Gerry Nehra gives “legal blessing” to Telexfree
With TelexFree Brazil in crisis mode and hundreds of thousands of affiliate investors money frozen in company accounts by court order, the company has begun to focus on new markets, hoping to lure new investors from the US and Canada to keep the scheme going.
Over the recent July 26th and 27th weekend, TelexFree held a “super weekend” in NewPort Beach, California, where the company went to great efforts to reassure investors that, despite the company’s bank accounts being frozen and all recruiting and ROI payments being suspended in their largest affiliate market, that this would have no bearing on their US operations.
Today we focus in on one of the more recognisable speakers at the TelexFree event, US MLM attorney Gerald Nehra.
Nehra (right) talked for just over a half hour with the intent of adding legal weight to the legitimacy issue of TelexFree’s business model.
[7:55] After I left Amway in 1991 I had a very brief period as the vice-president and general counsel for Fuller Brush. Fuller Brush did not make it in attempting to convert from direct selling to multi-level direct selling.
And when that job wasn’t going to work out I ended up returning from Colarado back to Michigan and opening up a private law practice. Since 1992, I have practiced law exclusively in multi-level direct selling law. That is all that I do.
Nehra opens his talk by assuring affiliates in attendance that they ‘are in the right place‘ [00:24], later sharing that he himself is ‘delighted to be on board‘ [17:05].
Much emphasis is placed by Nehra on Amway and the FTC court case of 1978, that was decided in favour of Amway. Nehra uses the decision to justify TelexFree’s operations today in the US:
[4:14] Independent contractor representatives, like you, were given two ways to make money. Sell the products to customers, receive a commission.
Additionally and optionally find other people who want to be like you, introduce them to the company. The company will keep track in their computer of who sponsors who, what you know as a genealogy, an upline or a downline.
And when the second person sells products to customers and gets their commission, that will give you, the person who sponsored them, an override, a bonus, a second commission.
That twist, that addition to the way that Amway was selling products and services was accused by the Federal Trade Commission of being an illegal pyramid.
An administrative law judge listened to all the evidence and said “No, government, the Amway business model, with its protections in it, with its guidelines, with the way they do it is legal.
[7:00] That (the Amway decision) is known as a seminal decision and that is paving the way for what you are doing today.
Why Nehra places such emphasis on comparing Amway to TelexFree is unclear.
Amway has a product range that affiliates market to consumers. TelexFree affiliates join the company, pay $289 for a single AdCentral or $1375 for ten of them, with TelexFree paying out a guaranteed $20 per week for 52 weeks per AdCentral purchased by an affiliate.
For a more detailed look at TelexFree’s business model, you can read the BehindMLM TelexFree review.
With nothing inherently being sold to customers (retail or affiliates), it is the money an affiliate deposits into the company that determines how many $20 weekly ROI payments they make. Naturally it follows on that the money paid out is thus sourced from new affiliates joining the company and investing in AdCentrals, along with existing affiliates re-investing once their AdCentral 12 month “contract” is up.
That fundamental difference doesn’t seem to phase Nehra however, who insists that TelexFree is wholly legal in the US.
[15:55] This company has a compensation plan that is unique, is different, some people might refer to it as somewhat aggressive (laughter).
It is legally designed and I can legally bless and defend your compensation plan if and only if it leads to its intended resolve.
When you place ads what are you trying to do? You’re trying to get customers!
When you are rewarded, what are you rewarded for? You’re rewarded for putting more customers on the books.
In truth however, under the guise of “buying back” its contracts from affiliates, TelexFree affiliates are guaranteed a $20 a week ROI for 52 weeks per AdCentral bought, based nothing more than handing over $289 USD per AdCentral to TelexFree.
Again, this doesn’t seem to concern Nehra:
[30:05] (Question from an affiliate): Based on your legal standing, do you feel TelexFree is on solid ground from legal standpoint here in the United States?
[30:12] (Nehra responding): I would not be here unless I also felt very strongly, just as you said that. You are on very solid legal ground.
Despite the obvious affiliate-funded Ponzi scheme mechanic built into and residing in the core of TelexFree’s business model, Nehra argues that it is the affiliates of the company who are to blame should a regulator (the SEC) deem the company an illegal Ponzi scheme.
[11:25] There’s a lot of regulatory activity out in the United States and out in the world. And I’m going to tell you that most of the activity that I have personally been involved in, and I’m going back to my days when I started out in Amway all up to today, I would say 98-99% of the regulatory activity that I have personally been involved in, and I have sat across the desk from an assistant attorney-general in at least twenty states on behalf of clients trying to negotiate issues and problems, 98% have dealt more with independent contractor conduct then it has dealt with plan design.
[12:34] You can have legally designed plans that have been vetted by the Nehra and Waak law firm and Jeffrey Babner and Grimes and Reece and D. Jack Smith and uh, Kevin Thompson – you can have all five of em bless the plan and you can still get in trouble.
Because what is said in the field what is done in the field, even with a legal plan, there’s more weight with it in the eyes of the regulators than the design.
You guys can control the future of this company. You gotta play it by the book, you gotta follow the instructions of the corporate leadership and your upline leadership. You’ve gotta say the right things, do the right things and most importantly, keep the focus on customer activity.
Whilst there is obviously nothing wrong with focusing on retail activity (and it should be wholly encouraged), merely having it as an option is simply not good enough. And of course it in no way nullifies paying out your affiliates $20 a week depending on how many $289 AdCentrals they “purchase” from the company.
Ignoring that core aspect of the TelexFree compensation plan, Nehra instead trots out the tired “blame the affiliates” approach, citing the pyramid scheme Equinox as an example:
[14:08] That plan was vetted by their own lawyers, was vetted by the Direct Selling Association government relations lawyers and, believe me, was legal.
They got shutdown by the Federal Trade Commission and Bill Gouldd received a lifetime ban from this industry.
How’d that happen? Distributor conduct.
The bad guy distributors, rather than following the plan, and the safeguards and the guidelines in the plan, had converted the plan into a $5000 front-load abusive program.
And they would tell their newly minted downlines “well in our line of sponsorship here’s the way we do it. You forgo $5000 and you rent a little office from us in this building we got down the street and everything is gunna be fine”.
Well it wasn’t fine, and it wasn’t the plan that was designed and vetted and approved.
And the federal government said “what’s going out in the field is so pervasive and the company is not policing it, and stopping it and pulling it back and disciplining people”, that you’re gone.
That company’s gone. Shutdown completely.
“Blame the affiliates” is a legal approach that has failed numerous times in US courts, with judges holding company’s entirely responsible for how the business is run. Primarily this is due to the simple fact that an affiliate is only able to work a compensation plan within the constraints of the compensation plan itself.
If an affiliate can earn an income via recruitment and ignore retail, something is fundamentally wrong with that company’s compensation plan.
In the case of Equinox, here’s what actually happened:
Beginning in 1996, Equinox came under scrutiny for a number of improprieties and illegal acts, including deceptive recruitment tactics. Numerous individuals had filed criminal and civil complaints against Equinox, claiming the firm had swindled them out of money.
On 25 April 2000, the Federal Trade Commission issued a notice that Equinox International had settled the court case with a penalty of $40,000,000 in restitution to the victims of Equinox International.
Additionally, Gouldd, the principal of Equinox International, was forced to liquidate many of his possessions and is furthermore barred for life from participating in any network marketing organization in the United States.
Equinox International dissolved in 2001.
Regardless of what Nehra would have you believe, ultimately Equinox was held responsible for its compensation plan and business model.
So too will TelexFree should the SEC deem its $298 AdCentrals, which pay out a guaranteed $20 a week ROI to affiliates who pay for them, to be an unregistered security.
At the end of the day whatever company you are in, if you’re receiving commissions based on how much money you and other affiliates put into the company, something is going to give. In the case of TelexFree Nehra confirms that the vast majority of money flowing into the company is via affiliates:
[7:05]Now the critical issues here… in your plan, is that you have a product or a service that you sell to customers. And that the customers use the service and that the income that the company generates is from the sale and use of the product being sold and used by end-users.
Now, can end-users be you guys? Can end-users be reps? Yes they can. Of course, we want you to be users of the product. We don’t want you to be 100% users of the product, we also want to have outside customers, that’s very, very important.
[19:26] I believe that it is ok to have a very high percentage of your customers being yourselves, the representatives of your company. However, the amount customers that are not representatives needs to be some number and the number that I’m on the look for is 20%.
Now I’m not sure that this company is there yet but I know it’s moving in that direction and I’m comfortable with the movement and the trend here.
Movement and trends aside, TelexFree obviously has less than 20% retail. “I’m not sure”…? Please. This is TelexFree’s own lawyer we’re talking about here. If anyone believes he’s not sure what the precise amount of retail activity is within the company they’re delusional.
If TelexFree had anywhere near 20% retail (which is still not enough when you’re offering a guaranteed $20 a week ROI), Nehra would be shouting about it from the rooftops.
Instead what Nehra focuses on is the “we have a product so we’re legal” argument:
[10:15] When I started with Jim and with Mike and Carl I realised your magic ingredient. The magic ingredient that seperates you from some other companies that have been indirectly referred to that have gone and been in a lot of trouble.
That special ingredient is that you have a real product. You have a real product slash service (applause from TelexFree affiliates).
And the last person that spoke said something about customers. Customers makes you so legal that it is incredible.
And here’s my, here’s my special request to you, to keep this in mind: Every time you take a wonderful long-distance service and get it activated by placing it with a friend or neighbour and help them make their first phonecall – you’re helping the company become even more legal (applause).
“We have a product” is the tired justification every single Ponzi scheme in the last decade has attempted to defend itself with. To date every company that has used this defence in a US court has failed.
Long time readers of BehindMLM will probably get a strong sense of dejavu in reading the above transcript from Nehra’s talk. Verbatim, it’s pretty much the same psuedo-compliance that was trotted out for two relatively recent high-profile MLM Ponzi scheme scams, Zeek Rewards and AdSurfDaily.
Not surprisingly, Nehra was balls-deep on the legal side of both schemes.
Nehra filed an affidavit in court declaring that Ad Surf Daily “was not a Ponzi scheme”. Ad Surf Daily was shut down in 2008 for being an illegal Ponzi investment scheme and its founder, Andy Bowdoin, confessed as much in mid 2012.
In late 2011 Paul Burks, founder and CEO of Zeek Rewards, held a secret meeting with early investors and informed them that Nehra was on retainer and had “taken the Zeek Rewards system apart”, making recommendations to change the terminology used by the company and its affiliates to describe the income opportunity.
Burks even went so far as to reassure the early investors that ‘generally when Gerry Nehra is involved, the Feds know that he’s cleaned up the act really well‘.
In August 2012 the SEC shut down Zeek Rewards for being an illegal $600M Ponzi investment scheme.
Notably both companies were shut down purely on the merits of their business model and how revenue flowed into the company and was subsequently paid out to affiliates.
Despite being heavily involved in two catastrophically industry damaging Ponzi schemes now, in which all participants, promoters, management and legal advisors should have known better, Nehra seemingly has learnt nothing from both experiences:
[25:47] The question is the word “investment”. Take it out of your vocabulary!
The word investment has a special meaning to the Securities and Exchange Commission. It is a highly sensitive, regulated word. We are not offering anybody in this country or in any country an investment.
We have to be very cautious about how the word is translated into other languages and I’m not bilingual so well I can’t help there, but do not use the word investment.
You are not offering anybody an investment and we don’t want the word anywhere in our literature and we don’t want to use the word verbally in any of our meetings.
Right. Because not calling an investment an investment will simply make the issue go away. Just like it did in both AdSurfDaily and Zeek Rewards… Nehra branded psuedo-compliance at its finest.
Conveniently ignored and underscoring all of Nehra’s comments is the business halting legal action that has already begun in Brazil against TelexFree. When asked by a concerned affiliate about the injunction granted against the company Nehra brushed it off, stating
[24:20] Okay, I am the MLM specialist and attorney for TelexFree in the United States only. So I gotta duck the question.
[24:50] I should not be used as a marketing tool and I cannot be referenced overseas because I do not advise the company on their overseas operations. I only am a US attorney helping TelexFree in the United States.
TelexFree themselves however use Nehra prominently as a marketing tool on both their localised Brazilian (Portuguese) and Spanish (Spanish) website portals:
These are portals that have nothing to do with TelexFree’s US affiliates or the company’s US-based business operations.
Probably a more accurate reason Nehra won’t touch on Brazil and TelexFree is that there the company’s own lawyers pretty much admitted it was a Ponzi scheme, arguing in court that
should the company spend a few more days being prohibited from signing up new investors, they would have no money to pay the old ones.
Not surprisingly a Brazilian judge rejected this argument and denied TelexFree’s injunction appeal.
As it stands now several legal proceedings involving TelexFree appeals have been rejected by the Brazilian courts, with one judge remarking
the issue is that the earnings will be exhausted when the main source of revenue of the group (new affiliate registrations) stops.
Many (affiliates) do not even have the opportunity to recover their initial investment (minimum U.S. $ 339) and this is detrimental.
Key to the legal issues in Brazil is that TelexFree use the exact same business model in Brazil as they do in the US and elsewhere in the world.
You sign up as a TelexFree affiliate, pay the company $289 or $1375 dollars and in return get a guaranteed $20 a week per position invested in.
Call it what you want, market it how you want and attach whatever products and services to it that you want… when the regulators come knocking the issue of TelexFree’s AdCentrals being classified as an unregistered security is a no-brainer.
AdSurfDaily? Ponzi scheme.
Zeek Rewards? Ponzi scheme.
Third time’s the charm Nehra? Yeah right.
Nehra is basically doing two things: blaming the affiliates if anything goes south here north of the equator, and doing his own version of willfully blind eye.
Basically, he’s setting things up by planting the seed that if the affiliates aren’t compliant then regulators will come down on them. So when the regulators *do* come down on them, some nameless “rogue affiliates” can be blamed instead of the company itself.
Also, he’s basically approaching things from “pyramid scheme” POV. FTC vs. Amway was over definition of pyramid scheme and how different MLM is from pyramid scheme, as defined in FTC vs. Koscot Interplanetary. So he keeps emphasizing what was his role in the Amway case (he was employed by Amway at the time, I believe) but it’s ultimately IRRELEVANT.
This is known as “domain transfer”… I don’t actually know the topic, but I feel I know enough to talk about it.
Frankly, Nehra’s involvment in both ASD and Zeek should be proof enough that he knows NOTHING about Ponzi schemes, and NOTHING he said in the meeting offered ANY sort of defense in that regard. You’re simply LEAD to believe he did.
Gerry Nehra is at least aware of the problem, that his primary function has changed from being legal advisor to becoming a marketing tool.
I believe he has become too familiar with his own pseudo compliance solutions and have started to believe in them himself.
He clearly realized that the AdCentrals and Family Packs were investments, so he added 10 “99TelexFree” software products to the deal “to MAKE it become legal”. He also made the weekly payouts become INDIRECTLY rather than directly, i.e. people are paid with 1 “99TelexFree” software per week, and can sell it back to the company for $20.
I believe he has lost his touch as a lawyer. He’s indirectly assisting his clients in running illegal businesses.
I don’t think any court will believe in the idea that people are buying multiple “99TelexFree” software packages for personal consumption. Adding products to a system won’t change the reality, the AdCentral will still be an investment in its primary functions.
do you mean the company is now based in the us and no longer in Brazil?am lucky because am paid.
Carlos Wanzeler’s cousin and aunt sue Telexfree:
The new Telexfree legal strategy (or at least new public speech) is that the relation between Telexfree and affiliates is commercial, not a consumer relation, and so, according to them, the prosecutors don’t have the right to interfere in it. (of course they say it using some juridical expressions to look more credible)
Speaking of which, how much of a return on their investment do you estimate these ponzi schemes get when they hire a big name guy like Nehra? It’s probably a drop in the bucket to pay his retainer in comparison to what they bring in because people trust him since he’s a lawyer.
“If Gerry Nehra checked it out, it can’t be a scam!”
How many people do you think see a presentation like his and decide to jump in based only on it? How many people will decide to “go all in” and ignore the rest of the facts (such as this blog’s very existence) because of his credibility?
Zeek Rewards had what, 1.2 million or something users and 2 million or so accounts from memory…
Personally I think TelexFree is going to be gutted in Brazil, which will follow on globally. Authorities in the US are probably just going to watch what happens in Brazil and take it from there.
Given Nehra’s professional capacity, he can’t pull a Troy Dooly and say he didn’t have access to all the data – there’s definitely an issue of culpability with Nehra’s blatant assurances that the business model is legal. Perhaps not on the same level as top promoters and the owners, but there nonetheless.
Uh, if affiliate’s aren’t consumers then TelexFree is an even easier identifiable Ponzi scheme than if they were. At least with affiliates being consumers there’s someone paying for a product, otherwise it’s just a straight up investment Ponzi.
herbalife was gutted by a belgian court,but US authorities did not follow up on that in the US. Gold Quest was gutted in india, but that did not affect operations in the US ?
MLM law is so grey that countries prefer to handle MLM in accordance to their own perceptions and traditions in this sector. When there is no set standard for MLM in individual countries, how are you expecting some international standards of compliance which can decide the legality of an MLM across different countries ?
And therein lies Mr Nehra’s “OUT” when the proverbial hits the fan.
Nehra is very careful to ensure he refers to the business “MODEL” and not the business “REALITY” when discussing ponzis of the Zeek / TelexFree type, giving himself “plausible deniability” when the inevitable happens.
The serial hucksters (HYIP players) know what the vulnerabilities are, so they disingenuously rely on “management” to provide legal cover.
In AdSurfDaily, the document/video presentation was known as the “Legality Statement.” It featured ASD’s Andy Bowdoin and North Carolina attorney Robert Garner explaining how legal the “opportunity” purportedly was.
The Feds ripped it to shreds. It later became an element in a racketeering lawsuit some of ASD’s own members brought against Bowdoin and Garner. The RICO case ultimately was dismissed by the Plaintiffs, more or less because the Feds offered a restitution remedy through a process known as remissions.
The Zeek video featuring Paul Burks and early affiliates is an example of MLM hucksters relying on “management” to provide legal cover. The serial HYIP affiliates hope later to escape prosecution or eliminate/minimize downline lawsuits by relying on a false-reliance defense — i.e., Burks told us he relied on attorneys, and we promoted it on that basis.
The Legisi HYIP case shows that defense might not fly. At its core, the issue (as Oz points out above) is willful blindness. Another issue is secret deal-making and undisclosed partnerships.
The false-reliance defense also made a brief appearance in the ASD case, with one of Bowdoin’s business partners essentially claiming he’d formed a “Chinese” version of ASD based on ASD’s assurances the business model was legal.
Like Bowdoin, the business partner already had some baggage: The SEC charged him in the 1990s with drumming up business for three prime-bank swindles.
The bitter reality of MLM in the United States right now is that certain schemes and the disingenuous, see-no-evil behavior of affiliates is setting the stage for nation-states to claim that the United States is exporting Ponzi schemes and that American lawyers are permitting it to happen.
So, while the United States has legitimate concerns about trademark infringement and the sale of knockoff goods in China, for example, the Chinese (in Diplospeak) could say something to this effect: Your concerns are duly noted and we are addressing them, even as we recognize U.S.-based Ponzi schemes operating within our borders, using U.S. lawyers to give them a boost and proselytizing to our people.
It is just HORRIBLE Capitalism. In some cases, it is producing dangerous bedfellows. Profitable Sunrise, for example, almost certainly was a three-way marriage among Americans so drunk on religion that they’ve divined a construction by which their God applauds greed and wants to see it become a global export, U.S. domestic political extremists and/or “sovereign citizens” and Eastern European organized crime (or worse).
If the money was good enough, they’d probably even push it if it was named OsamaSurf or AlQuedaBids or FARCProfits or CarlosTheJackalFreedomCompany.
Then, of course, they’d build some narrative after the government(s) moved that Commies and Nazis and conspiratorial bankers were destroying freedom and trying to keep the peasants in chains.
Such might be the case regarding the FTC and pyramid schemes, but the laws on unregistered securities and the SEC are rather clear cut.
There is no doubt in my mind that TelexFree’s AdCentrals would be an unregistered security in the eyes of the SEC. As such the case against TelexFree would be no different to both AdSurfDaily and Zeek Rewards. There’s plenty of precedent in this area within the US.
As far as the US authorities and Brazil goes, it’s obvious that the shutdown of TelexFree in Brazil will kill the opportunity globally. In that sense it’d make sense for the US to conserve their resources and let the company collapse organically in the US. It’s not like TelexFree is a major player there yet, such to the extent that ASD and Zeek were before they were shutdown.
So IF TelexFree is taken down in the U.S., he can basically claim …
“I warned you at the California event about compliance, but some of you simply decided to act contrary to what I said and had strongly advised you to do.
I can’t control what any distributors or associates do or say. So I can’t help you guys there. Toodles! Arrivederci! Hasta la vista, suckers!”
Paying weekly ROIs to affiliates just to post ads, watch commercial, test videogames or share images (none of the activities I listed generates any return to the company) on FB is illegal all over the world.
QNET is based in Hong Kong.
Doesn’t the mention of Gerry Nehra usually spell the kiss of death?
They’re making sh** up as they go along. It’s mental diarrhea.
Come to think of it, I think some TVI Express scammers in China claimed that because TVI Express is not a Chinese company, they CANNOT be shut down in China due to international law/treaty/something. Didn’t happen, of course.
Not for bright-eyed HYIPsters hoping for “make money fast doing nothing”… And had done NO due diligence. Oooh! He’s a big-name lawyer! He must be right! NOT!
Even Brazilian affiliates reapeat all the time “our company has hired the best MLM lawyer in the US.”
While these ponzie lawyers easily manipulate the crowd by telling them if the scam (oooops business) gets shut down it will be the promoters fault, they forget to mention sites like this which makes these scams public information.
With all the info made public through the information highway, Really anyone can send complaints out to the proper authorities. Blaming affiliates is simply a bunch of crappola.
These mlm lawyers are a real joke in my opinion.
The injunction from Acre was against
* TelexFree Brazil (Ympactus)
* James Merrill (USA)
* Carlos Wanzeler (USA)
* Lyvia Wanzeler (USA)
* Carlos Costa (Brazil)
* TelexFree USA was mentioned as part of the case
An asset freeze can also include the company in the US, especially if it has been directly involved in something in the situation in Brazil.
The trial on the 12th of August will probably reveal further details for what the charges are about, and how far the actions will be extended.
TelexFree USA have moved payments to a payment processor in Canada, GPG Global Pay Gate or something.¨
It’s nearly impossible to predict anything before August 12th. The Court in Acre CAN shut down the company in the US, through a court in the US. It CAN also freeze assets in Canada, through a Canadian court.
Gerry Nehra will first of all have impact on people who already are interested in joining, and who prefer confirmations from “experts” and other “authorities”. He’s more valuable as a marketing tool than as a lawyer.
But it’s impossible to estimate any total effect. He may also draw some negative attention towards his clients, e.g if promoters are using him as part of their own marketing. I don’t know anything about what that type of negative attention might be, but I know it sometimes happens.
A targeted marketing campaign could have been interesting. “Join a Ponzi today – recommended by Gerald Nehra”. 🙂
You can assume we will have little effect on people who really are interested in joining. People who are searching for information on the internet have normally made their decisions BEFORE they start to search. They are simply looking for confirmation for something.
Criminal investigation against Telexfree will be reopened:
I thought that was ordered by the Court itself?
The Court has a higher authority than the police. If the Court has ordered something (the injunction, 30 day deadline), the police can’t make any decisions in conflict with that order.
The 30 days deadline was an “ongoing process” already ordered by the Court (for a period of 30 days). Starting a criminal investigation into the same matters before the order had been concluded would have violated that order. But that particular process is no longer “ongoing” when a charge sheet has been filed.
With that logic, it’s a normal procedure rather than a defeat.
I think you are misreading the report.
There “WAS” a court ordered injunction in place preventing the police investigation, but that injunction was lifted by order of a higher court
Even the most rabid Telexfree (Ympactus Comercial Ltda) supporter would consider the decision a defeat for their side.
As I understand it an injunction was granted by a judge. In this latest appeal (by the police?) multiple judges voted on the issue with a majority in favour of lifting the injunction.
I think the argument was that police arrests without the conclusion of the civil trial wouldn’t be fair.
Bollocks to that, Ponzi schemes are criminal matters and should be dealt with as such.
the injunction was “valid unitl further analysis by three judges”. The judge who had granted the injunction kept his vote, but the two others disagreed with him.
Ah ok, thanks for the clarification.
Conveniently now that the investigation has been resumed, Wanzeler and Merril are hiding out in the US. I wonder if they’ll go after Carlos Costa next week.
People, the big issue in Brazil is Telexfree maneuver to return to work. The company is making its mark as a guarantee that the process will still be judged by the magistrate Khalil Thais.
The problem is that the suspicion that if the company is released there will be no money to pay everyone. In Vitória, Espírito Santo, Brazil headquarters in Telexfree, relatives Wanzeler are going to the courts to fight for the return of money invested. But it is unlikely that the company is working again.
Prosecutors are investigating the link Telexfree with other MLM companies too. The funny thing is that the current directors, owners or leaders of MLM companies have attended other in the past. This whole staff will be investigated.
In the case of Telexfree, the connection shall be cleared with the company and Foneclub Sanderley Rodrigues. And also the involvement of former socios him with BBom and Mister Colibri. There are more than 30 pyramids in research in Brazil.
Then this will be “year of the scam” in Brazil, much like 2008 was for Colombia when the government declared “economic state of emergency” and ordered nationa-wide raid of all the various scam offices. Who was the president then? Carlos Uribe? He would have been re-elected if his sons didn’t become buddies with David Murcia of Grupo DMG (one of the scams that got closed). 🙂
I read it in a similar way, but I was looking for the logic behind the injunction. A court will normally not interfere with police work “randomly” or “on a general basis”, i.e. you can’t seek the Court for protection against investigation without any legal reason for doing it.
The 30 day deadline was a serious legal reason for a temporary restraining order.
“Normal procedure” is the most correct description of it. It was about “Court vs police” rather than “TelexFree vs police”.
Yesterday, Carlos Costa made a Google Hangout http://exame.abril.com.br/negocios/ao-vivo/telexfree-faz-conferencia-online-com-diretor-de-marketing
Its not only about an arrest since generally there are preliminary determinations required before an arrest is made… the first of which is a determination that a crime has taken place at all.
Costa’s attorney asked for and was granted a temporary injunction prohibiting the police from detaining, searching and questioning his client, because, he argued that they had no “just cause” to do so since there was no crime. There were allegations (obviously refuted) but even that was subject to various appeals.
Several months have passed and numerous hearings have clarified this issue. A panel of judges, having the benefit of further information now rule that “just cause” does exist and the criminal investigation may proceed.
It does not seem likely that the civil trial must conclude for an arrest to be made. Reasonable suspicion is usually enough to detain investigate and arrest. Costa would likely be granted bail.
There clearly was a “legal reason” for the decisions. Rulings relate directly to the facts and law present in the case at hand.
That idea wasn’t too bad in itself, but it will need to be heavily modified to reflect the realities of the case, and to find the proper channels for attention.
1. THE REALITIES
In reality, Gerald Nehra is NOT blessing the current business model, he’s blessing his own plan for how the promoters themselves can turn it into a legitimate MLM business. He’s blessing a PLAN rather than the reality.
In reality, he is screwing current and future promoters if the plan fails. They will need to blame themselves rather than the company if they don’t bring in enough customers to support their own payouts.
Nehra has used his own experience as a lawyer to limit his own blessings to areas where nobody can blame him if anything goes wrong. If they do blame him, they have simply not understood the message he was trying to tell them.
He’s actually trying to direct blame away from the organizers and over to the promoters themselves if anything fails. “Blame” can potentially also include legal responsibilities, e.g. people themselves have handled the business illegally.
2. PROPER CHANNELS FOR ATTENTION?
This point can’t be analysed clearly before other details have been analysed in point #1.
Some examples for “proper channels”:
SEC is a “proper channel” for some types of information, e.g. if you want a regulatory body to look into the case.
Media (in general) is another channel, e.g. if you want reporters to look into something and publish the results to a wider audience.
Different groups of professionals can be a third channel, e.g. if you want some specialised information added or want them to recommend something.
TIC TOC folks…..Gerry Nehra is the Canary in the Coal Mine! better tighten those running shoes and put some protective outer wear on….
OK. This is just plain strange. This video is titled “TelexFree Scott Miller Is Not Brad Pitt Newport Beach.”
In it, Scott Miller tries a “Carlos Danger” laugh line at approx. the 5:16 mark. See U.S. cultural reference here:
The video appears to have been taped at Newport Beach cheerleading session for TelexFree in late July at which Gerald Nehra was a speaker lamenting on the problems affiliates can cause for an “opportunity.”
Now, juxtapose those comments by Nehra against a claim from a group led by Scott Miller (video below) that people who send $15,125 to get going in TelexFree with a “contract” will make at least $1,100 a week for a year. (Sending in lower sums results in lower earnings, according to the video — but they’re apparently happy to accept the lesser sums.)
The video is called, “I’m A Guru PaidWeeklyRevolution.”
If you look at the video featuring Nehra that Oz posted in the story above, you’ll clearly see the words “PaidWeeklyRevolution.”
So, you have PaidWeeklyRevolution touting Nehra’s speech and his take on compliance while the same group positions TelexFree as an opportunity in which one can purchase a “contract” that provides an income.
What IS that, if not a security, if not an investment contract?
These messages are impossibly butchered and are made even stranger by the fact that TelexFree appears not even to be named in the “I’m A Guru PaidWeeklyRevolution” video — although the company name does appear in the text pitch at the YouTube site.
Two speakers at a TelexFree event — one an attorney effectively certifying its legality while telling the troops they are to blame if things go south, and the other a pitchman whose group is promoting the opportunity as the purchase of a “contract” that pays out more and more as affiliates pay in more and more.
This is a trend in Chain Recruiting: just tell people they can earn money, without EVER mentioning what opportunity they are actually joining (just the recruiter’s organization scheme name) unless they really really ask or you need them to sign something.
Shawn Dahl’s OBS did this to a lot of Herbalife recruits, then switched to Vemma when The Verge’s Scamworld series outed them.
It’s a way to disguise the stink of the attached opportunity.
Furthermore, it’s often built as “team-building”, with the leader able to take the team to some OTHER opportunity when the chance comes.
In fact, at least one of the “usual suspect” HYIP ponzi forums has a ” Co-Ops, Teambuilds, and Downline Clubs” subforum to facilitate the sourcing of new victims.
I use vague descriptions like that to avoid being too locked onto one specific target. “Proper channels” can be almost anything. That method will allow me to switch between different types of channels or aim at multiple channels. I will use SEC as an example here (since it’s clearly identifiable).
One of the Brazilians asked a question about “Why don’t people inform the authorities in the USA about this scam?”. The answer is simply that we’re not organized in that way, i.e. to meet the needs of specific groups of professionals or regulatory bodies, e.g. in the type of information and how it has been organized.
If you want to provide information to someone, you will first need to know what TYPE of information they potentially can be interested in, and you will also need to ORGANIZE it for that specific purpose. You can’t drown people in work either, so the information should be carefully selected.
SEC is potentially among those “proper channels”, along with FTC, FBI and other government agencies.
* I know nothing about the organization and how it works.
* I know something vague and general about rules
* I can guess something about “limited resources”
Based on a limited set of knowledge about a “target audience” like that, it should be possible to find SOME information of interest and avoid drowning them in work.
Government agencies are normally required to do their OWN investigation, using “proper sources”. That’s typically from the company itself, e.g. financial information and marketing material. It can also be from other official sources. They also have some rules about neutral point of view.
It is possible to vaguely identify SEC as a “target audience” with some key points for which types of information they can be interested in. Or I can describe it from the opposite viewpoint = it is possible for me to use SEC as a “qualified external source” that clearly will outperform Gerald Nehra as a legal advisor. 🙂
“Vaguely” is because I can’t be expected to study the organization in detail, I will need to find less time consuming methods than that.
In Brazil, they should probably “hire” the Court itself rather than some lawyers. 🙂
People normally have some weird ideas about different types of solutions to a problem, e.g. the idea that a lawyer can make something become legal simply by reviewing a plan. We already KNOW that other of his clients have been shut down by authorities, so the idea doesn’t make much sense.
One of Gerald Nehra’s weak spots is that he’s not solely referring to his legal knowledge. He’s also applying ideas from his own belief system, ideas that may partially reflect some truths but will fail to match the reality. There’s actually major flaws in some of his logics.
One major flaw (around 13:40 into the video):
Equinox was shut down as a pyramid scheme in 2001. Gerald Nehra has identified the problem to be about individual distributors who didn’t follow the plan. In that scenario, his client will be innocent and simply a victim for some “rogue individuals”.
The major flaw is that he identifies the problem to be “out there somewhere”, among the distributors rather than within the reach of his own clients. When he describes a problem in that way, his clients won’t be able to put up any solutions to it either.
The other flaw is that he doesn’t correct his own ideas to match the reality, he expects the reality to match his own ideas. We normally don’t present something as “legitimate” more than 12 years after it actually has been shut down. He should have presented it as his personal viewpoint rather than as a professional one.
“To a hammer, everything looks like a nail.”
Basically, he had the idea in his head (i.e. a company is RUINED by bad affiliates) and went out looking for stuff he can use as “proof”. This belies the assumption that the company itself is blameless. It is not.
However, it is what TelexFree folks WANTS to hear, that the company is great, and they are the people that’ll make it happen.
The way Gerald Nehra identifies a problem also makes it difficult to analyse for others. I’m unable to identify whether he actually believes in his own ideas about “legitimate business”, or if he KNOW there are some serious issues there.
If Nehra KNOW there are some serious issues, his legal advices to a client should normally be directed towards “Exit strategies” and “defense strategies” sometimes in the future, rather than towards growing the company.
I will guess he’s believing in his own ideas. He has focused at his OWN “field of expertise” rather than at the total amount of information available, e.g. he has ignored the situation in Brazil almost completely. He also completely ignores the “investment” factor.
I would normally have tried to get an overview for all known information if I had been in a similar role as an advisor. I’ll guess that idea illustrates that I’m not an “expert” either, i.e. I don’t expect to solve all types of problems within my own “field of expertise”.
The method I’m using here is simply to look at some of the information available, and try to analyse it and make it become understandable. The video is clearly a “source for information”, and it can potentially tell a lot about the company’s defense strategies.
That idea makes it difficult for me to identify a strategy correctly. I’m clearly NOT an “expert”, if we identify that to be about specialising in some specific areas. I’m trying to identify things from a much wider perspective but in less details.
Gerald Nehra has been “MLM legal expert” since 1982 or something = 31 years. Some ideas have probably become dominant (or a “habit”), so when I’m looking for logical explanations to something I may be looking at the wrong set of ideas = my own ideas rather than his.
Telexfree: Police is investigating not only owner, but also “network leaders”:
It will be interesting when the law comes knocking on the Telexfreeze office in the USA, only to find out they have no office.
Telexfree video uploaded by ponzie recruiter faith sloan about the new Financial Advantage Plan.
TelexFREE Newport Beach California Convention Update Call.
Good morning, Mr yo.
Your mission, should you choose to accept it, is to find ONE single “opportunity” promoted by Faith Sloan which was NOT a HYIP ponzi or “get-rich-quick” endless chain recruitment scheme.
That is a mission “impossible” Mr. Littleroundman. Yes good morning to you also.
So now the caring people at TelexFree are promoting a debt consolidation/credit correction/credit counseling/credit rebuilding product program! EXCELLENT…..Mission, Ministry & Movement! Really? ‘Getting secured loans without scoring the credit? smells like ‘predatory lending’ is about to add insult to injury…
Just wait until this group of greasy scammers sells a few of these over-priced consumer products to the wrong victim…If one were to say that TelexFree couldn’t reach any lower than they did with the bogus insurance product…I would never have believed it…but they just did.
I don’t think Telexfree affiliates can act as anything but a lead generators for this type of lending. At least in California not only does the Department of Real Estate tightly oversees equity lending, including licensing, but if the California Association of Realtors thought Telexfree was operating illegally or in a way that gave them a competitive advantage there would be a flood of regulatory and political pressure brought on by that lobby.
That being said, this should be is a good time to open up equity lending so the credit repair/referral business has potential… but then again what difference does any of this make if Telexfree is only a ponzi/pyramid?
Carlos Costa to the press: “Brazil is not prepared for the revolution that is MLM”:
@ Brazilian, Mlm or ponzie recruiting scheme?
US is not impressed, having INVENTED MLM 40 years ago.
But then MLM wasn’t what it cracked up to be either.
That interview is a bit of an eye-opener. Pretty much “we are running what we believe to be a legal Ponzi scheme under current Brazilian law. Oh and we’re legal everywhere else in the world too.”
No wonder Costa and TelexFree keep getting shutdown in court by the prosecution. Dude just can’t stop talking out of his rear end.
Sanderley Rodrigues (a.k.a. “Sann Rodrigues”) is mentioned more and more often as one of the key organizers for the pyramid and Ponzi scheme part. He’s from USA.
Carlos Costa doesn’t appear to be very qualified himself, and neither do Carlos Wanzeler nor James Merrill. The professional organizers can probably be found other places in the system.
If so, at least the prosecutors are onto it. If they can drag back Merril and Wanzeler from the US after the next hearing I’m sure it will all come out in the wash.
I’m actually a bit surprised Brazilian affiliates haven’t questioned Wanzeler and Merril’s convenient escape to the US as soon as the injunction was handed down. They seem to be awfully comfortable with the idea that 2/3rds of TelexFree’s executive management have effectively abandoned them.
I don’t even know why Costa continues his silly campaign, he’s made so many bumbles now that I’m almost certain if you squeezed him honey would come out.
Do not expect much racionality from Telexfree affiliates. 2/3rds of the leaders are out and the other one just waves papers but, yet, people believe them.
And we should not forget Sann Rodrigues, famous for having run another Ponzi in USA, foccused in Brazilian immigrants. Most agree he is a kind of ocult mentor in Telexfree.
It is easy to see Telexfree’s Ponzi Scheme in this P&L Exercise:
(Ozedit: link is to a TelexFree investment ROI projection spreadsheet)
You Guys are all wrong, TelexFREE is giving people a business opportunity never before seen. They paying weekly and all the promoters are happy. Everything else is irrelevant.
TelexFree is giving people a ticket to participation in a global Ponzi scheme. They are not paying weekly, with promoters in Brazil (their largest investor) market having not been paid for some time now due to a count ordered injunction against the scheme.
Your hip pocket and that of the affiliate investors you’ve recruited is irrelevant to analysis of the company’s Ponzi business model and compensation plan.
TelexFree gave you a fake business where you help it cheat your friends and family out of money, and give you a split of the “profit” it gained.
Of course you’ll be happy and they’ll be paying weekly.
Still irrelevant? Or is it ‘a ignorância é felicidade’? (Ignorance is bliss)
People don’t *want* to believe the false prophets, but they feel they have no choice if they want to get their money back.
In the “Pigeon King Ponzi” of Canada, many victims were reluctant to pursue legal remedies and help investigators gather evidence of fraud as they felt it may interfere with Pigeon King’s bankruptcy proceedings and getting them paid.
It wasn’t until a local agriculture magazine did a series of in depth investigations that got police to do a full investigation with subpoenas and such.
The victims are now faced with a “cognitive dissonance”: where their brain contains two sets of conflicting information. One is the longstanding belief that TelexFree makes them easy money, and the newly discovered belief that TelexFree is a scam.
In past studies, 50% of victims will NOT seek justice. Instead, they simply walk away (I give up), negotiate with the scammer to get some back, or outright join the scammer to fight the government and authorities.
Nehra and Merril come from the same family. I hope that both of them spend their lives in prison like their brother Madoff is going to do.
Hopefully they get to pay for every dime that stole from all of us. Not only Merril but the rest of them who started Telexfree.