Thursday, July 08, 2010

Michael Cooper Flies the Coop - Now Cooped Up

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Not All Cause for Celebration
Also, Tax People Founder Finally Imprisoned

Michael Cooper Flies the Coop - Now Cooped Up

For those of you who remember Renaissance, a.k.a. The Tax People, you might also recall that its founder, Michael Cooper, was found guilty by a federal jury of about half of the 148 counts against him, including mail fraud, wire fraud, money laundering and conspiracy - back in February of 2008, almost four years after his indictment. Much of that delay had to do with Cooper's extended stay (on the lam) in Mexico.

The relevant MarketWave Alert is HERE.

Now, over two years later, Cooper has finally been sentenced. He received 20 years in prison, restitution of $10 million to the IRS, and a forfeiture judgment of $75 million.

A local news report can be found HERE.

A comprehensive recap of past local news reports can be found HERE.

Although TTP was initially hit by the Kansas AG in 2001 for, among other things, being an illegal pyramid scheme, which is what got them shut down, it is interesting to note that what ultimately got Cooper and his cohorts sent to sit in the corner for big people was the fraudulent tax advise they were teaching. For example, start a business teaching people how to take business deductions by starting a business teaching people how to take business deductions. So no, it wasn't Cooper's illegal pyramid scheme that eventually did him in. It was tax evasion. As Tom Cruise's character said in "The Firm", it isn't sexy, but it has teeth.

Victory in Legal Battle for Reps - In a War We Don't Want to Win!

A recent decision (HERE) by the 9th Circuit Court in the case of POKORNY V. QUIXTAR (3:07-CV-00201-SC) ruled Amway's (called Quixtar when the case was filed) policy that forced distributors to resolve disputes by private arbitration to be "unconscionable" and unenforceable. So now this class action can go forward through the legal system and eventually, if not settled, before a jury.

There is one rather remarkable comment made within the Circuit Court's decision. The court, referencing a previous case, stated an agreement, or any portion thereof, is procedurally unconscionable if "the weaker party is presented the clause and told to 'take it or leave it' without the opportunity for meaningful negotiations... Thus, we have said that a contract is procedurally unconscionable under California law if it is 'a standardized contract, drafted by the party of superior bargaining strength, that relegates to the subscribing party the opportunity to adhere to the contract or reject it." In other words, practically every M.L.M. distributor agreement is "procedurally unconscionable" and unenforceable under California law!

This decision is certainly a legal victory for distributors, and creates legal precedent that will very likely cause a more rep favorable rewriting of P&Ps throughout the industry at least related to our dispute settlement options. What's more, it demonstrates that even if we, as distributors, sign our Distributor Agreements and thus declare our agreement to all parts of it, that doesn't mean all parts can be legally enforced. Companies are now on notice that you can't make your P&Ps ridiculously one-sided and grossly unfair just because you know most reps won't even read them, and will hardly ever object to them even if they do.

Having said that, we all really should read the Policies & Procedures before we join an opportunity, and if they are ridiculously one-sided and grossly unfair, don't agree to it! Many companies are counting on us all just rubber stamping this step. If enough don't join because of "unconscionable" P&Ps, and make it known that's why they are not joining, these companies will soften their policies all on their own.

So yes, let's celebrate the rep's victory in this particular battle, but before we get too excited, let's consider why this war is even being fought.

In Pokorny v. Quixtar (Amway), the plaintiff is alleging that Amway is committing fraud and guilty of RICO violations because they are operating an illegal pyramid scheme. The basis for this pyramid claim is that in Amway the large majority of distributors lose money, and that most of the commissionable products are being purchased by distributors, not sold to non-participant retail customers. Of course, they are citing the infamous "Webster v. Omnitrition" decision (1994) where the - guess who? - 9th Circuit Court of Appeals opined that M.L.M. companies should only pay commissions on products retailed to non-participants in the business opportunity. This decision overturned a lower court's summary judgment in favor of Omnitrition and remanded the case back to the court for trial (it was eventually settled privately). Fortunately, at least up until now, this was just an opinion and did not create any significant legal precedent. This case, however, absolutely could! In fact, the "expert" hired by Amway's opposition is Robert Fitzpatrick, an über-anti-MLM-zealot who founded the Pyramid Scheme Alert organization. This is the same Robert FitzPatrick that Barry Minkow hires every time he shorts the stock of a public M.L.M. company then needs to publish a negative report to cause their share price to drop.

If someone incidentally creates a cure for cancer while trying to formulate a poison to destroy all life on Earth, should we be celebrating the cure, or raging against the poison? Or both? All I'm saying is, let's be careful about who and what we're rooting for here.

Founder & CEO