It’s called “affinity fraud”.

Here is the U.S. Securities and Exchange Commission’s definition of affinity fraud:

Affinity fraud refers to investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups. The fraudsters who promote affinity scams frequently are – or pretend to be – members of the group. They often enlist respected community or religious leaders from within the group to spread the word about the scheme, by convincing those people that a fraudulent investment is legitimate and worthwhile. Many times, those leaders become unwitting victims of the fraudster’s ruse.

You can read more about affinity fraud by clicking the link to the SEC site above.

MadeBig and Transcend Marketing International Inc. are examples of this type of fraud. Think back to 2006 when the MadeBig “shopping site” was being hocked by your friends, family, people in your community – and now how many are still involved or have anything good to say about it? Certainly a few have stayed with the scheme over the years as it changed format but the vast majority have quit since 2006 – finally realizing they had been conned.

Affinity fraud was featured in an NBC ‘Dateline’ story which ran last month, entitled “Too Good to be True”. The amounts lost and the sheer scale of the fraud by far eclipsed anything Richi Roane or TMII have ever achieved but the story was similar and the methods the same.

Although ‘Dateline’ gave the story a lot of exposure, the story had been featured in various media outlets as the perpetrators of the fraud were being prosecuted. So large was the fraud that the FBI and the SEC investigated and prosecuted the three ring leaders, securing stiff sentences for the fraudsters.

What caught my eye especially was the way that peoples’ faith had been taken advantage of – talk of using the profits (which never existed for the investors of course) for good causes. It appears that church groups and other good folk make very easy targets for such fraudsters and history has shown that Richi Roane’s TMII are no strangers to targeting these groups and taking full advantage of their trust.

In the Dateline (Tri-Energy) scam story, the scam was spread among Mormons who were often acting in good faith and believing it could only be good. Unfortunately, they had unwittingly joined with people out to deceive them and fleece them for as much money as they possibly could – with the vague possibility they could pay them some kind of return or dividend, as new members joined – effectively a good old Ponzi scheme.

If you didn’t catch the show and haven’t read the story, it makes for an interesting read and you will likely draw parallels to the MadeBig scam, as I did.

Daughter turns mom in for Ponzi scheme

‘Something had to be done,’ about $50 million fraud, she said on TODAY

I was struck by how similar this tale is to the same stories received at MadeSmall by victims of TMII’s MadeBig scam.

Although the story on TV was about another, larger scam, the methods and the effects were exactly the same as those in the MadeBig story.

The daughter in the story did a lot of detective work and passed on recordings of conference calls to the US Securities and Exchange Commission, who later prosecuted the three ringleaders and put them into a federal prison. Although the mom and an aunt were investigated, the Federal authorities decided they were as much victims and declined to prosecute them. One would hope they took this let-off as a final warning not to get involved in such a scam again.

Similar recordings of the MadeBig scam exist and many are available on this website.

Perhaps this goes some way to explaining why Richi Roane and his ringleaders have largely gone underground. They would do well to remain that way, given the new climate of business regulation.

The story is also featured on NBC’s ‘Dateline’ tonight at 9 pm Eastern/Pacific, 8 Central
Dateline: “Too good to be true”

Oregon Department of Justice, Salem

You can read about it in the case study of Mike’s agency with TMII.

You can see the full complaint activity report for Mike’s case here.

With a new web domain and URL, Roane now pitches his Empowerment Program, under the guise of YEP – Your Empowerment Program, which can be found at www.yep4life.com

Richi markets the site in a way that those silly enough to sign up as agents get what seems to be their own site – in effect a sub-domain of yep4life where their URL becomes something like theirname.yep4life.com and would allow the agents to then get the credit for signing up people from their sub-domain. Their name and contact details are inserted at the top of the generic home page, if the agent desires this.

Businesses have used this approach before and in some cases been prosecuted for an obvious pyramid scheme so it will be interesting to see if this development/iteration catches the attention of the relevant authorities. Companies have made the mistake of maintaining that the sub-domain is the product the agent bought but in reality it is the false opportunity to sell agencies. The argument is often made that the agent can sell other products from the site such as training materials but again, this has lead to prosecution in the past. Once again, this is an old idea which Richi Roane has recycled and will maintain that it is new and revolutionary when it is anything but.

The new site includes an income calculator “for illustrative purposes only” of course. It allows viewers to estimate their income if so many people sign up below them.

Supposedly, everyone signing up sits on the same level, yet the calculator shows 12 levels below the agent so this can be taken with a grain of salt.

Of course, it inflates the potential income by automatically assuming that all those signed up on the levels below will actually recruit anyone else. The facts of multilevel marketing indicate that most of those who sign up on the lower levels will not continue the pyramid and the only income they send up the line is their initial sign-up fee.

Additionally, there are limits to the amount of levels that any scheme like this can sustain. If you assume the top agent recruits six people and then the recruits each sign up another six and so on, you have created the classic pyramid diagram which exceeds the entire population of the world around level 13.

The unsustainable exponential progression of a classic pyramid scheme

Strangely, the YEP calculator thinks that by stopping at level 12, it can avoid being labeled a pyramid scheme. If you enter six in every field of the calculator, you get some rather ridiculous results:

It looks like new wrapping paper on the same old pyramid scheme but we’ll be keeping an eye on this over the next few months.

If you have any comments or rebuttals, feel free to post them on this page.

They are called ZCHP Limited Company and include screen shots of both the current MadeBig site and the TMII Back Office, as two of the three examples on their site.

Interestingly, 302 Productions also list the MadeBig site in their portfolio. You may recall that 302 Productions is owned by Glen Gunnell, former Creative Web Designer for TMII, who was laid off in December 2008, along with most of the other TMII staff.

I question the wisdom of claiming to be involved in any way with TMII/MadeBig – let alone listing them in a portfolio, given their track record and the fact that the Oregon Attorney General’s office determined in 2007 that TMII could be a pyramid and issued a warning. Current Attorney General’s office spokesman Tony Green said in July 2009 that the office has not changed its opinion.

Richi Roane

Richi was excited that Crescent City, California, seemed to be the new hotbed for TMII Empowerment Program activity. You may recall this is the home city of TMII “wannabe” Kevin Fugate who is documented as stating he made no income from TMII in the past year in his public bankruptcy documents, yet continues to be associated with this scam.

There were at least three callers who introduced themselves from Crescent City, underlining the fact that TMII have made some headway in another smalltown, USA.

Roane discussed how the TMII Back Office has been changed (new Back Office was rolled out on Friday November 13th) and also how Empowerment Program agents will get their own website, to further market the pyramid. Richi talks about there being just two legs beneath each agent but however he presents it, it is common knowledge that pyramid promoters are the masters of redrawing the pyramid to make it look like anything but.

Richi said it was “exciting to see the growth” and co-host, Gerald Parks (clearly the latest Terry Lussier of TMII) talked about the “tremendous feedback” he was receiving. As usual, this is to be taken with a grain of salt as few people associated with this scam are able to stay truthful and fact-based.

On this occasion, Roane opened up the call to agents’ questions.

The first question from an agents* was can you catch up on empowerment program workshop calls that you miss – are they recorded and available?

Roane’s answer was that you can’t catch up although the calls are recorded – how difficult would it be to put the calls online (as we do on this site very easily?) Roane’s almost prehistoric solution was don’t worry – the workshop series is only 16 weeks long so simply wait until that workshop comes around again and listen then. Seriously…….this was from the so-called Internet Guru.

The next question asked about site names for the agents’ own sub-sites that they will use to market the pyramid scheme to a cold, Internet-based market. The agent asked if they could use their own name (forename-surname). Richi (who really doesn’t care what you call it, so long as it doesn’t claim to be his sites) gave very rudimentary advice on what search engines might use and how important it was for a good ranking but really nothing of substance.

The last agent question asked if agents would receive e-mail notification when people sign up on their sub-website. Richi’s answer to this was yes.

After the question and answer session, there was more discussion of the new MasterCard debit card. Agents can earn reward points, as with conventional reward point cards and get 1 point for each dollar spent on the card.

Finally, there was yet another reference to ‘Autoship’ which apparently still exists although no mention was made of what the agents get for their money each month.

Richi Roane

As usual with these MLM conference calls, the beginning was chaotic as Roane himself came late and co-host Gerald Parks got things going. Without a formal ‘turn’ system, agents introduce themselves and talk over other agents, making the whole exercise somewhat pointless.

Announcements made when Roane finally showed up regarded the new TMII Mastercard (debit card) which is being marketed as the latest novelty in this long-running pyramid scheme. As well as the card, there is a benefits and rewards package which Richi suggests has 800+ merchants involved. This may be an exaggeration though, based upon Richi’s past documented exaggerations although as this is a package bought from a third party this time, it is not unlikely.

Roane asked for Kevin Fugate to talk about the card and benefits package but he was not available on this call. Fugate makes an interesting choice of spokesman, having been involved with TMII and MadeBig for some years, claiming to make all sorts of income from his association, yet declared bankruptcy earlier this year. His financial records show no income from TMII so his opinion and experiences are suspect, at best.

Agents were encouraged to be on all scheduled calls for updates. This would be 7 pm (Pacific) each Monday through Thursday, 8 pm Wednesdays and the Saturday morning call. This seems a ridiculous way of sharing information, in this modern age of e-mail and web sites but the advantage to Richi and TMII is that they can say whatever they like, in the (false) belief that they will not be held to it later.

Richi wished listeners “a blessed holiday season” and encouraged them to “make your life more fruitful.” Obviously, Richi is hoping the listeners will make his life a lot more fruitful – they are no use to him otherwise.

Gerald Parks harped on again about paying just $39 for the Empowerment Program, referring ten people and making $180 ($95 bonus) through they pyramid scheme. The rewards program was mentioned again, with the promise that you can “shop at your favorite stores.”

Gerald Parks

“Don’t forget to dream this week!” oozed Gerald and he ended by asking for energy and excitement from agents who joined him on the nightly recruitment calls.

With a complete lack of originality, TMII/MadeBig are using Napoleon Hill’s “Think And Grow Rich”, which was first published in 1937 (and not 1928, as quoted by Gerald Parks on the call.)

For $39 a month, you too can listen to an “expert” (who is Gerald and he gets this title because he once attended a Bob Proctor seminar on the book and paid several hundred dollars for the experience) explain the book and lessons within.

Interestingly, no mention was made of this book being in the public domain and therefore free for anyone to publish and use, without any need to pay royalties.

The upshot of this is that anyone with a search engine can find the same resources readily available for free, on the Internet. You could even buy the book for $8 or less on Amazon and dispense with Gerald’s brand of “expertise”.

Gerald Parks

Unfortunately, the prime targets for this latest iteration of MadeBig are of course friends and family of the cult members and Richi makes certain to remind listeners of this. Hopefully most will recognize the name behind it and recall getting burned before.

Other aspects of Richi’s call included word that the TMII debit cards are now shipping out – this is the method for crediting commissions that TMII have recently hit upon for novelty factor.

No more talk of ‘blue checks’ then? (Pity!)

TMII’s MyOffice is going down for a few days and is supposedly back up over the weekend, to reflect the new changes. One assumes Richi has some actual software experts working on this because if the problems with the games site are any indication, it may not go as smoothly as he hopes.

Gerald Parks seemed a little surprised that Richi had not read “Think and Grow Rich” until the Empowerment Program but my surprise was more that Richi reads at all and also where Gerald has been for the past ten years because Richi has not demonstrated any of the skills covered in this seventy year old book, so clearly hadn’t read it before.

Catch Gerald’s call Thursday (22nd) night at 7 pm Pacific as he hopes to have cult members calling in excitedly, to talk about their cards arriving which adds to the mirage of money going out to agents.

As with the real mirages, the money is very likely to disappear or dry up in a short space of time – especially if people realize they can get the same course for far less money or free!

Originality never was TMII’s strong point.

They were featured in the October 2009 news update of Pyramid Scheme Alert, an international association who work to expose, study and prevent pyramid schemes.

Pyramid Scheme Alert is the first consumer organization to confront the abuses and trickery of pyramid scheme perpetrators.

The Pyramid Scheme Alert website is the world’s largest and most authoritative information source about the deception and harm of multi-level marketing (MLM) pyramid schemes. The site enables consumers to identify, avoid or escape pyramid scams. Hundreds of MLM scams operate openly and 99% of all consumers who join the schemes never earn a profit.

Many suffer devastating financial losses. Only the top perpetrators make money — from the losses of all the others below them.

PSA President, renowned pyramid scheme expert and author of the book “False Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and Pyramid Schemes,” Robert FitzPatrick, took an interest in the long-running MadeBig scam and decided to highlight its existence in the recent newsletter.

Robert FitzPatrick

In correspondence to MadeSmall.net this week, Mr FitzPatrick writes:

“Your actions and insight are very important. Few people are able to see through MLMs such as MadeBig, despite checkered pasts of promoters or the absurdity of the plans.

MLM has, sadly, secured a place in our society as the bearer of the American Dream. Reality has tarnished so many other areas, yet MLM seems immune to reality. Thus, its mirages, tricks, lies, etc. pass for hopeful entrepreneurship and a remaining beacon of “opportunity” for the average guy.

Therefore your work and others are important for shedding the light of reality on this  arena of flim-flam. As you have already encountered, in pointing up reality you carry the risk of being seen as the dream-stealer, negative thinker, etc. So, what you have done merits support perhaps greater than you may realize.”

We certainly appreciate Mr. FitzPatrick and Pyramid Scheme Alert bringing the MadeBig scam and the MadeSmall website to a much wider audience and look forward to further cooperation in the future.