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The Eye on the Pyramids (Part 3: MLMs and the Conservative Republican Infrastructure) | The Nation

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Rick Perlstein

Rick Perlstein

Where the past isn’t even past.

The Eye on the Pyramids (Part 3: MLMs and the Conservative Republican Infrastructure)


(Courtesy of Flickr user Michael Coghlan)

Robert FitzPatrick calls it the “Pyramid Lobby”: a massive outlay of money and muscle from the multi-level marketing (MLM) industry, working “not just to curry favoritism or receive income at the public trough, but to prevent its extinction. This requires thwarting law enforcement and foiling consumer protection.” That is because MLM companies are effectively frauds: their main economic activity is recruiting “distributors,” who do not make profits by selling products but recruiting new distributors, and each new distributor the further down the chain has less of a chance—much of the time, less than a 1 percent of a chance—of making money. “Only the tobacco industry has as much at stake in its political lobbying and its public marketing campaign,” he writes.

And the targets for that campaign are almost exclusively Republicans. For MLM fraudsters are a huge part of the conservative infrastructure.

Of course, in the case of the mighty DeVos family in Michigan, the conservative infrastructure and the MLM industry almost entirely overlap. Richard DeVos Sr. number sixty on Forbes’s 2012 list of wealthiest Americans, with an estimated net worth of $5 billion made ripping Americans off, founded Amway—short for “American Way”—in 1959. In 1979, the company was forced by the Federal Trade Commission to tell distributors that over half its distributors do not make money, and that the average distributor made less than $100 month—a stricture they promptly violated. None of that kept the DeVos family from rising in Republican and conservative politics. After all, between 1991 and 1997, Common Cause documented, Amway affiliated companies gave $4.4 million in soft money to the Republican National Committee, DeVos and his wife giving $1 million in April of 1997 alone. In 2000 Amway gave $1.385 million in soft money to the RNC (just $500 less than Enron), and DeVos hosted a party starring Colin Powell on his private yacht at the Republican National Convention. In 2004 DeVos and his cofounder Jay Van Andel gave $2 million each to the right with “Progress for America” 527, and in 2006 his son tried and failed to win the Michigan governorship. Meanwhile I’ll never forget the time—it must have been about ten years ago—when I visited the Heritage Foundation to interview their fellow Lee Edwards for research on my book Nixonland. When we were done, he was kind enough to walk me to the office at Heritage of former Reagan administration Attorney General Edwin Meese. On the way, we passed an entire room at Heritage devoted to Amway, including a surreal display of Amway products—like, soap and shampoo. At the time, I was baffled; I had no idea what I was seeing. Now, it makes more sense. Heritage is among the conservative think tanks—others included the Mackinac Center for Public Policy, the Acton Institute; get the full list here—to which the Richard and Helen Devos Foundation provides massive, sustaining support.

Where does the business end and the conservative politicking begin? You tell me. Among the prominent Republicans to speak for big bucks at Amway events include both Presidents Bush, Ronald Reagan, Ollie North, Ralph Reed and Newt Gingrich (who put a tax break worth $283 million benefitting only Amway in a tax bill when he was speaker of the House). The towering tribune of morality Rick Santorum, FitzPatrick writes, “was a favored speaker at large meetings held by Amway ‘kingpin’ Fred Harteis, and received financial support from the Harteis family, their recruits and other kingpins.” (Santorum never did understand the difference between freedom and exploitation anyway).

And that, says FitzPatrick, “readily answers the question of why the FTC, under President Bush’s appointee, Timothy Muris, undertook a policy of protecting illegal business practices. The answer is plain and simple.”

That’s how it works at the federal level. At least we have state attorney generals to save us. Right?

I’m sure you can guess the answer: it depends on what party your attorney general belongs to. Let’s say you are a citizen of Utah—where one can find more MLM companies per capita than anywhere else (“MLM,” Utahans joke, stands for “Mormons Losing Money”).  According to reporter Jeff Ernsthausen of Harper’s, Utah’s last attorney general, Mark Shurtleff, got $475,000 from members of the Direct Selling Association since 1999, or 14 percent of his campaign funding from sources other than the state Republican Party. In 2004 he spoke to distributors for an MLM called USANA Health Sciences. “If you work hard, you can realize the dream of financial wealth and success,” he told them. “There is no greater way to do that than through…multilevel marketing programs.” He should know. Half of USANA’s political contributions went to the campaigns of Shurtleff and his successor as Utah attorney general (because, the company said, of their “strong consumer advocacy policies”).

In 2006, Shurtleff testified to the state assembly that they really ought to pass the Direct Selling Association–written amendment to the state’s anti-fraud law that according to FitzPatrick “exempts multi-level marketing schemes.” Texas passed a similar law. (In 2003 the Direct Selling Association wrote a similar bill that a group of Republicans cosponsors introduced in the US House of Representatives.)

The next Utah attorney, John Swallow, also a Republican, got about 17 percent of the first $680,000 he raised for his election from DSA members. “In a moment of candor with a potential donor this spring,” Harper’s Ernsthausen wrote—the donor is an accused telemarketing scammer named Aaron Christner, although also goes under the pseudonym Vince Scarpuzzi—Swallow was taped boasting of his intention to bring the Utah commerce department’s division of consumer protection under his own, rather than the governor’s office.

A similar pattern obtains in North Carolina, where a telecommunications MLM called ACN spent 85 percent of its political money on the Republican attorney general candidate; Idaho, their AG’s biggest donor was an Idaho-based MLM, Melaleuca, which left town ahead of the law (in 1991 it was issued a cease-and-desist order by Michigan’s attorney general); and, of course, Michigan itself, where Ernsthausen discovered “families controlling the Amway fortune have given more than $145,000 to attorney general campaigns in Michigan since 1996, including $87,500 to current AG Bill Schuette.”

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Let’s reiterate just who it is these Republican tribunes of the common man are in bed with. FitzPatrick writes of how in the early 1980s Wisconsin’s Democratic assistant attorney general “obtained and reviewed the tax returns of all of Amway’s active distributors in Wisconsin. The losses…were shocking even to the prosecutors…. Average net income of minus $900. Those nearing a net profit were far less than 1 percent of the total consumer participants.” (The company “stated or implied” to recruits that they were likely to make $12,000 in a year.) “The actual odds of winning are significantly better at a Las Vegas craps table than joining the end of an MLM recruitment chain,” FitzPatrick concludes; it all is enough to make one’s head’s spin.

But here is the thing. It’s easy to picture this as knowing hucksters fleecing innocent rubes. Would that it were so simple. Five members of the House Republican caucus are also Amway distributors. So is, for example, Douglas Wead, frequently described as George W. Bush’s “spiritual adviser,” who was an aide in George H.W. Bush’s White House and is the man credited with coining the phrase Compassionate Conservatism. We’re talking about more than rich people cynically buying influence here, and politicians cynically selling it. For there is also the issue of belief. The fact is that the culture of MLM marketing is deeply interwoven with conservative political culture—and evangelical, and Mormon, religious culture. It is deeply interwoven with conservative and religious-right ideology. It is interwoven in ways that speak the pathologies of all these worlds. I will turn to that complexity in my last and final post in this series. It’s about their vision of the American way .

Read parts one and two of Rick’s series on multi-level marketing and the right.

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