Recruiting firm is accused of fraud

Jon Taylor was once a hard-working Nu Skin distributor.

For a year, he says he gave the Provo-based company his all.

Now all he gives the multilevel marketing firm is grief.

Through a Web site — mlm-thetruth.com. — he tells the world this opinion: Multilevel marketing is a fraudulent business model.

To Taylor, there is no difference between most multilevel marketing companies and illicit pyramid schemes. And to an outsider, the line between the two seems razor-thin.

Under both systems, new recruits must pay to join. They are told they will make money based on the number of recruits they bring in.

The crux of the idea: The higher on the pyramid you are, the more money you will make.

The difference between the two is that in a pyramid scheme, there are no real products, and in the end, only the originators make money. Everybody else loses. Once the originators run out of new recruits, they can no longer pay old ones, and the pyramid collapses.

"Pyramid schemes have two common problems — either they are requiring someone to pay money for nothing, or they require a person to buy enormous amounts of product up front with no opportunity to turn that product back in," says Andre Peterson, a spokesman at Tahitian Noni International, also a multilevel marketing firm.

The Direct Selling Association of America pushed legislation that they said would help law-enforcement differentiate between legitimate multilevel marketers and illegal pyramid schemes.

Under the proposed legislation, multilevel marketing companies would be required to buy back unused products.

Most multilevel marketing companies that sell nutrition supplements already have such a policy.

"To claim we're a pyramid scheme is ridiculous," says Nu Skin's Charles Allen. "If someone feels like they were duped into buying something, they can bring it back and we'll give them a full refund."

But Taylor, the former Nu Skin peddler, remains unconvinced. He sees the association's proposed legislation, which was not passed last year by Utah lawmakers, as an attempt to cover up for the worst type of pyramid scheme — the product-based pyramid scheme.

Two examples of pyramid schemes that posed as multilevel marking companies are Equinox International and Trek Alliance.