Advocare Ordered to Pay $150 Million for ‘Pyramid Scheme’
Plano, Texas based health and wellness drink maker Advocare has had the smack put down on them by the Federal Trade Commission. The investigation that started back in November of 2016 has culminated in a huge fine that will (at least in part) eventually trickle down to the hundreds of thousands of people who lost money in what investigators call a classic "pyramid scheme."
To be clear, the FTC found no fault with Advocare's products, the celebrity endorsements (including tight-end Jason Witten of the Dallas Cowboys, and quarterback Drew Brees of the New Orleans Saints), or the sponsorship of major sporting events and teams (like NASCAR's Hendrix Motorsports). The issue is Advocare's "multi-level marketing model," that suckered people into believing they could earn a significant amount of money selling the company's products.
Former Advocare CEO Brian Connolly, along with top producers Danny & Diane McDaniel and Carlton & Lisa Hardman were named as defendants in the ruling for their part in convincing people that they could get rich by selling the product. The 2 husband and wife teams were featured in a promotional recruiting video along with the former Advocare boss that claimed that there were literally millions to be made with the company. According to Fox 4, the McDaniels claimed in the video that the $33 million that they earned while working for Advocare changed their life.
The FTC pummeling was spurred on by the fact that most people who sold the products lost money, and the majority of people who didn't only made between one penny and $250. The investigation showed that the true money maker in the program was the incentives earned by convincing several people to work under you.
Bizjournals.com reports that the FTC has ordered the company to stop this "recruiting" process immediately, but will allow Advocare's products to sold through traditional retail means.