Evelyn Pringle February 1, 2007
The judge in the Zypexa secret document case has sent a New York Times reporter an invitation to attend a hearing in the on-going Eli Lilly fiasco in the US District Court for the Eastern District of New York.
"This invitation," Judge Jack Weinstein wrote, "is intended to permit Alex Berenson to confront testimony received at a hearing in this court on January 16-17 implicating him in a conspiracy to obtain and publish confidential documents sealed by this court."
According to Lilly, it took no part in extending this invitation. However, since when does a judge send out invitations, unsolicited by either side in litigation, to witnesses or by the sounds of it a potential defendants?
Mr Berenson most likely earned the invite in December 2006, when he published several articles exposing the fact that for a decade, Eli Lilly had failed to warn consumers, members of the medical profession, and the FDA, about risks of severe weight gain, blood sugar problems, and diabetes associated with Zyprexa.
Mr Berenson also reported that Lilly had illegally promoted Zyprexa for off-label uses not approved by the FDA, quoting Lilly’s own internal documents as his source.
For years, Lilly has been allowed to keep this information hidden, while settling thousands of cases out of court, by falsely claiming that the millions of documents produced during litigation contained trade secrets and getting judges to seal them all with protective orders.
In what can only be considered a heroic act, an expert witness in the Zyprexa litigation, Dr David Egilman, apparently helped facilitate the outing of some of the secret documents when he provided them to attorney, Jim Gottstein, who then provided them to Mr Berenson at the New York Times.
Being Mr Egilman is doctor, when it became obvious that Lilly was going to continue to keep this information secret, after settling out of court with the second round of Zyprexa victims, it can easily be understood why he would believe certain documents had to be made public.
Doctors take an oath to do no harm. Allowing Lilly do go on marketing Zyprexa off-label for every ailment known to mankind without fully warning the public about the serious health risks associated with the drug would have resulted in many more injuries and deaths without a doubt.
A sincere desire by a doctor and an attorney to find a way to warn the public about a dangerous drug does not constitute a conspiracy by any stretch of the imagination.
The only evil conspiracy here involves Lilly’s off-label marketing of Zyprexa to the extent that it took a drug approved for the extremely limited indications of treating adults with schizophrenia or manic depression and turned it into its number one selling product.
In regard to the out-of-court settlements, which to date have cost Lilly about $1.2 billion, Lilly’s chief executive, Sidney Laurel, said in a January 4, 2007 press release: "While we remain confident that these claims are without merit, we took this difficult step because we believe it is in the best interest of the company, the patients who depend on this medication, and their physicians."
"We wanted to reduce significant uncertainties involved in litigating such complex cases," he stated.
Lilly’s press release expressed no remorse, only more denial, even when the secret documents quoted in the media at that time substantiated every allegation made by the plaintiffs in the cases that were settled out of court.
In the first two rounds of litigation combined, the company has reportedly settled with about 26,500 plaintiffs, but round three is coming up. According to Lilly‘s SEC filings, approximately 1,200 more claims have been identified that are not included in the settlements.
In a January 15, 2007, legal filing, Lilly attorneys claim the Zyprexa documents are not widely disseminated in stating: "Despite a concerted effort by a small group of individuals to take advantage of Dr. Egilman's and Mr. Gottstein's violation of CMO-3, and to violate the Temporary Mandatory Injunctions, this effort fell flat."
Wrong. Any reporter who wants the documents can get them off the internet within a hour max. Furthermore, any journalist interested in this issue already has them. Just because they are not being quoted, does not mean that the documents are not widespread.
The truth is, Lilly has been successful in using the court system to threaten and intimidate citizens, including journalists, into silence. After watching the harassment of all the people caught up in this dog-and-pony show, as Lilly causes them to run up massive legal bills, no sane journalist would openly quote from those documents.
Lilly has plenty to lose if the truth comes out and doctors and consumers decide the risks associated with Zyprexa far outweigh the benefits. In 2005, Zyprexa represented 30% of the company’s total sales.
But if Lilly is to be believed that it is not promoting the off-label use of Zyprexa, there seems to be no end in sight to the epidemic of mental illness sweeping the planet because according to Lilly’s latest SEC filing, Zyprexa sales rose another 12% to $1.16 billion in 2006.
Lilly has no one but itself to blame for the mess its in. If the company had ignored the articles in the Times, and went on its merry way of promoting Zyprexa off-label the same way it had for a decade, people would have lost interest in the story and forgotten what was in the documents.
Furthermore, if Lilly is looking for a scapegoat, the finger of blame should be pointed at the company’s high-priced legal team that screwed up royally by opening the door to First Amendment arguments.
Showing posts with label Scoop. Show all posts
Showing posts with label Scoop. Show all posts
Wednesday, August 4, 2010
Bush + Republicans + Amway = Fraud
Evelyn Pringle December 8, 2004
This article is the first in an investigative series covering the Amway Scandal.
Former Amway insider, Eric Scheibeler, has written a must read new book called "Merchants Of Deception." This one time member of the Amway motivational cult has turned whistleblower and FBI witness and boy does he have some tales to tell.
In the book, Scheibeler exposes an Enron sized fraud with Amway raking In billions of dollars annually, and the billionaire founding families Being the largest soft money contributors to the GOP, with funds that have Been generated from what may turn out to be one of the largest consumer fraud scandals in history, perpetrated by the world's largest multi-level marketing company (MLM).
The former Federal Auditor has also has a website, www.merchantsofdeception.com, that reveals the close ties between Amway and Republicans.
As a life long conservative, Scheibeler was discouraged to both discover and document that "the GOP seems to have been hijacked by political payoffs from an industry that is rife with consumer deception, and bogus 'business opportunity' selling."
He goes on to say that it's "time this secret influence peddling and the harm it causes consumers and our democracy are revealed. I was on the inside for nine years. I saw it with my own eyes. I also have the internal documents, financials, and the audio and video tapes to prove it."
Merchants of Deception exposes the company's deceptive marketing of phony business opportunities and other secret scams by Amway's top promoters to sell so-called success tools to unsuspecting recruits all over the world. It also contains first hand accounts of the Kingpin's fraudulent recruitment practices that have led to an endless stream of lawsuits.
Scheibeler and Dateline Team Up In Sting Operation
In addition to writing a book and setting up a web site, Scheibeler provided key documentation for the May 7, 2004, NBC Dateline program that televised an expose of the secretive and illegal pyramid business run by Amway & Quixtar kingpins.
During its investigation, Dateline smuggled hidden cameras into recruitment meetings in order to document the company's deceptive claims and promises, and to expose its multi-million dollar 'secret' business. The expose verified the common allegation made in numerous consumer lawsuits, that the company is merely a front for a hidden pyramid business based on selling books, tapes, and registrations to seminars and rallies to new recruits, with nearly all participants losing money.
According to Dateline, the FBI and the IRS are conducting investigations into the scheme.
Republicans Will Do Anything For A Buck
Amway's billionaire founders, Rich DeVos and Jay VanAndel, have been the largest soft money contributors to the GOP on and off for the past 20 years. Together, DeVos and VanAndel gave $4,000,000 to a 527, just 45 days prior to the last election. And you can bet that they demand (and get) a bang for every red cent.
Scheibeler's book reveals how GOP donations and corporate promotion have resulted in a trade off for political protection and tax reduction benefits for the MLM. His web site provides a goldmine of documentation to back up his claims, including audiotapes.
By going to the site, you can hear Newt Gingrich promoting Amway at a large event, or you can listen to audio clips of then Texas Governor George W Bush. There is even a clip sent by high-level kingpin distributors from a private meeting within the White House.
Scheibeler tells how some members of the GOP have been paid as much as $100,000 for a single promotional appearance at an Amway seminar. The list of high-paid Republican speakers who have appeared at rallies over the years, reads like a list of who's who in the GOP. It includes former Presidents George Bush, Ronald Reagan, Gerald Ford and former Vice Presidents Bob Dole and Dan Quayle, along with other GOP heavyweights like Gingrich, Oliver North, Senator Rick Santorum and even the latest SE Regional Chairman for the Bush-Cheney '04 campaign, Ralph Reed.
Scheibeler reveals just how much Republican law makers have given back to Amway in return for the large speaking fees and contributions, which includes tax breaks and a blanket of immunity from investigations into the company's illegal business practices. In hindsight, it is more than evident that the money bought a whole lot of regulatory protection for Amway.
Merchant's of Deception provides a good example of how the racket works in the case of Newt Gingrich. His speaking fees are reported to be in the $50,000 range. The books explains how, after accepting speaking fees, Gingrich arranged a reported last-minute modification in a comprehensive tax bill that allegedly provided a $283 million tax break to just one company -- Amway.
One report called the tax break a $283 million payoff. "The payoff for Amway was not in the original House or Senate version of the tax bill. House Speaker Newt Gingrich intervened at the last minute to help get the special tax break inserted in the bill." (San Antonio Express-News Aug 12,1997).
Who Else Is Involved In The Amway Scandal?
Back in 1997, syndicated columnist Molly Ivins described Amway's Lobbying power in Congress. "Amway has its own caucus in Congress. Yes, the Amway caucus. Five Republican House members are also Amway distributors: Reps. Sue Myrick of North Carolina, Jon Christensen of Nebraska, Dick Chrysler of Michigan, Richard Rombo of California and John Ensign of Nevada. Their informal caucus meets several times a year with Amway bigwigs to discuss policy matters affecting the company, including China's trade status," she said.
Ivins also noted that, "House Majority Whip Tom DeLay, a onetime Amway salesman, also remains close to the company."
Which figures, because everybody knows that if there's a buck to be made from a scam, DeLay is sure to be lurking around in the shadows somewhere nearby.
And the fund-raising power of this pyramid company is not limited to the company's top dogs. The downline distributors are often pressured to produce large sums of money by soliciting small contributions from a great number of people. And that money can add up fast, considering that in 2000, Amway reportedly had over 700,000 distributors.
In 1997, a request from Congresswoman Sue Myrick to Amway Kingpin, Dexter Yager, for help in her fund raising events, increased her campaign war chest by more than $20,000 with small contributions from distributors. The next year, another fundraiser aimed at distributors brought in over $35,000.
W and Amway Are Tight
When it comes to W and Amway, it's a give and take situation. They mutually provide "quid pro quo" favors to each other. For instance, during the 2000 campaign, W used the company's voicemail network to reach thousands of Kingpin Dexter Yager's distributors with a personalized message from none other than Bush himself.
Then last summer, when Amway co-founder Rich DeVos attended a dinner party at the home of a friend in Grand Rapids, MI, he got seated right across the dinner table from W, according to the Orlando Sentinel.
DeVos isn't shy about discussing his contributions to Bush. "People ask Me sometimes why I support Bush, "DeVos said, "I just tell them, 'Because When I walk into the room, he says, "Hi, Rich." 'I've been a friend to the family for a long time.'"
"I give the max," DeVos said proudly.
"People talk about buying access, But all I can tell you is that politicians know the people who support them," he told the Sentinel.
And DeVos ain't lying, he has been very generous to W over the years. The $2,000 campaign Limit that he gives directly to Bush, is but a fraction of what he actually contributes. His wife, kids, and their spouses, also make large donations to W and other members of the GOP.
During the 2000 election cycle, DeVos, his wife, and son contributed a combined sum of $760,000 to Republican candidates and causes, and according to FEC records, Amway itself contributed a whopping $1.3 million, with every dime going to Republicans.
Favored politicians are also aware that the Amway perks don't necessarily end once they leave office. For example, DeVos has remained such great friends with President Ford over the years, that when Ford travels, it's often on DeVos' private jet.
How Much Does W Protect Amway - Let Me Count The Ways
Scheibeler's reporting provides a well documented expose of the Bush administration's direct involvement in the regulatory protection of Amway, and verifies that DeVos does get a lot of bang for every buck.
As we all know, there are rampant cases of improper influence in the Bush White House. Right off the top my head, energy and drug companies come to mind.
But Amway is different; its primary goal is not merely to rip off tax payers. It's to literally protect its very existence. The MLM completely relies on political protection to prevent it from being shut down by regulators and law enforcement.
And Bush has demonstrated that he was more than willing to engage in the protection racket.
On his web site, Scheibeler is highly critical of the FTC, and its current chairman, Bush appointee, Timothy Muris, mainly because of the agency's utter refusal to properly investigate and/or prosecute pyramid schemes, despite the overwhelming number of well documented complaints that have been filed with the agency.
Without a doubt, Amway's business practices are flagrant violations of FTC rules. Three separate federal court rulings have defined these types of pyramid sales as illegal schemes, and there are any number of websites on the internet that document the financial harm caused to millions of people by Amway's deceptive recruitment schemes. Yet, the Bush administration has consistently ignored the company's violations.
Scheibeler's web site attracts testimonials from Amway victims all over the world. Complaints have come in from Australia, New Zealand, UK, Germany, France, Canada, and Slovakia. And the whole world watches as the FTC turns a blind eye to the blatant exportation of this "American" fraud.
In fact, it could be said that Bush has aided and abetted Amway's criminal behavior. To begin with, appointing Tim Muris to head the FTC was the equivalent of setting a fox loose in the chicken coup. Before his appointment, Muris was as an attorney with the antitrust division of the law firm Howrey, Simon, Arnold and White, LLP. And guess who the firm's antitrust division counts as one of its largest clients? Amway.
So here we have it, while Muris was at Howrey, and while he was in charge of the FTC, his former law partners were representing Amway in a class action lawsuit initiated by a former Amway distributor that alleged that the MLM's recruitment program was an illegal pyramid scheme.
And there's more. The MLM's influence with the FTC doesn't end with Muris, it extends beyond him. During the Clinton administration, a company named Equinox (an Amway clone), was prosecuted for violating the pyramid scheme fraud statutes. One of Equinox's expert witnesses was David Scheffman, and he testified against the FTC and defended the scheme.
Scheffman claimed that the company's business model was legitimate and not a pyramid scheme, based on the assertion that company operated just like Amway. In the end, Equinox lost the court battle and was shut down, but guess where Scheffman ended up? Muris made him the Chief Economist at the FTC.
Does the information above indicate any conflict of interest violations within the Bush administration? Probably not, since the term conflict of interest was obviously deleted from the White House vocabulary when Bush moved in.
This article is the first in an investigative series covering the Amway Scandal.
Former Amway insider, Eric Scheibeler, has written a must read new book called "Merchants Of Deception." This one time member of the Amway motivational cult has turned whistleblower and FBI witness and boy does he have some tales to tell.
In the book, Scheibeler exposes an Enron sized fraud with Amway raking In billions of dollars annually, and the billionaire founding families Being the largest soft money contributors to the GOP, with funds that have Been generated from what may turn out to be one of the largest consumer fraud scandals in history, perpetrated by the world's largest multi-level marketing company (MLM).
The former Federal Auditor has also has a website, www.merchantsofdeception.com, that reveals the close ties between Amway and Republicans.
As a life long conservative, Scheibeler was discouraged to both discover and document that "the GOP seems to have been hijacked by political payoffs from an industry that is rife with consumer deception, and bogus 'business opportunity' selling."
He goes on to say that it's "time this secret influence peddling and the harm it causes consumers and our democracy are revealed. I was on the inside for nine years. I saw it with my own eyes. I also have the internal documents, financials, and the audio and video tapes to prove it."
Merchants of Deception exposes the company's deceptive marketing of phony business opportunities and other secret scams by Amway's top promoters to sell so-called success tools to unsuspecting recruits all over the world. It also contains first hand accounts of the Kingpin's fraudulent recruitment practices that have led to an endless stream of lawsuits.
Scheibeler and Dateline Team Up In Sting Operation
In addition to writing a book and setting up a web site, Scheibeler provided key documentation for the May 7, 2004, NBC Dateline program that televised an expose of the secretive and illegal pyramid business run by Amway & Quixtar kingpins.
During its investigation, Dateline smuggled hidden cameras into recruitment meetings in order to document the company's deceptive claims and promises, and to expose its multi-million dollar 'secret' business. The expose verified the common allegation made in numerous consumer lawsuits, that the company is merely a front for a hidden pyramid business based on selling books, tapes, and registrations to seminars and rallies to new recruits, with nearly all participants losing money.
According to Dateline, the FBI and the IRS are conducting investigations into the scheme.
Republicans Will Do Anything For A Buck
Amway's billionaire founders, Rich DeVos and Jay VanAndel, have been the largest soft money contributors to the GOP on and off for the past 20 years. Together, DeVos and VanAndel gave $4,000,000 to a 527, just 45 days prior to the last election. And you can bet that they demand (and get) a bang for every red cent.
Scheibeler's book reveals how GOP donations and corporate promotion have resulted in a trade off for political protection and tax reduction benefits for the MLM. His web site provides a goldmine of documentation to back up his claims, including audiotapes.
By going to the site, you can hear Newt Gingrich promoting Amway at a large event, or you can listen to audio clips of then Texas Governor George W Bush. There is even a clip sent by high-level kingpin distributors from a private meeting within the White House.
Scheibeler tells how some members of the GOP have been paid as much as $100,000 for a single promotional appearance at an Amway seminar. The list of high-paid Republican speakers who have appeared at rallies over the years, reads like a list of who's who in the GOP. It includes former Presidents George Bush, Ronald Reagan, Gerald Ford and former Vice Presidents Bob Dole and Dan Quayle, along with other GOP heavyweights like Gingrich, Oliver North, Senator Rick Santorum and even the latest SE Regional Chairman for the Bush-Cheney '04 campaign, Ralph Reed.
Scheibeler reveals just how much Republican law makers have given back to Amway in return for the large speaking fees and contributions, which includes tax breaks and a blanket of immunity from investigations into the company's illegal business practices. In hindsight, it is more than evident that the money bought a whole lot of regulatory protection for Amway.
Merchant's of Deception provides a good example of how the racket works in the case of Newt Gingrich. His speaking fees are reported to be in the $50,000 range. The books explains how, after accepting speaking fees, Gingrich arranged a reported last-minute modification in a comprehensive tax bill that allegedly provided a $283 million tax break to just one company -- Amway.
One report called the tax break a $283 million payoff. "The payoff for Amway was not in the original House or Senate version of the tax bill. House Speaker Newt Gingrich intervened at the last minute to help get the special tax break inserted in the bill." (San Antonio Express-News Aug 12,1997).
Who Else Is Involved In The Amway Scandal?
Back in 1997, syndicated columnist Molly Ivins described Amway's Lobbying power in Congress. "Amway has its own caucus in Congress. Yes, the Amway caucus. Five Republican House members are also Amway distributors: Reps. Sue Myrick of North Carolina, Jon Christensen of Nebraska, Dick Chrysler of Michigan, Richard Rombo of California and John Ensign of Nevada. Their informal caucus meets several times a year with Amway bigwigs to discuss policy matters affecting the company, including China's trade status," she said.
Ivins also noted that, "House Majority Whip Tom DeLay, a onetime Amway salesman, also remains close to the company."
Which figures, because everybody knows that if there's a buck to be made from a scam, DeLay is sure to be lurking around in the shadows somewhere nearby.
And the fund-raising power of this pyramid company is not limited to the company's top dogs. The downline distributors are often pressured to produce large sums of money by soliciting small contributions from a great number of people. And that money can add up fast, considering that in 2000, Amway reportedly had over 700,000 distributors.
In 1997, a request from Congresswoman Sue Myrick to Amway Kingpin, Dexter Yager, for help in her fund raising events, increased her campaign war chest by more than $20,000 with small contributions from distributors. The next year, another fundraiser aimed at distributors brought in over $35,000.
W and Amway Are Tight
When it comes to W and Amway, it's a give and take situation. They mutually provide "quid pro quo" favors to each other. For instance, during the 2000 campaign, W used the company's voicemail network to reach thousands of Kingpin Dexter Yager's distributors with a personalized message from none other than Bush himself.
Then last summer, when Amway co-founder Rich DeVos attended a dinner party at the home of a friend in Grand Rapids, MI, he got seated right across the dinner table from W, according to the Orlando Sentinel.
DeVos isn't shy about discussing his contributions to Bush. "People ask Me sometimes why I support Bush, "DeVos said, "I just tell them, 'Because When I walk into the room, he says, "Hi, Rich." 'I've been a friend to the family for a long time.'"
"I give the max," DeVos said proudly.
"People talk about buying access, But all I can tell you is that politicians know the people who support them," he told the Sentinel.
And DeVos ain't lying, he has been very generous to W over the years. The $2,000 campaign Limit that he gives directly to Bush, is but a fraction of what he actually contributes. His wife, kids, and their spouses, also make large donations to W and other members of the GOP.
During the 2000 election cycle, DeVos, his wife, and son contributed a combined sum of $760,000 to Republican candidates and causes, and according to FEC records, Amway itself contributed a whopping $1.3 million, with every dime going to Republicans.
Favored politicians are also aware that the Amway perks don't necessarily end once they leave office. For example, DeVos has remained such great friends with President Ford over the years, that when Ford travels, it's often on DeVos' private jet.
How Much Does W Protect Amway - Let Me Count The Ways
Scheibeler's reporting provides a well documented expose of the Bush administration's direct involvement in the regulatory protection of Amway, and verifies that DeVos does get a lot of bang for every buck.
As we all know, there are rampant cases of improper influence in the Bush White House. Right off the top my head, energy and drug companies come to mind.
But Amway is different; its primary goal is not merely to rip off tax payers. It's to literally protect its very existence. The MLM completely relies on political protection to prevent it from being shut down by regulators and law enforcement.
And Bush has demonstrated that he was more than willing to engage in the protection racket.
On his web site, Scheibeler is highly critical of the FTC, and its current chairman, Bush appointee, Timothy Muris, mainly because of the agency's utter refusal to properly investigate and/or prosecute pyramid schemes, despite the overwhelming number of well documented complaints that have been filed with the agency.
Without a doubt, Amway's business practices are flagrant violations of FTC rules. Three separate federal court rulings have defined these types of pyramid sales as illegal schemes, and there are any number of websites on the internet that document the financial harm caused to millions of people by Amway's deceptive recruitment schemes. Yet, the Bush administration has consistently ignored the company's violations.
Scheibeler's web site attracts testimonials from Amway victims all over the world. Complaints have come in from Australia, New Zealand, UK, Germany, France, Canada, and Slovakia. And the whole world watches as the FTC turns a blind eye to the blatant exportation of this "American" fraud.
In fact, it could be said that Bush has aided and abetted Amway's criminal behavior. To begin with, appointing Tim Muris to head the FTC was the equivalent of setting a fox loose in the chicken coup. Before his appointment, Muris was as an attorney with the antitrust division of the law firm Howrey, Simon, Arnold and White, LLP. And guess who the firm's antitrust division counts as one of its largest clients? Amway.
So here we have it, while Muris was at Howrey, and while he was in charge of the FTC, his former law partners were representing Amway in a class action lawsuit initiated by a former Amway distributor that alleged that the MLM's recruitment program was an illegal pyramid scheme.
And there's more. The MLM's influence with the FTC doesn't end with Muris, it extends beyond him. During the Clinton administration, a company named Equinox (an Amway clone), was prosecuted for violating the pyramid scheme fraud statutes. One of Equinox's expert witnesses was David Scheffman, and he testified against the FTC and defended the scheme.
Scheffman claimed that the company's business model was legitimate and not a pyramid scheme, based on the assertion that company operated just like Amway. In the end, Equinox lost the court battle and was shut down, but guess where Scheffman ended up? Muris made him the Chief Economist at the FTC.
Does the information above indicate any conflict of interest violations within the Bush administration? Probably not, since the term conflict of interest was obviously deleted from the White House vocabulary when Bush moved in.
Amway, Republicans & That Old Time Religion
Evelyn Pringle December 14, 2004
Eric Scheibeler's book new, Merchants of Deception,[*] is a first hand account of the author’s recruitment into the Amway cult, his rapid advancement as a recruiter of others, and his final awakening after many years of mind-dulling dedication to the cult ideology. The book evidences Eric's deep personal resolve to try and stop what happened to him from happening to others.
For decades, Amway has used its political clout within the extreme Right Wing of the Republican party to gain access to foreign markets, obtain special tax breaks, and most importantly, to retain immunity from prosecution for pyramid scheme fraud. The giant MLM is able to generates funds all over the globe, simply by using some of those funds to buy protection against regulation and oversight. It has unprecedented influence with the current White House. But worst of all, it has the reach and ability to recruit, manipulate, and misinform millions of new people each year.
The Amway Snow Job - How It Works
Over the past 20 years, more than 10 million Americans have been lured into the trap of investing vast amounts of time and money in Amway’s pyramid sales scheme. And each new recruit was subjected to its radical conservative propaganda campaign as a key component of the motivational training that their up-line recruiters insisted they must have in order to be successful with Amway.
To that end, millions of Amway audiotapes, CDs and videos are sold each year. The main message they expound is that success is achieved by emulating the Amway beliefs and values, characterized by political conservatism, disdain for the poor, extreme distrust of government social programs, and adherence to the rules of right-wing Christianity.
To date, there have been no studies done on the political leanings of recruits entering the Amway program. But it is known that many recruits who may not have embraced the radical right-wing agenda going in, adopt it soon after being exposed to Amway's indoctrination. If even half of the recruits believe the propaganda they are exposed to, it means millions of people are converted each year as a direct result of their involvement with the MLM.
Eric is a good example of this kind of conversion. Before he came into Amway, politics had never been an issue with him, and he was not a deeply religious person. But he soon came to believe that he was dealing with people of great faith and integrity, in part because the tapes he was instructed to listen to.
Unbeknownst to Eric, an educational process had begun that would eventually alter and control nearly all of his values and beliefs. As part of that process, he was instructed to (1) attend choreographed Amway rallies where it delivers its message, often over 2 or three days; (2) read politically charged books; (3) listen to hours of politically slanted audiotapes and voicemail messages; and (4) pay large amounts of money to listen to Right Wing Religious and Republican spokespersons at seminars around the nation.
While attending these seminars, Eric began to learn about the supposed evils of liberalism and the Democratic Party and how the liberals wanted to take from the hardworking, honest people and give to the nonproductive members of society, who were only poor because they were lazy.
Distributors were also pushed to contribute money to the campaigns of conservative Republicans who were brought in to speak. It they were not from their home state, they were urged to help get them elected anyways in order to make the whole country better.
When speaking, top promoters constantly linked the Amway teachings to religion, with comments such as, “When you’re loyal to the upline, it’s being loyal to God. It’s being loyal to your husband and loyal to your children,” by Amway Double Diamond Linda Harteis at a Ladies Meeting.
When Republicans spoke at rallies, they were often introduced as great Americans, while their Democratic counterparts were portrayed as godless, anti-family, anti-business, and anti-success. Mother Jones magazine correctly described the Amway distributor force as "heavily influenced by the company's dual themes of Christian morality and free enterprise" and operating "like a private political army."
A typical example of the kind of derogatory political messages that are broadcast to Amway members, is one sent by Dexter Yager a few years back. The entire message was a condemnation of Hillary Clinton, disguised as a prayer. At one point, Yager says, “God, melt that woman’s brain,” and that was one of the milder prayer lines.
The comments made by these people can only be described as bizarre. For instance, they claimed that women who chose a career over staying home and raising their children, either lacked values or were just plain stupid. They'd make other comments like, "Why do you think she's working, because she hates her kids?"
According to Eric, these kinds of remarks were often followed with a disclaimer such as, "I certainly understand the bad position that these women are in. Some are forced into the workplace, because they are married to a man that just isn't a man."
After a thorough brainwashing, Eric came to believe that Amway had given him and his wife the gift of membership in a group of like-minded people who believed in God, America, and the family. He reached the point where he bought into what co-founder DeVos claimed in his book, Believe! "This country was built on a religious heritage, and we had better get back to it. We had better start telling people that faith in God is the real strength of America!" DeVos wrote.
The Bush Family & Religious Heathens
Several members of the media have looked into the relationship between the two Bush Presidencies and members of the extreme Religious Right Wing. After reading up on that gang, the only thing I know for sure, is that there is not a single honest person in the whole bunch.
First off, lets take a look at evangelist Doug Wead, a divorced Baptist Minister, and former Diamond distributer, who is still a regular speaker at Amway conventions.
Wead was the first President Bush's liaison to the Christian Right and he later served as Special Assistant to the President in the first Bush White House. Time magazine referred to him as "the man who coined the phrase the compassionate conservative."
He was linked to the second President Bush early on as well. US News and World Report described Wead as an "old friend and advisor" to George W Bush. In the book, First Son, Author and Dallas Morning News Reporter, Bill Mintuglio, said that Wead was a man who had spent years "preparing strategy reports" for both President Bush and GW.
The book claims W was the “family liaison to hard-edged conservatives and to Christian evangelical leaders, developing close ties to (among others) defeated ... congressional candidate Doug Wead, with his Amway and Jim and Tammy Faye Bakker connections.”
In 1998, W decided it was his turn. Within days of his reelection as governor, W was secretly planning to run for President, because, as he said, he felt certain he had been called. He was encouraged in this belief by evangelical friends like Doug Wead and by his mother, who called him “the Chosen One," according to Kitty Kelly's book, the Family.
Anticipating W’s reelection, Wead had already written a memo encouraging him to run, “You have been given a great opportunity, an opportunity that has been denied to many who have sought it. It is a gift that has rarely been extended. It might not ever be extended again,” Wead wrote.
Years earlier, Wead had lost his own Congressional bid after Republican Senator Barry Goldwater, threw his support behind Wead's Democratic opponent, and stunned the Christian community with the remark, "I don't think God should be sold for money."
Goldwater was obviously a good judge of character and realized that it would be better to have a Democrat in office than a charlatan like Wead. And he was absolutely right, because as it turns out, Wead's past with Amway is even shadier than most people know.
At one time, Wead and his ex-wife Gloria, were both Diamond distributors, sponsored by Dexter and Birdie Yager. Wead earned large sums of money by speaking at Amway functions throughout the Yager organization.
Wead and another kingpin, Jean Godzich, eventually branched out and set up an Amway in France. In 1986, the French government began investigating it and decided the company was a dangerous mind-control cult, and a fraudulent business. Amway France terminated the distributorship of Godzich, from whose group most of the complaints had originated.
So what do Wead and Godzich do next? They set up a new MLM in France, called Groupement or GEPM. Its product line consisted of Amway products, its business structure was identical to Amway France, and its cultic activities were just as blatant as they were in the first operation.
After receiving numerous complaints about GEPM, French authorities moved in to shut it down, but this time it issued criminal arrest warrants, 13 for the company’s distributors, and 2 for Godzich and Wead. Godzich took all the cash and fled the country and Wead never returned to France.
This man is the same Doug Wead, who 2 years later, would become a White House Aide to the first President Bush, and spiritual adviser to the second. God help us!!!
Some Religious Top Guns Need Extra Protection
The Amway pyramid fraud scheme seems to offer steady employment. If you are being investigated or arrested in one country or state, all you have to do is move along to another and set up shop again. Defrocked religious zealots seem to get away with doing this time and time again.
For example, Don Storms is an Executive Diamond with Amway. He is also an ex-minister, who spent 13 years traveling the country with a gospel quartet, before teaming up with Jim Bakker and becoming a senior vice president at the PTL Club. In 1979, he and wife Ruth started their Amway business. Today, Storms is a real estate developer, in addition to his Amway business, according to MLM Survior.com on July 13, 1999.
Don’s buddy, Kevin Trudeau, is a prolific marketer, but with a vary shady past. He is a twice-convicted felon and has served time in prison for credit card fraud. The FTC has prosecuted him a couple times for concocting fraudulent infomercials and at one time or another, he has been under investigations by 18 state Attorneys General, and the US Postal Service.
Trudeau was once involved with the MLM company, Nutrition for Life, Inc (NFLI). But that involvement came to an abrupt halt, after the SEC began investigating his recruitment practices. On April 17, 1996, the Illinois Attorney General filed a lawsuit against Trudeau, and his partner, for running an illegal pyramid scheme that was set up to peddle motivational books and tapes. The State of Michigan also ordered him to stop all marketing in that state related to his business the Trudeau Marketing Group (TMG).
So what do the Ex-Pastor and Ex-Con have in common? Quixtar. Their Quixtar/Trudeau connection was revealed in a spam e-mail, which stated in part:
"PLEASE CONTACT ME RIGHT AWAY! URGENT! URGENT! URGENT! DON'T LET THIS ONE GET AWAY FROM YOU. THE LARGEST, MOST EXPLOSIVE MLM OPPORTUNITY OF ALL TIME IS NOW UNDERWAY. IT IS UNIMAGINABLY HUGE. HUGE AMOUNTS OF MONEY ARE BEHIND IT, HUGE CORPORATIONS LIKE MICROSOFT AND IBM,. . .
"IT IS VITALLY IMPORTANT THAT YOU RESERVE YOUR POSITION NOW IN THE TRUDEAU TRAINING TEAM ORGANIZATION, WHICH NOW WITHOUT QUESTION THE MOST UNBELIEVABLE MLM MARKETING GROUP IN HISTORY. KEVIN TRUDEAU, WHO IS THE HUGE IN THE TV INFOMERCIAL BUSINESS WORLDWIDE, AND HIS ORGANIZATION OF INFORMERCIAL DISTRIBUTORS (TO WHICH I BELONG) ARE BUILDING AN EXCLUSIVE MARKETING ORGANIZATION IN COOPERATION WITH AND DIRECTLY DOWNLINE FROM THE BIGGEST LEADERS IN THE NETWORK MARKETING INDUSTRY TODAY, THE JODY VICTOR, DEXTER YAGER, DON STORMS, BLAINE ATHORN GROUP."
How's that for Amway name-dropping? A little research by MLM Survivor.com, revealed the following: On June 30, 1999, Trudeau placed an announcement on the TMG's voicemail system. It seems that his long-time buddy and ex-business associate, Blaine Athorne, (who fired him after his 1989 credit card fraud) hired the TMG in an exclusive relationship with his Amway/Quixtar organization.
Trudeau briefly noted his earlier job with network marketing, but claimed it was the changing dynamics in the company, which made it impossible for him to continue as a distributor. "I no longer could promote that business. . . [because of] disagreement in management."
Oh really? Could that disagreement have had something to do with his conviction for pyramid fraud, or the $1 million fine that he had to pay as a result of his infomercial fraud?
Or maybe it was about the Postal Service investigation or the umpteen investigations by state Attorneys General. Who knows?
About Quixtar, Trudeau says: "I believe in my heart of hearts is the ultimate network marketing opportunity of all times. . ." One of the claims he makes on behalf of Quixtar is: "You'll be able to buy hundreds of thousands and eventually millions of products at very good pricing -- similar to Sam's Club." Then comes the big push!
"I have chosen after multiple meetings with corporate executives, top distributors and lawyers that it would be in the best interests of everyone if I did not become a distributor in Amway or Quixtar. I have formed a company called the Trudeau Training Team. The Trudeau Training Team has signed an exclusive marketing and sales arrangement with Storms Enterprises Inc. . . Don Storms has personally sponsored my long-time friend and business associate Blaine Athorne. Blaine Athorne is going to be the founding distributor in our downline organization. . . My company has signed an exclusive marketing and sales training contract with Blaine Athorne’s distributorship and downline, and Don Storms.
"Many of the marketing strategies that I've employed in the past will be utilized in this organization."
What marketing strategy is he referring to here? Is there any other, besides the old standard run-of-the-mill pyramid scheme?
Trudeau says Don Storms is "one of the greatest network marketers of all time," and Storms says, "Kevin Trudeau's training [is] the best in the world."
So here it is for all to see, a prime example of the quality of ethical and legal behavior we can expect from Amway/Quixtar and its distributors.
More Secretive Religious Groups
Amway founder Richard DeVos is a member of the Council for National Policy (CNP). A group described as "the Most Powerful Conservative Group You've Never Heard Of," by ABC News in a May, 2004 report that noted the group's extraordinary secrecy.
If you want to do a little Republican name-dropping, just recite the names of the 500 or so members of the CNP. They include Christian Coalition president Pat Robertson; political strategist Ralph Reed; Sen Jesse Helms; Congressmen Dick Armey and Tom Delay; Gun Owners of America head Larry Pratt; Oliver North; Texas billionaire Nelson Bunker Hunt; Focus on the Family head James Dobson; and former presidential candidate Gary Bauer.
"According to a membership roster ... other notable former and current members include: Attorney General John Ashcroft and Health and Human Services Secretary Tommy Thompson. (Both are no longer members); Christian businessmen like Holland and Jeffrey Coors, of the brewing company; two of fundamentalist Christianity's most prominent end-of-the-world theologists: John Ankerberg, and Dave Breese," ABC noted.
DeVos is also a major supporter of a right-wing, Christian non-profit entity called Gospel Communications International, which has annual revenues of $6.7 million. Its Board of Directors reads like a Who’s Who of Amway kingpins, with DeVos as Chairman and his son, Doug DeVos, as Vice-Chairman. Out of 15 Directors, 10 are from Amway.
Launched in 1995, Gospel.com, claims to be the largest Christian website on the Internet. In 1999, it claimed that it had more than 780 million hits from people in 216 different countries and territories around the world.
During 1998, Gospel was responsible for showing videos and films to over 200 million people in schools, churches, homes, prisons, hospitals, and on television. To give you an idea of what kind of information was contained in those films, consider that 2 books that were being promoted on its website as of September 14, 2004, included, From Reveler to Revelation - the Journey of President George W Bush; and A Greater Freedom: Stories of Faith from Operation Iraqi Freedom, by Oliver North.
And of course no religious nutcase tale would be complete if Jerry Falwell wasn‘t mentioned. Not to worry, ole Jerry is in the loop. Amway Kingpin, Dexter Yager, not only financially supports Falwell’s Liberty University, one of Yager's sons sits on the University’s board of directors.
Dexter Yager is such a prince, that years ago, he even let Jim and Tammy Faye Bakker broadcast their religious show from his home, after they lost the PTL ministry, according to Mother Jones Magazine. What a guy.
So How Much Money Are We Talking About?
How much money are we talking about? Well first of all, Amway perks are not limited to money contributions. For example, when describing the events at the 2000 Republican Convention, the New York Times wrote, “For the party’s top underwriters, there will be an array of gold-plated events in Philadelphia, including cocktails with Gen. Colin L. Powell and an evening cruise on the Delaware River aboard the ‘Enterprise,’ the yacht owned by Richard M. DeVos, the Amway founder, who is a Bush supporter.”
Four years later on September 2, 2004, the Detroit Free Press described another boat ride. Insiders were feted aboard Dick and Betsy DeVos’ yacht at the 2004 Republican National Convention in New York, as well as Jay Van Andel’s lavish 169-footer.
Besides yachts trips, we are looking at a whole lot of money being passed around. For example, in 1994, Amway and Anschutz were the top two donors, each giving $250,000 toward a $2.5-million soft money contribution to the RNC. It was the largest single political donation on record.
In return, the Amway big-wigs are treated very well. On July 18, 1996, DeVos was honored at a $3 million Republican fundraiser, where keynote speaker, Bob Dole, paid tribute to him. A week later it was reported that Amway had donated $1.3 million to the San Diego Convention and Visitors Bureau, to pay for Republican infomercials airing on Pat Robertson's Family Channel during the convention, according to the Sept/Oct 1996, issue of Mother Jones magazine.
Although the Democrats filed a complaint and blocked the payoff, it demonstrates how one hand washes the other when it comes to Amway, the Religious Right Wing, and the Republican Party.
In the Bush/Cheney campaign 2000, Betsy DeVos, daughter-in-law of Richard DeVos, became a so-called Bush Pioneer by raising over $100,000. And overall, in 2000, Amway was the second largest contributor of soft money to the RNC, with donations totaling $1,138,500, second only to Reynolds Tobacco.
In 2004, the 527 “Progress for America” received a bundle. “The latest crop of donors includes Amway founders Richard DeVos and Jay Van Andel, who each chipped in $2 million,” reports Newsweek, “The Secret Money War,” Sept 20, 2004.
So what does Amway get in return for all this money? A lot. But most importantly, it allows Amway to operate with political protection against criminal investigations that would lead to the collapse of not only Amway, but the entire MLM industry.
Pyramid Scheme Alert Takes On The MLM
In June 2000, the first consumer advocacy group was formed that focuses directly on pyramid scheme fraud. Pyramid Scheme Alert, Inc (PSA) is a non-profit organization, founded by three activist/authors, with support and encouragement from attorneys, former regulators and private citizens all over the world.
PSA Directors, Robert FitzPatrick and Susanna Perkins, have written an excellent white paper report entitled, "The Amway Industry," which details the damaging and corrupting influence of the MLM industry on consumers and democracy. It is by far, the most thorough and comprehensive report available for people looking for information about the MLM industry. [**]
PSA also has a website that is full of information, which receives more than 150,000 hits per month. The organization provides answers to a stream of consumer inquiries each day. Several of its directors have served as expert witnesses in private and government sponsored court proceedings involving MLM companies. PSA's findings has been referenced, quoted, and featured in reports on NBC, ABC, BBC and in many newspapers and magazines around the world.
It was surely a welcome sight for consumers. For decades now, people have went up against Amway with very little success, and for good reason. Amway attorneys routinely threaten website publishers with libel suits. State Attorney General offices say they are too small and financially strapped to take on MLMs in court, and appeals to the FTC have consistently gone unanswered.
Amway Will Be In Business Until Bush Leaves Office
In light of the above, you can bet that Amway will not be closing its doors anytime soon. Its illegal scheme will remain in tact for at least as long as Bush is in the White House.
But there is one oddity about the Bush-Amway gang that Eric recently pointed out. In most cases of fraud, crooks don’t steal from their own. So this makes Amway unique, because it pays the current administration to protect a multi-billion dollar fraud that targets Conservative Christian Republicans almost exclusively.
Eric said he wondered what kind of animals would eat their own? If my memory serves me correctly, I think pigs do that.
(Second Article In A Series On Amway Scandal)
* With prior permission, this article contains a large amount of information taken directly from Eric Scheibeler's website, www.merchantsofdeception.com, and his book, Merchants of Deception.
** With prior permission, this article contains an extensive amount of information taken directly from "The Amway Industry" white paper written by Robert FitzPatrick and Susanna Perkins, Directors of PSA, and the PSA website.
Eric Scheibeler's book new, Merchants of Deception,[*] is a first hand account of the author’s recruitment into the Amway cult, his rapid advancement as a recruiter of others, and his final awakening after many years of mind-dulling dedication to the cult ideology. The book evidences Eric's deep personal resolve to try and stop what happened to him from happening to others.
For decades, Amway has used its political clout within the extreme Right Wing of the Republican party to gain access to foreign markets, obtain special tax breaks, and most importantly, to retain immunity from prosecution for pyramid scheme fraud. The giant MLM is able to generates funds all over the globe, simply by using some of those funds to buy protection against regulation and oversight. It has unprecedented influence with the current White House. But worst of all, it has the reach and ability to recruit, manipulate, and misinform millions of new people each year.
The Amway Snow Job - How It Works
Over the past 20 years, more than 10 million Americans have been lured into the trap of investing vast amounts of time and money in Amway’s pyramid sales scheme. And each new recruit was subjected to its radical conservative propaganda campaign as a key component of the motivational training that their up-line recruiters insisted they must have in order to be successful with Amway.
To that end, millions of Amway audiotapes, CDs and videos are sold each year. The main message they expound is that success is achieved by emulating the Amway beliefs and values, characterized by political conservatism, disdain for the poor, extreme distrust of government social programs, and adherence to the rules of right-wing Christianity.
To date, there have been no studies done on the political leanings of recruits entering the Amway program. But it is known that many recruits who may not have embraced the radical right-wing agenda going in, adopt it soon after being exposed to Amway's indoctrination. If even half of the recruits believe the propaganda they are exposed to, it means millions of people are converted each year as a direct result of their involvement with the MLM.
Eric is a good example of this kind of conversion. Before he came into Amway, politics had never been an issue with him, and he was not a deeply religious person. But he soon came to believe that he was dealing with people of great faith and integrity, in part because the tapes he was instructed to listen to.
Unbeknownst to Eric, an educational process had begun that would eventually alter and control nearly all of his values and beliefs. As part of that process, he was instructed to (1) attend choreographed Amway rallies where it delivers its message, often over 2 or three days; (2) read politically charged books; (3) listen to hours of politically slanted audiotapes and voicemail messages; and (4) pay large amounts of money to listen to Right Wing Religious and Republican spokespersons at seminars around the nation.
While attending these seminars, Eric began to learn about the supposed evils of liberalism and the Democratic Party and how the liberals wanted to take from the hardworking, honest people and give to the nonproductive members of society, who were only poor because they were lazy.
Distributors were also pushed to contribute money to the campaigns of conservative Republicans who were brought in to speak. It they were not from their home state, they were urged to help get them elected anyways in order to make the whole country better.
When speaking, top promoters constantly linked the Amway teachings to religion, with comments such as, “When you’re loyal to the upline, it’s being loyal to God. It’s being loyal to your husband and loyal to your children,” by Amway Double Diamond Linda Harteis at a Ladies Meeting.
When Republicans spoke at rallies, they were often introduced as great Americans, while their Democratic counterparts were portrayed as godless, anti-family, anti-business, and anti-success. Mother Jones magazine correctly described the Amway distributor force as "heavily influenced by the company's dual themes of Christian morality and free enterprise" and operating "like a private political army."
A typical example of the kind of derogatory political messages that are broadcast to Amway members, is one sent by Dexter Yager a few years back. The entire message was a condemnation of Hillary Clinton, disguised as a prayer. At one point, Yager says, “God, melt that woman’s brain,” and that was one of the milder prayer lines.
The comments made by these people can only be described as bizarre. For instance, they claimed that women who chose a career over staying home and raising their children, either lacked values or were just plain stupid. They'd make other comments like, "Why do you think she's working, because she hates her kids?"
According to Eric, these kinds of remarks were often followed with a disclaimer such as, "I certainly understand the bad position that these women are in. Some are forced into the workplace, because they are married to a man that just isn't a man."
After a thorough brainwashing, Eric came to believe that Amway had given him and his wife the gift of membership in a group of like-minded people who believed in God, America, and the family. He reached the point where he bought into what co-founder DeVos claimed in his book, Believe! "This country was built on a religious heritage, and we had better get back to it. We had better start telling people that faith in God is the real strength of America!" DeVos wrote.
The Bush Family & Religious Heathens
Several members of the media have looked into the relationship between the two Bush Presidencies and members of the extreme Religious Right Wing. After reading up on that gang, the only thing I know for sure, is that there is not a single honest person in the whole bunch.
First off, lets take a look at evangelist Doug Wead, a divorced Baptist Minister, and former Diamond distributer, who is still a regular speaker at Amway conventions.
Wead was the first President Bush's liaison to the Christian Right and he later served as Special Assistant to the President in the first Bush White House. Time magazine referred to him as "the man who coined the phrase the compassionate conservative."
He was linked to the second President Bush early on as well. US News and World Report described Wead as an "old friend and advisor" to George W Bush. In the book, First Son, Author and Dallas Morning News Reporter, Bill Mintuglio, said that Wead was a man who had spent years "preparing strategy reports" for both President Bush and GW.
The book claims W was the “family liaison to hard-edged conservatives and to Christian evangelical leaders, developing close ties to (among others) defeated ... congressional candidate Doug Wead, with his Amway and Jim and Tammy Faye Bakker connections.”
In 1998, W decided it was his turn. Within days of his reelection as governor, W was secretly planning to run for President, because, as he said, he felt certain he had been called. He was encouraged in this belief by evangelical friends like Doug Wead and by his mother, who called him “the Chosen One," according to Kitty Kelly's book, the Family.
Anticipating W’s reelection, Wead had already written a memo encouraging him to run, “You have been given a great opportunity, an opportunity that has been denied to many who have sought it. It is a gift that has rarely been extended. It might not ever be extended again,” Wead wrote.
Years earlier, Wead had lost his own Congressional bid after Republican Senator Barry Goldwater, threw his support behind Wead's Democratic opponent, and stunned the Christian community with the remark, "I don't think God should be sold for money."
Goldwater was obviously a good judge of character and realized that it would be better to have a Democrat in office than a charlatan like Wead. And he was absolutely right, because as it turns out, Wead's past with Amway is even shadier than most people know.
At one time, Wead and his ex-wife Gloria, were both Diamond distributors, sponsored by Dexter and Birdie Yager. Wead earned large sums of money by speaking at Amway functions throughout the Yager organization.
Wead and another kingpin, Jean Godzich, eventually branched out and set up an Amway in France. In 1986, the French government began investigating it and decided the company was a dangerous mind-control cult, and a fraudulent business. Amway France terminated the distributorship of Godzich, from whose group most of the complaints had originated.
So what do Wead and Godzich do next? They set up a new MLM in France, called Groupement or GEPM. Its product line consisted of Amway products, its business structure was identical to Amway France, and its cultic activities were just as blatant as they were in the first operation.
After receiving numerous complaints about GEPM, French authorities moved in to shut it down, but this time it issued criminal arrest warrants, 13 for the company’s distributors, and 2 for Godzich and Wead. Godzich took all the cash and fled the country and Wead never returned to France.
This man is the same Doug Wead, who 2 years later, would become a White House Aide to the first President Bush, and spiritual adviser to the second. God help us!!!
Some Religious Top Guns Need Extra Protection
The Amway pyramid fraud scheme seems to offer steady employment. If you are being investigated or arrested in one country or state, all you have to do is move along to another and set up shop again. Defrocked religious zealots seem to get away with doing this time and time again.
For example, Don Storms is an Executive Diamond with Amway. He is also an ex-minister, who spent 13 years traveling the country with a gospel quartet, before teaming up with Jim Bakker and becoming a senior vice president at the PTL Club. In 1979, he and wife Ruth started their Amway business. Today, Storms is a real estate developer, in addition to his Amway business, according to MLM Survior.com on July 13, 1999.
Don’s buddy, Kevin Trudeau, is a prolific marketer, but with a vary shady past. He is a twice-convicted felon and has served time in prison for credit card fraud. The FTC has prosecuted him a couple times for concocting fraudulent infomercials and at one time or another, he has been under investigations by 18 state Attorneys General, and the US Postal Service.
Trudeau was once involved with the MLM company, Nutrition for Life, Inc (NFLI). But that involvement came to an abrupt halt, after the SEC began investigating his recruitment practices. On April 17, 1996, the Illinois Attorney General filed a lawsuit against Trudeau, and his partner, for running an illegal pyramid scheme that was set up to peddle motivational books and tapes. The State of Michigan also ordered him to stop all marketing in that state related to his business the Trudeau Marketing Group (TMG).
So what do the Ex-Pastor and Ex-Con have in common? Quixtar. Their Quixtar/Trudeau connection was revealed in a spam e-mail, which stated in part:
"PLEASE CONTACT ME RIGHT AWAY! URGENT! URGENT! URGENT! DON'T LET THIS ONE GET AWAY FROM YOU. THE LARGEST, MOST EXPLOSIVE MLM OPPORTUNITY OF ALL TIME IS NOW UNDERWAY. IT IS UNIMAGINABLY HUGE. HUGE AMOUNTS OF MONEY ARE BEHIND IT, HUGE CORPORATIONS LIKE MICROSOFT AND IBM,. . .
"IT IS VITALLY IMPORTANT THAT YOU RESERVE YOUR POSITION NOW IN THE TRUDEAU TRAINING TEAM ORGANIZATION, WHICH NOW WITHOUT QUESTION THE MOST UNBELIEVABLE MLM MARKETING GROUP IN HISTORY. KEVIN TRUDEAU, WHO IS THE HUGE IN THE TV INFOMERCIAL BUSINESS WORLDWIDE, AND HIS ORGANIZATION OF INFORMERCIAL DISTRIBUTORS (TO WHICH I BELONG) ARE BUILDING AN EXCLUSIVE MARKETING ORGANIZATION IN COOPERATION WITH AND DIRECTLY DOWNLINE FROM THE BIGGEST LEADERS IN THE NETWORK MARKETING INDUSTRY TODAY, THE JODY VICTOR, DEXTER YAGER, DON STORMS, BLAINE ATHORN GROUP."
How's that for Amway name-dropping? A little research by MLM Survivor.com, revealed the following: On June 30, 1999, Trudeau placed an announcement on the TMG's voicemail system. It seems that his long-time buddy and ex-business associate, Blaine Athorne, (who fired him after his 1989 credit card fraud) hired the TMG in an exclusive relationship with his Amway/Quixtar organization.
Trudeau briefly noted his earlier job with network marketing, but claimed it was the changing dynamics in the company, which made it impossible for him to continue as a distributor. "I no longer could promote that business. . . [because of] disagreement in management."
Oh really? Could that disagreement have had something to do with his conviction for pyramid fraud, or the $1 million fine that he had to pay as a result of his infomercial fraud?
Or maybe it was about the Postal Service investigation or the umpteen investigations by state Attorneys General. Who knows?
About Quixtar, Trudeau says: "I believe in my heart of hearts is the ultimate network marketing opportunity of all times. . ." One of the claims he makes on behalf of Quixtar is: "You'll be able to buy hundreds of thousands and eventually millions of products at very good pricing -- similar to Sam's Club." Then comes the big push!
"I have chosen after multiple meetings with corporate executives, top distributors and lawyers that it would be in the best interests of everyone if I did not become a distributor in Amway or Quixtar. I have formed a company called the Trudeau Training Team. The Trudeau Training Team has signed an exclusive marketing and sales arrangement with Storms Enterprises Inc. . . Don Storms has personally sponsored my long-time friend and business associate Blaine Athorne. Blaine Athorne is going to be the founding distributor in our downline organization. . . My company has signed an exclusive marketing and sales training contract with Blaine Athorne’s distributorship and downline, and Don Storms.
"Many of the marketing strategies that I've employed in the past will be utilized in this organization."
What marketing strategy is he referring to here? Is there any other, besides the old standard run-of-the-mill pyramid scheme?
Trudeau says Don Storms is "one of the greatest network marketers of all time," and Storms says, "Kevin Trudeau's training [is] the best in the world."
So here it is for all to see, a prime example of the quality of ethical and legal behavior we can expect from Amway/Quixtar and its distributors.
More Secretive Religious Groups
Amway founder Richard DeVos is a member of the Council for National Policy (CNP). A group described as "the Most Powerful Conservative Group You've Never Heard Of," by ABC News in a May, 2004 report that noted the group's extraordinary secrecy.
If you want to do a little Republican name-dropping, just recite the names of the 500 or so members of the CNP. They include Christian Coalition president Pat Robertson; political strategist Ralph Reed; Sen Jesse Helms; Congressmen Dick Armey and Tom Delay; Gun Owners of America head Larry Pratt; Oliver North; Texas billionaire Nelson Bunker Hunt; Focus on the Family head James Dobson; and former presidential candidate Gary Bauer.
"According to a membership roster ... other notable former and current members include: Attorney General John Ashcroft and Health and Human Services Secretary Tommy Thompson. (Both are no longer members); Christian businessmen like Holland and Jeffrey Coors, of the brewing company; two of fundamentalist Christianity's most prominent end-of-the-world theologists: John Ankerberg, and Dave Breese," ABC noted.
DeVos is also a major supporter of a right-wing, Christian non-profit entity called Gospel Communications International, which has annual revenues of $6.7 million. Its Board of Directors reads like a Who’s Who of Amway kingpins, with DeVos as Chairman and his son, Doug DeVos, as Vice-Chairman. Out of 15 Directors, 10 are from Amway.
Launched in 1995, Gospel.com, claims to be the largest Christian website on the Internet. In 1999, it claimed that it had more than 780 million hits from people in 216 different countries and territories around the world.
During 1998, Gospel was responsible for showing videos and films to over 200 million people in schools, churches, homes, prisons, hospitals, and on television. To give you an idea of what kind of information was contained in those films, consider that 2 books that were being promoted on its website as of September 14, 2004, included, From Reveler to Revelation - the Journey of President George W Bush; and A Greater Freedom: Stories of Faith from Operation Iraqi Freedom, by Oliver North.
And of course no religious nutcase tale would be complete if Jerry Falwell wasn‘t mentioned. Not to worry, ole Jerry is in the loop. Amway Kingpin, Dexter Yager, not only financially supports Falwell’s Liberty University, one of Yager's sons sits on the University’s board of directors.
Dexter Yager is such a prince, that years ago, he even let Jim and Tammy Faye Bakker broadcast their religious show from his home, after they lost the PTL ministry, according to Mother Jones Magazine. What a guy.
So How Much Money Are We Talking About?
How much money are we talking about? Well first of all, Amway perks are not limited to money contributions. For example, when describing the events at the 2000 Republican Convention, the New York Times wrote, “For the party’s top underwriters, there will be an array of gold-plated events in Philadelphia, including cocktails with Gen. Colin L. Powell and an evening cruise on the Delaware River aboard the ‘Enterprise,’ the yacht owned by Richard M. DeVos, the Amway founder, who is a Bush supporter.”
Four years later on September 2, 2004, the Detroit Free Press described another boat ride. Insiders were feted aboard Dick and Betsy DeVos’ yacht at the 2004 Republican National Convention in New York, as well as Jay Van Andel’s lavish 169-footer.
Besides yachts trips, we are looking at a whole lot of money being passed around. For example, in 1994, Amway and Anschutz were the top two donors, each giving $250,000 toward a $2.5-million soft money contribution to the RNC. It was the largest single political donation on record.
In return, the Amway big-wigs are treated very well. On July 18, 1996, DeVos was honored at a $3 million Republican fundraiser, where keynote speaker, Bob Dole, paid tribute to him. A week later it was reported that Amway had donated $1.3 million to the San Diego Convention and Visitors Bureau, to pay for Republican infomercials airing on Pat Robertson's Family Channel during the convention, according to the Sept/Oct 1996, issue of Mother Jones magazine.
Although the Democrats filed a complaint and blocked the payoff, it demonstrates how one hand washes the other when it comes to Amway, the Religious Right Wing, and the Republican Party.
In the Bush/Cheney campaign 2000, Betsy DeVos, daughter-in-law of Richard DeVos, became a so-called Bush Pioneer by raising over $100,000. And overall, in 2000, Amway was the second largest contributor of soft money to the RNC, with donations totaling $1,138,500, second only to Reynolds Tobacco.
In 2004, the 527 “Progress for America” received a bundle. “The latest crop of donors includes Amway founders Richard DeVos and Jay Van Andel, who each chipped in $2 million,” reports Newsweek, “The Secret Money War,” Sept 20, 2004.
So what does Amway get in return for all this money? A lot. But most importantly, it allows Amway to operate with political protection against criminal investigations that would lead to the collapse of not only Amway, but the entire MLM industry.
Pyramid Scheme Alert Takes On The MLM
In June 2000, the first consumer advocacy group was formed that focuses directly on pyramid scheme fraud. Pyramid Scheme Alert, Inc (PSA) is a non-profit organization, founded by three activist/authors, with support and encouragement from attorneys, former regulators and private citizens all over the world.
PSA Directors, Robert FitzPatrick and Susanna Perkins, have written an excellent white paper report entitled, "The Amway Industry," which details the damaging and corrupting influence of the MLM industry on consumers and democracy. It is by far, the most thorough and comprehensive report available for people looking for information about the MLM industry. [**]
PSA also has a website that is full of information, which receives more than 150,000 hits per month. The organization provides answers to a stream of consumer inquiries each day. Several of its directors have served as expert witnesses in private and government sponsored court proceedings involving MLM companies. PSA's findings has been referenced, quoted, and featured in reports on NBC, ABC, BBC and in many newspapers and magazines around the world.
It was surely a welcome sight for consumers. For decades now, people have went up against Amway with very little success, and for good reason. Amway attorneys routinely threaten website publishers with libel suits. State Attorney General offices say they are too small and financially strapped to take on MLMs in court, and appeals to the FTC have consistently gone unanswered.
Amway Will Be In Business Until Bush Leaves Office
In light of the above, you can bet that Amway will not be closing its doors anytime soon. Its illegal scheme will remain in tact for at least as long as Bush is in the White House.
But there is one oddity about the Bush-Amway gang that Eric recently pointed out. In most cases of fraud, crooks don’t steal from their own. So this makes Amway unique, because it pays the current administration to protect a multi-billion dollar fraud that targets Conservative Christian Republicans almost exclusively.
Eric said he wondered what kind of animals would eat their own? If my memory serves me correctly, I think pigs do that.
(Second Article In A Series On Amway Scandal)
* With prior permission, this article contains a large amount of information taken directly from Eric Scheibeler's website, www.merchantsofdeception.com, and his book, Merchants of Deception.
** With prior permission, this article contains an extensive amount of information taken directly from "The Amway Industry" white paper written by Robert FitzPatrick and Susanna Perkins, Directors of PSA, and the PSA website.
IRS To Amway - The Party's Over
Evelyn Pringle January 10, 2005
Apparently, the IRS has decided that Amway distributors are having too much fun listening to tapes, reading books, and attending the same training seminars year after year after year.
In July, 2004, the United States Tax Court issued a ruling that barred 2 distributors from claiming business related tax deductions for the cost of these items.
The husband and wife distributors, Randall and Kay Ollett, have been in Amway since 1996, and have listed thousands of dollars in Amway-related business expenses on their tax returns each and every year, even though they have never showed one dime of profit.
The Tax Court has evidently decided that partying with the Amway crowd is no longer going to be funded at the tax payers expense, because when it was asked to determine whether the Olletts engaged in their Amway activity with the intent of making a profit in 1999 and 2000, it concluded that the Olletts did not have an actual and honest objective of making a profit from their distributorship, and therefore, could not deduct Amway-related expenses on their Federal Tax Return.
Olletts Kept Their Day Jobs
The Olletts began to operate a distributorship under the name of Ollett Enterprises in 1996. They were recruited into Amway by upline sponsors, David and Carole Marzke. However, both couples were ultimately members of a larger distributor network established by Bill Florence, known as the Florence organization.
The Olletts filed joint Federal income tax returns for 1999 and 2000. On their 1999 return, they listed Amway business expenses in the amount of $17,384, and a net loss of income of $1,450; in 2000 they listed expenses of $23,001, and a net loss of $3,235.
In addition to being Amway distributors, the Olletts remained employed in their regular jobs, with a combined income of $96,389 in 1999 and $98,949 in 2000. Until the court determined otherwise in 2004, they had been able to use their losses from Amway to offset the income they earned from their regular employment.
Olletts Become Their Own Best Customers
A distributor earns money by selling products and recruiting new downline distributors. Under Amway’s system, a distributor earns a performance bonus based not only on the sales volume generated by the distributor himself, but also on the sales volume generated by the distributor’s downline.
Generally speaking, the only distributors who earn large bonuses for the sale of products, are those who have built-up a large network of downline distributors. (For details on Amway's compensation method, go to the web site of Eric Scheileber, author of Merchant's of Deception, www.merchantsofdeception.com)
Like just about every other distributor in Amway, the Olletts focused most of their efforts on building their downline rather than developing a customer base and selling products. They testified that they spent 15 to 20 hours a week “prospecting, contacting, and showing the plan, and attending local meetings."
After 3 or 4 years, the Olletts still only had 5 distributors in their downline. Yet in the words of a true Amway diehard, they testified that they believed the key to success was “to meet [people] * * * and get them into this business” and that “the profit comes when you have enough people, when you’ve registered enough people."
As for selling efforts, Kay claimed she regularly spoke to prospects about ordering products. But when it came time to get honest about actual sales, she had to admit that 70-75% of the sales were for products they themselves purchased for their own use.
The Olletts became their own best customers. They purchased every kind of product imaginable, including soap, shampoo, deodorant, dish-washing liquid, detergent, facial products and a water treatment system. They even ordered food items such as health food bars and energy drinks, and clothing such as men’s socks, slacks, and sport shirts.
IRS Bans Tax Payer Funded Amway Roadtrips
For 1999 and 2000, the Olletts claimed $15,122 in tax deductions for travel expenses to attend training seminars hosted by the Florence organization. They claimed that they attended the functions in order to learn how to build a successful distributor network.
They testified that by 1999 they had decided they were going to spend “whatever it took to go to those meetings." And they meant it, because in 1999, they listed a deduction of $6000 for a Cadillac to drive to functions because Kay didn't like to fly. They also claimed travel expenses for hotels, meals, and the cost of tickets for the events.
In 1999, they listed expenses for seminars like: Dream Weekend in Birmingham, AL; Florence Spring Leadership Conference in Chattanooga, TN; Weekend of the Diamonds in Charlotte, NC; Florence Family Reunion in Tampa City, FL; a training on cosmetics sponsored by Florence Enterprises in Columbia, SC; a free enterprise celebration in St Louis, MO; and Florence Fall Leadership conference in Knoxville, TN.
In addition, the Olletts listed travel expenses for trips allegedly made to “show the plan” to prospective recruits, even though they enlisted no recruits during any of the trips.
They continued their business-related travel in 2000 and attended training seminars in Atlanta, GA; Knoxville, TN; Greensboro, NC; a Renaissance hotel at an unspecified location; Columbia, SC; and a seminar in Atlanta, GA a second time.
The Olletts continued to travel all over the country to attend the training seminars long after it became evident that the training had not improved their ability to sell products or recruit their own network of distributors. The court noted that losses incurred in the initial stages of a business may be expected, but losses that continue without explanation beyond that period typically indicate a lack of a profit objective.
The court wanted to know why the trips were always to events where the Olletts met up with the same people year after year, and why they still found it necessary to attend so many training seminars during their third and fourth years in Amway. It decided the answer was that the Olletts were enjoying the social aspects of the trips, and using Amway as a device to deduct personal expenses as business expenses.
For instance, the court noted that on two occasions, the Olletts drove to Champaign, Ill, where their daughter attended college and tried to claim the trips as a business expense: Randall testified: "The fact that I was going to use my business car to transport [personal] effects down there meant I made sure that I would have somebody to show the plan to."
They again tried to claim a deduction in 1999, for a trip they took to Chattanooga, TN, where their parents lived. Randall testified that the expense was justified: "Because I used my business car, I made sure that I prospected and tried to--made contacts with people in Chattanooga." The court didn't buy it.
In 1999 and 2000, the Olletts also listed a $4,081 deduction for books, tapes, and other materials. They claimed these items were part of Amway’s training program and that they were instructed to purchase them by their upline.
The Olletts offered no indication of how long they expected the IRS to allow them to claim tax deductions for a business that was clearly never going to turn a profit. When the court asked Randall how he intended to turn their losses into profits, his response was basically keep on truckin: "The only way I can solve it is to talk to more people. And there, in essence, is the challenge that I have, which is finding those people," he said.
What Constitutes A Legitimate Business-Related Expense?
Under rules in the Federal Tax Code, Section 162 provides that a taxpayer who is carrying on a trade or business may deduct ordinary and necessary expenses incurred in connection with the operation of the business. The Olletts had the burden of proving entitlement to a business expense deduction. The deductibility of their Amway expenses depended on whether their activity was engaged in for profit.
In determining whether an activity is engaged in for profit, Section 183 provides a list of factors for the court to consider: (1) The manner in which the taxpayer carried on the activity; (2) the expertise of the taxpayer or his advisers; (3) the time and effort expended by the taxpayer in carrying on the activity; (4) the expectation that the assets used in the activity may appreciate in value; (5) the success of the taxpayer in carrying on other similar or dissimilar activities; (6) the taxpayer’s history of income or losses with respect to the activity; (7) the amount of occasional profits, if any, which are earned; (8) the financial status of the taxpayer; and (9) elements of personal pleasure or recreation.
After considering these factors, the court determined that the Olletts did not have an actual and honest objective of making a profit, in part because: (1) they did not have any sales experience prior to becoming distributors and yet they relied solely on their upline for advice and training; (2) they did not seek independent business advice at the beginning of their venture to assess its potential for success; and (3) they did not seek advice on turning around years of operating losses.
But most importantly, the court said, the Olletts reported no significant revenue from their Amway activity and no reason for them to believe they ever were going to have any significant revenue from this activity.
Pay The Tab -- The Party's Over
In its final ruling, the court determined that the Olletts "repeatedly used their Amway activity as an attempt to mask obviously personal expenses as deductible business expenses. In effect they attempted to live a deductible lifestyle. The conferences at times of the year associated with vacation and recreation are consistent with this same mindset."
Because of the manner in which the Olletts carried on their Amway activity, the lack of revenue, and the size and persistence of the continuing losses, the court ruled that their activity was not carried on for profit, and therefore, they could not deduct their losses from that activity from income earned through their regular employment
This ruling may turn out to be a blessing in disguise for the millions of distributors who only survive in Amway because they can deduct their Amway losses (aka expenses) from the income earned in their real jobs. If the IRS bars these deductions once and for all, the victims of Amway will be forced to face fact that they will never make a dime off this pyramid scheme.
Apparently, the IRS has decided that Amway distributors are having too much fun listening to tapes, reading books, and attending the same training seminars year after year after year.
In July, 2004, the United States Tax Court issued a ruling that barred 2 distributors from claiming business related tax deductions for the cost of these items.
The husband and wife distributors, Randall and Kay Ollett, have been in Amway since 1996, and have listed thousands of dollars in Amway-related business expenses on their tax returns each and every year, even though they have never showed one dime of profit.
The Tax Court has evidently decided that partying with the Amway crowd is no longer going to be funded at the tax payers expense, because when it was asked to determine whether the Olletts engaged in their Amway activity with the intent of making a profit in 1999 and 2000, it concluded that the Olletts did not have an actual and honest objective of making a profit from their distributorship, and therefore, could not deduct Amway-related expenses on their Federal Tax Return.
Olletts Kept Their Day Jobs
The Olletts began to operate a distributorship under the name of Ollett Enterprises in 1996. They were recruited into Amway by upline sponsors, David and Carole Marzke. However, both couples were ultimately members of a larger distributor network established by Bill Florence, known as the Florence organization.
The Olletts filed joint Federal income tax returns for 1999 and 2000. On their 1999 return, they listed Amway business expenses in the amount of $17,384, and a net loss of income of $1,450; in 2000 they listed expenses of $23,001, and a net loss of $3,235.
In addition to being Amway distributors, the Olletts remained employed in their regular jobs, with a combined income of $96,389 in 1999 and $98,949 in 2000. Until the court determined otherwise in 2004, they had been able to use their losses from Amway to offset the income they earned from their regular employment.
Olletts Become Their Own Best Customers
A distributor earns money by selling products and recruiting new downline distributors. Under Amway’s system, a distributor earns a performance bonus based not only on the sales volume generated by the distributor himself, but also on the sales volume generated by the distributor’s downline.
Generally speaking, the only distributors who earn large bonuses for the sale of products, are those who have built-up a large network of downline distributors. (For details on Amway's compensation method, go to the web site of Eric Scheileber, author of Merchant's of Deception, www.merchantsofdeception.com)
Like just about every other distributor in Amway, the Olletts focused most of their efforts on building their downline rather than developing a customer base and selling products. They testified that they spent 15 to 20 hours a week “prospecting, contacting, and showing the plan, and attending local meetings."
After 3 or 4 years, the Olletts still only had 5 distributors in their downline. Yet in the words of a true Amway diehard, they testified that they believed the key to success was “to meet [people] * * * and get them into this business” and that “the profit comes when you have enough people, when you’ve registered enough people."
As for selling efforts, Kay claimed she regularly spoke to prospects about ordering products. But when it came time to get honest about actual sales, she had to admit that 70-75% of the sales were for products they themselves purchased for their own use.
The Olletts became their own best customers. They purchased every kind of product imaginable, including soap, shampoo, deodorant, dish-washing liquid, detergent, facial products and a water treatment system. They even ordered food items such as health food bars and energy drinks, and clothing such as men’s socks, slacks, and sport shirts.
IRS Bans Tax Payer Funded Amway Roadtrips
For 1999 and 2000, the Olletts claimed $15,122 in tax deductions for travel expenses to attend training seminars hosted by the Florence organization. They claimed that they attended the functions in order to learn how to build a successful distributor network.
They testified that by 1999 they had decided they were going to spend “whatever it took to go to those meetings." And they meant it, because in 1999, they listed a deduction of $6000 for a Cadillac to drive to functions because Kay didn't like to fly. They also claimed travel expenses for hotels, meals, and the cost of tickets for the events.
In 1999, they listed expenses for seminars like: Dream Weekend in Birmingham, AL; Florence Spring Leadership Conference in Chattanooga, TN; Weekend of the Diamonds in Charlotte, NC; Florence Family Reunion in Tampa City, FL; a training on cosmetics sponsored by Florence Enterprises in Columbia, SC; a free enterprise celebration in St Louis, MO; and Florence Fall Leadership conference in Knoxville, TN.
In addition, the Olletts listed travel expenses for trips allegedly made to “show the plan” to prospective recruits, even though they enlisted no recruits during any of the trips.
They continued their business-related travel in 2000 and attended training seminars in Atlanta, GA; Knoxville, TN; Greensboro, NC; a Renaissance hotel at an unspecified location; Columbia, SC; and a seminar in Atlanta, GA a second time.
The Olletts continued to travel all over the country to attend the training seminars long after it became evident that the training had not improved their ability to sell products or recruit their own network of distributors. The court noted that losses incurred in the initial stages of a business may be expected, but losses that continue without explanation beyond that period typically indicate a lack of a profit objective.
The court wanted to know why the trips were always to events where the Olletts met up with the same people year after year, and why they still found it necessary to attend so many training seminars during their third and fourth years in Amway. It decided the answer was that the Olletts were enjoying the social aspects of the trips, and using Amway as a device to deduct personal expenses as business expenses.
For instance, the court noted that on two occasions, the Olletts drove to Champaign, Ill, where their daughter attended college and tried to claim the trips as a business expense: Randall testified: "The fact that I was going to use my business car to transport [personal] effects down there meant I made sure that I would have somebody to show the plan to."
They again tried to claim a deduction in 1999, for a trip they took to Chattanooga, TN, where their parents lived. Randall testified that the expense was justified: "Because I used my business car, I made sure that I prospected and tried to--made contacts with people in Chattanooga." The court didn't buy it.
In 1999 and 2000, the Olletts also listed a $4,081 deduction for books, tapes, and other materials. They claimed these items were part of Amway’s training program and that they were instructed to purchase them by their upline.
The Olletts offered no indication of how long they expected the IRS to allow them to claim tax deductions for a business that was clearly never going to turn a profit. When the court asked Randall how he intended to turn their losses into profits, his response was basically keep on truckin: "The only way I can solve it is to talk to more people. And there, in essence, is the challenge that I have, which is finding those people," he said.
What Constitutes A Legitimate Business-Related Expense?
Under rules in the Federal Tax Code, Section 162 provides that a taxpayer who is carrying on a trade or business may deduct ordinary and necessary expenses incurred in connection with the operation of the business. The Olletts had the burden of proving entitlement to a business expense deduction. The deductibility of their Amway expenses depended on whether their activity was engaged in for profit.
In determining whether an activity is engaged in for profit, Section 183 provides a list of factors for the court to consider: (1) The manner in which the taxpayer carried on the activity; (2) the expertise of the taxpayer or his advisers; (3) the time and effort expended by the taxpayer in carrying on the activity; (4) the expectation that the assets used in the activity may appreciate in value; (5) the success of the taxpayer in carrying on other similar or dissimilar activities; (6) the taxpayer’s history of income or losses with respect to the activity; (7) the amount of occasional profits, if any, which are earned; (8) the financial status of the taxpayer; and (9) elements of personal pleasure or recreation.
After considering these factors, the court determined that the Olletts did not have an actual and honest objective of making a profit, in part because: (1) they did not have any sales experience prior to becoming distributors and yet they relied solely on their upline for advice and training; (2) they did not seek independent business advice at the beginning of their venture to assess its potential for success; and (3) they did not seek advice on turning around years of operating losses.
But most importantly, the court said, the Olletts reported no significant revenue from their Amway activity and no reason for them to believe they ever were going to have any significant revenue from this activity.
Pay The Tab -- The Party's Over
In its final ruling, the court determined that the Olletts "repeatedly used their Amway activity as an attempt to mask obviously personal expenses as deductible business expenses. In effect they attempted to live a deductible lifestyle. The conferences at times of the year associated with vacation and recreation are consistent with this same mindset."
Because of the manner in which the Olletts carried on their Amway activity, the lack of revenue, and the size and persistence of the continuing losses, the court ruled that their activity was not carried on for profit, and therefore, they could not deduct their losses from that activity from income earned through their regular employment
This ruling may turn out to be a blessing in disguise for the millions of distributors who only survive in Amway because they can deduct their Amway losses (aka expenses) from the income earned in their real jobs. If the IRS bars these deductions once and for all, the victims of Amway will be forced to face fact that they will never make a dime off this pyramid scheme.
Amway - Modern Day Teflon Don
Evelyn Pringle January 13, 2005
The paperwork involved in the endless stream of lawsuits filed against Amway and its Kingpin distributors over the past 2 decades would probably fill a 10 story office building. The complaints and discovery documents filed in these actions, which Amway has fought so hard to keep hidden, outline 20 years of fraud perpetrated on millions of unwitting and vulnerable recruits all over the world.
There have been so many suits filed, that the company's attorneys can't even come up with an exact number. In 1985, Amway Diamond Rick Setzer sued Amway. During the discovery process, in a request for production of documents, Setzer's attorneys asked for:
"Copies of all lawsuits filed against Amway corporation and or Richard DeVos and or Jay VanAndel for the past 10 years."
This was Amway's response, in part:
"The request imposes an undue burden in that the number of lawsuits filed against Amway Corporation and/or Richard DeVos and/or Jay Van Andel for the past ten years represents literally thousands of lawsuits, with the file on each lawsuit varying from several pages to entire rooms filled with documentation." Affidavit in Support of Defendants' Objections to Plaintiffs' First Request For Production of Documents.
Even if "thousands" only means 2000, over 10 years that means 200 law suits were filed each year. That number is astronomical when you consider that the number of distributors who actually go so far as to file a lawsuit is but a small percentage of the actual number of distributors who fall victim to Amway each year.
If people took the time to read the records contained in these lawsuits, they would find a common theme: Amway is a pyramid scheme; the tools business is a pyramid scheme; recruits are lured in by exaggerated income claims and flamboyant displays of wealth; retail selling is ignored in favor of self-consumption of Amway products; distributors and potential distributors are pressured to buy tools and tickets to motivational rallies.
Founder Jay Van Andel's former speechwriter, Don Gregory, described how Amway preys on new recruits. "Recruits are brainwashed into spending a fortune on peripherals while consuming Amway products. They either lose their shirts or begin making money by getting enough people underneath to do the same," he said.
Eric Scheibeler is a former Amway insider turned whistleblower and FBI witness who has written a book about his experiences in Amway, entitled Merchants of Deception. (A free advance copy of the book, Merchant's of Deception, may be downloaded for a limited time at www.merchantsofdeception.com).
According to Eric, the 1970 FTC ruling requires that the majority of products going through a MLM must be sold to an end consumer (a non distributor) in order to not be considered an illegal pyramid scheme. This is referred to as the retail sales rule. Yet Eric says that he and his wife were taught to build a business that relied almost entirely on self consumption, which he has since learned is illegal.
A prime example of this excessive sales for self-consumption is still going on today, 30 years after the FTC issued its ruling, is the July, 2004, IRS case against Amway distributors, Kay and Randall Ollett. When testifying, Kay told the court that about 70-75% of their sales were a result of products purchased by her and her husband for their own use. The Olletts purchased almost all of their household products through their distributorship, including soap, shampoo, deodorant, dish-washing liquid, detergent, facial products, food items such as health food bars and energy drinks, a water treatment system, and even clothing such as men’s socks, slacks, and sport shirts.
The Tax Court ruled against the Olletts and would not allow the couple to claim tax deductions for expenses related to their Amway activity.
Eric also explains how the "tools" business of selling books, tapes, and videos is also an illegal pyramid because it is a closed system and no product is ever sold at retail to a consumer outside the group. Which means recruits unknowingly become involved in not one, but two illegal pyramids, when they join Amway, according to Eric.
The downline distributors are never told that their upline is making as much or more from the sale of tools as they are from the sale of products. The distributors assume that the lifestyles of their upline are attributable to their Amway businesses, and buy more tools hoping to achieve the same success.
So it becomes a never-ending cycle: the more tools the downline distributors buy, the more successful upline distributors appear; which in turn motivates downline distributors to buy more tools. Over 99% of low level distributors eventually quit, or go broke trying to hang on long enough reach a level where they too can get a cut of the tools profits.
In the 1998 New Hampshire case of Lavoie v Yager, Ruby directs alleged that their upline cut them off from the tools profits, and also alleged unfair trade practices, illegal chain distribution scheme, interference with advantageous relations, securities fraud, under the RICO Act. The complaint in this case is unique in that it contains details on the inner working of Kingpin Dexter Yager's system, and it also follows the progression of a distributor through the system.
Another wealth of insider information can be found in the 1998 Morrison v Amway suit. 29 distributors filed a lawsuit and revealed many of Amway's best-kept secrets. The suit alleges that the distributors make the majority of their income selling tools rather than products and that distributors in the downlines are coerced into spending money on tapes and functions by being told that they have no chance of success unless they do. It also alleges that tools profits are used to control and coerce downline distributors, and that those who ask questions or refuse to play the game risk having their businesses destroyed
The 1998 Vernon v Amway case seems to substantiate Eric Scheileber's claim that Amway recruits unknowingly become part of 2 illegal schemes when they join Amway. This case sought damages incurred by: fraudulent inducement in causing plaintiffs to participate in an illegal scheme to purchase and sell motivational tapes and tickets to Amway events; and conspiracy to fraudulently induce them to enter into an agreement to execute what they believed to be an Amway Sales Plan.
Teflon Amway
In addition to all the schemes described in the 1000s of complaints filed in civil suits, Amway’s long history of illegal activity is also well documented in criminal court files. In fact, one particularly scathing report compared the Amway business structure to the business structure of organized crime groups and found them nearly identical.
The report was submitted by an expert witness in a lawsuit filed back 1998, but Amway was able to keep it hidden until early 2004 when it suddenly began showing up on the internet. Here's what Amway does not want you to know. After an in-depth study of Amway business practices, the nation’s foremost organized crime expert, Professor G Robert Blakey, reached the following conclusion:
“It is my opinion that the Amway business is run in a manner that is parallel to that of major organized crime groups, in particular the Mafia. The structure and function of major organized crime groups, generally consisting of associated enterprises engaging in patterns of legal and illegal activity, was the prototype forming the basis for federal and state racketeering legislation that I have been involved in drafting. The same structure and function, with associated enterprises engaging in patterns of legal and illegal activity, is found in the Amway business.”
It should be noted that Blakey has impeccable credentials as an authority on organized crime. His legislative drafting experience resulted in the passage of the Organized Crime Control Act of 1970 (RICO). He was also directly involved in drafting and implementing RICO-type legislation in 22 of the more than 30 states that enacted racketeering laws.
Wisconsin Attorney General Takes On Amway
As far back as the early 1980s, Amway was warned that the media and law enforcement agents were monitoring its conduct in a number of states. One internal memo that surfaced in a lawsuit, dated December, 1982, to Jay Van Andel, from Casey Wondergen, was titled: Subject: Distributor Activities Drawing Legal and Media Heat On Amway.
The memo specifically notified Amway leaders that the company was being investigated by Attorneys General in Wisconsin, California, Oregon, Minnesota, New York, and possibly New Jersey and Connecticut.
The state with the most active investigation was Wisconsin. The attorney general’s office conducted an in-depth investigation and determined that Amway: (1) Did not accurately portray the income experience of persons who had participated in the business under the current Compensation Plan, and (2) Did not indicate the percentage of persons who had actually achieved the earnings levels being used as illustrations, and therefore, Amway had violated Wisconsin’s trade practices law.
The attorney general determined that the actual average annual adjusted gross income for each of the approximately 20,000 Wisconsin distributorships was $267, or 2.2% of the projected $12,000 income. During 1979-1980, only about 139, or less than 1%, had an adjusted gross income in excess of $12,000. In fact, the average net income (after expenses) was a net loss of $918. (State of Wisconsin v Amway Corporation et al, 7/82).
In response to his findings, the attorney general obtained a consent agreement requiring Amway to disclose actual sales and actual income or profit experiences of active Representatives when it used hypothetical examples. The agreement required Amway to disclose the percentage of Representatives who actually had achieved any level of performance which was being used for illustrative purposes.
Amway was further required to disclose the percentage of active Representatives versus those who had become inactive. A number of distributors were also fined for illegal misrepresentation of income.
FTC Takes On Amway
In 1979, the FTC rendered a determination in response to charges that Amway's claims about the amount of money distributors earned had the capacity to deceive potential distributors. As a result, an order was issued that prohibited Amway from misrepresenting the amount of profit, earnings or sales its distributors were likely to achieve. The order also required that whenever Amway made above-average earnings or sales claims, it had to also disclose clearly and conspicuously either the average earnings of all distributors or the percent of distributors who actually earn the amount claimed.
In 1983, the FTC took Amway back to court after it determined that the company had violated the 1979 order by placing an ad in major newspapers that represented the earnings of distributors without the required disclosures. The FTC complaint charged that the ad contained earnings and sales claims that were higher than the average income earned in any recent year. In addition, it charged Amway with violating the 1979 order for failing to include a clear and conspicuous disclosures in the ad of the average earnings or sales of all distributors or the percent of distributors who actually achieved the results claimed. Amway was $100,000.
Canada Takes On Amway
In 1983, Amway was involved in another criminal case in Canada. Canadian authorities charged that Amway set up dummy companies and created fictitious trade between them to get customs to accept a lower value for goods. The company was charged with evading duties and taxes by using false invoices to misrepresent the value of products it shipped across the border.
Key documents used in the fraud were provided to Canadian authorities by whistle blower, Dorothy Edgar, who was an executive secretary to Edward Engel, Amway's then vice-president of finance. Engel learned of the fraud in late 1977, and urged Amway to disclose it to Revenue Canada. When Amway refused, Engel and Edgar resigned.
In response to the charges, Amway and Amway Canada Ltd agreed to plead guilty to charges of defrauding the Canadian Government and were fined $20 million. As part of the plea bargain, Amway was required to sign a statement acknowledging that the allegations by the Canadian government were "substantially correct.” All total, Canada billed Amway $148 million in back customs, duties, taxes and penalties.
In 1989, the Canadian authorities took Amway back to court to collect the back duties, fees, and fines that the company had agreed to pay in the 1983 settlement agreement. Although the Canadian department of Revenue claimed Amway owed $148 million, the case was finally settled for $45 million.
Eight years later in 1996, the Canadian government took on Amway again to challenged its attempt to claim a tax deduction for fines it paid for the 1983 criminal conviction on tax fraud. The court ruled that Amway could not treat the fines paid for tax evasion as a tax deductible expense.
When considering the validity of the 20-year stream of lawsuits against Amway, a person surely has to wonder why thousands upon thousands of people would make up the same lie.
The paperwork involved in the endless stream of lawsuits filed against Amway and its Kingpin distributors over the past 2 decades would probably fill a 10 story office building. The complaints and discovery documents filed in these actions, which Amway has fought so hard to keep hidden, outline 20 years of fraud perpetrated on millions of unwitting and vulnerable recruits all over the world.
There have been so many suits filed, that the company's attorneys can't even come up with an exact number. In 1985, Amway Diamond Rick Setzer sued Amway. During the discovery process, in a request for production of documents, Setzer's attorneys asked for:
"Copies of all lawsuits filed against Amway corporation and or Richard DeVos and or Jay VanAndel for the past 10 years."
This was Amway's response, in part:
"The request imposes an undue burden in that the number of lawsuits filed against Amway Corporation and/or Richard DeVos and/or Jay Van Andel for the past ten years represents literally thousands of lawsuits, with the file on each lawsuit varying from several pages to entire rooms filled with documentation." Affidavit in Support of Defendants' Objections to Plaintiffs' First Request For Production of Documents.
Even if "thousands" only means 2000, over 10 years that means 200 law suits were filed each year. That number is astronomical when you consider that the number of distributors who actually go so far as to file a lawsuit is but a small percentage of the actual number of distributors who fall victim to Amway each year.
If people took the time to read the records contained in these lawsuits, they would find a common theme: Amway is a pyramid scheme; the tools business is a pyramid scheme; recruits are lured in by exaggerated income claims and flamboyant displays of wealth; retail selling is ignored in favor of self-consumption of Amway products; distributors and potential distributors are pressured to buy tools and tickets to motivational rallies.
Founder Jay Van Andel's former speechwriter, Don Gregory, described how Amway preys on new recruits. "Recruits are brainwashed into spending a fortune on peripherals while consuming Amway products. They either lose their shirts or begin making money by getting enough people underneath to do the same," he said.
Eric Scheibeler is a former Amway insider turned whistleblower and FBI witness who has written a book about his experiences in Amway, entitled Merchants of Deception. (A free advance copy of the book, Merchant's of Deception, may be downloaded for a limited time at www.merchantsofdeception.com).
According to Eric, the 1970 FTC ruling requires that the majority of products going through a MLM must be sold to an end consumer (a non distributor) in order to not be considered an illegal pyramid scheme. This is referred to as the retail sales rule. Yet Eric says that he and his wife were taught to build a business that relied almost entirely on self consumption, which he has since learned is illegal.
A prime example of this excessive sales for self-consumption is still going on today, 30 years after the FTC issued its ruling, is the July, 2004, IRS case against Amway distributors, Kay and Randall Ollett. When testifying, Kay told the court that about 70-75% of their sales were a result of products purchased by her and her husband for their own use. The Olletts purchased almost all of their household products through their distributorship, including soap, shampoo, deodorant, dish-washing liquid, detergent, facial products, food items such as health food bars and energy drinks, a water treatment system, and even clothing such as men’s socks, slacks, and sport shirts.
The Tax Court ruled against the Olletts and would not allow the couple to claim tax deductions for expenses related to their Amway activity.
Eric also explains how the "tools" business of selling books, tapes, and videos is also an illegal pyramid because it is a closed system and no product is ever sold at retail to a consumer outside the group. Which means recruits unknowingly become involved in not one, but two illegal pyramids, when they join Amway, according to Eric.
The downline distributors are never told that their upline is making as much or more from the sale of tools as they are from the sale of products. The distributors assume that the lifestyles of their upline are attributable to their Amway businesses, and buy more tools hoping to achieve the same success.
So it becomes a never-ending cycle: the more tools the downline distributors buy, the more successful upline distributors appear; which in turn motivates downline distributors to buy more tools. Over 99% of low level distributors eventually quit, or go broke trying to hang on long enough reach a level where they too can get a cut of the tools profits.
In the 1998 New Hampshire case of Lavoie v Yager, Ruby directs alleged that their upline cut them off from the tools profits, and also alleged unfair trade practices, illegal chain distribution scheme, interference with advantageous relations, securities fraud, under the RICO Act. The complaint in this case is unique in that it contains details on the inner working of Kingpin Dexter Yager's system, and it also follows the progression of a distributor through the system.
Another wealth of insider information can be found in the 1998 Morrison v Amway suit. 29 distributors filed a lawsuit and revealed many of Amway's best-kept secrets. The suit alleges that the distributors make the majority of their income selling tools rather than products and that distributors in the downlines are coerced into spending money on tapes and functions by being told that they have no chance of success unless they do. It also alleges that tools profits are used to control and coerce downline distributors, and that those who ask questions or refuse to play the game risk having their businesses destroyed
The 1998 Vernon v Amway case seems to substantiate Eric Scheileber's claim that Amway recruits unknowingly become part of 2 illegal schemes when they join Amway. This case sought damages incurred by: fraudulent inducement in causing plaintiffs to participate in an illegal scheme to purchase and sell motivational tapes and tickets to Amway events; and conspiracy to fraudulently induce them to enter into an agreement to execute what they believed to be an Amway Sales Plan.
Teflon Amway
In addition to all the schemes described in the 1000s of complaints filed in civil suits, Amway’s long history of illegal activity is also well documented in criminal court files. In fact, one particularly scathing report compared the Amway business structure to the business structure of organized crime groups and found them nearly identical.
The report was submitted by an expert witness in a lawsuit filed back 1998, but Amway was able to keep it hidden until early 2004 when it suddenly began showing up on the internet. Here's what Amway does not want you to know. After an in-depth study of Amway business practices, the nation’s foremost organized crime expert, Professor G Robert Blakey, reached the following conclusion:
“It is my opinion that the Amway business is run in a manner that is parallel to that of major organized crime groups, in particular the Mafia. The structure and function of major organized crime groups, generally consisting of associated enterprises engaging in patterns of legal and illegal activity, was the prototype forming the basis for federal and state racketeering legislation that I have been involved in drafting. The same structure and function, with associated enterprises engaging in patterns of legal and illegal activity, is found in the Amway business.”
It should be noted that Blakey has impeccable credentials as an authority on organized crime. His legislative drafting experience resulted in the passage of the Organized Crime Control Act of 1970 (RICO). He was also directly involved in drafting and implementing RICO-type legislation in 22 of the more than 30 states that enacted racketeering laws.
Wisconsin Attorney General Takes On Amway
As far back as the early 1980s, Amway was warned that the media and law enforcement agents were monitoring its conduct in a number of states. One internal memo that surfaced in a lawsuit, dated December, 1982, to Jay Van Andel, from Casey Wondergen, was titled: Subject: Distributor Activities Drawing Legal and Media Heat On Amway.
The memo specifically notified Amway leaders that the company was being investigated by Attorneys General in Wisconsin, California, Oregon, Minnesota, New York, and possibly New Jersey and Connecticut.
The state with the most active investigation was Wisconsin. The attorney general’s office conducted an in-depth investigation and determined that Amway: (1) Did not accurately portray the income experience of persons who had participated in the business under the current Compensation Plan, and (2) Did not indicate the percentage of persons who had actually achieved the earnings levels being used as illustrations, and therefore, Amway had violated Wisconsin’s trade practices law.
The attorney general determined that the actual average annual adjusted gross income for each of the approximately 20,000 Wisconsin distributorships was $267, or 2.2% of the projected $12,000 income. During 1979-1980, only about 139, or less than 1%, had an adjusted gross income in excess of $12,000. In fact, the average net income (after expenses) was a net loss of $918. (State of Wisconsin v Amway Corporation et al, 7/82).
In response to his findings, the attorney general obtained a consent agreement requiring Amway to disclose actual sales and actual income or profit experiences of active Representatives when it used hypothetical examples. The agreement required Amway to disclose the percentage of Representatives who actually had achieved any level of performance which was being used for illustrative purposes.
Amway was further required to disclose the percentage of active Representatives versus those who had become inactive. A number of distributors were also fined for illegal misrepresentation of income.
FTC Takes On Amway
In 1979, the FTC rendered a determination in response to charges that Amway's claims about the amount of money distributors earned had the capacity to deceive potential distributors. As a result, an order was issued that prohibited Amway from misrepresenting the amount of profit, earnings or sales its distributors were likely to achieve. The order also required that whenever Amway made above-average earnings or sales claims, it had to also disclose clearly and conspicuously either the average earnings of all distributors or the percent of distributors who actually earn the amount claimed.
In 1983, the FTC took Amway back to court after it determined that the company had violated the 1979 order by placing an ad in major newspapers that represented the earnings of distributors without the required disclosures. The FTC complaint charged that the ad contained earnings and sales claims that were higher than the average income earned in any recent year. In addition, it charged Amway with violating the 1979 order for failing to include a clear and conspicuous disclosures in the ad of the average earnings or sales of all distributors or the percent of distributors who actually achieved the results claimed. Amway was $100,000.
Canada Takes On Amway
In 1983, Amway was involved in another criminal case in Canada. Canadian authorities charged that Amway set up dummy companies and created fictitious trade between them to get customs to accept a lower value for goods. The company was charged with evading duties and taxes by using false invoices to misrepresent the value of products it shipped across the border.
Key documents used in the fraud were provided to Canadian authorities by whistle blower, Dorothy Edgar, who was an executive secretary to Edward Engel, Amway's then vice-president of finance. Engel learned of the fraud in late 1977, and urged Amway to disclose it to Revenue Canada. When Amway refused, Engel and Edgar resigned.
In response to the charges, Amway and Amway Canada Ltd agreed to plead guilty to charges of defrauding the Canadian Government and were fined $20 million. As part of the plea bargain, Amway was required to sign a statement acknowledging that the allegations by the Canadian government were "substantially correct.” All total, Canada billed Amway $148 million in back customs, duties, taxes and penalties.
In 1989, the Canadian authorities took Amway back to court to collect the back duties, fees, and fines that the company had agreed to pay in the 1983 settlement agreement. Although the Canadian department of Revenue claimed Amway owed $148 million, the case was finally settled for $45 million.
Eight years later in 1996, the Canadian government took on Amway again to challenged its attempt to claim a tax deduction for fines it paid for the 1983 criminal conviction on tax fraud. The court ruled that Amway could not treat the fines paid for tax evasion as a tax deductible expense.
When considering the validity of the 20-year stream of lawsuits against Amway, a person surely has to wonder why thousands upon thousands of people would make up the same lie.
Tuesday, August 3, 2010
Amway - Mafia Like Business
January 31, 2005
Evelyn Pringle
Professor G Robert Blakey was retained as an expert witness in the 1998 Procter & Gamble v Amway lawsuit to issue an opinion on Amway's business practices. Blakey is one of the nation's foremost authorities on organized crime and after studying its business structure and functions, Blakey determined that the Amway business is run in a manner that is parallel to the businesses run by members of organized crime, "consisting of associated enterprises engaging in patterns of legal and illegal activity."
Pyramid schemes that include little or no sales to retail customers are illegal. Because the tool pyramids sell to Amway distributors only, and not to retail customers, the tool pyramids are illegal.
And Amway knows they are illegal. Company memos from the early 1980's that have surfaced in lawsuits, reveal that co-founders Rich DeVos and Jay Van Andel, were well aware of the illegality of the tool pyramids operating under the umbrella of Amway.
However, they recognized the enormous power accruing within the pyramids and that the income from the tool systems was becoming greater than the income from marketing Amway products. But if they dared to take action against the pyramids, they feared the kingpins would decide to take their downlines and leave Amway altogether. When it became clear that the company risked collapse if it continued to the fight, Amway decided to join the kingpin distributors in the tool business instead.
Mafia Like Corporate Structure
Professor Blakey determined that Amway uses corporate structures to protect individuals from liability and to hide the company’s illegal activities. The major families use the corporate form for their tools business and the Amway sales and marketing business. For example, Don Wilson has Wilson Enterprises for Amway sales and marketing, and WOW International for tools.
Currently, there are three primary lines of sponsorship within Amway, headed by Dexter Yager, Bill Britt,* and Ronald Puryear and all three run their tool pyramids through separate corporations.
While very few of these companies operate under normal corporate rules, or are bound to each other legally, according to Blakey, "In order for the business to function, there is an association-in-fact among the participants. The large family leaders ... work with the DeVos and Van Andels (Amway Corporation) to ensure the continuing operation of the business."
This association is necessary due to the predictable power struggles, he notes.
Family leaders, much like organized crime groups, hold positions because of who they are, and not because of any particular job qualifications.
For instance, Blakey reports that when deposed in the P&G suit, James Rosloniec, a Amway Vice President, supposedly in charge of audit and control, said he did not know what Amway Financial Services did, and he had no knowledge of the Amway companies, Amway Jewelry Company, Amway Realty Network, Group Fifty Corp, Merchandising Products, Nutrilite Products, Nutrilite Products, Limited - New Zealand, Sunrise Auto Plaza, Taerus Expo Corp, American Way, Limited, Video Incentives, Plus, or Amway International, Inc.
More often than not, Blakey noted, Rosloniec had little or no knowledge about the operations of corporations where he was both an officer and director. Eg, he was a Vice President and director with HI, Inc; yet in his testimony, he said he "believes" this corporation owns a Hawaii distribution center, but had never been to a company meeting or board meeting. He "believes" he is president and treasurer of Amway Investment, Inc., which has a value in excess of $300 million. He "assumes" he is president of Amway Auditing and Financial Services, which is a shell corporation.
"All of this indicated that Rosloniec is nothing more than a "shill" for the DeVos and Van Andel family," Blakey determined.
Mafia-Like Dispute Resolution
The nature of the Amway corporation lends itself to disputes and just like the Mafia, Amway families prefer to handle their disputes internally. There is a formal method of resolution with binding arbitration, and an informal method, with determinations rendered by family leaders, Blakey explains.
The formal resolution method is set forth in Amway's Business Reference Manual. When a problem arises, it is first discussed with the offender. If the problem persists, it is reported to the offender’s upline. If it still persists, a warning letter may be issued, with a copy sent to Amway. If this does not resolve the issue, a direct distributor may take action, including termination.
If the violator is dissatisfied, he can appeal to Amway for an informal conciliation procedure. If there is still no resolution, the panel issues a recommendation. If the party disagrees, he can request a review by the ADA Board. Upon receipt of a recommendation Amway reviews the matter and issues a final determination binding on all parties.
For those who may be interested, the informal method is outlined in the complaint filed in the 1998 Musgrove lawsuit. The Musgroves alleged that their upline had illegally taken monies owed to them and their downlines.
The Musgroves claim they were warned that going to Amway or the ADA would be a "mistake." When there was no resolution, they went to Jody Victor - a principal of the ADA. Victor advised them that to cross Don Wilson or Dexter Yager would be the equivalent of "being drawn and quartered."
When nothing got resolved, the Musgroves went to Amway, which resulted in retaliation against them and prompted them to file the lawsuit.
Mafia Methods Of Coercion & Control
Blakey points out that "The Mafia uses "omerta" and violence for control," and "Amway uses other tactics, with similar effect."
Low-level distributors must honor their upline. No negative talk or action is permissible. Paul Klebniov discussed this no-talk-rule in the December 9,1991, issue of Forbes Magazine: "Amway's attitude toward any insider critical of the organization has bordered on paranoia."
According to Blakey's report, a distributor who steps out of line is punished. "Punishment may start off with being vilified by uplines as a "loser," as "negative," or as "brain-dead" which are typical Amway appelations for anyone who does not believe in the Amway system and the riches that allegedly flow from it," he says.
"More serious offenders," says Blakey, "may have portions of their business taken away - e.g. they can no longer appear at rallies, or downline distributors are "re-routed."
The Eric Scheibeler Experience
The punishment Blakey described actually happened to Eric Scheibeler and his wife. In a depositon, the former Amway distributor explains how he and his wife thought they were joining Amway, but ended up in a pyramid scheme.
"What we didn't realize is that we were in an Amway motivational organization ... to promote, market and retail the system to our organization. And we personally were used ... to extract somewhere between three and four million dollars, I'm estimating, of good people's money that went to books, tapes and seminars, which is really the real secret income source that our upline Amway diamond was making money from," he recounts.
Eric describes how "people are brought in based on this incredible life-style and economic success of the Amway distributors ... when, in fact, a lot of them don't make a net income of one dollar on Amway. Almost all their profits come from recruiting - using Amway as a shell corporation to recruit people into their secret motivational organization, which is where all their income has come from," according to his deposition.
In his book Merchants of Deception, Eric said in time he discovered that "perhaps millions of others had been recruited and induced to participate in not just one, but two illegal pyramid-type businesses. The first was the tool business that had no end user outside of the organization, and the second was the Amway business," he said.
(The book can be downloaded from his website, merchantsofdeception.com, for a limited time only).
Eric tried to do something about the fraud, and says, "I provided information of fraud, global fraud, to Amway regarding ... forced participation in the tool business, fraudulent income representations, and they took no action ... I provided that also to Dick DeVos, the president of Amway, personally in both fax and certified letter, and the action they took was cut my income off," he said in his deposition.
As punishment for speaking out against the company, Amway cut off their monthly commissions drawn from the organization the Scheilebers had developed, and withheld about $20,000 while the couple went bankrupt, lost everything, and barely held onto their home.
At their lowest point, Eric’s sponsor asked him to sign an agreement stating he would never speak about his experience with Amway again. In return, Amway would release the $20,000 of the Scheileber’s money the company claimed it was holding "in escrow," and would buy Eric's Amway business for $75,000. In a nutshell, they wanted to buy the business and his silence for $95,000. Eric declined.
Same Coercion & Control Alleged In Lawsuits
This upline coercion and control is alleged in nearly every one of the many law suits filed all over the country. For instance, the 1998 Taylor v Amway suit alleged that the upline warned the distributors that they had the authority, political connections and clout to cause the plaintiffs to lose their business and told distributors to buy tools and attend functions or they would be "cut out like cancer."
After taking a look at the Van Andel Institute's Website, I'd say Van Andel indeed had the political ties to make good on such threat. The site lists Van Andel's history in politics.
"In 1992, President George Bush appointed Jay to serve as the United States Ambassador and Commissioner General to the Genoa Expo '92 in Genoa, Italy. He has also served as Chairman of the U.S. Chamber of Commerce, a Director of the Gerald R. Ford Foundation, a member of the U.S.O. World of Governors, and North American Chairman of the Netherlands American Bicentennial Commission," it says.
The complaint filed in the Stewart v Amway case alleges the uplines coerced attendance at functions, controlled by family leaders, and anyone trying to hold events independent of high level approved functions was "blackballed" from participating in other events.
In the 1998 Morrison v Amway case, 29 distributors filed the suit and revealed many of the company's secrets. The suit alleges downlines are coerced into spending money on tapes and functions and told that they have no chance of success unless they do and that those who ask questions or refuse to play the game risk having their businesses destroyed
For those who may be interested, the complaint in the 1998 New Hampshire case of Lavoie v Yager, details on the inner working of the Yager tool system and also outlines the progression of a distributor through the system.
Report of Actual Violence
Blakey found, "There are also reports of violence against those who attempt to take action against Amway."
For example, Edward Engel was Amway's chief financial officer until he resigned in 1979, over a disagreement with DeVos and Van Andel. Engels claims he and his family received threats for years after his resignation.
"It was a Big Brother organization," says Engel today. "Everyone assumed that the phones were tapped, and that Amway had something on everybody."
In 1983, while Engel's former secretary, Dorothy Edgar, was helping the Canadian authorities in their investigation of Amway, she was roughed up in Chicago, after she was told to "stay away from Amway."
Engel picked her up after the incident and says he believes her story, according to Paul Klebniov's article.
In 1982, former Amway distributor, Philip Kerns, quit the company and wrote an expose called "Fake it Till You Make It." He claims Amway had private detectives follow him and rough him up. The expose prompted Phil Donahue and 60 Minutes to run highly critical programs about Amway.
The many examples of threats, intimidation, blackmail, and violence outlined above definitely mimic attempts to control with methods often used by members of the Mafia.
Eric says there was one question that had haunted him. "How could this have possibly gone on for so long?"
After delving into the company's political connections he discovered the answer. His book reveals the close ties between Amway, the Republican Party, and both Bush administrations. According to Eric, over the past 20 years, there have been huge contributions and large speaking fees paid to prominent Republicans, which have resulted in immunity and protection for Amway against investigations into its violations of anti-pyramid scheme statutes.
If not for this prepaid-insurance, I firmly believe that Amway would have been shut down 20 years ago.
* (Part 1 of this article contains the statement: "Bill Britt has since been booted out of Amway." It should have said, according to a tape recorded message by Triple Diamond Ron Puryear, leader of World Wide Dream Builders, Bill Britt, retired from the Amway IBOA board of directors in June of 2004. The announcement occurred just after the board of directors met in its June session, where Britt was supposedly approached by other directors about compromising personal issues relating to two 911 emergency calls made by a woman reporting disputes. His speaking fees from World Wide Dreambuilders functions have ended since he won't be speaking at those seminars any longer.)
Evelyn Pringle
Professor G Robert Blakey was retained as an expert witness in the 1998 Procter & Gamble v Amway lawsuit to issue an opinion on Amway's business practices. Blakey is one of the nation's foremost authorities on organized crime and after studying its business structure and functions, Blakey determined that the Amway business is run in a manner that is parallel to the businesses run by members of organized crime, "consisting of associated enterprises engaging in patterns of legal and illegal activity."
Pyramid schemes that include little or no sales to retail customers are illegal. Because the tool pyramids sell to Amway distributors only, and not to retail customers, the tool pyramids are illegal.
And Amway knows they are illegal. Company memos from the early 1980's that have surfaced in lawsuits, reveal that co-founders Rich DeVos and Jay Van Andel, were well aware of the illegality of the tool pyramids operating under the umbrella of Amway.
However, they recognized the enormous power accruing within the pyramids and that the income from the tool systems was becoming greater than the income from marketing Amway products. But if they dared to take action against the pyramids, they feared the kingpins would decide to take their downlines and leave Amway altogether. When it became clear that the company risked collapse if it continued to the fight, Amway decided to join the kingpin distributors in the tool business instead.
Mafia Like Corporate Structure
Professor Blakey determined that Amway uses corporate structures to protect individuals from liability and to hide the company’s illegal activities. The major families use the corporate form for their tools business and the Amway sales and marketing business. For example, Don Wilson has Wilson Enterprises for Amway sales and marketing, and WOW International for tools.
Currently, there are three primary lines of sponsorship within Amway, headed by Dexter Yager, Bill Britt,* and Ronald Puryear and all three run their tool pyramids through separate corporations.
While very few of these companies operate under normal corporate rules, or are bound to each other legally, according to Blakey, "In order for the business to function, there is an association-in-fact among the participants. The large family leaders ... work with the DeVos and Van Andels (Amway Corporation) to ensure the continuing operation of the business."
This association is necessary due to the predictable power struggles, he notes.
Family leaders, much like organized crime groups, hold positions because of who they are, and not because of any particular job qualifications.
For instance, Blakey reports that when deposed in the P&G suit, James Rosloniec, a Amway Vice President, supposedly in charge of audit and control, said he did not know what Amway Financial Services did, and he had no knowledge of the Amway companies, Amway Jewelry Company, Amway Realty Network, Group Fifty Corp, Merchandising Products, Nutrilite Products, Nutrilite Products, Limited - New Zealand, Sunrise Auto Plaza, Taerus Expo Corp, American Way, Limited, Video Incentives, Plus, or Amway International, Inc.
More often than not, Blakey noted, Rosloniec had little or no knowledge about the operations of corporations where he was both an officer and director. Eg, he was a Vice President and director with HI, Inc; yet in his testimony, he said he "believes" this corporation owns a Hawaii distribution center, but had never been to a company meeting or board meeting. He "believes" he is president and treasurer of Amway Investment, Inc., which has a value in excess of $300 million. He "assumes" he is president of Amway Auditing and Financial Services, which is a shell corporation.
"All of this indicated that Rosloniec is nothing more than a "shill" for the DeVos and Van Andel family," Blakey determined.
Mafia-Like Dispute Resolution
The nature of the Amway corporation lends itself to disputes and just like the Mafia, Amway families prefer to handle their disputes internally. There is a formal method of resolution with binding arbitration, and an informal method, with determinations rendered by family leaders, Blakey explains.
The formal resolution method is set forth in Amway's Business Reference Manual. When a problem arises, it is first discussed with the offender. If the problem persists, it is reported to the offender’s upline. If it still persists, a warning letter may be issued, with a copy sent to Amway. If this does not resolve the issue, a direct distributor may take action, including termination.
If the violator is dissatisfied, he can appeal to Amway for an informal conciliation procedure. If there is still no resolution, the panel issues a recommendation. If the party disagrees, he can request a review by the ADA Board. Upon receipt of a recommendation Amway reviews the matter and issues a final determination binding on all parties.
For those who may be interested, the informal method is outlined in the complaint filed in the 1998 Musgrove lawsuit. The Musgroves alleged that their upline had illegally taken monies owed to them and their downlines.
The Musgroves claim they were warned that going to Amway or the ADA would be a "mistake." When there was no resolution, they went to Jody Victor - a principal of the ADA. Victor advised them that to cross Don Wilson or Dexter Yager would be the equivalent of "being drawn and quartered."
When nothing got resolved, the Musgroves went to Amway, which resulted in retaliation against them and prompted them to file the lawsuit.
Mafia Methods Of Coercion & Control
Blakey points out that "The Mafia uses "omerta" and violence for control," and "Amway uses other tactics, with similar effect."
Low-level distributors must honor their upline. No negative talk or action is permissible. Paul Klebniov discussed this no-talk-rule in the December 9,1991, issue of Forbes Magazine: "Amway's attitude toward any insider critical of the organization has bordered on paranoia."
According to Blakey's report, a distributor who steps out of line is punished. "Punishment may start off with being vilified by uplines as a "loser," as "negative," or as "brain-dead" which are typical Amway appelations for anyone who does not believe in the Amway system and the riches that allegedly flow from it," he says.
"More serious offenders," says Blakey, "may have portions of their business taken away - e.g. they can no longer appear at rallies, or downline distributors are "re-routed."
The Eric Scheibeler Experience
The punishment Blakey described actually happened to Eric Scheibeler and his wife. In a depositon, the former Amway distributor explains how he and his wife thought they were joining Amway, but ended up in a pyramid scheme.
"What we didn't realize is that we were in an Amway motivational organization ... to promote, market and retail the system to our organization. And we personally were used ... to extract somewhere between three and four million dollars, I'm estimating, of good people's money that went to books, tapes and seminars, which is really the real secret income source that our upline Amway diamond was making money from," he recounts.
Eric describes how "people are brought in based on this incredible life-style and economic success of the Amway distributors ... when, in fact, a lot of them don't make a net income of one dollar on Amway. Almost all their profits come from recruiting - using Amway as a shell corporation to recruit people into their secret motivational organization, which is where all their income has come from," according to his deposition.
In his book Merchants of Deception, Eric said in time he discovered that "perhaps millions of others had been recruited and induced to participate in not just one, but two illegal pyramid-type businesses. The first was the tool business that had no end user outside of the organization, and the second was the Amway business," he said.
(The book can be downloaded from his website, merchantsofdeception.com, for a limited time only).
Eric tried to do something about the fraud, and says, "I provided information of fraud, global fraud, to Amway regarding ... forced participation in the tool business, fraudulent income representations, and they took no action ... I provided that also to Dick DeVos, the president of Amway, personally in both fax and certified letter, and the action they took was cut my income off," he said in his deposition.
As punishment for speaking out against the company, Amway cut off their monthly commissions drawn from the organization the Scheilebers had developed, and withheld about $20,000 while the couple went bankrupt, lost everything, and barely held onto their home.
At their lowest point, Eric’s sponsor asked him to sign an agreement stating he would never speak about his experience with Amway again. In return, Amway would release the $20,000 of the Scheileber’s money the company claimed it was holding "in escrow," and would buy Eric's Amway business for $75,000. In a nutshell, they wanted to buy the business and his silence for $95,000. Eric declined.
Same Coercion & Control Alleged In Lawsuits
This upline coercion and control is alleged in nearly every one of the many law suits filed all over the country. For instance, the 1998 Taylor v Amway suit alleged that the upline warned the distributors that they had the authority, political connections and clout to cause the plaintiffs to lose their business and told distributors to buy tools and attend functions or they would be "cut out like cancer."
After taking a look at the Van Andel Institute's Website, I'd say Van Andel indeed had the political ties to make good on such threat. The site lists Van Andel's history in politics.
"In 1992, President George Bush appointed Jay to serve as the United States Ambassador and Commissioner General to the Genoa Expo '92 in Genoa, Italy. He has also served as Chairman of the U.S. Chamber of Commerce, a Director of the Gerald R. Ford Foundation, a member of the U.S.O. World of Governors, and North American Chairman of the Netherlands American Bicentennial Commission," it says.
The complaint filed in the Stewart v Amway case alleges the uplines coerced attendance at functions, controlled by family leaders, and anyone trying to hold events independent of high level approved functions was "blackballed" from participating in other events.
In the 1998 Morrison v Amway case, 29 distributors filed the suit and revealed many of the company's secrets. The suit alleges downlines are coerced into spending money on tapes and functions and told that they have no chance of success unless they do and that those who ask questions or refuse to play the game risk having their businesses destroyed
For those who may be interested, the complaint in the 1998 New Hampshire case of Lavoie v Yager, details on the inner working of the Yager tool system and also outlines the progression of a distributor through the system.
Report of Actual Violence
Blakey found, "There are also reports of violence against those who attempt to take action against Amway."
For example, Edward Engel was Amway's chief financial officer until he resigned in 1979, over a disagreement with DeVos and Van Andel. Engels claims he and his family received threats for years after his resignation.
"It was a Big Brother organization," says Engel today. "Everyone assumed that the phones were tapped, and that Amway had something on everybody."
In 1983, while Engel's former secretary, Dorothy Edgar, was helping the Canadian authorities in their investigation of Amway, she was roughed up in Chicago, after she was told to "stay away from Amway."
Engel picked her up after the incident and says he believes her story, according to Paul Klebniov's article.
In 1982, former Amway distributor, Philip Kerns, quit the company and wrote an expose called "Fake it Till You Make It." He claims Amway had private detectives follow him and rough him up. The expose prompted Phil Donahue and 60 Minutes to run highly critical programs about Amway.
The many examples of threats, intimidation, blackmail, and violence outlined above definitely mimic attempts to control with methods often used by members of the Mafia.
Eric says there was one question that had haunted him. "How could this have possibly gone on for so long?"
After delving into the company's political connections he discovered the answer. His book reveals the close ties between Amway, the Republican Party, and both Bush administrations. According to Eric, over the past 20 years, there have been huge contributions and large speaking fees paid to prominent Republicans, which have resulted in immunity and protection for Amway against investigations into its violations of anti-pyramid scheme statutes.
If not for this prepaid-insurance, I firmly believe that Amway would have been shut down 20 years ago.
* (Part 1 of this article contains the statement: "Bill Britt has since been booted out of Amway." It should have said, according to a tape recorded message by Triple Diamond Ron Puryear, leader of World Wide Dream Builders, Bill Britt, retired from the Amway IBOA board of directors in June of 2004. The announcement occurred just after the board of directors met in its June session, where Britt was supposedly approached by other directors about compromising personal issues relating to two 911 emergency calls made by a woman reporting disputes. His speaking fees from World Wide Dreambuilders functions have ended since he won't be speaking at those seminars any longer.)
Mission Accomplished in Iraq by Bremer and CPA
Evelyn Pringle April 25, 2007
When President Bush announced "Mission Accomplished," and the end of the war in May 2003, he also said we would help the citizens of Iraq rebuild their country. "Now that the dictator's gone," he stated, "we and our coalition partners are helping Iraqis to lay the foundations of a free economy."
Apparently he was referring to the Coalition Provisional Authority that took up residence in Saddam's luxurious palace in May 2003, with the newly appointed King, Paul Bremer. The CPA was granted the authority to award reconstruction contracts in Iraq and it used that authority to implement what will go down in the history books as the most blatant war profiteering scheme of all time.
In large part, the masterminds of the reconstruction disaster that would occur after the CPA took over Iraq were Secretary of Defense, Donald Rumsfeld, and Undersecretary of Defense, Douglas Feith.
But to ensure control of the contracting process on the ground in Iraq, Bush filled the top slots of the CPA with the administration cronies. For instance, a friend of Cheney's, Peter McPherson, took a leave of absence as president of Michigan State University to serve as Bremer's economic deputy.
The leader of the CPA's private development sector was Thomas Foley, an old college classmate of Bush, who served as finance chairman for his Presidential campaign in Connecticut and also raised more than $100,000 for Bush.
Relatives of the administration were also given jobs, such as Ari Fleischer's brother Michael, and Simone Ledeen, the daughter of Michael Ledeen. Cheney's daughter Liz, also did a short stint. However, it should be noted that none of them lounged around for too long in what soon became a hellhole in Iraq.
On May 16, 2003, the CPA issued its first regulation and described its authority in no uncertain terms stating:
"The CPA is vested with all executive, legislative, and judicial authority necessary to achieve its objectives, to be exercised under relevant U.N. Security Council resolutions, including resolution 1483 (2003), and the laws and usages of war. This authority shall be exercised by the CPA Administrator."
With one swipe of the pen, Bremer granted himself the authority to run the government ministries, appoint Iraqi officials and award contracts for reconstruction. Next he fired 500,000 Iraqis, most of them soldiers, but pink slips also went out to many doctors, nurses, teachers and other public employees as well.
For the most part, the CPA financed its activities with billions of dollars that belonged to the Iraqis. On May 22, 2003, a UN Security Council passed a resolution that directed the proceeds from Iraqi oil to be placed in a Development Fund for Iraq, and the CPA was granted authority to control the fund and decide which profiteers would get contracts.
During the year that Bremer controlled the purse strings, the Iraqi Development Fund received $20.2 billion, including $8.1 billion from the UN's oil-for-food program, $10.8 billion from Iraqi oil, and the rest from repatriated funds, vested assets and donations.
The CPA accounting system was cash and carry and a steady stream of cash was flown into Bagdad from the US. Inspector General, Stuart Bowen later said that he knew of one $2 billion flight.
A report released by the House Government Reform Committee in February 2007, shows that in the 13 months that Bremer ruled, from May 2003 to June 2004, the Federal Reserve Bank in New York shipped nearly $12 billion in a cash to Iraq.
One can only imagine the Bank service charges associated with these shipments because to accomplish this feat, according to the Democratic chairman of the Reform Committee, Henry Waxman, the cash weighed 363 tons and the Bank had to count and pack 281 million individual bills, including more than 107 million $100 bills, and then load them onto wooden pallets to be shipped to Bagdad on C-130 cargo planes.
Inspector Bowen later said that he determined that some of this cash went to pay salaries for thousands of "ghost employees" and Iraqi civil servants who did not exist.
Within a few months of the CPA's arrival in Iraq reports of corruption in the contracting process began appearing in the media. A British adviser to the Iraqi Governing Council told the BBC that officials in the CPA were demanding bribes of up to $300,000 in return for contracts.
Reports of flat out-fraud remained steady throughout Bremer's reign in Iraq. One audit showed that the CPA Ministry of Finance could not provide documentation for about $17 million spent on employee salaries in February 2004, and a CPA Advisor to the Ministry of the Interior said the Ministry was paid for 8,602 guards but only 602 could be verified.
A CPA advisor to the Ministry of Finance was so concerned about payroll corruption that he submitted a formal complaint that stated in part: "Of the 1.6 million government employees currently on payroll, credible estimates put the number of ghost workers at somewhere between 250,000-300,000 employees."
An October 2004, audit performed for the International Advisory and Monitoring Board, created by the UN to monitor the spending of Iraqi money, found one case where a payment of $2.6 million was authorized by a CPA senior adviser to the Ministry of Oil, and auditors were unable to obtain an underlying contract or any evidence that the services had been rendered.
The auditors in this group found 37 cases where files could not be located for contracts worth $185 million all total. In another 52 cases, there was no record that goods had been received for a total of $87.9 million.
People on the ground in Iraq said that doing business with the CPA was reminiscent of the Wild West. Former CPA employees told a congressional committee that sackfuls of cash were tossed around like footballs. Franklin Willis, showed pictures of himself and others holding up bundles of $100 notes totaling $2 million, which he said was used to pay the contractor Custer Battles. "We told them to come in and bring a bag," Willis said.
He also testified that millions of dollars in $100 bills were stored in the basement of the CPA offices and distributed to favored contractors with little accounting discipline. For instance, in the year that the CPA ruled, Custer was awarded contracts worth more than $100 million.
Two former Custer employees ended up filing a lawsuit under the Federal False Claims Act, saying Custer had swindled $50 million from the CPA with scams like double-billing for salaries and repainting the forklifts found at the Baghdad airport and then leasing them back to the US government.
The employees said the CPA paid the Custer $15 million to provide security for Iraq's civilian airline, when no services were needed because the airline was grounded during the time covered by the contract.
These employees said they kept informing the CPA about Custer's fraudulent conduct for more than a year and when they asked why the firm continued to get contracts, they were told: "Battles is very active in the Republican party, and speaks to individuals he knows in the Whitehouse almost daily."
In June 2004, the Government Accounting Office estimated that more than $1 billion in had been wasted due to illegal overcharges by contractors since the war began. A later audit by the Iraqi government found that as much as $1.27 billion was lost to accounting irregularities between June 2004 and February 2005.
Inspector Bowen cited two examples of poor oversight in a November 3, 2005 interview on National Public Radio where $28 million was paid to build 5 power plants and $1.8 million was paid to rebuild a library, but the work was never performed and the money
"simply disappeared," he said.
A recent report by Bowen says DynCorp was paid $43.8 million for a residential camp for police training personnel and has been empty for months and that the company may also have billed $18 million in other unjustified costs.
About $4.2 million, he says, was improperly spent on 20 VIP trailers and an Olympic-size pool and an additional $36.4 million in spending for weapons such as armored vehicles, body armor and communications equipment that cannot be accounted for.
Not surprisingly, Cheney's Halliburton remained the top profiteer under Bremer's rule. A July 23, 2004, audit conducted by Bowen, showed the company had received 60% of all contracts paid for with Iraq money, including 5 no-bid contracts worth $222 million, $325 million, $180 million, and the last 2 together totaled $194 million for the last two. In comparison, the audit showed that the CPA awarded only 2% of the reconstruction contracts to Iraqi companies.
In one example of blatant fraud, an audit found that Halliburton was charging for more than 41,000 meals a day for soldiers when only about 14,000 were served.
By the fall of 2003, the country was realizing that the rational for war was based on lies and that the only ones drawing any benefits were the profiteers. So when Bush asked Congress for another $20 billion for the CPA, Bremer was summoned to Washington to explain where all the money was going and of course he testified in full stonewall mode.
Before the Appropriations Committee on September 22, 2003, Bremer said the CPA had detailed records of all its receipts and outlays that could be audited by Congress. But when he testified before the Armed Services Committee 3 days later he said the Office of Management and Budget was responsible for maintaining the CPA records and that Congress would have to go to the White House to access the records.
That arrogant assertion went over like a lead balloon with many members of Congress. Senator Robert Byrd said he was outraged over the inability to monitor CPA spending. "There is no reason why any arm of the executive branch charged with making such significant spending decisions," he said, "should not be working directly with Congress."
"When we're talking about handing over another $20 billion to the CPA," he said, "there is a real need for Congress to confirm that the CPA has its finances in order and that it is managing the taxpayer's money responsibly."
"We don't even know how much of the $20 billion," Byrd said, "will flow to government contractors in Iraq."
"Whatever the amount is," he noted, "we know that the size and scope of the profits being made will be enormous."
"Former Bush Administration officials," he warned fellow Senators, "are even setting up consulting firms to act as middlemen for contractors hoping to take part in the bonanza."
"Are we turning the U.S. Treasury into a grab bag for favorite campaign contributors to be financed at taxpayer expense?" he asked.
The answer was yes, and what a grab bag it was. Media reports revealed that Bush's ex-campaign manager and Feith's former law partner had set up consulting firms to profit off the war by lining up contracts for clients through their partners in crime within the CPA.
Other reports revealed that contracts worth $407 were awarded to a firm called Nour that was formed less than 2 months after the war began. The names linked to the profits from Nour, among many others, included former Secretary of Defense, William Cohen, Ahmad Chalabi via a $2 million kickback, his nephew Salam Chalabi as the attorney handling the deal, and the money trail even led to the First Brothers, Marvin and Jeb Bush.
But come to find out, Doug Feith the ringleader on the ground in Washington, had awarded a batch of no-bid contracts to a favored company the month before the war began for the purpose of controlling the media in post-war Iraq.
In October 2003, the Center for Public Integrity obtained copies of 7 contracts awarded to the San Diego-based Science Applications. The total value of the contracts was redacted but the Center was able to determine that they were all awarded in February 2003, and called for the work to be directed by Feith.
However, the Center's most stunning discovery was that when the contracts were awarded, Feith's top deputy at the time, Christopher "Ryan" Henry, had been a senior vice president at SAIC until October 2002.
In addition, one of SAIC's board members was Army General, Wayne Downing, who ran counterterrorism in the Bush administration for almost a year after 9/11, and had even went to the CIA with Cheney to discuss intelligence on Iraq. Downing had also served as an advisor to Ahmed Chalabi and the Iraqi National Congress, and was well-known advocate for a war against Saddam.
Some of the SAIC contracts required that specific persons referred to as "executive management consultants" be hired and the pay range listed went as high as $209 and $273 per hour. The Center said congressional sources estimated the value of the media contract as $38 million for the first year and as high $90 million in 2004.
The SAIC had no special expertise to justify the award of these contracts. One company executive, quoted in the media, said the firm's only credential for setting up an independent media, supposedly modeled after the BBC, was military work in "informational warfare"-signal jamming, "perception management," and the like.
Under these contracts, the Iraq Media Network (IMN) was established and journalist, Mark North, who covered the Iraq invasion for National Public Radio, was hired to train Iraqi journalists to report for the IMN.
In one of the many Congressional hearings, North testified about the control of the IMN by the CPA and said CPA officials regularly directed and censored the activities of the news station and provided "a laundry list of CPA activities" to cover in the news reports instead of stories about security or the lack of electricity and jobs
While testifying, he also described the CPA's shabby treatment of Iraqi employees and its refusal to pay their wages. "For the first two months," North said, "the local staff of about 200 journalists and technicians were not paid their salaries."
When the staffers went on strike in attempt to get paid, he said, the CPA told the Iraqis to get back to work or the US Army would remove them from the studios.
All total, the CPA had control of Iraqi money for one year between June 2003 and June 2004, but unfortunately no auditors arrived to take a look at the agency's spending until April 2004, two months before the CPA's rule was scheduled to end.
And as so often happens when it comes to giving solid advice or warnings, the senior Senator from Virginia was absolutely right. It was far too late for audits, because the CPA and its gang of profiteers had already robbed the Iraqis blind.
The favored companies enjoyed a fraud-free-all. For instance, Halliburton said it had lost over $60 million worth of government property including trucks, office furniture and computers. Inspector Bowen reported that 6,975 items valued at $61.1 million were lost, and in June 2005, the Defense Contract Audit Agency reported that the Halliburton had overcharged or presented questionable bills for close to $1.5 billion.
In the end, Bowen's audit concluded that "the CPA's internal controls for approximately $8.8 billion in DFI funds disbursed to Iraqi ministries through the national budget process failed to provide sufficient accountability for the use of those funds."
As of February 2007, according to Bowen, audits of the CPA have resulted in 300 criminal and civil investigations, 5 arrests and convictions, and another 23 cases are currently under prosecution at the DOJ, and he is working on 76 on-going investigations.
One of the convictions involved Robert Stein, a former CPA comptroller and funding officer, who recently pleaded guilty to 5 felony counts including conspiracy, money laundering, and bribery in stealing more than $2 million of reconstruction funds and taking more than $1 million in kickbacks to rig the bids on contracts that exceeded $8 million.
The whistleblower case against Custer Battle went to trial and a jury found that Custer had committed 37 acts of fraud and filed $3 million in false claims, and rendered a verdict with a $10 million penalty. However, the verdict was overturned by Republican appointed US District Court Judge TS Ellis III, who ruled that the CPA was not a US entity and therefore the false claims act does not apply to it.
In the ruling, the judge said Custer's accusers "failed to prove that the U.S. government was ever defrauded. Any fraud that occurred was perpetrated instead against the Coalition Provisional Authority, formed to run Iraq until a government was established."
Legal experts say this ruling is great news for the CPA and contractors because from now on anyone charged with any act of fraud related to the Iraqi money doled out by the CPA in Bagdad will use it in attempt to avoid civil or criminal prosecution.
When President Bush announced "Mission Accomplished," and the end of the war in May 2003, he also said we would help the citizens of Iraq rebuild their country. "Now that the dictator's gone," he stated, "we and our coalition partners are helping Iraqis to lay the foundations of a free economy."
Apparently he was referring to the Coalition Provisional Authority that took up residence in Saddam's luxurious palace in May 2003, with the newly appointed King, Paul Bremer. The CPA was granted the authority to award reconstruction contracts in Iraq and it used that authority to implement what will go down in the history books as the most blatant war profiteering scheme of all time.
In large part, the masterminds of the reconstruction disaster that would occur after the CPA took over Iraq were Secretary of Defense, Donald Rumsfeld, and Undersecretary of Defense, Douglas Feith.
But to ensure control of the contracting process on the ground in Iraq, Bush filled the top slots of the CPA with the administration cronies. For instance, a friend of Cheney's, Peter McPherson, took a leave of absence as president of Michigan State University to serve as Bremer's economic deputy.
The leader of the CPA's private development sector was Thomas Foley, an old college classmate of Bush, who served as finance chairman for his Presidential campaign in Connecticut and also raised more than $100,000 for Bush.
Relatives of the administration were also given jobs, such as Ari Fleischer's brother Michael, and Simone Ledeen, the daughter of Michael Ledeen. Cheney's daughter Liz, also did a short stint. However, it should be noted that none of them lounged around for too long in what soon became a hellhole in Iraq.
On May 16, 2003, the CPA issued its first regulation and described its authority in no uncertain terms stating:
"The CPA is vested with all executive, legislative, and judicial authority necessary to achieve its objectives, to be exercised under relevant U.N. Security Council resolutions, including resolution 1483 (2003), and the laws and usages of war. This authority shall be exercised by the CPA Administrator."
With one swipe of the pen, Bremer granted himself the authority to run the government ministries, appoint Iraqi officials and award contracts for reconstruction. Next he fired 500,000 Iraqis, most of them soldiers, but pink slips also went out to many doctors, nurses, teachers and other public employees as well.
For the most part, the CPA financed its activities with billions of dollars that belonged to the Iraqis. On May 22, 2003, a UN Security Council passed a resolution that directed the proceeds from Iraqi oil to be placed in a Development Fund for Iraq, and the CPA was granted authority to control the fund and decide which profiteers would get contracts.
During the year that Bremer controlled the purse strings, the Iraqi Development Fund received $20.2 billion, including $8.1 billion from the UN's oil-for-food program, $10.8 billion from Iraqi oil, and the rest from repatriated funds, vested assets and donations.
The CPA accounting system was cash and carry and a steady stream of cash was flown into Bagdad from the US. Inspector General, Stuart Bowen later said that he knew of one $2 billion flight.
A report released by the House Government Reform Committee in February 2007, shows that in the 13 months that Bremer ruled, from May 2003 to June 2004, the Federal Reserve Bank in New York shipped nearly $12 billion in a cash to Iraq.
One can only imagine the Bank service charges associated with these shipments because to accomplish this feat, according to the Democratic chairman of the Reform Committee, Henry Waxman, the cash weighed 363 tons and the Bank had to count and pack 281 million individual bills, including more than 107 million $100 bills, and then load them onto wooden pallets to be shipped to Bagdad on C-130 cargo planes.
Inspector Bowen later said that he determined that some of this cash went to pay salaries for thousands of "ghost employees" and Iraqi civil servants who did not exist.
Within a few months of the CPA's arrival in Iraq reports of corruption in the contracting process began appearing in the media. A British adviser to the Iraqi Governing Council told the BBC that officials in the CPA were demanding bribes of up to $300,000 in return for contracts.
Reports of flat out-fraud remained steady throughout Bremer's reign in Iraq. One audit showed that the CPA Ministry of Finance could not provide documentation for about $17 million spent on employee salaries in February 2004, and a CPA Advisor to the Ministry of the Interior said the Ministry was paid for 8,602 guards but only 602 could be verified.
A CPA advisor to the Ministry of Finance was so concerned about payroll corruption that he submitted a formal complaint that stated in part: "Of the 1.6 million government employees currently on payroll, credible estimates put the number of ghost workers at somewhere between 250,000-300,000 employees."
An October 2004, audit performed for the International Advisory and Monitoring Board, created by the UN to monitor the spending of Iraqi money, found one case where a payment of $2.6 million was authorized by a CPA senior adviser to the Ministry of Oil, and auditors were unable to obtain an underlying contract or any evidence that the services had been rendered.
The auditors in this group found 37 cases where files could not be located for contracts worth $185 million all total. In another 52 cases, there was no record that goods had been received for a total of $87.9 million.
People on the ground in Iraq said that doing business with the CPA was reminiscent of the Wild West. Former CPA employees told a congressional committee that sackfuls of cash were tossed around like footballs. Franklin Willis, showed pictures of himself and others holding up bundles of $100 notes totaling $2 million, which he said was used to pay the contractor Custer Battles. "We told them to come in and bring a bag," Willis said.
He also testified that millions of dollars in $100 bills were stored in the basement of the CPA offices and distributed to favored contractors with little accounting discipline. For instance, in the year that the CPA ruled, Custer was awarded contracts worth more than $100 million.
Two former Custer employees ended up filing a lawsuit under the Federal False Claims Act, saying Custer had swindled $50 million from the CPA with scams like double-billing for salaries and repainting the forklifts found at the Baghdad airport and then leasing them back to the US government.
The employees said the CPA paid the Custer $15 million to provide security for Iraq's civilian airline, when no services were needed because the airline was grounded during the time covered by the contract.
These employees said they kept informing the CPA about Custer's fraudulent conduct for more than a year and when they asked why the firm continued to get contracts, they were told: "Battles is very active in the Republican party, and speaks to individuals he knows in the Whitehouse almost daily."
In June 2004, the Government Accounting Office estimated that more than $1 billion in had been wasted due to illegal overcharges by contractors since the war began. A later audit by the Iraqi government found that as much as $1.27 billion was lost to accounting irregularities between June 2004 and February 2005.
Inspector Bowen cited two examples of poor oversight in a November 3, 2005 interview on National Public Radio where $28 million was paid to build 5 power plants and $1.8 million was paid to rebuild a library, but the work was never performed and the money
"simply disappeared," he said.
A recent report by Bowen says DynCorp was paid $43.8 million for a residential camp for police training personnel and has been empty for months and that the company may also have billed $18 million in other unjustified costs.
About $4.2 million, he says, was improperly spent on 20 VIP trailers and an Olympic-size pool and an additional $36.4 million in spending for weapons such as armored vehicles, body armor and communications equipment that cannot be accounted for.
Not surprisingly, Cheney's Halliburton remained the top profiteer under Bremer's rule. A July 23, 2004, audit conducted by Bowen, showed the company had received 60% of all contracts paid for with Iraq money, including 5 no-bid contracts worth $222 million, $325 million, $180 million, and the last 2 together totaled $194 million for the last two. In comparison, the audit showed that the CPA awarded only 2% of the reconstruction contracts to Iraqi companies.
In one example of blatant fraud, an audit found that Halliburton was charging for more than 41,000 meals a day for soldiers when only about 14,000 were served.
By the fall of 2003, the country was realizing that the rational for war was based on lies and that the only ones drawing any benefits were the profiteers. So when Bush asked Congress for another $20 billion for the CPA, Bremer was summoned to Washington to explain where all the money was going and of course he testified in full stonewall mode.
Before the Appropriations Committee on September 22, 2003, Bremer said the CPA had detailed records of all its receipts and outlays that could be audited by Congress. But when he testified before the Armed Services Committee 3 days later he said the Office of Management and Budget was responsible for maintaining the CPA records and that Congress would have to go to the White House to access the records.
That arrogant assertion went over like a lead balloon with many members of Congress. Senator Robert Byrd said he was outraged over the inability to monitor CPA spending. "There is no reason why any arm of the executive branch charged with making such significant spending decisions," he said, "should not be working directly with Congress."
"When we're talking about handing over another $20 billion to the CPA," he said, "there is a real need for Congress to confirm that the CPA has its finances in order and that it is managing the taxpayer's money responsibly."
"We don't even know how much of the $20 billion," Byrd said, "will flow to government contractors in Iraq."
"Whatever the amount is," he noted, "we know that the size and scope of the profits being made will be enormous."
"Former Bush Administration officials," he warned fellow Senators, "are even setting up consulting firms to act as middlemen for contractors hoping to take part in the bonanza."
"Are we turning the U.S. Treasury into a grab bag for favorite campaign contributors to be financed at taxpayer expense?" he asked.
The answer was yes, and what a grab bag it was. Media reports revealed that Bush's ex-campaign manager and Feith's former law partner had set up consulting firms to profit off the war by lining up contracts for clients through their partners in crime within the CPA.
Other reports revealed that contracts worth $407 were awarded to a firm called Nour that was formed less than 2 months after the war began. The names linked to the profits from Nour, among many others, included former Secretary of Defense, William Cohen, Ahmad Chalabi via a $2 million kickback, his nephew Salam Chalabi as the attorney handling the deal, and the money trail even led to the First Brothers, Marvin and Jeb Bush.
But come to find out, Doug Feith the ringleader on the ground in Washington, had awarded a batch of no-bid contracts to a favored company the month before the war began for the purpose of controlling the media in post-war Iraq.
In October 2003, the Center for Public Integrity obtained copies of 7 contracts awarded to the San Diego-based Science Applications. The total value of the contracts was redacted but the Center was able to determine that they were all awarded in February 2003, and called for the work to be directed by Feith.
However, the Center's most stunning discovery was that when the contracts were awarded, Feith's top deputy at the time, Christopher "Ryan" Henry, had been a senior vice president at SAIC until October 2002.
In addition, one of SAIC's board members was Army General, Wayne Downing, who ran counterterrorism in the Bush administration for almost a year after 9/11, and had even went to the CIA with Cheney to discuss intelligence on Iraq. Downing had also served as an advisor to Ahmed Chalabi and the Iraqi National Congress, and was well-known advocate for a war against Saddam.
Some of the SAIC contracts required that specific persons referred to as "executive management consultants" be hired and the pay range listed went as high as $209 and $273 per hour. The Center said congressional sources estimated the value of the media contract as $38 million for the first year and as high $90 million in 2004.
The SAIC had no special expertise to justify the award of these contracts. One company executive, quoted in the media, said the firm's only credential for setting up an independent media, supposedly modeled after the BBC, was military work in "informational warfare"-signal jamming, "perception management," and the like.
Under these contracts, the Iraq Media Network (IMN) was established and journalist, Mark North, who covered the Iraq invasion for National Public Radio, was hired to train Iraqi journalists to report for the IMN.
In one of the many Congressional hearings, North testified about the control of the IMN by the CPA and said CPA officials regularly directed and censored the activities of the news station and provided "a laundry list of CPA activities" to cover in the news reports instead of stories about security or the lack of electricity and jobs
While testifying, he also described the CPA's shabby treatment of Iraqi employees and its refusal to pay their wages. "For the first two months," North said, "the local staff of about 200 journalists and technicians were not paid their salaries."
When the staffers went on strike in attempt to get paid, he said, the CPA told the Iraqis to get back to work or the US Army would remove them from the studios.
All total, the CPA had control of Iraqi money for one year between June 2003 and June 2004, but unfortunately no auditors arrived to take a look at the agency's spending until April 2004, two months before the CPA's rule was scheduled to end.
And as so often happens when it comes to giving solid advice or warnings, the senior Senator from Virginia was absolutely right. It was far too late for audits, because the CPA and its gang of profiteers had already robbed the Iraqis blind.
The favored companies enjoyed a fraud-free-all. For instance, Halliburton said it had lost over $60 million worth of government property including trucks, office furniture and computers. Inspector Bowen reported that 6,975 items valued at $61.1 million were lost, and in June 2005, the Defense Contract Audit Agency reported that the Halliburton had overcharged or presented questionable bills for close to $1.5 billion.
In the end, Bowen's audit concluded that "the CPA's internal controls for approximately $8.8 billion in DFI funds disbursed to Iraqi ministries through the national budget process failed to provide sufficient accountability for the use of those funds."
As of February 2007, according to Bowen, audits of the CPA have resulted in 300 criminal and civil investigations, 5 arrests and convictions, and another 23 cases are currently under prosecution at the DOJ, and he is working on 76 on-going investigations.
One of the convictions involved Robert Stein, a former CPA comptroller and funding officer, who recently pleaded guilty to 5 felony counts including conspiracy, money laundering, and bribery in stealing more than $2 million of reconstruction funds and taking more than $1 million in kickbacks to rig the bids on contracts that exceeded $8 million.
The whistleblower case against Custer Battle went to trial and a jury found that Custer had committed 37 acts of fraud and filed $3 million in false claims, and rendered a verdict with a $10 million penalty. However, the verdict was overturned by Republican appointed US District Court Judge TS Ellis III, who ruled that the CPA was not a US entity and therefore the false claims act does not apply to it.
In the ruling, the judge said Custer's accusers "failed to prove that the U.S. government was ever defrauded. Any fraud that occurred was perpetrated instead against the Coalition Provisional Authority, formed to run Iraq until a government was established."
Legal experts say this ruling is great news for the CPA and contractors because from now on anyone charged with any act of fraud related to the Iraqi money doled out by the CPA in Bagdad will use it in attempt to avoid civil or criminal prosecution.
Ohio Governor Race - Fox Guarding Henhouse
Evelyn Pringle November 2006
Ken Blackwell is ready to cash in on the Republican promise of putting him in the Governor's mansion in 2006 after he proved that he was indispensable in the successful plot to rig the 2004 Presidential election in Ohio for George W Bush.
As secretary of state in 2004, Blackwell held broad powers for setting election standards in everything from the processing of voter registration to overseeing the distribution of voting machines and ballots. He was also simultaneously serving as co-chairman in the Bush-Cheney campaign in Ohio.
Which means, in 2006, with Blackwell still in the position of secretary of state, once again voters in Ohio have a fox guarding the voting henhouse. Only this time the stakes are even higher for Blackwell because his political future is on the line.
In 2004, long before election day, a major voter suppression scheme was successful when Blackwell issued an order saying voter registration forms would only be accepted if they were on 80-pound, unwaxed, white paper, and as many as 72,00 voters lost their right to vote due to an unavoidable registration error.
Printed registration forms in local newspapers provided to help citizens register to vote were rendered useless and one Ohio County had to post a notice online saying it could not accept its own registration forms.
Under the threat of court action, on September 28, 2004, six days before the registration deadline, Blackwell withdrew but the damage was done.
On election day itself, voters in Democratic precincts encountered a wide variety of obstacles in the path to the voter's booth. They faced Republican challengers at the polls, the purging of names from voter rolls, and the most obvious scarcity of voting machines, but only in Democratic neighborhoods.
In Republican precincts there were plenty of voting machines, but in urban precincts, where many African-Americans voted, and in other Democratic strongholds, such as polling stations around college campuses, there was a conspicuous absence of enough machines.
For instance, at Kenyon College where Democratic students had registered in record numbers, Blackwell allotted only 2 machines even though there was a 1,300 surge of voters, and the wait was up to eleven hours.
In contrast, Republican fundamentalist students at nearby Nazarene University had one machine for 100 voters and students faced no waiting lines.
Democratic voters at inner-city precincts in cities like Cleveland, Columbus, and Toledo, who were voting for Kerry by a margin of nine to one, had to wait in line up to 7 hours.
Due to a deliberate and well coordinated effort, at other polling station all over the state there were not enough machines and Democrats had to stand in line in the rain for as long as ten hours, and of course just as intended, in many cases it was impossible for people to wait that long so many left without casting a vote.
By midmorning on election day, when it became clear that people were having to drop out of line without voting due to the long wait, precincts asked Blackwell for the right to distribute paper ballots to speed up the process and Blackwell denied the requests, claiming it would invite fraud.
In a desperate attempt to stop the madness, a lawsuit was filed, and the affidavits that were filed by voters and election officials in support of a plea to the courts for help, describe election fraud in motion. An affidavit by an official from Precinct 40 stated:
''I am serving as a presiding judge, a position I have held for some 15+ years in precinct 40. In all my years of service, the lines are by far the longest I have seen, with some waiting as long as four to five hours.
"I expect the situation to only worsen as the early evening heavy turnout approaches. I have requested additional machines since 6:40 a.m. and no assistance has been offered.''
By the time US District Judge Algernon Marbley issued an order requiring that voters be given paper ballots in early evening, it was too late. According to estimates by the Washington Post, as many as 15,000 voters in Columbus alone had given up and left without voting
When poll closing time came, some precincts illegally dismissed voters who had waited for hours in the rain, in violation of Ohio law, which requires that people waiting in line at closing time be allowed to vote.
Critics say there is no way to definitively estimate how many citizens lost their right to vote in Ohio because they were forced to drop out of line to go to work or take care of their children.
The plot to steal the election involved other tactics as well. In the summer of 2004, the Toledo Blade reported that 28,000 voters were erased from the Lucas County voter registration rolls and that the purge included voters like Barbara and Ralph George "who first registered to vote for John F. Kennedy in 1960 and had lived in the same East Toledo house for 44 years."
In Gahanna Ward 1B, at a fundamentalist church, a so-called "electronic transfer glitch" gave Bush nearly 4,000 votes when only 638 people voted at that polling station.
Democratic Congressman, John Conyers of Michigan, and the Democratic staff of the House Judiciary Committee launched an investigation into the Ohio election and received more than fifty thousand complaints from Democratic voters. In stark contrast, there were no complaints filed by Republican voters in Ohio in 2004 alleging a deprivation of the right to vote in Republican precincts.
And make no mistake, the well coordinated statewide effort to steal the election involved a whole bag of dirty tricks. In Columbus, where 125,000 new voters had registered, more than half of them black, the board of elections predicted that it would need 5,000 machines to handle all the voters.
But instead preparing for the large turnout by lining up more equipment, the House Judiciary investigation found that Matt Damschroder, the chairman of the Franklin County Board of Elections, and former head of the Columbus Republican party, decided to "make do" with 2,741 machines.
And even then, he distributing the machines to favor Republicans. According to the Columbus Dispatch, precincts that had voted 70% or more for Al Gore in 2000, received 17 fewer voter machines in 2004, while strong GOP precincts received 8 more machines.
As a result, an investigation by the Columbus Free Press, showed that white Republican suburbanites had average waits of only twenty-two minutes, while black urban Democrats waited on average three hours and fifteen minutes.
During the election, inner city voting machines broke down and polls opened late. The Toledo Blade reported that the sole machine at the Birmingham polling site in east Toledo broke down at about 7 am, and that per order of Blackwell, there were no paper ballots available for backup.
The first major indication that serious voter fraud had been committed was when the wide unexplainable discrepancies began to appear between the exit polls and actual vote counts and they all favored Bush.
Experts say exit polling is the most reliable polling because unlike pre-election polls, in which voters are asked to predict future behavior, exit polls interview people leaving the voting box about an act that they just completed.
On the basis of exit polls in 2004, CNN predicted that Kerry would defeat Bush in Ohio by a margin of 4.2%, but in the end Bush supposedly won Ohio by 2.5%.
In fact, precincts where Bush received at least 80% of the vote, the exit polls were off by an average of 10%, a pattern that experts say indicates Republican election officials stuffed the ballot box in those precincts.
Bush also tallied 6.5% more votes than the polls had predicted in Pennsylvania, and 4.9% more in Florida. According to Steven F Freeman, a visiting scholar at the University of Pennsylvania, who specializes in research methodology, the odds against all 3 of those shifts occurring in concert was one in 660,000.
"As much as we can say in sound science that something is impossible," he says, "it is impossible that the discrepancies between predicted and actual vote count in the three critical battleground states of the 2004 election could have been due to chance or random error."
Mr Freeman made a point of telling Robert Kennedy Jr in an interview for an article in Rolling Stone Magazine that he's no Democrat lover. "I'm not even political -- I despise the Democrats," he said. "I'm a survey expert. I got into this because I was mystified about how the exit polls could have been so wrong."
But Mr Freeman also said in Rolling Stone, "When you look at the numbers, there is a tremendous amount of data that supports the supposition of election fraud."
"The discrepancies are higher in battleground states," he points out, "higher where there were Republican governors, higher in states with greater proportions of African-American communities and higher in states where there were the most Election Day complaints."
According to Mr Kennedy, the exit poll created for the 2004 election was designed to be the most reliable in history. Six news organizations hired Edison Media Research and Mitofsky International, whose principal, Warren Mitofsky, pioneered the exit poll for CBS in 1967
Shortly before 8:00 pm, reporters at each of the major networks were briefed by pollsters and told that Kerry had an insurmountable lead with at least 309 electoral votes to Bush's 174, with fifty-five too close to call.
As the last polling stations closed on the West Coast, exit polls showed Kerry ahead in ten of 11 battleground states, including Ohio, winning by a million and a half votes nationally overall. But to this day, the Bush gang would have voters believe that every single poll was dead wrong.
In January 2006, a group of mathematicians from the National Election Data Archive, a nonpartisan watchdog group, compared Ohio's exit polls to the certified vote count in each of the 49 precincts polled by Edison/Mitofsky and found that in 22 of those precincts the results differed widely from the official tally.
The wildest discrepancy came from a precinct that Mitofsky numbered "27," in order to protect the anonymity of people surveyed. According to the exit poll, Kerry should have received 67% of the vote, yet the certified tally gave him only 38%.
The statistical odds against such a variance are just shy of one in 3 billion, according to "The Gun is Smoking: 2004 Ohio Precinct-level Exit Poll Data Show Virtually Irrefutable Evidence of Vote Miscount," US Count Votes, National Election Data Archive, January 23, 2006.
Such results, the archive says, provide "virtually irrefutable evidence of vote miscount."
The discrepancies the experts add, "are consistent with the hypothesis that Kerry would have won Ohio's electoral votes if Ohio's official vote counts had accurately reflected voter intent."
According to Ron Baiman, vice president of the archive and a public policy analyst at Loyola University, "No rigorous statistical explanation" can explain the "completely nonrandom" disparities that almost uniformly benefited Bush."
The final results he said in Rolling Stone are "completely consistent with election fraud -- specifically vote shifting."
After conducting an investigation of Ohio ballots, on July 29, 2005, another expert, Richard Hayes Phillips, PhD testified at an Election Assessment Hearing in Texas and said, "I have investigated the Ohio election results, precinct by precinct, and have found three categories of problems: voter suppression, ballots cast but not counted, and alteration of the vote count."
Statewide, he said, there were 35,000 provisional ballots and over 92,000 regular ballots that were not counted as votes for president.
These uncounted ballots, he reported, most of them punch cards, were highly concentrated in precincts that voted overwhelmingly for John Kerry, by margins of 12 to 1 in Cleveland, 7 to 1 in Dayton, 5 to 1 in Cincinnati, 4.5 to 1 in Akron, 3 to 1 in Lorain County, 2.7 to 1 in Stark County, and 2.3 to 1 in Trumbull County.
In Lucas County, Mr Phillips said, other means of voter suppression led directly to lower voter turnout in Democratic precincts. The 88 precincts with the lowest turnout were all in Toledo and all were won by John Kerry and complaints were filed in 31 of these precincts.
Among the complaints he noted were: long-time residents removed from the voting rolls, broken voting machines, polling stations running out of ballots and turning people away, voters sent back and forth between polling places, and long lines not designated by precinct so that voters waited in the wrong line.
One-third of provisional ballots were not counted, he said, often because people voted at the wrong table in the right polling place.
But it appears like the chickens have come home to roost because Ohio politicians are now up to their necks in scandals, making its current Republican led government a poster child for the term "culture of corruption."
The largest corruption probe in Ohio history has produced charges against Governor Bob Taft, convicted of four misdemeanors for accepting unreported gifts; and his side-kick, Tom Noe, co-chairman of Bush-Cheney 2004 Ohio reelection campaign.
On October 27, 2005, Tom Noe was officially charged with illegally funneling $45,400 to the 2004 Bush-Cheney campaign at a $2,000-a-seat fund-raiser in Columbus, in a scheme where Noe made contributions by passing the money through 24 friends and associates, described as "conduits" by investigators.
Some of the known "conduits," included 4 current or former Ohio elected officials, including Toledo City Councilman Betty Shultz, Lucas County Commissioner Maggie Thurber, former state Representative Sally Perz, and former Toledo Mayor Donna Owens.
Court records also show that 2 former aides to Governor Taft also served as funnels.
All of the conduits signed donor cards that stated they were the source of their donations even though each knew that Noe made the contributions, prosecutors said. Each politician faced state ethics charges for failing to disclose the money they received from Noe.
On May 31, 2006, Noe entered a guilty plea in the US District Court in Toledo to 3 felony charges related to violating campaign finance laws.
On June 1, 2006, the Toledo Blade reported that, “State and federal politicians from Mr. Taft to Secretary of State Ken Blackwell, the Republican nominee for governor, to California Gov. Arnold Schwarzenegger - have returned tens of thousands of dollars in contributions from Noe and his wife.”
In the summer of 2005, Tom Noe, was described by the Columbus Free Press, as a high-roller crony of Governor Taft, Ohio Senator George Voinovich and President Bush.
That said, at the time of Noe's indictment, a senior Justice Department official called the case the largest campaign money-laundering scheme prosecuted by the DOJ since the new campaign finance laws were enacted in 2002.
For many years Noe was the Chairman of the Board of Elections in Lucas County and he was heavily involved in the procurement deals that brought Diebold voting machines into inner city Toledo and many of those machines suspiciously malfunctioned on election day in 2004. Sworn testimony in hearings conducted by the Free Press after the election confirm that thousands of inner city voters were disenfranchised due to Noe's decisions.
In by now a widely publicized 2003 fundraising letter, Diebold CEO Wally O'Dell promised to deliver Ohio's 2004 electoral votes to Bush, and Noe and O'Dell were two of Ohio's nineteen Bush Pioneers or Rangers, a group that includes only high money donors.
Before Noe got busted, Blackwell and Noe were practically kissing cousins. In the months before the 2004 election, when voting rights activists tried to challenge Blackwell's partisan handling of provisional ballots in court, Noe intervened on Blackwell's behalf.
While Tom handled the court duties, his wife Bernadette worked on the Board of Election in Lucas County to reverse the Ohio tradition of allowing provisional ballots to be cast in precincts other than the one in which voters were registered to help disenfranchise inner-city Toledo Democratic voters.
And as a reward for their large contribution to the theft of the 2004 election, in January 2005, Noe and his wife co-sponsored Ohio’s inaugural ball in Washington, and according to the Toledo Blade, "Mr. Bush and Mr. Noe embraced. The President then hugged Mrs. Noe."
Noe had previously been appointed chairman for a committee of the US Mint, that advises the US Treasury secretary on designs and themes for coins and congressional medals. According to a Treasury Department press release Noe was recommended for the appointment by Speaker of the House Dennis Hastert (R-Ill) and nominated by Treasury Secretary John Snowe.
For years Noe was called northwest Ohio's "Mr. Republican." And his generosity to Ohio politicians did not go unrewarded. He was appointed to the Ohio Turnpike Commission, the Bowling Green State University board, and the Ohio Board of Regents.
But the grand prize came in 1997, when Noe gained access to $50 million from the Ohio Bureau of Workers' Compensation fund and was given authority to invest in coins and other collectibles, and under the contract, 80% of the profits were to go to the Worker's Compensation fund, and the remainder to Noe.
On April 8, 2005, the election theft celebration by the Noe couple came to an abrupt end, when an investigation into the Lucas County election turned up so much dirt that Blackwell was forced to fire the entire Lucas County Board of Elections including Bernadette.
And then twenty days after Blackwell fired Bernadette, on April 28, 2005, the Toledo Blade reported that the US attorney for the Northern District of Ohio, had confirmed that his office, in conjunction with the FBI, was looking into Noe's fundraising activities, as chairman of the Bush-Cheney campaign in northwest Ohio.
Parallel to the Federal probe, the Blade noted, was the investigation of the Lucas County and Franklin County Offices of the Prosecutor into Noe's inability to account for $10-12 million from the Workmen's Compensation fund.
Less than a month later, on May 26, 2005, state law enforcement officials raided Noe's company trying to find out what happened to the missing $10-12 million. The distinct possibility has been raised numerous times, that Noe may have funneled some of the mysteriously-missing money to politicians.
According to the May 31, 2006 Toledo Blade, the Noes have given more than $200,000 to politicians over the last 16 years and their “giving increased substantially," the Blade noted, "after the Bureau of Workers’ Compensation in 1998 gave him the first of two $25 million payments to invest in his rare-coin funds."
In addition to Governor Taft, the investigation has led 2 of Taft's former aides to plead no contest to ethics charges. On July 29, 2005, Brian Hicks, Taft’s former Chief of Staff, and Cherie Carroll, Hicks' executive assistant, admitted that they took gifts from Noe.
On February 9, 2006, the Ohio Elections Commission referred 2 other former Taft aides for prosecution. H Douglas Talbott admitted that he funneled money from Noe to 3 Ohio Supreme Court Justices and accepted a $39,000 loan from Noe, and J Douglas Moorman was referred because he failed to report a $5,000 loan from Noe.
On February 13, 2006, Noe was indicted on 53 felonies counts related to the Workmen's Compensation fund after a grand jury charged him with 22 counts of forgery, 11 counts of money laundering, 8 counts of tampering with records, 5 counts of grand theft, 6 counts of aggravated theft, and one count of engaging in a pattern of corrupt activity under the Racketeer Influenced and Corrupt Organizations (RICO) Act.
Noe is currently right smack in the middle of a jury trial on the above charges, the last thing that Ohio Republicans wanted in the news in the weeks before the mid-term elections.
The future does not look bright for Blackwell. According to a poll reported on November 2, 2006, in Columbus Business First, "a Democratic sweep brewing in key state and federal political races."
"The survey," Business First said, "found 55 percent of those questioned said they would vote for Democrat Ted Strickland in the Ohio gubernatorial election Nov. 7, and 39 percent said they planned to cast their ballots for J. Kenneth Blackwell."
That said, if nothing else, the results of the 2004 election demonstrate that polls mean nothing in Ohio and critics say voters had better not underestimate the possibility of another stolen election with Blackwell still in charge of the process.
Ken Blackwell is ready to cash in on the Republican promise of putting him in the Governor's mansion in 2006 after he proved that he was indispensable in the successful plot to rig the 2004 Presidential election in Ohio for George W Bush.
As secretary of state in 2004, Blackwell held broad powers for setting election standards in everything from the processing of voter registration to overseeing the distribution of voting machines and ballots. He was also simultaneously serving as co-chairman in the Bush-Cheney campaign in Ohio.
Which means, in 2006, with Blackwell still in the position of secretary of state, once again voters in Ohio have a fox guarding the voting henhouse. Only this time the stakes are even higher for Blackwell because his political future is on the line.
In 2004, long before election day, a major voter suppression scheme was successful when Blackwell issued an order saying voter registration forms would only be accepted if they were on 80-pound, unwaxed, white paper, and as many as 72,00 voters lost their right to vote due to an unavoidable registration error.
Printed registration forms in local newspapers provided to help citizens register to vote were rendered useless and one Ohio County had to post a notice online saying it could not accept its own registration forms.
Under the threat of court action, on September 28, 2004, six days before the registration deadline, Blackwell withdrew but the damage was done.
On election day itself, voters in Democratic precincts encountered a wide variety of obstacles in the path to the voter's booth. They faced Republican challengers at the polls, the purging of names from voter rolls, and the most obvious scarcity of voting machines, but only in Democratic neighborhoods.
In Republican precincts there were plenty of voting machines, but in urban precincts, where many African-Americans voted, and in other Democratic strongholds, such as polling stations around college campuses, there was a conspicuous absence of enough machines.
For instance, at Kenyon College where Democratic students had registered in record numbers, Blackwell allotted only 2 machines even though there was a 1,300 surge of voters, and the wait was up to eleven hours.
In contrast, Republican fundamentalist students at nearby Nazarene University had one machine for 100 voters and students faced no waiting lines.
Democratic voters at inner-city precincts in cities like Cleveland, Columbus, and Toledo, who were voting for Kerry by a margin of nine to one, had to wait in line up to 7 hours.
Due to a deliberate and well coordinated effort, at other polling station all over the state there were not enough machines and Democrats had to stand in line in the rain for as long as ten hours, and of course just as intended, in many cases it was impossible for people to wait that long so many left without casting a vote.
By midmorning on election day, when it became clear that people were having to drop out of line without voting due to the long wait, precincts asked Blackwell for the right to distribute paper ballots to speed up the process and Blackwell denied the requests, claiming it would invite fraud.
In a desperate attempt to stop the madness, a lawsuit was filed, and the affidavits that were filed by voters and election officials in support of a plea to the courts for help, describe election fraud in motion. An affidavit by an official from Precinct 40 stated:
''I am serving as a presiding judge, a position I have held for some 15+ years in precinct 40. In all my years of service, the lines are by far the longest I have seen, with some waiting as long as four to five hours.
"I expect the situation to only worsen as the early evening heavy turnout approaches. I have requested additional machines since 6:40 a.m. and no assistance has been offered.''
By the time US District Judge Algernon Marbley issued an order requiring that voters be given paper ballots in early evening, it was too late. According to estimates by the Washington Post, as many as 15,000 voters in Columbus alone had given up and left without voting
When poll closing time came, some precincts illegally dismissed voters who had waited for hours in the rain, in violation of Ohio law, which requires that people waiting in line at closing time be allowed to vote.
Critics say there is no way to definitively estimate how many citizens lost their right to vote in Ohio because they were forced to drop out of line to go to work or take care of their children.
The plot to steal the election involved other tactics as well. In the summer of 2004, the Toledo Blade reported that 28,000 voters were erased from the Lucas County voter registration rolls and that the purge included voters like Barbara and Ralph George "who first registered to vote for John F. Kennedy in 1960 and had lived in the same East Toledo house for 44 years."
In Gahanna Ward 1B, at a fundamentalist church, a so-called "electronic transfer glitch" gave Bush nearly 4,000 votes when only 638 people voted at that polling station.
Democratic Congressman, John Conyers of Michigan, and the Democratic staff of the House Judiciary Committee launched an investigation into the Ohio election and received more than fifty thousand complaints from Democratic voters. In stark contrast, there were no complaints filed by Republican voters in Ohio in 2004 alleging a deprivation of the right to vote in Republican precincts.
And make no mistake, the well coordinated statewide effort to steal the election involved a whole bag of dirty tricks. In Columbus, where 125,000 new voters had registered, more than half of them black, the board of elections predicted that it would need 5,000 machines to handle all the voters.
But instead preparing for the large turnout by lining up more equipment, the House Judiciary investigation found that Matt Damschroder, the chairman of the Franklin County Board of Elections, and former head of the Columbus Republican party, decided to "make do" with 2,741 machines.
And even then, he distributing the machines to favor Republicans. According to the Columbus Dispatch, precincts that had voted 70% or more for Al Gore in 2000, received 17 fewer voter machines in 2004, while strong GOP precincts received 8 more machines.
As a result, an investigation by the Columbus Free Press, showed that white Republican suburbanites had average waits of only twenty-two minutes, while black urban Democrats waited on average three hours and fifteen minutes.
During the election, inner city voting machines broke down and polls opened late. The Toledo Blade reported that the sole machine at the Birmingham polling site in east Toledo broke down at about 7 am, and that per order of Blackwell, there were no paper ballots available for backup.
The first major indication that serious voter fraud had been committed was when the wide unexplainable discrepancies began to appear between the exit polls and actual vote counts and they all favored Bush.
Experts say exit polling is the most reliable polling because unlike pre-election polls, in which voters are asked to predict future behavior, exit polls interview people leaving the voting box about an act that they just completed.
On the basis of exit polls in 2004, CNN predicted that Kerry would defeat Bush in Ohio by a margin of 4.2%, but in the end Bush supposedly won Ohio by 2.5%.
In fact, precincts where Bush received at least 80% of the vote, the exit polls were off by an average of 10%, a pattern that experts say indicates Republican election officials stuffed the ballot box in those precincts.
Bush also tallied 6.5% more votes than the polls had predicted in Pennsylvania, and 4.9% more in Florida. According to Steven F Freeman, a visiting scholar at the University of Pennsylvania, who specializes in research methodology, the odds against all 3 of those shifts occurring in concert was one in 660,000.
"As much as we can say in sound science that something is impossible," he says, "it is impossible that the discrepancies between predicted and actual vote count in the three critical battleground states of the 2004 election could have been due to chance or random error."
Mr Freeman made a point of telling Robert Kennedy Jr in an interview for an article in Rolling Stone Magazine that he's no Democrat lover. "I'm not even political -- I despise the Democrats," he said. "I'm a survey expert. I got into this because I was mystified about how the exit polls could have been so wrong."
But Mr Freeman also said in Rolling Stone, "When you look at the numbers, there is a tremendous amount of data that supports the supposition of election fraud."
"The discrepancies are higher in battleground states," he points out, "higher where there were Republican governors, higher in states with greater proportions of African-American communities and higher in states where there were the most Election Day complaints."
According to Mr Kennedy, the exit poll created for the 2004 election was designed to be the most reliable in history. Six news organizations hired Edison Media Research and Mitofsky International, whose principal, Warren Mitofsky, pioneered the exit poll for CBS in 1967
Shortly before 8:00 pm, reporters at each of the major networks were briefed by pollsters and told that Kerry had an insurmountable lead with at least 309 electoral votes to Bush's 174, with fifty-five too close to call.
As the last polling stations closed on the West Coast, exit polls showed Kerry ahead in ten of 11 battleground states, including Ohio, winning by a million and a half votes nationally overall. But to this day, the Bush gang would have voters believe that every single poll was dead wrong.
In January 2006, a group of mathematicians from the National Election Data Archive, a nonpartisan watchdog group, compared Ohio's exit polls to the certified vote count in each of the 49 precincts polled by Edison/Mitofsky and found that in 22 of those precincts the results differed widely from the official tally.
The wildest discrepancy came from a precinct that Mitofsky numbered "27," in order to protect the anonymity of people surveyed. According to the exit poll, Kerry should have received 67% of the vote, yet the certified tally gave him only 38%.
The statistical odds against such a variance are just shy of one in 3 billion, according to "The Gun is Smoking: 2004 Ohio Precinct-level Exit Poll Data Show Virtually Irrefutable Evidence of Vote Miscount," US Count Votes, National Election Data Archive, January 23, 2006.
Such results, the archive says, provide "virtually irrefutable evidence of vote miscount."
The discrepancies the experts add, "are consistent with the hypothesis that Kerry would have won Ohio's electoral votes if Ohio's official vote counts had accurately reflected voter intent."
According to Ron Baiman, vice president of the archive and a public policy analyst at Loyola University, "No rigorous statistical explanation" can explain the "completely nonrandom" disparities that almost uniformly benefited Bush."
The final results he said in Rolling Stone are "completely consistent with election fraud -- specifically vote shifting."
After conducting an investigation of Ohio ballots, on July 29, 2005, another expert, Richard Hayes Phillips, PhD testified at an Election Assessment Hearing in Texas and said, "I have investigated the Ohio election results, precinct by precinct, and have found three categories of problems: voter suppression, ballots cast but not counted, and alteration of the vote count."
Statewide, he said, there were 35,000 provisional ballots and over 92,000 regular ballots that were not counted as votes for president.
These uncounted ballots, he reported, most of them punch cards, were highly concentrated in precincts that voted overwhelmingly for John Kerry, by margins of 12 to 1 in Cleveland, 7 to 1 in Dayton, 5 to 1 in Cincinnati, 4.5 to 1 in Akron, 3 to 1 in Lorain County, 2.7 to 1 in Stark County, and 2.3 to 1 in Trumbull County.
In Lucas County, Mr Phillips said, other means of voter suppression led directly to lower voter turnout in Democratic precincts. The 88 precincts with the lowest turnout were all in Toledo and all were won by John Kerry and complaints were filed in 31 of these precincts.
Among the complaints he noted were: long-time residents removed from the voting rolls, broken voting machines, polling stations running out of ballots and turning people away, voters sent back and forth between polling places, and long lines not designated by precinct so that voters waited in the wrong line.
One-third of provisional ballots were not counted, he said, often because people voted at the wrong table in the right polling place.
But it appears like the chickens have come home to roost because Ohio politicians are now up to their necks in scandals, making its current Republican led government a poster child for the term "culture of corruption."
The largest corruption probe in Ohio history has produced charges against Governor Bob Taft, convicted of four misdemeanors for accepting unreported gifts; and his side-kick, Tom Noe, co-chairman of Bush-Cheney 2004 Ohio reelection campaign.
On October 27, 2005, Tom Noe was officially charged with illegally funneling $45,400 to the 2004 Bush-Cheney campaign at a $2,000-a-seat fund-raiser in Columbus, in a scheme where Noe made contributions by passing the money through 24 friends and associates, described as "conduits" by investigators.
Some of the known "conduits," included 4 current or former Ohio elected officials, including Toledo City Councilman Betty Shultz, Lucas County Commissioner Maggie Thurber, former state Representative Sally Perz, and former Toledo Mayor Donna Owens.
Court records also show that 2 former aides to Governor Taft also served as funnels.
All of the conduits signed donor cards that stated they were the source of their donations even though each knew that Noe made the contributions, prosecutors said. Each politician faced state ethics charges for failing to disclose the money they received from Noe.
On May 31, 2006, Noe entered a guilty plea in the US District Court in Toledo to 3 felony charges related to violating campaign finance laws.
On June 1, 2006, the Toledo Blade reported that, “State and federal politicians from Mr. Taft to Secretary of State Ken Blackwell, the Republican nominee for governor, to California Gov. Arnold Schwarzenegger - have returned tens of thousands of dollars in contributions from Noe and his wife.”
In the summer of 2005, Tom Noe, was described by the Columbus Free Press, as a high-roller crony of Governor Taft, Ohio Senator George Voinovich and President Bush.
That said, at the time of Noe's indictment, a senior Justice Department official called the case the largest campaign money-laundering scheme prosecuted by the DOJ since the new campaign finance laws were enacted in 2002.
For many years Noe was the Chairman of the Board of Elections in Lucas County and he was heavily involved in the procurement deals that brought Diebold voting machines into inner city Toledo and many of those machines suspiciously malfunctioned on election day in 2004. Sworn testimony in hearings conducted by the Free Press after the election confirm that thousands of inner city voters were disenfranchised due to Noe's decisions.
In by now a widely publicized 2003 fundraising letter, Diebold CEO Wally O'Dell promised to deliver Ohio's 2004 electoral votes to Bush, and Noe and O'Dell were two of Ohio's nineteen Bush Pioneers or Rangers, a group that includes only high money donors.
Before Noe got busted, Blackwell and Noe were practically kissing cousins. In the months before the 2004 election, when voting rights activists tried to challenge Blackwell's partisan handling of provisional ballots in court, Noe intervened on Blackwell's behalf.
While Tom handled the court duties, his wife Bernadette worked on the Board of Election in Lucas County to reverse the Ohio tradition of allowing provisional ballots to be cast in precincts other than the one in which voters were registered to help disenfranchise inner-city Toledo Democratic voters.
And as a reward for their large contribution to the theft of the 2004 election, in January 2005, Noe and his wife co-sponsored Ohio’s inaugural ball in Washington, and according to the Toledo Blade, "Mr. Bush and Mr. Noe embraced. The President then hugged Mrs. Noe."
Noe had previously been appointed chairman for a committee of the US Mint, that advises the US Treasury secretary on designs and themes for coins and congressional medals. According to a Treasury Department press release Noe was recommended for the appointment by Speaker of the House Dennis Hastert (R-Ill) and nominated by Treasury Secretary John Snowe.
For years Noe was called northwest Ohio's "Mr. Republican." And his generosity to Ohio politicians did not go unrewarded. He was appointed to the Ohio Turnpike Commission, the Bowling Green State University board, and the Ohio Board of Regents.
But the grand prize came in 1997, when Noe gained access to $50 million from the Ohio Bureau of Workers' Compensation fund and was given authority to invest in coins and other collectibles, and under the contract, 80% of the profits were to go to the Worker's Compensation fund, and the remainder to Noe.
On April 8, 2005, the election theft celebration by the Noe couple came to an abrupt end, when an investigation into the Lucas County election turned up so much dirt that Blackwell was forced to fire the entire Lucas County Board of Elections including Bernadette.
And then twenty days after Blackwell fired Bernadette, on April 28, 2005, the Toledo Blade reported that the US attorney for the Northern District of Ohio, had confirmed that his office, in conjunction with the FBI, was looking into Noe's fundraising activities, as chairman of the Bush-Cheney campaign in northwest Ohio.
Parallel to the Federal probe, the Blade noted, was the investigation of the Lucas County and Franklin County Offices of the Prosecutor into Noe's inability to account for $10-12 million from the Workmen's Compensation fund.
Less than a month later, on May 26, 2005, state law enforcement officials raided Noe's company trying to find out what happened to the missing $10-12 million. The distinct possibility has been raised numerous times, that Noe may have funneled some of the mysteriously-missing money to politicians.
According to the May 31, 2006 Toledo Blade, the Noes have given more than $200,000 to politicians over the last 16 years and their “giving increased substantially," the Blade noted, "after the Bureau of Workers’ Compensation in 1998 gave him the first of two $25 million payments to invest in his rare-coin funds."
In addition to Governor Taft, the investigation has led 2 of Taft's former aides to plead no contest to ethics charges. On July 29, 2005, Brian Hicks, Taft’s former Chief of Staff, and Cherie Carroll, Hicks' executive assistant, admitted that they took gifts from Noe.
On February 9, 2006, the Ohio Elections Commission referred 2 other former Taft aides for prosecution. H Douglas Talbott admitted that he funneled money from Noe to 3 Ohio Supreme Court Justices and accepted a $39,000 loan from Noe, and J Douglas Moorman was referred because he failed to report a $5,000 loan from Noe.
On February 13, 2006, Noe was indicted on 53 felonies counts related to the Workmen's Compensation fund after a grand jury charged him with 22 counts of forgery, 11 counts of money laundering, 8 counts of tampering with records, 5 counts of grand theft, 6 counts of aggravated theft, and one count of engaging in a pattern of corrupt activity under the Racketeer Influenced and Corrupt Organizations (RICO) Act.
Noe is currently right smack in the middle of a jury trial on the above charges, the last thing that Ohio Republicans wanted in the news in the weeks before the mid-term elections.
The future does not look bright for Blackwell. According to a poll reported on November 2, 2006, in Columbus Business First, "a Democratic sweep brewing in key state and federal political races."
"The survey," Business First said, "found 55 percent of those questioned said they would vote for Democrat Ted Strickland in the Ohio gubernatorial election Nov. 7, and 39 percent said they planned to cast their ballots for J. Kenneth Blackwell."
That said, if nothing else, the results of the 2004 election demonstrate that polls mean nothing in Ohio and critics say voters had better not underestimate the possibility of another stolen election with Blackwell still in charge of the process.
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