CHAPTER 7:
The Investigation

There has always been an aura of mystery and intrigue to the conclaves of senior Amway distributors. One must wonder if the secrecy with which the fraternity surrounds itself is designed to keep the layman from discovering how much he knows or how much he doesn't know. One such person who desired to uncover these truths was Don Griffin, a native born Oregonian who is half Klamath Indian. He, too, was an ex-Amway distributor with an inquiring attitude for more information regarding this "inner circle."

I knew where I could find Don on a Saturday afternoon. He was coaching basketball for his church team in Portland, Oregon. When I arrived at the church gymnasium, Don looked up, waved and went on up the court to complete a fast sprint, gently demonstrating to his team a neatly tucked dunkshot. He ran over to greet me as he always did with his big bear hug. He was drenched in sweat. "What are you trying to do? Give me a shower? Where's a towel?" I teased. Don smiled. For years he had been more than a friend. He was like a brother.

"Good to see you, Phill We're still going to that Amway meeting tonight, right?"

"You bet." I replied.

"Great! I've been looking forward to this meeting all day."

"Did you get the information I needed?"

"I sure did and more, too!" The way Don answered told me he must be onto something big. He was bouncing up and down as quickly as the basketball he had just been dribbling.

"Well, fill me in!" "You know all that bragging we've been hearing at various rallies around the country about how the Amway Corporation won great victories in court with the Federal Trade Commission?" Don asked. "Yes, yes, go on. "Well, it isn't at all what those distributors are blowing it up to be. I guess you might say it's in the eyes of the beholder. In fact, the FTC in its final order shot the company down on two key points. They said that Amway had to 'cease and desist' from two major violations. One was price fixing, and the other was misrepresentation of distributors' income." I was stunned. So far, prior to hearing this from Don, many distributors whom I knew had been led to believe that the company was the underdog and was being harassed by big government." "How can you be so sure, Don?" I asked. "It's all in black and white. I've seen the report myself. It's at the State Consumer Protection Agency. It's hot! In fact, it's really a mind blower. The report tells you everything you need to know about the entire case. It shows the complaint, the opinion of the commission who reviewed the case and, of course, the final order which tells Amway to 'cease and desist' from certain practices. I'll get you a copy this week, okay?"

(After personally reviewing the FTC report and speaking with the FTC attorneys concerning the commission's final order, it is my own opinion that this order was not a victory for the company. However, because some of the original charges were reversed, it was understandable how Amway could interpret this otherwise. One could also see how they would want to.)

"I'd sure like to know how they are complying to this final order." "Oh, they're complying all right. They have to. I have also seen a copy of Amway's compliance report--what a stack of papers! The real question should be, 'Are the one million distributors complying?' But let's not belabor that now," Don calmly replied. "Besides, we have a lot to do tonight, right? I'll see you later this evening. I've got to shower."

Don ran off across the shiny hardwood floor, slapping the back of his teammates as he went. He had always been an extrovert and was deeply loved and respected by his peers. That night was going to be a very important evening. Don and I had decided to attend a "line" seminar being held at a new local hotel, the Marriott. Our plan was to gather as much information as possible concerning the activities of the distributors during this three-day event. This was not the first time Don and I had worked together in this fashion to gather information. We had visited dozens of homes, rallies and conventions in a blitz of documentation.

Our purpose was to poll as many distributors as we could to determine their "business volume." We would also question the hotel's catering department to find out what the actual costs would be to the promoters of this event. What kinds of profit would be realized from this weekend for those in command? Soon we would have a good idea.

When Don and I arrived at the Marriott Hotel, we could see that the promoters of this event had really gone all out. There was a Rolls Royce parked at the front door. Directly behind it was a 32-foot luxury motorhome. We stood together and watched as dozens of Amway distributors took turns sitting in this classic automobile.

"Oh, look at that interiorly exclaimed a young woman, carrying an oversized handbag. She gently and lovingly ran her fingers across the supple leather seats and polished wood trim interior.

"Someday I'm going to own a car just like this!" she declared, now smiling and perching herself into the back seat. The others laughed and crowded around to experience the pleasure of how it felt to sit behind the wheel of this fabulously expensive automobile.

The motorhome received the same reverence. There was a line of distributors anxiously waiting, each desiring to see the inside of this luxury coach. Each distributor was easily identified by his large blue "Dream Weekend" nametag. Boy, were they doing just that-dreaming! The retail price on these two vehicles totaled close to a quarter of a million dollars!

Don and I did not waste any time. After watching the distributors with the Rolls and the motor coach, we went about our outlined assignments. We split up and questioned as many of the distributors as possible prior to the evening's program. Our objective was to find out the business volume (approximate amount of retail sales for the month) of each distributor we interviewed.

Approximately 90 percent of all those we interviewed were more than willing to provide us with the much needed information. Our approach was simple and, of course, enthusiastic.

"Hil My name is Philip Kerns, and I'm doing a story on free enterprise. Would you please assist me in collecting some important information for this vital success story?"

In most cases after securing the name of the distributor, our conversation continued something like this.

"How long have you been in the business?" I asked.

"Oh, I'd say about six months."

"And what was your total business volume this last month?"

"Now wait a minute. That's personal."

"Sure, I understand that, sir, but we're just doing a poll to determine the average business volume of all distributors. This information will be kept confidential." I reassured him.

"I see. Okay. Well, it was $175 this last month."

"Have you ever had a better month?"

"Nope."

"Thanks so much. I appreciate your cooperation!"

Just as soon as I would finish one interview, I'd turn to start another. Sometimes I'd glance at the person I had just talked to, only to see that he was telling others I was doing a story. This would invariably cause some excitement. It wasn't uncommon for a mob of enthusiastic ladies to follow me through the lobby, clawing at me and begging for an interview. It was all in fun, of course.

But I couldn't afford using time for only fun. Too much attention in this posh hotel lobby could cause me to be banished. Some of these meetings were considered "closed functions" because of the type of information given. Only distributors from this line of sponsorship could attend. Whenever this interviewing generated too much activity, I'd politely thank them for their time and slip away to find my partner.

Over a period of several months, we interviewed 156 distributors. We found that the average business volume of the combined group was $402 per month. Strikingly, this figure came close to the one Amway posted in its monthly magazine as required by the FTC. I learned later by studying the final report from the FTC that Amway was ordered to print this information. It was not merely an act of volunteerism.

This polling helped confirm the reliability of the company's statistics. Amway reported that the overall average active distributor produces only $454 in business volume each month. That is a gross earnings before operating expenses of about $135 (based upon a 30 percent margin for retail profit) each month for retail sales. If you wholesale the products, the earnings drop drastically. This is hardly enough money to pay for much in the way of operating costs such as gas, other car expenses, supplies and the like, let alone some of the expensive weekend events one is encouraged to attend. Tickets for these events range anywhere from $4 at the door up to $280.

Finally it was time for the rally to begin. Don and I now stood and watched as hundreds of people stood in line to enter the hotel ballroom. To the rear of this large room, one could see a well dressed tailor measuring a rather large portly man for a suit. He was bending over with his arms expanded from waist to heel, carefully stretching his tape vertically along the trouser leg. I watched carefully as he held this position for quite some time. I could see that he wanted the measurement to be exact.

It was 7:55 p.m. and in just five minutes the doors would open to the ballroom. in order to kill some time and to get a better look at the transaction, I stepped closer to the tailor and his customer. Behind them stood a long rack of handsomely designed threepiece suits.

All of a sudden, a very stylishly dressed brunette came up and took the arm of the tailor's patron. The gentleman seemed quite pleased that she had joined him. I watched carefully as he reached into his jacket and removed his wallet. He carefully counted out several large bills and was promptly given some change and a receipt. The tailor and his client shook hands. The tailor gave a stiff respectful bow, and the customer turned, put an arm around his confrere and walked happily away. Onlookers nodded in approval. It was quite a show.

I thought to myself, "Couldn't he have purchased this same suit for much less at a retail outlet?" Then I remembered my first rally when I had purchased a ring for my wife. I had questioned Lester about the table full of expensive jewels, but he had said that they were being provided by local wholesalers, which he had invited to participate in the rally. However, later when my wife had her ring appraised, we learned I had paid full retail price, plus some.

Clearly, concessions are an important part of these rallies. The magnitude of this unorthodox traffic is enormous, and the cash profits resulting from it are huge.

The doors had now been opened for several minutes. It was a beautiful ballroom with exquisite chandeliers. The tables were adorned with crisp white linen tablecloths, crystal and fine china. The water-filled goblets glistened in the dim light. Scurrying to and fro across the floor were well mannered waiters and busboys attending to the needs of those now seated. Each attendant, properly dressed in a white jacket with gold buttons and shiny black slacks, was ready to assist. Don motioned me to follow him and together we slipped into the kitchen. We found a doorway unattended next to the speakers' platform. This was where we waited and watched. All around us scurried the hotel staff carrying trays of various entrees. They were so busy serving the 1,500 hungry guests that they never even blinked at us.

As soon as the meal was over, the lights were dimmed even more; and once again, as in most such functions, the band began to play. This time a triumphant march set the stage. The announcer named the couple to be honored, and then the spotlight was swung to the side door. just as I had witnessed at dozens of these events, a long procession of distributors filed past the crowd up to the stage. Every achievement was recognized no matter how small.

Now was the moment for which everyone had been waiting. The host was standing at center stage, edifying the individual he was about to present. Sometimes this narration would go on for several minutes, elaborating on how much this person (usually Diamond level or above) loved everyone in the audience and how everyone should listen to each and every word he was going to say if the listener wanted to be successful.

I looked out at the sea of faces. The speaker seemed to hold them spellbound. Some were nodding and smiling approvingly to their neighbors. Others just shook their heads up and down showing their approval to his statements. All appeared to be hanging onto his every word.

As I stood there, I found myself concentrating so hard on these reactions that I missed the big introduction of the honored guest. As I analyzed the individual faces, I was so fully absorbed in their expressions that the throbbing of the band could only be faintly heard in the background. Suddenly I awakened from my trance of thought and turned to the platform. The leader now jerked his coat from his back and threw it over a chair. He stormed back and forth across the stage, exhorting his listeners to be winners, not failures! He bellowed out his message with promises of freedom and financial independence. Frequently, he would pause to absorb the enthusiastic applause of his listeners.

As I watched this exhibition, my subconsciousness reminded me of the statements I had previously missed:

"Ladies and Gentlemen, the greatest leader who ever lived. Our BODY could not exist without a head like this. The most wonderful man in the world..."

It suddenly hit me that this was how they had announced this leading dignitary! I had heard that sort of glorification at rallies all over the country. "But isn't Christ the head of the church body?" I thought.

The crowd was now laughing. As I looked up, I could see this leader, who was exalted much like a god, moving even faster than before. Body girations and descriptive arm and head motions accompanied his every word.

"Do you people out there want to be free?" The crowd now sprang to its feet and screamed back to him, "Yes! Yes!" Their arms were stretched outward and upward, hands open, in a Pentecostal fashion. Many were swaying and waving their arms back and forth as they responded to the speaker.

"How many of you people want to tell the boss to kiss off?" Again the crowd screamed back, even louder than before. The applause now became rhythmic. They all stood and clapped in unison. Some stamped their feet while others beat on the tables! It just kept going on and on. This pseudo Christ like figure lifted his hands towards the heavens and nodded his head to each beat. It was an orgy of enthusiasm.

Even after the crowd sat back down, their voiced responses continued. Each statement the speaker made generated more excitement in the crowd. The beating of the tables became more intense. Then those sitting at the table closest to me stood again. Hundreds of enthusiastic followers all across the room followed suit. Each was fully engrossed in the leader's words. As I looked out into that sea of faces, every eye appeared to be fixed upon the speaker with a glassy stare. They seemed hypnotized.

One black fellow directly across from me was beating the table so hard with his fist that the water goblets were beginning to spill. His face expressed utter jubilation, and his body was rocking to the throbbing beat.

Hundreds were now screaming at the top of their lungs, encouraging the speaker on. Dozens of individuals stood on their chairs; some whistled while others took their napkins and twirled them over their heads like rodeo stars.

I couldn't believe what I was seeing. It just wouldn't stop! For a moment the noise began to die down, and I thought they were going to quit. Instead the unified clapping took an intense upswing. They were now whistling, stamping and beating on the tables faster than ever. The noise was deafening. Bodies were twisting, jumping and dancing to the beat.

The speaker was dripping with sweat. His head was nodding with intense rhythmical sways. His hands, fists clenched beat up and down as if striking invisible drums. He intermittently lifted his arms upward and outward in a victory like stance.

"What do you need if you're going to succeed?" he roared into the microphone.

The crowd responded instantly. They knew the answer, and without missing a beat they chanted loudly, "Books, tapes, rallies! Books, tapes, rallies! Books, tapes, rallies! Books, tapes, rallies! Books, tapes, rallies!"

After what seemed like an eternity of chanting, the leader, much like the conductor of an orchestra, thrust his hands out slashing the air in an apparent signal for the crowd to stop. Instantly the room became silent. One could have heard a pin drop.

Then, after a few moments, one could see that people were now looking at each other. Some were smiling. Others were laughing. The host for the evening's program was now making announcements of future events, and the black fellow near me, like many others throughout the room, went around and began to shake the hands of everyone within reach.

"Ain't it great? Man, I'm excited!" he would exclaim to each person. Many, in turn, would acknowledge that they, too, were excited.

This fellow then came up to me and put his sweating palm into mine and with a gleaming smile asked, "Are you excited, Brother? Are you excited?"

I really didn't know what to say, so I just returned the smile. He went on and shook another dozen hands, expressing the joy and delight that he felt that night.

This same type of electricity was being generated all over the room. Don came and stood next to my side. I wondered what he was thinking.

All of this allegiance shown to the leader reminded me of what Lee Brown, Diamond Direct, had told a crowd at a different function. He urged them on with words similar to the following:

"Step out on faith now, not understanding, like I did not understand. I didn't know what it was all about, but I believed in my friend. I believed in my sponsor! And I stepped out in faith, not knowing what to do; but everything he suggested I did. But I also believed my sponsor and my friend would not do anything to hurt me. Do as your friend and your sponsor will do. Accept that on faith. And do that what is suggested for you to do. And just follow these principles which are proven to work, to have whatever you want in life!"

As I reflected on Brown's words, I felt Don nudge me. "C'mon, let's get out of here, Phil. All of this is making me sick. How could we possibly have been taken in by all of this at one time? We were so blind."

I stood fast and took one last long look. I felt compassion. My heart ached for all those I was watching.

"Phil, let's get out of here," Don pleaded. I surrendered to my friend's request. It seemed that reaching those people with the truth would be an insurmountable task, but I knew we had to try.

As Don and I walked back to the car, I remembered another event where the speaker seemed to hold this same kind of mesmerizing power over his fold. It was still vivid in my mind. The crowd really wanted to believe. The room was filled with the same type of hype and electricity.

As I reflected on that other event, I remembered the words, which he so dynamically exclaimed.

"I know what I'm going to have to say when I see someone who's got his nose so high in the clouds that if he walked outside and it was raining, he'd drown to death. I know what I'm going to have to say. I'll just have to say I've got a really good friend. No, this really good friend didn't have status. He got down on his knees and washed people's feet. And you know, baby, he made you and I. His name is Jesus Christ. So what gives you the right to have status?..."

Don was now driving up Powell Boulevard. He pushed the accelerator to the floor, and I sunk back in the seat, trying to remember more of what this distributor had said and why he had such an apparent hatred for status seekers. What was the real motive for his speech? His later statements revealed more of his intent.

"Now they got some books on the table back there. Be my guest. As a matter of fact, if I was back next to that book table, I'd be throwing them out into the audience because that's what you need. That's where it's at. Read! Read! Read! Listen to tapes!"

I was dead tired, and I fell asleep immediately upon reaching Don's place. I slept until late morning, and when I awoke, I just lay there and thought back upon the events of the preceding night. It had all seemed like a dream--the Rolls Royce, the motorhome, the tailor, the ballroom, the speaker, the hype--but I knew full well that it was not. It had really happened.

When Don finally got up, we sat at the table with a cup of coffee and analyzed not only the events of the night before, but all of the functions we had attended that month. This had become a ritual for us. In the past we, too, had been caught up in the put-on glamour and magic of these types of festivities; but now we were looking below the surface.

I would venture to believe that Amway distributors are motivated more than any company in America. Some distributors attend functions every week of the year. There are, for example, "Nuts and Bolts Seminars," "Dream Weekends," "Family Reunions," "Diamond Opens," "Pearl Opens" and a myriad of other sessions which climax with the biggest event of the year, "Free Enterprise Day."

The "Dream Weekend" at the Marriott Hotel proved to be a great financial success, not necessarily for those in attendance but for its sponsor. We learned from the catering department that the actual cost charged by the hotel per person for the program was $54.75. However, the host of the event charged $90 per ticket, thus grossing $135,000. The total gross profit was $52,875, as there were 1,500 in attendance. That's certainly not bad for a weekend's work. Of course, this figure includes only the tickets. It does not include the profits made from the sale of books, tapes, automobiles, programs, clothes and other concessions. That's all additional profit! One distributor told me that most Diamonds put on 10 to 12 rallies per year, and if they are not making $50,000 per weekend on concessions, they are just plain stupid!

Remember the "West Coast Free Enterprise Day" held at the Portland Coliseum? Well, the following year I did some research about that event. The stadium manager told me, "Free Enterprise Day was a mad house! And if you thought that the event you attended was crazy, how about this year. There were 17,000 present."

He went on to explain that it cost $2,000 per day to rent the arena for a total cost of approximately $6,000 for the three-day event. Tickets sold for $18 each so that translates out to $306,000. When you subtract the $6,000 cost, you see a $300,000 gross profit--for ticket sales only. All of the other items that were sold, no doubt, added greatly to the gross profit figure, perhaps even multiplying it several times.

But you say, "Hold it! What about costs like the band who played that famous 'Rocky Theme?"' I spoke with two members of the band, Marvin Bright and Daniel Lents. Both complained that they were never paid to play at these functions. In fact, the host insisted that they pay their own admission fee, transportation and lodging.

He's just greedy," said Lents. "Now that's what I call beating the band!"

We have only touched the surface on possible profits. Let's take a closer look at the kinds of money that could be made from the sale of concessions as well as rally tickets. The following is an example of total gross receipts which might possibly be made:

I believe I am being conservative in this example because many distributors buy boxes of books (paying full retail price) at these events to sell or distribute to their downlines. it is also considered taboo for distributors to attempt to purchase non-Amway produced books from local wholesalers.

The leaders, therefore, have a captive market--a market that is, in my opinion, incredibly more lucrative than Amway could ever be! Remember, this example is for just one event. Canon, Wells, Hall and others fly to and fro across the country and hold event after event each year.

The number of persons in attendance at this rally. Lester has had over 15,000 present at his Atlanta conventions.

Let's look at another aspect of this non-Amway produced business. If you are subscribing to a "Tape of the Week" Club, which would cost approximately $30 for eight weeks, you would be spending an additional $195 per year for tapes. If only one half of the entire Amway population, or approximately 500,000 distributors, subscribed to this program, that alone would add up to a staggering gross receipts of ninety-seven and one-half million dollars ($97,500,000.00) per year!

I have in my possession a distributor's income chart (non-Amway produced) which purports that the largest amount ever earned by selling AMWAY PRODUCTS in a given year was approximately $416,000. How did John Wells earn over $70 million in one year as was claimed? Was it on Amway products, or was it on concessions?

Thousands of distributors each year go to functions all over the country as well as abroad. Millions upon millions of dollars are spent at events on non-Amway produced materials, which can be found stacked in heaps and mounds on concession tables everywhere. From my estimation, during fiscal year l981 Amway distributors may possibly have contributed in excess of $791 million' on concessions to be motivated!

I found a distributor who stated that he spent 56 l/2 cents for every dollar worth of Amway products he bought during a six-month period. I took his number and multiplied it by the retail sales amount of $1.4 billion as reported by Amway Corporation in 1981. I have spoken to distributors who claim this figure (56 1/2 cents) is higher while others say it is lower.

Chapter 6		Chapter 8: Genuine Treasures
Back to the Beginning

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