Vemma mount affidavit defense against FTC lawsuit
Breaking his silence on the FTC illegal pyramid scheme complaint filed against Vemma, Founder and CEO B.K. Boreyko has finally addressed his “Vemma faithful”.
Wrote Boreyko on Facebook a few hours ago;
Hello Vemma faithful –
Just wanted to clear up a couple of phone calls I’ve received about moving to other companies.
Although I know there’s panic out there, I want you to hear it from me…hang tight. We have a hearing scheduled for September 3rd. I think we’ll win. Until then, I know you want to do the best for your teams and that’s a sign of great leadership.
I will and have always complied with the court’s order in this matter. I’m the kind of guy that would never violate the terms of that order.
If you hear anything different, tell them you talked to me and I said buckle up because there’s great things ahead for Vemma!
Indirectly, Boreyko appears to have broken his silence to address a rumor going around about his position on the FTC complaint.
Troy Dooly wrote about it yesterday:
VEMMA WARNING – There has been a rumor going around today started by someone purporting to be a “Top Vemma Leader” who stated BK said its done and over go find new homes! NOT TRUE!
Going off Boreyko’s post, it’s clear Vemma intend to mount a defense against the FTC’s claims.
And while the specifics of the defense are unknown at this time (for obvious reasons), we do have some information on what might be presented in court – at least in a broad sense.
Following an announcement yesterday in which he stated he “believed Vemma could win”, Kevin Thompson today announced that he has been retained by Vemma.
I’ve officially been retained to serve in a limited capacity in this case. Lead counsel is based out of Arizona.
What followed was a video appeal by Thompson, requesting “help from the Vemma community” via a “collection of affidavits”.
Thompson leads Vemma customers and affiliates to answer specific questions that paint Vemma in a positive light.
If you’re an affiliate you can also provide an affidavit and answer questions like:
“Did you feel the prices were fair?”, “How much product did you typically order each month?”, “Were you on autoship?”, “If you were on autoship, did you subscribe maybe to qualify for bonuses or did you subscribe because you wanted to replenish consumed product?” … What was the reasons behind the autoship subscription?
The problem as I see it, is that Thompson has essentially dangled the carrot of beating the FTC infront of affiliates – soliciting specific answers to specific questions.
Yes Thompson doesn’t say “answer question X with answer Y”, but close enough. Thompson knows full well the answers he needs to present affidavits in court, and that’s what he’s fishing for.
I can tell you now, no affidavit from an affiliate which states they signed up for autoship to qualify for commissions will be presented in court. At least not by Thompson.
A greater issue lies in the legal responsibility those filling in the affidavits and answering Thompson’s questions in the manner he wants.
What if they’re lying?
Say I’m a top Vemma affiliate who makes thousands of dollars a month – solely from my recruited downline who are all on autoship.
Thompson’s just told me all I need to do is download his affidavit form, fill in the answers to some questions he’s provided me in a video and I can get back to earning thousands as early as next week.
Yes I can be liable for lying on an affidavit, but what are the chances of my claims being investigated at next week’s hearing?
Is anyone going to be able to prove otherwise if I state I drink 3 slabs of Vemma a month and totally signed up for autoship “because I wanted to replenish consumed product”?
What, are the FTC going to rock up and go through my garbage to look for squashed cans of Verve?
Therein lies the problem with this line of defense. You’re asking people with a direct financially vested interest to answer questions they know, if answered a certain way, will protect their source of income.
To me that’s just not credible.
The way I see it, the only defense against the FTC’s primary complaints, that being Vemma is a product-based pyramid scheme, is to present to the court cold hard retail sales figures demonstrating the existence of retail sales within Vemma.
There are other issues in the complaint that need to be addressed, but as far as the core issue of Vemma being a product-based pyramid scheme goes, it’s that simple.
“Hi guys, between 2013 and 2014 we made $x in retail sales out of the $200 million we took in. Here’s the evidence…”
Now the question is does Vemma have this evidence, or have they been playing the dangerous game of “we ask our affiliates to sell products to retail customers before they reorder, but we never check or ask for evidence”?
Remember, these are the same affiliates Kevin Thompson is now asking to fill in affidavits to declare the opposite of what is written in the FTC complaint…
We all remember the nonsense that was pushed throughout the MLM industry after the Burnlounge appeal was denied:
‘Hay guys, affiliates are “end consumers” so we don’t need to worry about retail sales!’
This is the end-result of the MLM industry at large ignoring retail sales for far too many years. And only the existence of retail sales is going to make the FTC’s complaint against Vemma go away.
In the absence of cold-hard retail figures presented in court by Vemma on September 3rd, should a preliminary injunction not be granted, aren’t we just reinforcing the culture of autoship recruitment over retail the MLM industry has fostered?
How close do we want to get to legitimizing product-based pyramid schemes? And given the known sustainability problems associated with the product-based pyramid scheme business model, if we as an industry have to stoop so low to justify the profession, haven’t we already lost?
I have to say I’m quite surprised at the support from within the MLM industry Vemma have been getting, which reeks of emotional attachment (and dare I say it guilt by association) over facts.
Either Vemma have been selling products to retail customers or they truly have been running a $200 million product-based pyramid scheme these past few years.
This isn’t about manipulating the law to squeeze as much uncertainty out of dubious MLM business practices, nor should it be a test-case to see just how closely the MLM industry at large can align itself with outright deception and fraud.
This is an issue of retail sales, and either Vemma have been making retail sales or they haven’t.
Be mindful of which side of the FTC complaint you align yourself with, and the greater consequences both for yourself and the MLM industry, should that side prevail in court next week.
!!
just love this article oz.
one of the finest you’ve written.
i disagree with a few points you’ve made, some finer nuances about retail/self consumption which i feel you miss, but nevertheless a powerful point of view.
love it. love it.
The problem with the affidavit strategy is that the people signing them can be called as witnesses during a trial, and they can be cross examined by the other party.
So it has a limited function. He will need to find very specific types of people, e.g. “no starter kit / low monthly purchase / more than 3 months” (to indicate a “consumer type”).
MLM industry has no choice but to rally behind Vemma. If Vemma goes down, they all go down.
Most of the major MLM companies that were doing well rely upon “autoship to self-consuming distributors” model (that, and expand into new markets, like Herbalife pushing weight-loss in Cambodia and Vietnam, neither of which has overweight problems).
That’s one reason Avon quit DSA. Avon went MLM and realized it is NOT really direct selling.
the problem with the affidavit strategy is that the judge is not going to take anything said by affiliates on autoship ‘seriously’.
in another thread i said that the defense strategy adopted by vemma would be to show that there was ‘genuine’ self consumption going on, and it seems thompson is doing exactly that.
the FTC is most probably going to show that over 90% of vemma affiliates were on autoships. if that is the case, no amount of affidavits from vemma affiliates is going to help.
the only way out for vemma, to explain away it’s autoship requirements, is by showing healthy amounts of retail.
i think kevin thompson had made a mistake by posting a video ‘encouraging’ affiliates to tell the court ‘WHY’ they were purchasing vemma products.
he’s asking for their ‘support’ and in the context of the FTC attacking the vemma autoship model, it is plainly obvious ‘what kind of support’ he desires.
the FTC counsel just has to show the judge, thompsons video, and the judge will toss all affiliate affidavits in the dustbin.
thompson is representing the company vemma, and not the affiliates, by asking the affiliates to send in affidavits he is crossing the line. remember affiliates are not employees of the company, but independent business entrepreneurs.
What’s right about the affidavit strategy is that a jury may take the affiliates seriously.
is there a jury at the preliminary injunction hearing? i think not.
that’s NOT what the burnlounge appeal order said.
ALL that the order said was, is that self consumption is a sale to ultimate users.
this does not imply that ALL sales to affiliates are bonafide self consumption.
the court will study the ‘type’ and ‘quantity’ of purchases made by affiliates, to decide whether it is genuine self consumption.
with autoship requirements in vemma , the court will find [similar to burnlounge] that though the monthly purchases were for self consumption to a ‘certain extent’, the Primary Motive was recruitment commissions. that is, not ALL rewards were paid on the sale of products.
affiliates ARE end consumers/ultimate users TOO, but ALL sales to affiliates are NOT end consumer/ultimate user product sales.
if vemma has over 90% affiliates on autoship, then the Primary Motive for product purchase is obviously recruitment commissions. there is no real demand for the product, unless they can show healthy retail.
He probably found that method to be more reliable than telepathy. 🙂
Oops, we forgot to tell you that he’s retained as a defense attorney.
“He has actively tried to defend his client by asking for answers favorable to his client. That simply isn’t fair!”.
And Federal Rules of Evidence says that only employees can be used as defense witnesses?
norway, i am not aware of the ‘exact’ rules for evidence, or defense strategy, but an attorney on the payroll of the company, cannot ‘coach’ independent business associates to file affidavits in support of the company.
the affiliates can do this on their own, they have surely earned enough from vemma to put up their support for the company, if they choose to. boreyko’s post got over 2000 likes in around 8 hrs. there’s a lot of love and money out there to support vemma.
an hour ago troy dooly has posted on his FB page:
this is very good advice and compliance should be an ongoing effort with every MLM dealing with thousands of distributors.
i just hope dooly is not blaming the vemma problem on ‘organisational behaviors’, because the vemma compensation plan from corporate clearly ‘encouraged’ autoship.
What does that have to do with compliance?
uh, i thought he was already hired by vemma…
That latest post was addressed to “Boards of directors, top-level executives and brand managers” of other MLM companies, not Vemma.
hmm, striking the iron while its hot kind of thing, then 🙂
13 hours ago Troy Dooly said,
Dude doesn’t know what he’s talking about. SMH
IT’S NOT SIMPLE TO JUMP TO ANOTHER MLM
truthinadvertising.org/its-not-simple-to-jump-to-another-mlm
I wonder if this woman will send an affidavit to Kevin Thompson:
She’s an affiliate for the record, not a retail customer.
was she bloody getting her patients on vemma autoship!!
the hospital should fire her day before yesterday!
Well, Mona Camp is telling a bold faced lie. Nurses are only authorized to supply or administer prescription medications.
It’s related to the following question:
Answer:
The restrictive covenant is a broad, burdensome contract containing six paragraphs, 11 sub-paragraphs, and five sub-sub-paragraphs, and ends with the following provision:
I haven’t seen those contracts, but contracts like that will usually result in that people jumping ship from other companies will prefer to hold their entire organization separated from the company they join.
Example:
Herbalife leaders had their own companies, e.g. Online Business Systems.
* They first recruited people into those, e.g. as “OBS sales rep”
* then they signed them up as Herbalife distributors a few days later
My point is that experienced people usually will know how to handle situations like that.
hmm, in this context vemma attorney kevin thompson has posted a comment on troy dooly’s FB page yesterday :
ominous.
So we’ve got the FTC suing Vemma.
Jeunesse operating a similar autoship recruitment comp plan which may attract the attention of the FTC.
Vemma threatening to sue Jeunesse, but only if the FTC lawsuit against them fails.
And not a peep from Jeunesse corporate… oh my.
jeunesse is currently busy circulating it’s begging bowl for state charity….
just for kicks, a couple of YPR bashing jokes on twitter:
🙂
Section 5 covers “unfair or deceptive practices,” the explanation and relevance of which in the Vemma matter are too complex to explain on a blog such as this.
Might I suggest you read the explanation on MLMLaw.com here: NOLINK: mlmlaw.com/articles/binary-compensation-plans/
If Kevin Thompson is doing the reckoning, it will be his second round suing Jeunesse, if that’s the company he’s talking about.
He represented Matt Nestler years ago. If I were Alex Morton, I’d be a little nervous right about now, given the Kevin Thompson/Jeunesse history.
Blatant health claims–where’s the FDA when you need it?
Pick me! Pick me!