The Revenge of the Amdroids
Six years ago, John Hanrahan, a building supplies executive from Springfield, PA, thought he could make some extra money by selling household products like Sweet Shot breath freshener and Hour Guard insect repellent -- products made by the Amway Corporation. So he convinced his wife Stacy to sign up with him as a distributor, hoping that one day they could reach one of the highest levels on the Amway success ladder, the Diamond level, where the really big bucks start rolling in.But that dream never became a reality.In fact, it became a nightmare. Those above him in the Amway line of command kept pressuring him to buy more and more motivational tools. Then, when his wife began questioning the time and money he was spending on Amway, those superiors added an additional pressure. Do something about your wife, they told him. She is a "neggie," a loser.Stacy Hanrahan added her own pressures.She demanded he make a choice: it's either Amway or me.LOST IN THE SYSTEMOver one million North Americans belong to the multilevel marketing enterprise known as Amway. Cofounded in 1959 by Jan Van Andel and Rich Devos in Ada, MI, the company operates in 71 countries, producing approximately 400 home, personal and commercial goods. The Amway distribution structure has been compared to a pyramid-type scheme. In order to become an Amway salesperson you must be sponsored by someone who's already a distributor. The sponsor, known as your "upline," is your supplier and coach, the person in charge of showing you how to sell Amway products and services, and how to sponsor new people. It's in every distributor's best interest to sponsor as many new distributors as possible, because to earn significant profits as an Amway distributor, one must develop a sizeable "downline" (or line of distributorship) by recruiting and sponsoring other distributors into the Amway sales organization.The first step for a new distributor is to buy an Amway Business Kit, which costs approximately $125 and includes 13 of Amway's most popular products, as well as the Amway Sales and Marketing Plan and the Amway Code of Ethics. After that, it's supposed to be onward and upward -- but according to Stacy Hanrahan, it's about getting deeper and deeper enmeshed in a network of influence that is both emotionally and economically draining. "John was plugged into the system, and the more I pulled away, the more they pulled him in," she says. "Our upline made me out to be the enemy because I wasn't what they termed 'supportive.'" Within eight months, the couple lost $3,000 to products billed as sales aids -- audio and visual tapes, books, motivational events -- in the belief, encouraged by Amway distributors, that these tools teach how to project helpful, positive messages, consequently improving one's success in selling Amway products.For the first time in 14 years the Hanrahans experienced marital problems.Finally, after Stacy gave her husband the ultimatum -- her or Amway -- John moved out. Two months later, he came to his senses, but only after reading Amway: The Cult of Free Enterprise, a highly critical look at the company by former distributor Steven Butterfield. After John severed ties with the company, the Hanrahans found out that they were not alone. Stacy Hanrahan established a hotline for distributors and found that hundreds of Amway devotees saw themselves as victims of fraud and racketeering. They said they'd been promised potential fortunes and found psychological, emotional and financial devastation instead. Coming in for the largest share of criticism were two top-level Amway distributors, Dexter Yager and William Britt, who have developed lucrative businesses independent from Amway that specialize in selling motivational sales tools. Former distributors in their downlines complained that Britt and Yager convinced them that success in Amway was contingent upon the purchase of audio tapes, videotapes, cassettes, books and rallies. What's more, said the disgruntled disciples, Amway was aware (and tacitly approving) of what Britt and Yager were doing. These complaints prompted the Hanrahans (who were in Britt's downline) to file a civil class action suit on July 29, 1994 with the United States District Court for the Eastern District of Pennsylvania. The defendants included the Amway Corporation, Dexter Yager and William Britt, Yager's companies (which include Dexter Yager Motivation, Inc. and International Communication Corporation of America) and Britt's companies (which include Britt Motivation, Inc. and Executives Unlimited, Inc.) The other initial plaintiffs in the suit were Brian Bohrer of Erie and Mark and Lori Mensack, formerly of West Point, NY. (As of November 1995, Lori and Brian no longer wished to be named plaintiffs, but remain active class members.)The defendants denied the accusations, but agreed to settle the claims against them "for the sole purpose of reducing the expense and inconvenience of further litigation."The preliminary approval of the settlement was entered on Aug. 14, 1996. Under the terms of the settlement, which requires the court's final consent, each member will receive a 35 percent discount coupon toward certain Amway products. The coupons are redeemable for up to six months, and Amway has agreed to deliver the products at half the normal shipping rate.The court's consent would also require Britt and Yager to label all motivational tools with an advisory, telling Amway distributors that the purchase of such items is optional, and subject to a refund policy. A statement in the distributor agreement would also affirm Amway distributors' rights to religious and political independence. Despite the mandatory modifications, many deem portions of the agreement unsatisfactory."The terms of the agreement are disappointing," says Dayna Briar, a former distributor from Pennsylvania who wished not to use her real name. "We certainly cannot agree to the corporation benefiting financially in this settlement. How do distributors, no longer in Amway, find use for these coupons?"Many of these distributors were bilked out of a lot of money, according to Sidney Schwartz, a noted expert on multilevel marketing schemes. Since distributors have always purchased products at wholesale price, the coupons aren't really offering any new discounts -- a definitive example of adding insult to injury, insists Schwartz, who has set up an informative Website called Amway: The Untold Story (http:/www.teleport.com/%7Eschwartz). There are more than 1.5 million former or current distributors who are members of the class action suit.That includes all distributors in the United States, in either the Yager or Britt lines of sponsorship, who were in Amway between Jan. 1, 1990 and Aug. 1, 1996. Members who are not pleased with the settlement, or wish to file their own lawsuit, had until Nov. 15 to request an exclusion. The plaintiffs' lawyers say they have no idea yet how many that might be.MARRIED TO ITA whopping 90 percent of Amway devotees are couples, according to a company spokesperson. At introductory meetings, successful couples take turns telling the audience how "the business," as Amway is referred to, has changed their lives. Women encourage the audience to "join the family," and claim they now have the time and money to stay home and raise the children. But there are many couples like the Hanrahans who say their involvement with the company has damaged, not saved, their families' lives. Ashley Wilkes, a former distributor from Sunrise, MN, blames Amway for the breakup of his marriage.Head of photography and audio-visuals at the University of Minnesota's department of art history, Wilkes was reluctant to become a distributor when his then-wife Tracie suggested it in 1990. But he changed his mind once Tracie made it clear she would find someone else to do Amway with if he didn't."Their strategy is to get the interested or excited spouse programmed and then have them work on the partner until he or she sees the light," says Wilkes. "Cursed is the spouse who says no." Wilkes lost between $8,000 to $10,000 over a period of three and a half years. Roughly $7,000 of that amount was spent on motivational tools. It was in 1994 that Wilkes decided to leave the business, but Tracie objected. He says their upline and the messages contained in motivational tapes and books had convinced Tracie he was an enemy. "I was branded a dream stealer and a loser for rejecting Amway," says Wilkes. The actual incentive for an Amway couple to stay together is powerful, since divorce would likely dissolve the distributorship, says author Butterfield. "The example might send a negative ripple down through the group and threaten the stability of the whole edifice." According to Amway, the corporation does not threaten family ties, but strengthens and promotes them. One of the company's objectives is to offer both husbands and wives an opportunity to be involved in the business. Cofounder Rich Devos writes in his book Believe, "We do not recruit men alone or women alone to sell our products when we can recruit the entire family."Couples are preferred since the chances of success are heightened when there's a team, says Angela Abdallah, communications and public relations administrator at Amway's Canadian headquarters in London, Ontario. "It's just the way the company has been run for over 35 years," says Abdallah.CULT-THINKMany of the Amway faithful who were sucked into buying thousands of dollars worth of tips and tapes now believe they were subjected to an insidious form of thought control."Britt and Yager's systems for success are designed to nullify the ability for independent thought," says Wilkes. "They create mindless sponsoring machines." Wilkes calls Amway devotees "Amdroids" and compares the motivational companies to cults."These support organizations exhibit blatant cult-like characteristics, such as charismatic leaders, love bombing, thought reform and exclusive cult language," says Wilkes.Joe Kelley, a Philadelphia counselor who calls himself "an expert in undue influence," says that the relationships between sponsors and their downlines frequently exhibit cult-like characteristics. He has worked with former Amway couples, and says distributors often use deception when sponsoring potential devotees -- the word "Amway" is seldom mentioned when recruiting. Sponsors also lure people with vague promises of big money. "Emotional motivation is sold in the guise of becoming a better Amway distributor," he says. The tools give distributors the impression that they have control over their decisions, when in fact they are paying for their own brainwashing."Speak it into being," the motivational tools exhort. "Just do it. There is no excuse. Failure in the business means you are at fault." Former devotee Dayna Briar agrees Amway distributors use strategies commonly found in cults. Her husband was prospected for a period of nine months, and during that time distributors tried to establish a close, personal relationship with him, which Briar says was artificial. "They expressed a genuine interest in his well-being, and the peer pressure to join this opportunity was powerful. They told him the facts don't count if the dream is big enough."Her husband was weary of not having a residual income. Amway identified that fear and turned it into his dream. She says the motivational tools suppress negative thoughts on Amway by disabling the ability to question or criticize."He was bombarded with tapes that outline the secrets of success. Many of the tapes contain tales of success -- rags-to-riches stories. He'd listen to them in the car and in the shower," says Briar. The Briars' basement stores roughly 2,000 tapes, which have accumulated during the past three years. The weekly meetings, monthly rallies, Tape-of-the-Week (a program which requires distributors to purchase and listen to at least one tape a week), newsletters and books ended up controlling her husband. Many of the distributors Briar met dedicated five to six nights recruiting. They become "totally surrounded by Amway." Despite Dayna's efforts to make her husband quit, he remains in Amway. Doubtful partners are branded "neggies." In one of William Britt's audiotapes, he claims he would have his wife, Peggy, pack her bags if she ever suggested leaving Amway.Pat Henry of Upper Darby says she also experienced marital problems because she did not want to join her husband in Amway. He left Amway a year later, but only after Pat had given him an ultimatum. Prior to that, she says, Amway made her out to be the bad guy, and a loser. Pat believes many of the distributors she met demonstrated cult-like qualities. Her husband regularly reported to his upline, was told not to associate with people outside Amway, and was discouraged from reading the newspaper. He would constantly search for recruits, says Pat. She recalls him hunting down people in the want ads, and joining churches just to get their congregation list.To get motivated he would go to bed at night with his headphones on. After the course of the year, he had spent roughly $3,000 on functions, tapes (at $8 apiece), and taking out potential recruits for coffee. Pat also remembers how enthusiastic her husband would get after attending functions. "He would often drive six to eight hours to attend rallies in Virginia, and when he would get back, it was as though he was high on drugs."NOTHING GAINED"What do you want out of life?" asks the Diamond Direct Distributor of the crowd gathered in the reception hall. If it's financial independence, he tells them, they've come to the right place. "Within two to five years of part-time effort, you can be free for the rest of your life." A mob awaits the Diamond as he works his way past the rows of chairs to the back of the room. One Amdroid takes a hit of Sweet Shot, the pocket-size Amway breath freshener, as he waits his turn. "You're nobody without your Sweet Shot," Amdroids will tell you.Distributors take turns speaking to the Diamond one-on-one and introduce him to the neophytes who would also like to sell Amway products. Their approach comprises a certain admiration bordering on reverence, but after all he is a "Diamond man."It's at meetings like these that Amway distributors are expected to get fired up to continue on their quest for success. Spring Leadership, Family Reunion in July, Free Enterprise Day in fall, Dream Night around Christmas -- all are made to seem extremely important, and distributors must pay their own transportation costs. Emerald and Diamond Direct Distributors organize the major functions and get the chance to tell thousands of aspiring distributors how they've struggled and persisted to get to where they are. "If we succeeded, so can you." But according to the 1995 survey found in the Amway Sales and Marketing Plan (also known as SA-440), the active distributor makes an average gross monthly income of only $88, says Sidney Schwartz. Meanwhile, Amway Communications administrator Angela Abdallah claims there is no estimated income for Diamonds. Factors include the number of people sponsored into a particular line of distributorship, as well as the time and effort put into building the business. But Abdallah promises that the potential is limitless.Schwartz also says the SA-440 indicates that about 41 percent of all distributors are considered active, which means that they are making some attempt at building their business. One in 50 active distributors have managed to make it to the Direct Distributor level, and one in 3,300 to the Diamond level.And author Butterfield claims that over 97 percent of all active distributors are not making any money. "If they buy tapes, attend functions and keep inventory, they are actually losing money and must subsidize their Amway business from other income." He says the 97 percent are motivated because of the messages projected throughout rallies, audiotapes, books and conventions.Kelley agrees that distributors are less likely to succeed if they do not have a manipulative personality, or aren't natural salespeople. But since the system is presented as flawless, the more people fail, the more motivational tools they think they need. Distributors who do manage to become Diamonds at the executive level or higher have the privilege to pursue the real road to success -- the motivation business, says Wilkes. The money lies in selling motivation -- by organizing functions and creating tapes. These distributors are like con artists who make money by teaching others to do the same, says Wilkes. For instance, Bill Britt, head of Executives Unlimited, recruited Ron Puryear. Puryear reached the Executive level and started his own motivational company -- World Wide Dream Builders. Wilkes wonders whether leaders who run the major functions and pack stadiums with thousands of aspiring Diamonds really believe, as they say, that everyone can make it.While Diamonds and Direct Distributors brag about financial freedom, they do not reveal how much money they have spent to get to that point, says Wilkes. "They show their Diamond pins, which they purchase themselves, and wave their checks, but you only hear one side." People justify their investments in motivational tools because they are made to believe in delayed gratification, and this simply distracts the person from their own demise, says Stacy Hanrahan. "'We'll see you on the beaches,' boast Diamonds. In other words, you too can join them on the beaches of the world, if you follow the plan. It's comical," says Stacy, laughing.THE LORD'S WAYThe language used in motivational tools for Amway frequently echoes or directly quotes the Bible, with the unstated assumption of a shared Christian perspective.In his book, Steven Butterfield points out that any information which may weaken an Amway disciple's commitment to the business is deemed negative, and that such negativity is often described in religious terminology. Consider this passage from the motivational lit: "It's out with the bad and in with the good. God is positive and the Devil is negative." Speakers cite Deuteronomy 8:18: "Always remember that it is the Lord your God who gives you power to become rich, and he does it to fulfill his promise to your ancestors."Jody Apple, a Churches of Christ minister from Swarthmore and a former distributor, says that the tactics used in Amway have no divine basis, despite the use of Biblical passages to make it seem as though God endorses financial success.Apple, who was downline from Bill Britt, left Amway because he also did not like the overt tactics used. "There is tremendous pressure to buy tapes and to attend the functions. You're also expected to buy all the positive mental attitude books."Stacy Hanrahan and Joe Kelley have both observed Amway distributors employing Christianity as the underlying message. They're known as "Name-it Claim-it" Christians, says Kelley -- they equate wealth with getting right with Christ. Yet, Abdallah says, Christianity plays no role from the corporation's standpoint. "We discourage the marrying of religion and business. You have to remember that Yager and Britt are independent distributors who own their own businesses."In January 1996, the Amway Policy Board wrote an editorial titled "The Right to Differ" in Amagram, Amway's monthly magazine. Amway stated that "if the business platform becomes a pulpit for preaching religious doctrines or political causes, people with differing beliefs who attend what they expect to be a business meeting are turned away -- or turned off -- from Amway. In essence, they are discouraged from participating in a business opportunity.""That's quite interesting that they would say that since Rich Devos, one of the founders of Amway, is the chairman of Gospel Films, a company which produces Christian films," says Stacy. She says the majority of distributors are Christians.THE BOTTOM LINEFormer Amway distributors will receive notice of the class action by mail, and an insert will be included in the Amagram. Yager and Britt will also place $375,000 into a cash fund to cover the expenses for the plaintiffs' two Philadelphia law firms, Kohn, Swift & Graf and Conrad, O'Brien, Gellman & Rohn. There's a still a chance the suit could come to naught. If 200 or more class members drop out of the suit, the Amway Corporation will have the option of terminating the settlement.The totals will be calculated in a month's time. In the event the proposal is dismissed, the parties will have to restart negotiating, says Stacy. Ashley Wilkes believes Amway has an appeal for the vast majority of economically oppressed people who believe all their troubles are financial. The motivational tactics feed off the fear, anger and frustration families experience during hard times."I'm not saying that Amway doesn't work," he concedes. "But everyone has the right to know exactly what they're getting into rather then be deceived about the effort, the expense and the odds."SIDEBARDiamond DealingHow do Amway distributors make money? Through a complex system of point values and bonuses -- and the ultimate dream is to "go diamond." Income is generated from the markup of products and services sold, plus "bonuses" from sales of recruits. Every item is assigned point value points (PV) and business value points (BV). BV is a dollar figure given to each product; it is totaled each month based on monthly sales. BV is usually higher than PV, and as the BV increases, so does the percentage on which the bonuses are figured.These unit amounts are assigned to each product. For example, Amway toothpaste may be 4.5 PV points and $3 in BV. The distributor determines the retail price of the product. Amway sells the product to its distributors somewhat below BV and recommends a retail mark-up of about 30 percent.The PV points determines the distributor's performance bonus bracket. Distributors total up the PV of all the Amway products bought by themselves and/or sold retail to others. Whenever 100 to 300 points are earned in a month, the distributor receives a bonus check from their sponsor of 3 percent on the BV. Monthly bonus percentages range from 3 percent to 25 percent. For example:100 PV a month = 3% x the BV300 PV a month = 6% x the BVThe PV and BV produced by the downline, everyone below the distributor in their line of sponsorship, affects the total volume and determines which bracket the distributor is in. Amway distributors get their own PV and all the PV of the people they've sponsored. For example, if the distributor has sponsored two people and they each sponsored two, their volume is the total of everyone in their group.Amway offers achievement levels based on PV. When a distributor attains 7,500 PV for any six months of the year, they become Direct Distributors, the first recognized level of achievement on the Amway success ladder. Direct Distributors break away from their sponsor and deal directly with Amway. Prior to going direct, distributors receive their bonus checks from their sponsors. The Direct Distributor no longer picks up products from their upline. Instead, the products are shipped directly to them by Amway, and sales bonuses are now paid directly by Amway. When a distributor reaches 1,500 PV in one month, the next pin level is Ruby Direct. Subsequent levels include Pearl, Emerald and Diamond. A Diamond Direct has six Direct Distributors downline.In 1995, Amway's recorded sales totaled $6.3 billion. According to Amway, this figure marks a 19 percent increase from the previous year. The Amway press kit says Amway has succeeded as a business because "it is a proper, ethical, and honorable addition to the marketplace."