June when I suddenly stopped receiving commission.
I saw one of the two structures I had built was completely taken away from me by Lyoness. Which is something they claimed could never happen in this system.
Reading between the lines, “structures” of course refers to an account unit investment chain, with new investments at the bottom feeding returns owed previous investors at the top of the chain.
The “lifeline” of Bernard Wagner? Recruiting new members who in turn convince new people to make down-payments.
In the 22nd week of 2008, Wagner had 68,000 participants under him. One week later, merely 38,000 were left.
“Now the amount would have to be about 1.4 to 1.5 million, over which I should receive commissions”.
Wagner estimates that had Lyoness of not terminated his affiliate downline, he’d be making approximately “somewhere between 50 and 100 thousand euros per month”.
Wagner is now suing Lyoness in an attempt to recover his lost commissions. Additionally two other former Lyoness managers are also suing the company for 1.5 million euros in unpaid commissions.
Our case is definitely not a unique incident. It is
Lyoness’ strategy to let people build their networks for them, and then let them drop as a rock without paying them.
That is one of the pillars the company is built on.
Personally I have no sympathy for Wagner or his lost income but his insights into the workings of Lyoness, specifically what he did in order to generate commissions (returns) are insightful.
One of the long-standing facts about the Lyoness income opportunity is that any affiliate who wishes to generate a substantial income from the opportunity inevitably has to participate in the AU investment scheme.
Often this is dismissed by new affiliates professing the merits of Lyoness’ merchant shopping network, however, in addition to simple common-sense, analysis of the 2012 Lyoness Income Disclosure Statement blows this facade out of the water.
And then of course there’s the blunt admission from CEO Hubert Freidl himself, who when “educating” Lyoness affiliates in Bulgaria in his pre-messiah days stated:
My goal is to make you achieve your wishes, dreams and goals.
It’s all about positions, positions, positions, positions.
By making downpayments one can acquire positions in the Lyoness system.
I don’t go out to merely register someone, it’s not about registering people for the cashback card. Then I could as well just register you at the nearby swimming pool.
The “positions” Freidl is referring to is of course the account units Lyoness affiliates purchase in order to kick start their involvement in the AU investment scheme.
Units are able to be created via shopping at Lyoness merchants, however as the 2012 Lyoness Income Disclosure Statement figure shows, this activity is dwarfed by affiliate’s directly investing in accounting units themselves.
ORF sought a response from Lyoness regarding Freidl’s comments and was given the following statement by Mathias Vorbach, Head of Communications:
I can’t comment on the video as I haven’t seen it myself.
However, I can’t imagine that Mr. Friedl has said anything that contradicts the philosophy of Lyoness.
The ORF report closes out with a statement from the Association for Consumer Information (VKI), who have ‘investigated the terms and conditions of Lyoness‘ after receiving ‘numerous complaints from consumers‘.
Appearing on camera, Peter Kolba from the Association explains
We have tried very hard but we do not understand the terms. We are convinced they are incomprehensible, especially for the average consumer.
We were very surprised to find 61 vague and inexplicable clauses. We had never seen so many incomprehensible clauses in one contract.
Additionally, the contracts signed by the members contain many clauses the violate the applicable Austrian legal requirements.
Therefore the VKI has filed a lawsuit against Lyoness, through which we want to force Lyoness to stop using these clauses. As well as, most importantly, prohibiting them from relying on the content of those contracts that were signed earlier.
This confusion is carried over to Lyoness’ operations around the globe, with the company being notoriously recognised as having one of the most complicated and convoluted compensation plans in the industry.
This largely contributes to the repeated instance we see here at BehindMLM where new Lyoness affiliates, unable to grasp or simply unaware of the account unit investment scheme at the heart of the company, launch into lengthy tirades of justification using the largely irrelevant merchant shopping network.
To date the BehindMLM Lyoness review has attracted over 1000 comments, with not a single Lyoness affiliate able to explain or justify the existence of the affiliate-funded AU investment scheme that generates the bulk of revenue for the company.
The ORF report, which I believe aired earlier this year, can be viewed below in its entirety (to turn subtitles on, first click the “cc” icon in the top right of the video and then the big “EN” box in the middle):