Norway Gaming Board: WMI still a pyramid scheme
When we last left Wealth Masters International, back on December 21st 2010 the Norway Gaming Board came out and declared the MLM company to be a pyramid scheme.
Naturally Wealth Masters weren’t happy with this and using lawyers Hellerøy, made full use of the three week grace period to appeal the Gaming Board’s decision.
During this time details of exchanged between the Gaming Board and Wealth Masters were scarce, but finally the two parties have concluded their appeal discussions and the verdict is in.
The Gaming Board has considered the concept of WMI (and) our assessment (is) that the WMI is a pyramid-like sales system.
All sales of products to Wealth Masters International in Norway must immediately stop.
So says a twenty seven page document released by the Norwegian Gaming Board a few days ago, detailing the exchanges that have taken place between their December 23rd decision and now, as well as the reasoning behind their ultimate conclusion.
The criteria used to establish whether or not Wealth Masters International was a pyramid scheme remained the same as the criteria used back in December.
1. If WMI is a business model similar to a pyramid scheme
2. If a payment is required to participate in WMI
3. If a payment is required to obtain the possibility to earn money in WMI
4. and if the income in general is based on enrolling instead of retail sale of wares or services, hereby if more than 50 % of the income is related to enrolling. This applies both to the company and to each single member.
The difference in the March report though is the revelation of some new information regarding the ongoing case, beginning with what happened after the December 21st announcement.
Following the December announcement, Wealth Masters Norway publicly came out and said that the Gaming Board had them all wrong.
The three week period in which they could lodge an appeal closed on January 12th, 2011. On January 6th, the Gaming Board received a request from Wealth Masters asking for an extension to this deadline.
This was granted and a new deadline was set for January 25th. Again on 21st January the board received a request from Hellerøy asking for another deadline extension.
Again this was granted and a new date was set for January 31st.
On February 2nd, twenty one days after the original deadline, the Gaming Board received an objection to it’s original December ruling.
Most of the objections seemed to revolve allegations that the Gaming Board hadn’t understood Wealth Masters International’s internal structure or product composition.
This despite meetings between the two organisations in which it was categorically established that the four representatives of the Gaming Board understood what the presentations Wealth Masters gave them.
And as for the products, despite some difficulties in actually obtaining them from Wealth Masters, they were eventually received and analysed by the board. This analysis helped form the basis of the Board original ruling, and seeing as Wealth Masters haven’t changed their products, their original findings still stand.
The Gaming Board considers Wealth Masters a pyramid scheme despite the mostly irrelevant objections rejections raised by the company’s lawyers, Hellerøy.
As for Wealth Masters itself in Norway, it appeared that even before the Gaming Board reaffirmed their position a few days ago – the company was dissolving anyway.
On February 5th, 2011, just three days after submitting their objections to the Gaming Board, Wealth Masters Scandanavia CEO Carl Harald Krystad stood down and handed the reigns over to a Johan Kloster. The Gaming Board believes however that Krystad still maintains a 40% stake in WMI Scandanavia, with the other 60% belonging to some guy called Hege Ensjø*.
If you’d just submitted an objection to the most important decision that wille ever be made regarding the company you have a 40% stake in, would you step down as CEO?
Clearly the writing was on the wall and Wealth Masters Scandanavia and Krystad knew what was coming…
Hilariously the report goes on to highlight a contradiction in the running of WMI in Norway. In the very same report it was first stated by Hellerøy that
(WMI Scandanavia) was established to provide individual Advisers assistance and ensuring that other service functions (are available to help) spread WMIs products and services in Scandinavia.
WMI Scandinavia has no direct contract with WMI and Thus, no legal or financial ties to this company.
Then in the same report, it Hellerøy went on to explain that
WMI is based not on a decentralized structure. WMI Scandinavia AS was established to take care of the individual consultant in the system.
This applies both to public authorities and that the company Scandinavia speaks on behalf of WMI.
WMI Scandinavia will thus be able to give correct information and credible evidence about the business. WMI Scandinavia will also could provide assistance to individual consultants in accordance with their signed service agreement.
For all intents and purposes, Wealth Masters Scandanavia was Wealth Masters in Norway, acting on their behalf. That didn’t seem to stop Hellerøy from trying to establish a backdoor ‘get out of jail free’ clause should things turn sour.
Understandably, the Gaming Board was having none of it and held both Wealth Masters and Wealth Masters Scandanavia responsible (hence Krystad fleeing I’m guessing).
Membership numbers were also disclosed for the first time in the report. The Gaming Board found that ‘several independent sources‘ (read: WMI members) were claiming that WMI ‘had 1100 members in Norway as a whole‘.
This claim was no doubt used to promote the popularity of the business in Norway and to attract confidence to the opportunity.
In dealing with the Gaming Board however, Krystad was forced to admit ‘that WMI has 200 active members in Norway. All of these (members) were also consultants for WMI’s products‘.
This didn’t stop Hellerøy from claiming otherwise though. In their February 2nd submission they claimed that the Gaming Board
In the letter dated 31 January 2011 from the law firm Hellerøy noted that the Gaming Board has incorrect information in relation to membership lists.
In the letter dated 31 January 2011, it is submitted that it is not correct that essentially all purchasing the product are also consultants.
So on one hand you’ve got lawyers claiming that not all WMI customers are members, but then the CEO of the company has already conceded otherwise.
Did Hellerøy imagine the Gaming Board would just forget what Krystad had earlier told them on the record?
I’m not too familiar with Norwegian law but it seems that even though this latest upholding of their earlier decision by the Gaming Board also has a window of appeal, dated three weeks from the date of the report itself, 28th March 2011.
With CEO Krystad abandoning ship (he’s the one that originally asked the Gaming Board to conduct an investigation into the company to settle the legitimacy of Wealth Masters in Norway once and for all), and lawyers Hellerøy seemingly only able to put together contradicting arguments and irrelevant rebuttals, I wonder if WMI Scandinavia will even bother lodging anything at all?
Seems kind of pointless now that the dust has settled.
One thing to take away from all this is that, in Norway at least, you can be sure that other MLM companies will obviously take note of the events as they’ve unfolded.
I doubt we’re going to see anyone else volunteering their company up for analysis by the Gaming Board anytime soon. This means that unless the Gaming Board are proactive, rather then reactive in their investigations, the doors could potentially be thrown open for other businesses to capitalise on WMI Scandinavia’s downfall.
Businesses who might not pass an investigation by the Gaming Board themselves.
You can read the full 27 page March report by the Gaming Board in Norwegian, or translated into English.
Note: I had a bit of trouble getting Google translate to translate the entire document into English (it’d stop around page 20 or so and leave the rest of the document in Norwegian).
A few refreshes and opening up the link in a new browser window seemed to eventually fix the problem though.
*Update 01/04/2011: A reader has contacted and informed me that Hege Ensjø is actually a woman whose name has been misspelt by the Gaming Board.
Her actual name is Hege Enodd ‘and she is the girlfriend of Per Gunnar Hoem, who is the top WMI consultant in Norway and included in the Executive Committee.
the shares that appears to be owned by Hege Enodd are actually controlled by Per Gunnar Hoem’.