E. The Earliest Evidence Of The Amway Tool Scam

A radio interview with Phil Piccolo (http://www.blogtalkradio.com/jimgillhouse/2010/08/27/phil-piccolo-this-week-on-aces-radio-live) in August 2010 reveals, at about 7 minutes into the discussion, Phil describes the average Diamond making $70-80k/yr from Amway. Phil was in Amway from 1977-1981, and was in Diamond qualifications when he left. I talked with Phil on the phone in late 2011, and he further stated the money at another company was much better, so he left Amway. Apparently, Phil has been scamming folks with various programs ever since he left Amway:  http://prosites-watchdog3.homestead.com/mlm_scams_phil_piccolo.html
Phil states he was making $10-25k/MONTH from the ATS, and this was in 1981 dollars! The interviewer, Troy Dooly, Network Marketing sycophant, glides right over this revelation, but think about how much more money was being made from the tool scam instead of from Amway, although the LCKs consistently leave the impression all of their goodies came from Amway profit:
Minimum: $10k/month x 12 months = $120,000/yr from tools, or 1.5 times more than the $80,000/yr from Amway

Maximum $25k/month x 12 months = $300,000/yr from tools, or 4.29 times more than the $70,000/yr from Amway

Midpoint  $17.5k/month x 12 months = $210,000/year from tools, or 2.8 times more than the $75,000/yr from Amway.

Understand that from an IBO’s point of view, making all this money from the tools equates to the IBOs operating at a net loss until they reach the Platinum level, or perhaps a little higher or lower pin level. In other words, the overwhelming vast majority (99% or more) of IBOs lose money because of the Amway Tool Scam!!! Another way of looking at this situation is that IF you can make it to Platinum level to merely start to break even, having lost money all along the way, you have to try to keep an organization of 75-150 IBOs together where ALL of them are probably operating at a net loss.

An internal memo, commonly called the Postma memo, written in January of 1983, shows Amway is well aware of the ATS: http://www.cs.cmu.edu/~dst/Amway/postma-memo-1983.html. Other good sources of ATS information are http://hunza1.tripod.com/amway/index.htmlhttp://www.amquix.info/http://www.cs.cmu.edu/~dst/Amway/.
Rich DeVos, co-founder of Amway along with his childhood buddy Jay Van Andel,  made a series of recordings in 1983, called the “Directly Speaking” recordings. This was a double entendre, as today’s Platinum level IBO was called a “Direct” distributor back then, and he was speaking directly to the Direct Distributors on the taped recordings. One of the recordings can be listened to, the other was transcribed, and both can be found here: http://www.amquix.info/amway_directly_speaking.html
Do a word search for “twenty”, and you will find Rich declares 20% is the limit on the tool profits he will allow, even though his lawyers get nervous with the legal authorities if the amount is more than 10%. As Phil describes above, the actual ATS profits were 10 to 20+ TIMES bigger than 20% limit, and other more recent reports from others are much higher than that. Rich never followed up on this, and virtually NOTHING has happened to fix the problem, at least in the U.S. and many other countries….which brings us to the issue, DO the upline still make these amounts on the tools? The short answer is yes (in the U.S. and many other countries) and no (in China, the UK and India, and perhaps other countries). For more information, see the section below entitled, “The Real Amway Tool Profit Size.”
Is Amway aware of the magnitude of the tool scam? You betcha. Take a look at this lawsuit and do a search for the word “million”: http://www.amquix.info/pdfs/shs_v_alticor/8th_court_of_appeals/053686_1br.pdf and you will find the following Amway statements, “Tools businesses also benefit economically from their principals’ agreements with Amway. For example, the requirement that distributors train and motivate their downlines enables tools companies like plaintiffs to earn significant revenue, in some cases millions of dollars, by selling motivational products through the line of sponsorship of their principals’ Amway distributorships (Apdx 825, 829, 861). Indeed, the gist of plaintiffs’ prolix Complaint is the allegation that they have the exclusive right to sell their BSM to the Amway distributors downline of their distributor owners (Apdx 8-9, 40).” and “Plaintiffs, as tools companies, have benefited mightily over the years from the Amway distributorships, the agreements, and the Rules of Conduct. They have earned thousands, even millions of dollars selling tools through the line of sponsorship of their principal’s Amway distributorships (Apdx 825). In reality, they owe their very being to the existence of the Amway network, which has prospered in large part because of the organizational mechanism embodied in the distributorship agreement and its allied Rules (Apdx 590). Plaintiffs acknowledge that the Amway Sales and Marketing Plan encourages distributors to purchase tools and to attend functions (Apdx 15-16). By their own characterization, plaintiffs are “related and supportive of the Amway business” and were in fact “birthed” by Amway by mandatory training and motivation requirements (Apdx 5). They conduct their business in accordance with the Amway Rules of Conduct applicable to BSM businesses (Apdx 827-28, 849-50). In particular, they benefit substantially from Amway Rule 4.14, which prohibits other distributors from trying to sell BSMs to distributors they did not sponsor (Apdx 205). The district court noted that the tools companies use motivational materials such as “tapes, lectures, rallies, and other motivational tools to encourage downline members to sell to their highest potential” (Adden. 2). The court further observed that the desire to motivate the distributors to greater sales efforts is the very purpose of the “tools” companies. (Id.) But the court curiously — and erroneously — stated that “the actual source of part or all of the underlying complaint is not the issue on this question of arbitration.” (Id. at 5.) That is profoundly not so, for the ultimate source of all benefits for plaintiffs’ Amway-related enterprises is the distributorship agreement, without which there would be no business for plaintiffs to support.”
It should be noted there is a very small minority of IBOs promoting the Amway business properly, but chances are VERY high you will not be contacted by them or were sponsored by them, as they are an extremely small minority. The only group I’m aware of that has a documented position against the Amway Tool Scam is this one: http://www.iteamusa.com and there are some so called “independents” who do not subscribe to any particular organized system/method, and are typically much more involved in selling the products to non-IBO customers than sponsoring new IBOs. This is logical, as the LCKs make most of their money from IBOs buying products, whereas the “independents” make most of their money from selling products. In fact, one such “independent” who was on the same trip with me to Prague, Czech Republic, told me he was astonished how small the minority of “independents” was, and was equally shocked when in a meeting with Emeralds and above, and Amway was proposing a new IBO bonus if certain results were attained within a short period of time. One of the high level female IBOs complained viciously and acidically words to the effect “WE (the high level IBOs) DO ALL THE WORK!!!” Indeed.
Personally, I am FOR a system that others can learn from, and I am WITH Rich DeVos’ words, but want him to follow up his words with similar actions. I would even support up to 50% of an IBO’s profit coming from the tools, but this profit should be limited as described and communicated to every prospect when being shown the marketing plan.
Note that Amway’s view of tool profit changed markedly within a dozen years of Rich’s speech: http://amway.robinlionheart.com/tools.htm (the actual article can be found for purchase here: http://nl.newsbank.com/), which says, in part,
“Tom Eggleston, chief operating officer of Amway Corp., said the corporation has no problem with the Yagers’ motivation sideline.

“We are satisfied that the retail selling price is competitive with similar training materials in the marketplace and delivers good value for distributors,” he said.”

What is NOT said is that other training materials come from companies that have advertising costs, and NOT a captured market. For example, one of the favorite lines from the upline regarding tools, is “The tools are optional, but so is success,” implying that if you don’t buy the tools, you will fail. Also, the training from other companies are generally purchased once, not every week, forever. It is also well known the other training companies make their money from the training products, this is NOT disclosed by the Amway upline, at least not until AFTER they leave Amway, as described throughout this blog.

One thought on “E. The Earliest Evidence Of The Amway Tool Scam

  1. Pingback: YPR Pariah | What is the Amway Tool Scam?

Comments are closed.