Friday, September 08, 2006

Amway Exposed, Part Five: Amway Money in Politics

Amway has a long history of exchanging campaign contributions for political influence and favorable legislation. As Betsy DeVos famously put it, "I have decided, however, to stop taking offense at the suggestion that we are buying influence... they are right. We do expect some things in return."

Unfortunately, Amway has used its influence to achieve goals that are not in the public interest, such as securing tax breaks for itself and pushing legislation to make the execution of the Amway "tools" scam easier.

Dick DeVos is using Amway money in his campaign to become the Governor of Michigan. Therefore, an examination of the way that Amway money has been used in politics in the past is very relevant to this race, because it gives us a good indication of how this Amway-purchased influence could impact the people of Michigan in the future.

Sue Myrick

Sue Myrick, the former mayor of Charlotte, North Carolina, used Amway's substantial resources to help elect herself to the U.S. House of Representatives. She is also an Amway distributor. After being elected, Myrick sponsored bills and supported policies that directly benefited Amway. Having made money by selling motivational tools and seminars to Amway's numerous distributors (source), it is a conflict of interest for Myrick to pursue policies in Amway's favor.

In 1994, the largest soft money campaign contribution of the election cycle went to Sue Myrick. According to Mother Jones, Myrick received $295,871 from Amway and its distributors in that cycle, largely because of appeals from top-level Amway distributors to the rest of the Amway distributor network.

In 1996, Myrick received $21,072 from the "Retail Sales" industry, including $4,000 from "Amway Distributor," $3,400 from "Amway Corp," $2,000 from "Amway," $1,620 from the "Direct Marketing Assn," (which represents Amway) and $1,000 from "Yager Enterprises" (think Dexer Yager of Amway fame).

Myrick also received over $100,000 from Amway sources in the 1997-1998 election cycle (source).

Amway's support to Sue Myrick paid off in a big way. Myrick introduced a bill that specifically excluded the selling of tools from the definition of a pyramid scheme. This legislation was clearly designed to make life easier for product-based pyramid schemes like Amway, because most high-level Amway participants profit by scamming low-level distributors into buying Amway motivational materials instead of selling products to other consumers.

By changing the definition of a pyramid scheme, this bill protected the Amway system and interfered with pyramid scheme laws at the state level, such as in North Carolina. From an open letter to Congresswoman Myrick posted on Pyramid Scheme Alert:
In addition to the deceptive program of selling marketing "tools" to recruits, Amway/Quixtar is in continuous jeopardy of prosecution for operating as an illegal pyramid scheme. This is due to its practice of selling the great majority of its goods to sales representatives who do not resell the products to end-users. Rather, they are induced to recoup their investment by recruiting other investors. The North Carolina statute against pyramid schemes (N.C. Gen. Statute ยง14-291.2) prohibits this practice. For more than two decades the Federal Trade Commission has defined and prosecuted multi-level marketing companies operating in this manner as "endless chains" that doom the vast majority of recruits to financial loss and which must ultimately collapse.

HR 1220 seeks to redefine a pyramid scheme so as to legalize this practice and to thwart effective enforcement of state laws such as our own in North Carolina, to reverse decades of FTC policy and to supercede numerous court rulings. Amway/Quixtar is the largest and most direct beneficiary of this attempted legislative maneuver.
The Amway system relies on exploitation and false promises of profitability to be successful. In particular, product-based pyramids like the Amway "tools" system essentially force people to buy products to enter the Amway system. Amway used profits from this flawed system to help get Sue Myrick elected, who in turn sponsored legislation to make this exploitation of consumers even easier. This is how Amway money is used in politics.

Dick DeVos, Political Influence, and Free Trade with China

For the folks concerned about Dick DeVos' role in lobbying for free trade policies and his "outsourcing to China," the Mother Jones article on Sue Myrick also has a juicy bit about the importance of Amway money in lobbying for free trade with China.
Should Amway duplicate that success in China, where it is waging its greatest recruitment campaign ever, it may eventually boast a Chinese sales force of 10 million.

That's why Amway relies so heavily on a politically friendly Congress. And it's what made Dick DeVos so particularly testy in the spring of 1995, when a block of Republican freshmen fought the president's peso-rescue loan to Mexico. "I'm very concerned," DeVos told Business Week. "Among some of those [newcomers], there is an increasingly persistent tendency to reject free trade."

(snip)

...in June, Congress reaffirmed China's trading status -- with the support of Myrick and others from the Amway caucus. Now, the DeVoses and Amway can look on the bright side: In less than a year, they've recruited a reported 300,000 distributors in Guangzhou alone.
Amway and Mike Cox

Based on filings to the Secretary of State, the DeVos family has contributed $34,700.00 to "Mike Cox for Attorney General" between 2002 and 2006. Family members include Maria DeVos, Doug DeVos, Pam DeVos, Elisabeth DeVos, Richard DeVos, Dick DeVos, and Daniel DeVos. The Van Andels donated $10,050.00 to Cox between 2002 and 2006. Family members include Steve Van Andel, Cynthia Van Andel, Carol Van Andel, and Nan Van Andel. This total of $44,750.00 does not even include other Alticor interests or employees.

Although there have been extensive complaints against Amway filed with the Michigan Attorney General, Mike Cox appears to have "gone easy" on the company. According to amquix.info, a thorough complaint about Amway/Quixtar business practices was filed to the MI AG on September 29, 2003 (complaint number 2003315082). According to amquix.info, this complaint was never reviewed by the AG's office.

In fact, complaints about multi-level marketing ranked among the top ten consumer complaints of 2002. Given their history, and that Amway/Quixtar is the largest MLM (and certainly the most prominent in Michigan), it is reasonably likely that many of these complaints could be directly attributed to Amway/Quixtar. Furthermore, groups of unhappy former Amway distributors urge their members to file complaints with the Michigan Attorney General (see examples here and here), which also lends credence to the theory that a majority of the numerous MLM complaints are complaints about Amway specifically. It is difficult to say exactly how many complaints about Amway there were and to what extent they were investigated, but all of the contextual evidence points to the idea that there were a lot of complaints and very little action taken. It could be interesting to see if it is possible to FOIA for complaints about Amway to investigate how they were handled.

Mike Cox has also gone easy on Amway on his website. Given that Amway/Quixtar is the most prolific MLM in existance, Amway benefits from distortions in descriptions of MLMs. According to several blog posts in August of 2005, the Michigan Attorney General's website contained this text with regard to multi-level marketing:
Multi-level marketing is a lawful and legitimate business method that uses a network of independent representatives to sell consumer products. Commissions should be based upon the sale of goods or services to end-user consumers who may include the sellers of the product.
This is misleading because it implies that MLM is a "legitimate" model, meaning that it is theoretically workable. This implication glosses over fundamental flaws in the way MLM is conducted, such as market saturation and its reliance on exploitative relationships. All it takes is a quick Google search on multi level marketing to get a more accurate picture of what these business models entail.

To be fair, the quoted paragraph on multi-level marketing was changed sometime between August 2005 and today. The new page has a much more sobering look at MLM: It now says that "Some legitimate businesses have been successful using an MLM compensation structure" and the line about "lawful and legitimate business" has been removed completely.

Still, Cox likely ignored numerous complaints about Amway and failed to point out the dangers of MLM schemes like Amway on his website for a substantial period of time. The evidence suggests that he may have been conciously protecting his Amway-affiliated campaign contributors, and this issue certainly merits further investigation.

The "Amway Tax Break"

There is, of course, the infamous "Amway Tax Break."

Amway and its leaders gave over $4 million to the GOP between 1993 and 1997. In exchange, Newt Gingrich inserted a last-minute $283 million tax break into the 1997 budget. That's one heck of a payoff.

Gingrich himself personally benefited from the Amway Tax Break as well. As an Amway motivational speaker, Gingrich earned a hefty sum of $50,000 per speech. Gingrich personally benefited financially because he looked out for Amway's interests. What is even worse is that it is the low-level Amway distributors that foot the bill for these kinds of seminars. Amway had no problem with using the political system and exploiting its distributors in this manner.

Other fun links and connections
For more information on Amway and Dick DeVos' actions as the company's President, feel free to take a look at previous posts in this series:

Amway Exposed, Part One: The Profitability of Amway

Amway Exposed, Part Two: The "Tools" Scam

Amway Exposed, Part Three: Dick DeVos Doesn't Believe in Workers' Rights

Amway Exposed, Part Four: Amway and Free Speech

(cross-posted on Michigan Liberal and Daily Kos ...both front paged!)

Also, thanks to Media Transparency for the plug on the Richard and Helen DeVos Foundation funder profile.

1 Comments:

At 7:34 AM, Anonymous Zack Pohl said...

Nirmal, this is probably the best post in the series. I just don't know where you come up with this stuff, but it's fantastic. I never knew about the Gingrich link, and you're right, talk about an investment! Four million is chump change when you're getting such a massive tax break kickback in return. Newtie didn't come out of it so bad either, since he was evidently raking in the cash giving motivational Amway speeches.

This is scary stuff.

 

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