Fraudulent MLM Structures: A Word of Caution
          
          
               There are many very solid, very honest MLM
          companies, but there is a threatening sentiment brewing
          in the federal and state regulatory agencies that could
          not only put you out of business, but could expose you
          to expensive lawsuites and even jail time if you don't
          heed the laws that are already on the books.
               The underlying issue is the question of what is
          actually being sold when a new distributor signs up. 
          The unique and complex structure of the MLM company is
          just what makes it profitable, but that is the very
          part that is under fire.  According to many regulators,
          when a recruit purchases his way into this structure,
          he may be really purchasing an investment -- an as of
          now unregulated one.  But unregulated only because
          enforcement has not been directed at the industry --
          not because the laws don't already exist.  Even back in
          the 1950s, when chinchilla breeding was a popular home
          business fad, the federal government successfully
          prosecuted a number of the promoters for securities
          fraud.  Yes, the courts held that the chinchillas were
          "securities" because they were being sold as an
          investment with a promise that money could be made with
          them.
               In order to protect yourself, your first step is
          to take a hard look at your MLM or network marketing
          company.  Examine the structure and how recruitments
          are done.  If it is sold on the basis of promises of
          income, or paying a fee for a higher level
          distributorship, it is probably a security.  In which
          case, saying that you are only selling the package the
          company gave you is no defense in a civil or criminal
          case against you.  You are the person who made the
          sale, and if that sale is illegal, it is you that will
          go to jail.  Others may be guiltier, but that is no
          defense.  Many people who have gone to jail for sending
          out chain letters try to blame the person who sent them
          the chain letter, to no avail, as they are equally
          guilty.  Not all participants may be prosecuted, and
          who gets prosecuted is often like a lottery, but it is
          an important consideration in looking at a company
          structure.  
               These comments are not meant to scare anybody off
          of MLM, but to inject a dose of reality before it is
          too late.  The mails have recently been flooded with
          offers from chain letter and pyramid schemes falsely
          claiming to be MLM companies.  If you participate in
          one, you face a real risk of legal action.
               But other companies, offering a real line of
          products, are flirting with the law by requiring
          monthly minimum purchases, or high distributorship fees
          to purchase a special level in the company.  Apart from
          the legal risks, there is also the more fundamental
          risk that in such schemes the majority, of necessity,
          must lose their money in order to enrich the promoters.