Wednesday, April 9, 2008

Would You Trust These Guys




Below is a fascinating little article that that illustrates the incredible consistency in the way our beloved founding families ( DeVos’s & VanAndel’s) conduct themselves in business. Their questionable ethics are not just restricted to IBO’s and ABO’s. Here’s what really bothers me. When a company go’s public it’s usually to raise money for investment in infrastructure or a new plant etc… It asks the public to invest their money in shares of stock with an implied promise to do it’s best to secure a return on their investment. It’s saying we don’t have the capital but we have the sweat equity, and if you help us we will do our best to make this win win. It does not mean they guarantee results, only that they will give good faith effort. Investment means risk, But risk with good faith! The article below is self explanatory read it for yourself.


GRAND RAPIDS -- The way three former Amway Corp. Asian subsidiary investors see it, Alticor Inc. President Doug DeVos, Chairman Steve Van Andel and former President Dick DeVos helped cheat them and others out of more than $1 billion seven years ago. Alticor attorney Robert Yonker says the former stockholders had an opportunity to recover their presumed losses, and they failed to do so. The investors sued Amway Asia Pacific, its executives and its New York investment firm, Goldman Sachs, nearly five years ago. They claim they were forced to sell shares when the company went private and before stockholders could reap rewards of China's huge consumer market. Two years ago, their case was dismissed by a Kent County Circuit Court judge. Their appeal got a hearing Thursday by a three-judge panel of the Michigan Court of Appeals. Former shareholders Robert F. Wardrop, a local attorney, and Donald and Nancee Turnwall, of Irons, believe Van Andel, Dick DeVos and Doug DeVos effectively forced shareholders to sell stock the day it was announced China would be admitted into the World Trade Organization. The WTO decision helped open the lucrative Chinese market to Amway and other businesses. The ex-investors claim China's entrance into WTO was not factored into an $18 per-share offer, even though Goldman Sachs and Van Andel had information China likely would be admitted into the trade group.
How did Van Andel have that information? Here is something that today's Press doesn't mention-
In addition to serving as chairman of Amway Asia Pacific, Van Andel also was vice chairman of the U.S. Chamber of Commerce, a group actively supporting China's bid. "This is an example of corporate America abusing individual investors for their own profit," said Clinton Krislov, a Chicago attorney representing the plaintiffs. (Source Citation: "Amway spinoff cheated investors, suit says; Some shareholders in Amway Asia Pacific say they had to take too low a price when the company went private.(Front Page)." The Grand Rapids Press August 7, 2003)
Here is a brief timeline on what happened back then.
In 1998, the Chinese government banned chain selling after its citizens complained about losing money on get-rich-quick schemes. The company was lumped into that group and forced to halt operations there. The stock rose the next year after reports surfaced that Dick DeVos had met with State Councilor Wu Yi of the Chinese government. The stories said authorities were considering doubling the number of Amway representative offices in China. According to the lawsuit, executives met in Chicago in September 1999 to discuss "Project Powerhouse," a plan for taking the company private. About two months later, the United States and China began intense negotiations regarding China's entry into the WTO. It was believed that if China did not enter by Nov. 30, 1999, when the group was meeting in Seattle, it could be years before another opportunity arrived. On Nov. 11, 1999, the principal shareholders delivered an $18 per-share offer. Four days later, Amway Asia Pacific's board of directors said the offer was fair and in the best interest of minority shareholders, "all without considering the impact of China's WTO admission," according to the lawsuit.
Others had sued, also, and the suit bounced around looking for jurisdiction.
Amway Asia Pacific now is part of Alticor Inc., the parent of Amway. A company lawyer, Bert Hultink, said "this has no more merit" than two other lawsuits connected to the stock repurchase. Those complaints were dismissed or dropped. The lawsuit started in New York, moved to Chicago and finally landed in Grand Rapids in late June after judges grappled with jurisdiction and whether the case belonged in state or federal court.
Today, Dick's lawyers claim that these people should have sued in Bermuda. Notice they don't answer the charge of how sleazy this was in the first place, only that it's the investors fault that they are in the wrong court. Gotta admit, that's a nice deflection.
Yonker said Amway gave shareholders a fair share. And, if they had a problem with that, they had an opportunity to increase their take. The shareholders should have sought an appraised value of their share with an appeal in the Supreme Court in Bermuda, where the company was incorporated, Yonker said. "They had an efficient judicial mechanism to determine they had fair value of their shares," he said. "They had that opportunity, didn't exercise it, and failed to use the tools at their disposal."
See? All your fault. Remember that when Dick screws you over in the future. You had the chance to stop him. Make sure you "exercise your opportunity

So let us reflect.
1. IBO’s in good standing denied bonuses they earned
2. Loyal IBO’s gouged for years with overpriced products
3. DeVos’s launch new networking biz (Fanista) developed over last 2 years in secret and excludes Q/A IBO’s
4. Shady hospital merger to access liquid cash to funnel into holding company ( alleged but consistent )
5. Orlando Magic arena: taxpayers pay for arena Magic organization stops airing home games on free network affiliates in Orlando area ( fans stiffed aka fan non appreciation day )
6. Spectrum health ( DeVos owned ) raises prices increases profit margins on the heals of GR hospital demanding higher reimbursements from BCBS or it will no longer accept BCBS insurance.
The list go’s on and on and on
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Thursday, April 3, 2008

The Agony Of Defeat



Quixtar"s arbitration process defeated in Federal court in Northern California. It seems the crack in the wall of Amway's oppressive rules of conduct is ever widening as the truth becomes more apparent in courts of law. It makes me wonder if perhaps when the crack in that wall gets wide enough will 31,000+ people be filing a class action suit seeking damages for loss of income due to illusory non compete, pain and suffering and such. I'm no lawyer and am not necessarily advocating that, But I do wonder if it's possible. The following article is posted on The IBO Rebellion Blog.

Quixtar continues to get pounded in courts across America. The latest fissure was opened by a decision handed down on March 31st in United States District Court for the Northern District of California. The decision, rendered by Senior Judge Samuel Conti, found Quixtar's arbitration process to be "procedurally and substantively unconscionable, and therefore unenforceable."

Judge Conti's written opinion was very comprehensive and quite impressive. Judge Conti meticulously detailed why each and every part of Quixtar's arbitration and dispute resolution process is inherently flawed and unfair.

The motion ruled on by Judge Conti was the result of a suit brought by former IBO Jeff Pokorny. Pokorny and others alleged the Quixtar is an illegal pyramid scheme. It appears that the California suit filed by the TEAM affiliated IBOs and Pokorny's class action suit are very similar. If you recall Quixtar has yet to refute any of the allegations claimed in the suit filed by Woodward and company. Pokorny's suit also named Bill Britt, Ron Puryear and their related tools organizations. Quixtar, Britt, and Puryear all made motion to have the suit removed from court and into arbitration where they can hide their mischief.

The Court attacked Quixtar's arbitration clause on the basis of how it is procedurally applied. The Court stated:

To determine whether a contract provision is procedurally
unconscionable, the Court looks for oppression or surprise, where oppression "'arises from an inequality of bargaining power that results in no real negotiation and absence of meaningful choice.'"

As most of you know by now the arbitration clause was added to distributor agreements in 1998. Quixtar then added the non-compete and non-solicitation clauses in the same underhand way in 2004. In both of these instances IBOs were not fully disclosed the information nor were they given any ability to opt out or negotiate. Again the unilateral actions of Amway / Quixtar will likely result in the striking down of the Quixtar's non-compete and non-solicitation clauses on the same grounds Judge Conti notes here.

What is interesting is that Quixtar admits that there is no negotiation but instead claims that the IBOAI is the "voice of IBOs." Judge Conti noted that IBOs have the option to join the IBOAI or not but that those that do join aren't allowed to vote until reaching the level of "Platinum." Quixtar did not present any evidence to suggest that the IBOAI did represent the best interests of IBOs. As we know the IBOAI failed miserably to represent IBOs. Outside of the 15 martyrs led by Woodward, the rest of the IBOAI laid down with the company over pricing issues as well as the dreaded name change to the notorious AMWAY. Judge Conti also noted that in Pokorny's case he was not only suing Quixtar but those in his upline and that believing the IBOAI would act in his interest was described as:
In such a scenario, allowing the most senior IBOs to "negotiate" the rights of all other IBOs would be leaving the proverbial fox in charge of the henhouse.
Pokorny's attorneys raised the following issues with Quixtar's arbitration process and all of the steps required leading to arbitration:

Plaintiffs, however, advance a number of problems with the
Conciliation stages of the Quixtar process, and argue that the
agreement is not enforceable. The specific defects Plaintiffs
allege are:

1. The Hearing Panel must make recommendations that promote
the RoC being challenged here.

2. The Conciliation requirement is not mutual. IBOs must
bring claims against Quixtar using the Quixtar ADR
process, but Quixtar is not required to do so.

3. The Conciliation process is not neutral because the
IBOAI board is dominated by the "Kingpin" IBOs that
Plaintiffs allege are part of the same unlawful
enterprise as Quixtar.

4. At most, the Hearing Panel or IBOAI board can make a
recommendation, which Quixtar may accept, reject, or
modify at its discretion.
5. Quixtar may unilaterally modify the RoC.

6. The procedure is burdensome, time-consuming, and
designed to encourage compliance with the very rules
Plaintiffs are challenging here.

7. IBOs must initiate all arbitration proceedings within 2
years, even if the applicable statute of limitations is
longer.
Judge Conti covers in great detail the short comings of the pre-arbitration procedures IBOs are forced to endure. Judge Conti sums it up as follows:
The Court finds, without reaching every possible defect
identified by Plaintiffs, that the RoC requirement that an IBO
engage in Informal and Formal Conciliation prior to arbitration is
substantively unconscionable, and exceedingly so. The ADR deck
could not possibly be stacked more in Quixtar's favor than it is
here. Having already concluded that the agreement is procedurally
unconscionable because the Plaintiffs did not have a chance to
negotiate its terms, the Court holds that the pre-arbitration
provisions of the agreement are unconscionable, and declines to
enforce them.
Quite frankly there is just too much quotable information to note in one post. I strongly urge you to read the attached opinion from Judge Conti. In item after item addressed by the judge, Quixtar and its processes and actions, all were found to be blatantly unfair. Even the issue of severability, where the judge can strip away parts that are unconscionable and leave the clause mostly intact, Quixtar failed to convince. In fact Judge Conti found the entire process so afoul of due process that he noted:
The Quixtar arbitration agreement is simply too tainted to be
saved through minor adjustments. Therefore, though mindful of the
strong state and federal policies favoring arbitration, the Court
holds that the entire Quixtar ADR scheme is unconscionable and
unenforceable.
In the end Judge Conti denied the motions of the defendants Quixtar, Britt, and Puryear. Judge filed his conclusion as follows.

For the foregoing reasons, the Court finds that the
arbitration agreement contained in the Registration, the BSMAA,
and the DM Terms and Conditions, and incorporating the RoC, is
procedurally and substantively unconscionable, and therefore
unenforceable. The Court therefore ORDERS as follows:

1. Quixtar's Motion to Dismiss or Stay and Compel
Compliance With Dispute Resolution Agreement is DENIED.

2. The Britt Defendants' Motion to Dismiss and Compel
Compliance With Dispute Resolution Agreement is DENIED.

3. The Puryear Defendants' Motion in Support of Joinder in
Quixtar's and Britt's Motion to Dismiss or Stay
Litigation and Compel Compliance With Dispute Resolution
Agreement is DENIED.

4. Plaintiffs' Motion to Strike Quixtar's Reply Re:
Statement of Recent Decision is VACATED AS MOOT.

IT IS SO ORDERED.

Full Court Document Here
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