Hey, you there. You look pretty smart—you’re reading The Observer, after all. What would you say if I told you there are ordinary New Yorkers out there making more money in a year than you’ll make in a decade? I’m not talking about bankers and movie stars. Heck, I used to be a waiter for 20 years—now look at me. You must have noticed how shiny my shoes are. Want to work for yourself? Go on vacation every month? Retire at the age of 29, then retire your mother? You didn’t wake up this morning planning to start a new life, but opportunity just knocked—you don’t want it to move to the next door. Did I mention you get a free BMW?
On an evening in June, in a nondescript, white-walled room in Williamsburg, a small crowd of sundry millennials in folding chairs listened to a variation of the above script. The opportunity knocking was WorldVentures, a six-year-old company based in Texas with a sales force of tens of thousands in 21 countries that pulled in $91 million in revenue last year. WorldVentures is ostensibly a travel club that grants members access to discounted vacations, but its sales reps are selling more than cheap hotel stays. In fact, they seem to expend most of their energy shilling for WorldVentures itself.
The pitch hinges on a video of average-looking people partying in exotic locations, followed by a stream of babbling from semi-suave pitchmen who claim to be making thousands, tens of thousands, more than a million a year, working for themselves. There’s a jumble in the middle of the presentation about “left and right teams”—a reference to WorldVentures’ complicated, pyramid-shaped payout system—but the main point is that you can “make a living by living,” if you act right now.
Pete Eggers, a tall, blond 29-year-old from Iowa, paced in front of the little room and down the aisle. He’d flown in to star in the massive WorldVentures training convention scheduled for Queens the next day. The small crowd seemed unnaturally jazzed, cheering and whooping like an MTV studio audience and guffawing at all the cheesy jokes. Such “biz op meetings” are customarily filled with plants, one former WorldVentures pitchman told The Observer. Indeed, it seemed as if about two-thirds of attendees were already in the fold, surrounding a half-dozen or so obvious new recruits.
“You know what mailbox money is?” Mr. Eggers asked them. “It’s money you get in your mailbox. I open my mailbox and I get usually a check for usually $5,000. Then I walk inside, and then I take a nap.”
Like Amway and many other direct-selling schemes, WorldVentures compensates its reps for sales made by people they recruit. It’s called multilevel marketing, or MLM, and it’s the legally sanctioned cousin to the pyramid scheme. You can sign up to get access to WorldVentures’ discounted trips, which are of arguable value, for a $199.99 sign-up fee on top of $26.99 a month. But wait—if you recruit just four people, your monthly fees are waived.
“Direct selling is the best-kept secret in the business world,” said Mr. Eggers, claiming to paraphrase Warren Buffett. Join WorldVentures as an “independent representative” for a $99.95 sign-up fee and $10.99 a month, and you’ll have the opportunity to make residual income through WorldVentures’ elaborate, cross-pollinating compensation plan.
WorldVentures says it pays out up to 65 percent of its sales revenue in compensation. There’s a direct commission, a weekly sales bonus and a monthly residual commission. Reps get paid a $20 commission for selling a basic membership to the travel club. But the easiest way to earn “mailbox money” is to recruit new reps.
The rapid-fire pitch made The Observer’s head feel fuzzy, so we sat down with the company’s 26-page compensation plan. WorldVentures has a virtually inscrutable payout schedule comprising seven ranks and two pyramid-shaped hierarchies. The first pyramid is called the “lineage.” You sit at the top and everyone you’ve personally recruited is added directly below you, and everyone they’ve recruited is below them, and so on. Lineage is factored into rank, which is factored into compensation. The second pyramid is the “binary organization.” Here the pyramid spreads out by twos—the top spot sits directly above a left and a right spot, each of which sits above its own pairs, and so on. You can then earn bonuses based on sales made by the binary organization, which is comprised of the reps you recruit, and the reps they recruit.
In order to start earning monthly commissions, a rep must be “30/30,” which means having 30 actively-involved customers and/or reps on each side of his or her binary organization. Reps who achieve this can earn up to $500 a month. The next level is 90/90, which can earn up to $2,000 a month. The top level, International Marketing Director, must have at least 3,000 people in his or her lineage, and must continue to average $56,250 in income in the three preceding months in order to maintain that rank. The list of requirements for each rank goes on for pages, with various exceptions and stipulations.
But multiple lawsuits have alleged that WorldVentures frequently bends its own rules in order to favor a small, elite group. According to one ongoing lawsuit, the top three spots onthe pyramid, which earn the most residual income, are owned by the two WorldVentures founders. The lawsuits claim that lucrative spots are given out as rewards to recruit “MLM superstars” like Matt Morris, author of The Unemployed Millionaire and founder of the distance learning MLM Success University.
The WorldVentures presentation in Williamsburg closed with nine reps who went up to the front of the room and described how they’d lifted themselves out of poverty, as if rising from their wheelchairs after a gulp of snake oil. “My name is Jay, I’m from Brooklyn. Bed-Stuy, Brooklyn. At first I thought it was a scam—I was doing scams, I thought it was a scam,” said one young man who claimed to be making mailbox money and driving a WorldVentures BMW. “When I saw that all I had to do was pop in a DVD and make money, I said ‘let’s do it.’”
WorldVentures reps do have the ability to earn residual income, get credit toward a BMW lease, and even a home bonus; but it’s much harder than the company makes it sound. MLM is a grind. When reps fail to make money, they’re taught to blame themselves. Reps are also heavily encouraged to spend their own money on WorldVentures’ myriad training events, which can range from $29 to hundreds of dollars to attend. WorldVentures has a tendency to sue its former employees who move to competing MLMs or speak negatively about the company, squashing public dissent; Google results for “is WorldVentures a scam” are overwhelmed with pro-WorldVentures websites and videos created by reps to give the appearance of legitimacy. “The reality is, it’s impossible for someone to realize the dreams that they’re pitching,” said one former high-level WorldVentures employee who asked not to be named. “The only people actually making money are the people the founders are manipulating the compensation plan for.”
Training events are among the key techniques by which the MLM industry keeps its sellers motivated. At WorldVentures, company executives work hard to maintain the image of a fun-loving, globetrotting family. Flawlessly-produced recruitment videos show people drinking, dancing, and playing in the sand in various vacation destinations. “You should be here! You should be here!” they chant at the camera. Reps are encouraged to go on DreamTrips, vacations that turn into pilgrimages to Las Vegas or Cancun that include company pep rallies and one-on-one dinners with higher-ups. WorldVenturesTV has uploaded 113 videos to YouTube taken on vacations and at company conventions like Millionaire Bootcamp 2012 and WorldVentures UNITED! 2012.
Wayne Nugent is the co-founder and “Chief Visionary Officer” of WorldVentures. “Ernst & Young is the second-largest audit company in the world. They gave us the Entrepreneur of the Year award in 2010,” Mr. Eggers told us. Actually, Mr. Nugent and his co-founder Mike Azcue were two of 38 entrepreneurs nominated in the Southwest Area – North region, which includes North Texas, Arkansas and Oklahoma. Before starting WorldVentures, the two worked together at GT Trends, another travel-based MLM with a less-than-stellar reputation. “After a short involvement, they disagreed with the business methods practiced by GTT and both men voluntarily resigned,” according to a WorldVentures-owned website. In 2011, they both admitted to willfully evading taxes from 2004 to 2007: Mr. Azcue owed $18,340, and Mr. Nugent owed $60,712.
Smooth-faced, tanned, and broad-shouldered, Mr. Nugent appeared on stage in Las Vegas for WorldVentures UNITED! 2012, dressed in a pink suit jacket with his black hair in an Elvis puff. He improvises his speeches. “There’s a real world, but there’s our world,” he riffed in the closing of his keynote to the WorldVentures faithful. “And that’s a world I get excited about my little girl being born into. And I get excited when we travel around the country! And I get excited when we’re traveling around the world, and there’s these WorldVentures babies! And we’re getting together. That’s what I’m seeing and feeling. Why? Because that’s what I’m experiencing in real life. It’s happening right now. And if you’re right here at the beginning, maybe you’re not seeing that all now. But it’s there and it’s good.”
The rambling speech earned a roaring, standing ovation from a crowd of more than 4,000, most of whom paid $199 to attend. Mr. Nugent apologized for skipping the afterparty, and ran offstage to catch a flight.
In their time with WorldVentures, Los Angeles couple Roger Yack and his wife Sabine drank “little sips of the Koolaid,” Mr. Yack said. They estimate they spent about $30,000 on conventions like UNITED! and other “training” events before they stopped working and were dismissed by the company. “I believe that the line is that people that attend those trainings earn five times more than people that don’t,” Mr. Yack said. “Those 1,000 people spend $298 just to hype and ‘rah, rah!’ like crazy. What WorldVentures was really good at was creating a culture.”
WorldVentures’ training director, Marc Acetta, is known for dressing up in costumes—dealing out cards and sipping whiskey as a character he calls The Gambler, or muzzling a woman’s breasts as Jim Carrey’s character from The Mask in a performance enhanced by a strobe light and cheap pyrotechnics. “You want to get in my business?” he asks an actor. “It’s a travel business. You’ll make a shitload of money. Want to do it?” When the man hesitates, Mr. Acetta spritzes him with a water gun. “Sit down, John. You don’t qualify.” Even one WorldVentures detractor described Mr. Acetta, despite his dopey stage antics, as “brilliant.”
“It’s basically the most expensive high school pep rally you’ll ever see,” said Steve Hilger, an attorney representing a former WorldVentures high earner, Randy Ostram. Mr. Ostram is involved in a lawsuit against WorldVentures in Louisiana. His claims include that WorldVentures allowed a pair of reps, Eric Allen and Chris Dorgeat, to swap people in and out of lucrative places in the upper echelons of the pyramid. The pair also created a “straw man” position for Mr. Dorgeat in the name of his brother, Mathieu, in order to reap the benefits of having two spots, the lawsuit says. Later, Chris Dorgeat placed one of his personal recruits, James Lee, into “Mathieu’s” spot, according to the suit.
Although claims in multiple lawsuits allege that WorldVentures promotes its top reps even when sales goals aren’t met, the company positions itself as a meritocracy. Boosterism is central to the MLM ethos. WorldVentures biz op meetings are “invite-only,” which confers a sense of magic and mystery and filters out any uninvested strangers who might break the spell. “You get paid what you’re worth,” Mr. Eggers told prospective WorldVenturers. “If you’re lazy, you get paid nothing. If you work hard, you get paid a lot.”
The sparkling pitchmen of WorldVentures alternately empower and undermine their flocks. There is no limit to the fun you can have! The riches you can reap! Those who are skeptical are “negative;” those who drop out are “losers.” Sadly, there are a lot of negative losers out there. According to WorldVentures’ own income disclosure statement, an unaudited document that the company puts out as a show of good faith and a hedge against regulators, 73.7 percent of reps fail to earn a commission and only .102 percent earn a yearly income above the poverty level. The average rep earns $325 in a year. That doesn’t account for the price of joining or the cost of training events.
Ninety-nine percent of WorldVentures reps lose money, according to an independent study by Dr. Jon M. Taylor, an anti-MLM crusader based in Utah, one of the MLM industry’s biggest hubs. That figure is in line with the 500-some MLM companies he’s scrutinized, largely depending on data provided by the companies themselves. “A good MLM is really an oxymoron,” he told The Observer.
There are people who make a living from WorldVentures, although perhaps not as many as claim to do so. The need to recruit more sellers provides a built-in incentive to inflate one’s own success, and “there’s a lot of self-deception going on,” Dr. Taylor said. He surveyed reps who lobbied for a federal rule change that favored MLMs. “Even though they thought they were making money, if you asked them directly, ‘if you took the money you paid to the company, and subtracted what you paid to the company in products or services, which would be greater’? Most of them didn’t even know.”
A lawsuit filed by one of WorldVentures’ minority co-founders, Robert Oblon, alleges that some top reps were paying the fees for some of their downline recruits themselves in order to maintain a high rank and appearance of success. According to the lawsuit, WorldVentures propped up one of its star couples, Dave and Yvette Ulloa, by “grandfathering” them into the highest rank in the company even though they hadn’t earned it. Jennifer Taylor, the WorldVentures employee who was responsible for making the rank changes in the company’s MLM payroll software, iMatrix, said in a sworn statement that she personally made that change and others like it at the request of WorldVentures executives. It was then announced at a WorldVentures convention that the Ulloas had achieved the rank of International Marketing Director, Ms. Taylor said, for the benefit of impressive entry-level reps: “It would be important because it gives them the image that these ranks are attainable in the natural sense of attaining them. So, you know, they wanted it to appear to a new person in the business that this could be you. You can achieve this rank and make this money.”
WorldVentures maintains it is not a pyramid scheme. Because it sells a product—vacations—it stays within the law. “We pay commissions to our Representatives for selling our DreamTrips Membership products,” a representative for WorldVentures said in an email. “There’s no compensation whatsoever tied to Rep recruitment. But if they recruit additional Representatives, they can earn bonuses and commissions off the retail sales made by those Reps.”
The Federal Trade Commission draws a distinction between MLM schemes and pyramid schemes, and actually lightened proposed regulation on MLMs in 2008 after fierce lobbying by the industry. Still, the FTC warns, “It’s best not to get involved in plans where the money you make is based primarily on the number of distributors you recruit and your sales to them, rather than on your sales to people outside the plan who intend to use the products.” A federal database shows 25 bankruptcies in which an individual or couple was a WorldVentures rep.
So far, WorldVentures has kept out of trouble with attorneys general, shamed or litigated former reps into silence, and successfully parlayed its rating from the Better Business Bureau up to a C. But the two most damning lawsuits from former reps may soon be joined by a third. Jeffrey Ostrove, a former WorldVentures rep who was involved for seven months, is preparing a class action suit against the company. More than 200 people have signed on, he said. “This is really ethically wrong, it’s morally wrong,” he told The Observer. “It’s taking advantage financially of people without them knowing about it.”