MLM Scam . What a dirty headline to read.

Another MLM SCAM in the form of Seaweed Farming.  Investors file suit against the promoter for RM26m refund.

 

This scheme is no different from those investment lots in properties, Sunshine Empire, Café franchise chain, Swisscash and Goldbullion.

A few UK, Canadian and USA companies are selling share(lots) in property,  pending development order, with the promise of huge return. Basically, they purchased a piece of cheap agricultural land in some remote area and promise the investors of high potential in value appreciation, once the land is converted to residential or commercial use. Investor does not get a title document. Just a piece of useless paper of purchase.  UK Land has been declared bankrupt. A few players are still operating in Malaysia, after being raided by Malaysian Central Bank(Bank Negara Malaysia). 

I smell rats. See the earlier post.

 

There are simply too many gullible Malaysians with lots of cash to submit to these schemers.  Greed played a big part in them. They only cried foul after they have lost money. Otherwise, they keep on promoting to their friends and relatives. 

Easy Money is Dirty Money. Remember this.

(Sep 30, Kuala Lumpur) -  Seven investors in a seaweed business representing 2,000-odd investors in Perak who claimed to have been deceived to invest in the venture since 2007, today filed a suit at the High Court here to get a full refund of their investment totalling RM26 million.

They named four companies, Fresh Palms Sdn Bhd, A.K United Sdn Bhd, Genuine Starlight Sdn Bhd and Loyal Sunrich Sdn Bhd, and two individuals P.G.P Nathan, 39, and Choi Kok Peng, 45, as the defendants.

The suit was filed through the law firm of N.P Ramachandran & Associates at the High Court Registrar’s Office at 9.30am.

Nathan is a director of Genuine Starlight and Loyal Sunrich while Choi is a member of the Board of Directors of Fresh Palms and A.K United.

The seven plaintiffs — P. William Rajah, 34, Chong Pek Kuon, 36, R. Edwin, 48, Abu Bakar Maidin, 52, S. Nathan, 56, M. Gunaballan, 58 dan P.K Pathmanathan, 58 — claimed to be representing the 2,000-odd investors who had suffered losses after investing in the seaweed business, which was conducted in Semporna, Sabah.

They claimed that the fifth and sixth defendants (Nathan and Choi) had cheated them by claiming hefty returns awaited legal investors of the venture.

They also claimed that Nathan had made a representation that each invested lot would receive a revenue three times the value of the investment within six months, with each lot initially priced at RM3,300, but was later increased to RM6,900.

The plaintiffs also claimed that investors who invested more than five lots were promised a holiday package overseas, while those who introduced a friend to invest in the venture would be given a commission.

Choi was also alleged to have promised a revenue three times the value of the investment, besides an investment certificate from VOIPCOM USA Inc, a United States-based company which allegedly agreed to carry out the project.

The plaintiffs claimed that because of the assurance given by the defendants, they had invested a total of RM25,826,800 between February 2007 and November 2008.

They are now seeking a full refund of the investment money, eight per cent interest, costs and other relief deemed fit by the court. — (Bernama) September 30, 2010 (Malaysian Insider)

Money Game - Jazmeen (M) Sdn Bhd

Many MLM companies are moving away from the traditional MLM channel of distribution. Some are in dubious business of "getting rich quick" scheme. The recent raids by Malaysian Central Bank (Bank Negara) is the proof of the rampantness of such activities and the number of greedy peoples supporting such scheme. 

There are still people whom believed that such schemes are legitimate investment. They still do not understand where the earnings are derived from. 

I just do not believe there are still so many gullible people. Recently, I met a professional with a master degree in finance. Although he lost money under the Swisscash scheme, he still believe that the scheme is genuine. He blamed Bank Negara for raiding and closing down the company. He claimed that he would not have lost money, if Bank Negara did not close down the company.

Even learned and professional Malaysian can be so gullible. Whats more with the uneducated or lowly educated people. See the latest news from the Star.

Wednesday July 28, 2010

Bank Negara seeks to nab five in get-rich-quick schemes

By TEE LIN SAY
linsay@thestar.com.my

KUALA LUMPUR: Bank Negara is seeking to arrest five individuals who are suspected of operating get-rich-quick schemes.

The five individuals are Dahlan David bin Abdullah, Ramunatul Aida binti Rahmat, Abd Halim bin Rafii, Abdul Halim bin Che Ismail and Harun bin Mat Saat. They are all believed to have commited crimes involved in illegal deposit taking and money laundering.

“They are operators of illegal schemes. They held positions of director in their respective companies. We believe they are all still in the country,” said a source who is investigating the case.

Illegal deposit taking falls under the Banking and Financial Institutions Act 1989 while money laundering falls under the Anti-Money Laundering and Anti-Terrorism Financing Act 2001.

Dahlan David and Ramunatul were respectively chief executive officer and director of Jazmeen (M) Sdn Bhd.

In a 2007 note to investors, Dahlan said “... Jazmeen is a platform and avenue for people to invest, save and earn a profitable monthly return, as we are growing by the numbers. My goal is to turn Jazmeen into an international business conglomerate”

Abdul Halim bin Che Ismail was a director in Silver Coin Resources Sdn Bhd while Abd Halim bin Rafii was in Syarikat Eastana Farm Industries Sdn Bhd. Lastly, Harun was in Pan Phoenix Dina Sdn Bhd.

Bank Negara is offering rewards to members of the public for information that leads to the successful arrest of these individuals. In March, a task force, helmed by Domestic Trade, Co-operative and Consumerism Minister Datuk Seri Ismail Sabri Yaakob, was formed with Companies Commission of Malaysia (CCM) chief executive officer Datuk Azmi Ariffin.

Azmi also presides on the working committee that consists of other regulators such as Bank Negara, police, the Securities Commission of Malaysia and the Cooperative Commission of Malaysia.

Last month, the task force obtained a conviction against Grand Merger Resources Enterprise for illegal cash transaction under the Kootu Fund (Prohibition) Act. The other cases, relating to illegal interest schemes against Island Red Cafe and Golden Nest Sdn Bhd under Section 84 of the Companies Act, are pending trial in court.

In May, Bank Negara started investigating The Gold Label Sdn Bhd for suspected illegal deposit-taking and money laundering activities.

The central bank raided the company’s premises in Northpoint Offices, Tower A Mid Valley City, Kuala Lumpur yesterday, following complaints received from the public.

Relevant assets and documents were seized for purpose of investigation. A global economic crime survey in 2009 found that nearly half of the financial crimes were committed by middle managers as a result of the economic downturn which had affected many organisations.(Source The Star)

Amendment to Direct Selling Act 1993 (Malaysia)

Amended Direct Sales Act 1993 (Malaysia)

Datuk Seri Ismail Sabri Yakcob

KUALA LUMPUR (June 8, 2010): Amendments to the Direct Sales Act 1993, aimed at ensuring a more ethical direct selling business, are expected to enhance traders and investors' confidence on business prospects in Malaysia.

Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yakcob said the ministry was also confident that the proposed amendments would curb unscrupulous practices through the pyramid scheme in the direct selling business.

The act was being amended to protect consumers' rights and interests, encourage growth and development of ethical direct selling activities and to ban all form of business using the pyramid and get-rich-quick schemes, he said when tabling the Direct Sales (Amendment) Bill 2020 for its second reading in the Dewan Rakyat today.

Ismail Sabri said the proposed amendments would also see an increase in penalty against offenders, including a higher fine fine of between RM1 million and RM10 million on companies found to promote or carry out business using the pyramid scheme.

For individual offenders, the fine will be between RM500,000 and not more than RM5 million or jail not exceeding five years or both, for the first time offender. --  Bernama.

How sincere and effective is the proposed amendment in policing the direct selling business in Malaysia?  The Ministry cannot police the industry effectively with the licenced players. What more to say about those illegitmate MLM companies?

Some licenced MLM companies with AJL number proudly printed on all business documents and forms. Their business are sactioned  and supported by other Ministers in their official launches. But these companies blatantly violated the DSA.

Just look at some of the application form for distributors and direct sellers and their sales invoices. Read those fine prints at the back or on the bottom before the doted line for applicants signature. Complaints were lodged with the Ministry. As usual, no action taken, especially for those crooked MLM companies with political connection.


Isn't this all hot air about protecting consumers?

Sample of these forms will be posted later.

Independent Business Owner (IBO)

I was an Amway distributor 30 years ago. My upline DD (Direct Distributor - a rank in Amway marketing plan) always remind me not to display the products at any commercial outlet.

Many part-time Amway distributors were coffee shop operators, dhoby shop operators, tailors or sundry shop owners. They displayed Amway products in their shops. Amway warned those distributors and threatened to terminate their distributorship. The reason being the shop owners have a competitive advantage over other distributors without a retail outlet.

Some MLM companies still practise this policy

My brain was conditioned by my upline that the key feature of the Amway business is “doing your own business without any overhead cost”. That means a distributor does not incur any stock holding cost and no fixed cost to pay every month. Sound great isn’t this? But in reality is this practicable?

Is MLM direct selling still running on the same principles today?  I am afraid not.  Today’s distributors are not on level playing field.

They have deviated from the original MLM concept.

 

Most MLM companies have started having retail outlets. Some of these retail outlets belong to the MLM companies, while others are distributor-owned. Some distributors open their own retail outlet on their initiative.  Some are stockist outlets.  
There are also distributors whom are compelled by the MLM companies to open retail outlets. These MLM companies discriminate the distributors with commission structure.

Is MLM direct selling dead?  Looks like it is heading to that direction. In the early day of MLM business, AVON was the only direct selling company operating via the franchised boutique store. They are the single-level marketing (SLM) company.  More and more established MLM companies are following the AVON concept by opening retails outlet directly or through their distributors.

These outlets are called Independent Business Owner (IBO), Franchise Business Owner (FBO), Franchise Stores or Distribution centres. You can called them by whatsoever name you may so choose but in substance these are retail outlets. 

The home party system by Tupperware, has also joined the bandwagon.

The key difference between conventional proprietary retail outlet and the IBO or FBO is that you are subjected to control by the MLM companies. MLM companies controlled the products you can sell, the price you can sell and the profit you can make. And your profit is your commission and you are still at the mercy of the MLM companies to pay you. Why there are still so many suckers around?

The true Independent Business Owner is  your neighbourhood papa-mama store.

Some of these MLM IBO or FBO operates a “side business” to re-coup the fixed cost. You would not be surprise to find foot reflexioloy, massage, facial treatment, manicure and pedicure, café, hair dressing and food business being transacted side by side.

The saying that the MLM companies keep shifting the goal post while the game is in progress is very true. The IBO and FBO earn higher commission for the same product sold, as compared to those without a retail outlet. Who can say the business is on level playing field?

The Myths of MLM is being challenged further.

See the picture of the MLM retail outlets of  Zhulian, Cosway, Elken and  Sunrider.

Did you notice a small piece of flyer sticked on the glass door of the shop? Most of these shops offer services like facial treatment, manicure  pedicure, foot reflexiology etc to supplement their revenues.

What is next on MLM?

Many entrepreneurs and businessmen are comtemplating MLM as a distribution channel.  In Indonesia, basic groceries such as rice, sugar, dressed chicken are sold via MLM. A few businessmen have approached me to sell their products via MLM. I am quite wary of those schemes with any element of money game or scam. 

One proposal involved live bird, fish, processed meat and ready-to-cook food.

Today, the Chinese burial plots are being sold via MLM. Restaurant franchise, gold bullion, unit trust, holiday resort, time sharing resort, land investment and your own future funeral package are also being sold via MLM.  What is next to join the queue?  Probably, the China woman will be available through MLM.

Imagine buying your own funeral package for future use. And, this is transferable to any other buyers. 

And, the word  MLM really stinks. A new term is therefore coined. They called it NETWORK MARKETING.  A new term does not change the substance. There are many scams involving the network marketing activities.

The most recent scam involving an established food outlet was reported in the cyber media.

Investors cry foul over KL cafe chain

Police are investigating a restaurant franchise chain after 10 investors, including a Singaporean, lodged a report claiming one of its directors had absconded with more than RM9 million.
The investors are part of a group of more than 3,000 people, mostly Malaysians, who bought shares in the franchise known as Island Red Cafe. About 200 Singaporeans are said to have invested in the company, which claimed a monthly turnover of about RM2 million.
Each lot of shares was sold for about RM6,000.
The first Island Red Cafe opened in Kuala Lumpur in 2007. The cafe is known for its range of local and Western food and has 15 outlets throughout Malaysia.
The 10 investors lodged their police report at the Nusa Bestari police station in Johor Baru on Sunday.
The MCA Youth’s consumer affairs bureau, which promotes and enforces consumer rights, is working with the police to deal with complaints.
The Singaporean who lodged the report, Ng Ee Siong, 50, said he was lured into investing in the business by its concept.
Ng, who works in a multi-level marketing business in Singapore, said that in return for a lot of shares that he bought some time last year, he was given a voucher worth RM100 to spend at any Island Red Cafe and RM300 in cash on a monthly basis.
He said: “I could easily have made back my principal sum in two years that way and earned a profit too.”
He said he bought a second lot of shares late last year and also introduced five Singaporean friends as investors.
But Ng claimed that he stopped receiving the vouchers and cash payouts earlier this year, adding that he had not been able to contact any of the company’s four directors — including the one who is said to have absconded. (article extracted from Malaysia Insider)


MLM, Networking Marketing or the newest IBO ( Independent Business Owner) are the same old stuff by the same old gang of people.  My next write up will be on IBO.

Things you need to know about MLM companies and their products

There are many scams involving MLM companies nowadays. These MLM companies no longer preserve their ethics that they endeared so much in the past. The principle of delivering quality products directly to the consumer at a “value for money” price and with money back guarantee has diminished.

The motive of many MLM companies today is to make “BIG” bucks and make it fast.  Product quality and price have become secondary.

To avoid being cheated by the unscrupulous MLM companies, consumers must be able to differentiate the products, the MLM companies and the direct sellers.

As at February 2009, there are 670 licensed direct selling companies approved by the Ministry of Domestic Trade, Co-operative and Consumerism. The direct selling industry generated a total revenue of RM4.56 billion in the year 2007. The ministry revoked the license of 12 direct selling companies. (source: Ministry of Domestic Trade)  On top of this figure, there are hundreds of unlicensed/illegitimate direct selling companies.

There are two direct selling trade associations in Malaysia. One is the Direct Selling Association of Malaysia (DSAM) and the other is the Multi-level Marketing Association of Malaysia. (MLMAM). The former consists of the big players whilst  the latter belongs to  the small timers.

All approved direct selling companies in Malaysia carries a license number with the prefix AJL 123456.  This license is issued by the Ministry of Domestic Trade , Co-operative and Consumerism.  This license number must be printed on all the official documents of the companies. Every direct seller of approved companies must carry an ID card with the AJL number.

Most MLM companies are in the business of health food, food supplements, traditional medicines and cosmetic & skin care. These products are subject to control and approval by the Ministry of Health, National Pharmaceutical Control Bureau. All approved products must carry the approval code BKP- MAL12345T.

All product inserts, brochures, leaflets and catalogue of health food, food supplement, traditional medicines and cosmetic & skin care must be vetted and approved by the Medicine Advertising Board. Approved product inserts, brochures, leaflets and catalogues carry a code number KKLIU12345/YYYY/ABCD.

So, to all the wise consumers, please ensure that direct sellers, be they your relatives, friends, colleagues, acquaintances or strangers, fulfill all the above-mentioned conditions before looking at their products and talking to them. If you are not cautious, there is a high chance that you will be scammed. There are now many unlicensed products being sold in the market.

Can you remember the famous “Slimming Pill” case in Singapore which caused liver failure? So, don’t be gullible.

MLM Companies Opening Retail Stores and Self Service Stores

MLM is a Multi-level Marketing system of direct selling. The fundamental concept of MLM is to sell products or services directly to the consumer via their own individual network of distributor, thereby by-passing the conventional channel of wholesaler and retailer. The advertisements of the product or services are also through the network of distributors by words of mouth and brochures, and hence eliminate the huge advertising and promotion cost usually borne by the marketing company or the manufacturer/producer.

The original concept and philosophy of MLM is to deliver quality products to consumer at lower cost and with personal touch and integrity. “Money back guarantee” was a practice they uphold strongly with pride. The MLM company, like Amway, also use simple, functional and cost effective packaging for their products. They save huge amount of money on advertising & promotion, packaging and distribution cost. The saving in cost is paid to the distributors in the form on commission.

Does the MLM company today still conserve the original concept and the core values of MLM? I am afraid the answer is “NO” to many established ones, as well as the newly sprung up MLM players.

I have been in the MLM industry for more than 20 years as a distributor and an employee of a MLM company. Both the MLM companies and its distributors no longer practice direct selling with the fundamental concept of delivering quality product at lower cost with personal touch and integrity. Instead, every MLM company and distributor practice “Make “Big’ money fast” and disappear quickly. It is sad to see a genuine business distribution channel being tarnished and destroyed by greed. Nowadays, the MLM people have no ethics and principles. They will go to the great extreme to extort money from whomever they can get hold of. Stranger and relatives are not spared.

Due to the aggressive and disgusting approach taken by direct seller, many MLM companies now resorted to opening retail outlets and self-service convenience stores, hoping to attract consumers, without the harassment of the “unwanted” direct sellers.

So, is this the dead nail of MLM and back to conventional distribution channel? Only time will tell.