Amway: Republican Benefactor Launches Comeback

OAKLAND, CA (IPS) — While the alleged Ponzi scheme of New York investment manager Bernie Madoff has claimed significant chunks of the fortunes of a number of well-known charities, celebrities and not-so familiar millionaires, over the years another outfit appears to have left a trail of a different sort – the broken dreams of thousands of wannabe entrepreneurs who were left with garages full of dust-gathering products, motivational tapes and how-to-get-rich-quick books.

Those who watched television over the winter holidays may have wondered why there seemed to be so many commercials for a company called Amway Global. Were these ads for the same company that has over the years been widely accused of running a pyramid scheme, had paid nearly 20 million dollars in fines in a Canadian criminal fraud case 25 years ago, and whose image with the public in recent years soured faster than a carton of cottage cheese left standing in the sun?

More recently, two former Amway/Quixtar distributors filed a class-action suit in federal court in California, charging Quixtar and several of its high-level distributors with fraud and racketeering.

Despite these controversies, Amway — which is temporarily being called Amway Global — appears to be heading back home. Can the company, which celebrates its fiftieth anniversary this year, stage a successful comeback in the U.S., or are they throwing a very desperate Hail Mary?

Eric Scheibeler, author of Merchants of Deception, a highly critical look at Amway, told IPS that the controversies stalking the company continue to this day.

Scheibeler said that he had “worked with local victims and initiated a UK government investigation in which the DTI/BERR (Department of Trade and Industry/Business, Enterprise & Regulatory Reform) took legal action against Amway and is waiting for an appeals court decision to potentially ban them from the country.”

According to Scheibeler, a high level “Emerald” Amway member who uncovered fraud and deception within the company and was ostracised for it, “UK Justice Norris found in 2008 that out of an IBO [Independent Business Owners] population of 33,000, ‘only about 90 made sufficient incomes to cover the costs of actively building their business.’ That’s a 99.7 percent loss rate for investors.

“The scheme appears to be falling apart in the U.S., UK and Australia hence the beefed up prime time ads in the U.S.,” he said.

IPS spoke with an Amway Global public relations person who provided some corroborating background for this article. However, questions focusing on the British lawsuit and Amway’s political activities — which the company required to be submitted via e-mail — were never answered.

Amway — an abbreviation of “American Way” — was founded in 1959 by two high school buddies from Grand Rapids, Michigan, Richard DeVos and the late Jay Van Andel. In 2000, it became part of an umbrella company called Alticor Inc., which does business as Quixtar in the U.S. and Canada and as Amway Corp. throughout the rest of the world.

In the intervening decades, Amway has become the second-largest direct-selling company in the world. In 2007, Amway Global and other companies under under Alticor umbrella reported sales of 7.2 billion dollars for the year ending Dec. 31, 2007, marking the company’s sixth straight year of growth.

Van Andel and DeVos became major financiers of Republican Party candidates and Religious Right causes. According to Progress for America, Amway’s founders contributed four million dollars to conservative groups in the 2004 election cycle.

In April 2005, Rolling Stone magazine reported that DeVos was connected with the dominionist political movement in the United States and that DeVos was had given more than five million dollars to the late D. James Kennedy’s Coral Ridge Ministries.

Despite the controversies and legal challenges the company continues to face, it never went out of business; instead, it shifted the bulk of its efforts to overseas markets. These days, its three current growth hotspots are Russia, China and India.

“In the late 1980s, about three-quarters of our business was here in the U.S.,” Steve Van Andel, Alticor’s chairman and co-chief executive and the son of one of Amway’s founders, recently told the Associated Press. “Now about 80 percent of it is outside the country.”

The privately owned company, which is called Amway Global — it intends to revert back to Amway in about a year — has several goals, including reacquainting the public with the company’s extensive product line — which includes health and beauty items and homecare products, jewelry, water purifiers — and refurbishing its tarnished image.

While times may be tough economically for a sustained rebirth, company officials “hope to repeat in the United States the kind of growth they’ve seen abroad in the past — and to revive the mystique that helped the company spread throughout the Midwest and, by the mid-1960s, the rest of the U.S. Amway’s hundreds of thousands of distributors dreamed of getting rich by selling cleaning products and by recruiting their acquaintances to join the fold,” AP reported.

According to AP, the company is still “operating on that basic model, including prices that tend to be higher than those of their competitors.”

While there is no question that the Amway story is a unique Horatio Alger-like U.S. success story, what makes it even more fascinating is that along the way, the company’s founders — and their progeny — have become political kingmakers.

In October, former Amway Corp. chief Dick DeVos held a private fundraiser featuring President George W. Bush, to raise money for the National Republican Congressional Committee and the Republican National Committee.

For nearly 40 years, the DeVos family has been a major benefactor of both the religious right and the Republican Party. Shortly before the 1994 election, the Amway Corporation gave the Republicans 2.5 million dollars which, at the time, was “the largest political donation in recent American history,” the Washington Post reported.

And in 1996, the company donated 1.3 million dollars to the San Diego Convention and Visitor’s Bureau “to help fund a Republican cable TV show to be aired during the party’s national convention,” the Associated Press reported. The program featured “rising GOP stars as ‘reporters,'” and aired on the Family Channel which was owned by Pat Robertson.

In 2006, former Amway President Dick DeVos ran for governor of Michigan, as a Republican against Michigan Governor Jennifer Granholm. DeVos, soundly defeated by 56 to 42 percent of the popular vote, recently announced that he would not run again in 2010. “Although Bernard Madoff allegedly swindled 50 billion dollars from about 8,000 victims, he seems to be an amateur in comparison to Amway,” Eric Scheibeler noted.

“Amway has brought in far in excess of that amount from tens of millions of consumers who invested in ‘their own Amway business’ and it seems near all did so and continue to do so at a loss. The difference is that the Madoff pipeline is shut down, while you may be recruited to an Amway meeting tomorrow.”

Bill Berkowitz is a longtime observer of the conservative movement. His column, "Conservative Watch," documents the strategies, players, institutions, victories and defeats of the American Right. Read other articles by Bill, or visit Bill's website.

6 comments on this article so far ...

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  1. Myles Hoenig said on January 30th, 2009 at 11:15am #

    It is such a shame that the excellent products of Amway are associated with these demons.

  2. Rahb said on January 30th, 2009 at 5:31pm #

    Myles: Agreed. Please do not regard this as a defense of Amway, just another view on it. About 10 – 15 yrs ago I was involved in Amway and continued as Quixtar began to roll out. The product was decent (often better than competitors) and more name brands became available. Contrary to the article, I was never asked to ‘fill my garage’ with product or even purchase a few extras to have on hand, it was possible to order directly from Ada via telephone and delivery was fairly quick, with Quixtar this became available via internet. Some groups on the other hand did encourage the store and sell method (making miniature door to door type walmarts) as they were very short-sighted and thought that this would give them a competitive edge (a friend’s husband lost their shirts in a group separate from mine, while I actually made a little money and the start-up cost was made up for within a month or two, not the millions that the other guys were after, but never got, mind you). Again contrary to the article, at the time the cost of the products, including delivery etc., was very often far better than competitors, I’d kill to get a cube of toilet paper (hundreds of rolls) at the price I got then, which was not much more expensive than what we would otherwise have paid for 36 rolls elsewhere…
    Tapes, books, and seminars were very much encouraged (as they are with any “self-help” seminars/ groups etc.) in all of the groups, and some people believed that they should continue purchasing them with blind confidence that they would bring about miracles or something, but never actually used the information within. I got 7 Habits of Highly Effective People and others that helped with a number of things in my life at the time. My “upline” / subsequently my “downline” and I realized that buying more books, tapes, etc. than you can effectively read, learn from, and use, or buying stuff that wasn’t working for others ’cause it’s on the list, didn’t make sense; so, we bought a few and shared them freely amongst each other.
    All that said, as we attended occasional seminars, I noticed more and more pressure to support and attend their religion and politics. That was a major reason that I left, as I’d been brought up to believe that discussion of religion and politics loses friends faster than anything, it didn’t seem to be a good business strategy.
    Of course my current views challenge the pyramid structure of our entire society (which, in all honestly, Amway adheres to more than taking it to the extreme – Banks, Inestment groups, and Oil companies are far more pyramid scammy than Amway was) , my view challenges the “benefits” of Capitalism etc. prized by Amway, in addition to seeing that sort of company as being more harmful to society than helpful (people already have replaced friendship with networking acquaintances far too much), the list goes on… Nonetheless, distorting or not providing both sides of the information about the company would only serve to encourage people to look into it and when they realize that they don’t, by Amway’s rules, have to keep stock on hand etc. they may participate not realizing/ failing to identify other problems with it.

  3. Rahb said on January 30th, 2009 at 5:34pm #

    “…participate not realizing/ failing to identify other problems with it…” including the huge donations to a political party of the companies choosing (as opposed to that of the people, much like any other corporate government.

  4. Myles Hoenig said on January 31st, 2009 at 3:30pm #

    Rahb,
    Like in any huge corporation with downloads and uploads and management and peons, there will always be small groups that defy the conventional stereotype that the organization encourages. So in your group it is normal for you to be respected as you were. And, in a ponzi scam, some people do make money. You got out just in time, it sounds.

    m

  5. Rahb said on February 1st, 2009 at 3:00pm #

    Myles, re. “…got out just in time…”, too true – one guy in my group managed to sell a vacuum cleaner and got one for himself, I pointed out that this would have him and the “customer” forever buying parts, filters, etc. from them, but he blew a ton before figuring it out for himself. So there are traps in it for everybody.
    I had another friend in another group who’s experience was like mine, again pulled in a little money from it. The key with us is that we actually read. We read any agreement, instruction, etc. that came our way and tried to actually understand the rules of Amway as a whole (or as a hole). That way, even if someone further up the chain said anything contrary they’d have to prove it. Most people just go with the mob though…

  6. R.D. Saunders said on June 2nd, 2009 at 2:10pm #

    I am the leader of Network of Caring the non-profit organization of Jim Dornan, a highly successful Independent Business Owner in Amway and founder of Network 21. There is no excuse for the failings of some in the Amway business. It is clear that you have a lot of passion and want to make a difference in the world. But should you judge an entire group of people you do not know because of the failings of some?

    The fact is, Jim Dornan’s Network 21 community of Amway is comprised of some of the finest people on earth. Your wholesale attempt to impugn them smacks of a judgementalism I think you would despise. And in your haste to condemn you have ignored or overlooked the fact that this organization has done some amazing things for peace and social justice around the world.

    I can’t speak with authority on Amway but I know for a fact that the Network 21 family of Amway IBO’s has done some amazing things.
    1. They have contributed $30 million to World Vision, a child sponsorship organization helping 100s of 1000s of children world-wide. In fact Network 21 is their largest corporate sponsor.
    2. They started the Karuna School and Hostel in Mumbai India rescuing 100s of orphans from the streets of Mumbai.
    3. They started the Fernando Foundation to promote power soccer where handicapped children can play a sport and become an athlete. Fernando has launched 55 teams in the US serving about 400 athletes.
    4. They pay the coal bill for an orphanage for deaf chidlren in China and have purchased hearing aids for several of them.
    5. They have purchased more than 1000 wheelchairs in parts of the world where people cannot afford to buy one and must crawl in the dirt.
    6. They paid for homes for abused children in San Diego.

    I could go on and on. We have people from every Christian faith, no faith, Muslim faith, Hindu faith, Buddhist faith and etc in our organization. I just think that maybe your article should have been more measured and thoughful…a lot of good things are happening.

    And as for the Amway business opportunity, there are many people who have failed at different businesses in their lives while others succeed in them. The same is true for Amway. The cost to start an Amway business is minimal, the training materials are essential, and those with a strong work ethic will do well. Many people are succeeding beyond their wildest dreams. We only tell them that if they work hard and are committed to personal growth they will probably succeed…so many have and it is undeniable.