Burke Hedges Lawsuit Show LifeVantage Don’t Treat Distributors the Same

People in MLM like to make the claim, "anyone can do it." To prove that point, they trot out someone who has "done it." We already know that the LifeVantage Top Distributors Came From Zrii, they didn't actually make their money showing LifeVantage Protandim. They bought their downlines over.

However, one of the more interesting LifeVantage distributors is Burke Hedges. Never heard of him? Me neither. I guess he's famous in MLM circles and has written some books. When LifeVantage was just starting out as an MLM, they made an offer to Burke Hedges to use his clout in the industry. The offer was confidential and not disclosed to the public until the arrangement went bad and turned into an ugly lawsuit (PDF). That PDF has all the details to the secret contract that Burke Hedges, doing business under his Backbone Worldwide company, agreed to.

The extra amendment that Mr. Hedges got, that the average distributor didn't, included $150,000, options to buy 120,000 shares of LifeVantage at 70 cents (as of 9/17/2013 worth about $190,000), and top rank in the LifeVantage organization for 18 months, and travel expenses up to $5,000 a month. The lawsuit alleges that the deal is worth over $5 million in total compensation.

MLM proponents will say that there's nothing wrong with this. They'll point out that in any business, people are hired into high positions, even at the CEO level. However, this undermines another point that they always make, "MLM is what you make of it. You work your way up. Etc." This shows that people at the top are gifted that position through secret agreements. Burke Hedges didn't need to go around and call his friends to share Protandim.

If there's nothing wrong with this, there's no reason not to make these agreements open and transparent. The existence of this one situation shows that LifeVantage might have more of these secret amendments out there. What if all the people at the top that they've been profiling as successes were just gifted that position? It's been well-documented that over 99% of the MLM participants lose money and 92% of distributors leave LifeVantage every year.

It looks like these people are just being lured into the losses based on the illusion of success of a few. Seems like the kind of thing that the FTC should look into.

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