Inside Empower Network

A Rare, Authentic, Objective Review by a Non-Participant

By Len Clements © 2013

Around August of 2012, not long after Zeek Rewards was hit with the regulatory trifecta (the SEC charged them with being a pyramid scheme, and Ponzi scheme, and an unregistered security), I began to receive an ascending number of inquiries concerning Empower Network¹ I don’t believe the timing was coincidental. A lot of people had just gotten a taste of quick, online derived cash with relatively little effort, and they found it delectable. When the SEC took Zeek off the menu, there was an unsatiated craving for more entrées that boasted a super-size serving of dough with the expectation that someone else was going to do a lot of the baking.

And Empower Network was discovered. And their patrons appear to be gorging themselves.

I’m not suggesting Empower Network affiliates don’t apply effort in the creation of their income. They do. So no, it’s not an unregistered security. Nor am I suggesting they are a Ponzi scheme. They are not, nor do I see anything that would even remotely suggest otherwise. So let’s eliminate those two issues right up front. But after a thorough, six month investigation involving a survey of 104 active affiliates² and a marathon six hour interrogation of CEO and co-founder Dave Wood.³ plus another hour-and-a-half with co-founder David Sharpe, it appears there are still some dark spots on Empower Network’s X-ray, and a couple urgently warrant a biopsy. Having said that, and much to their credit, one of the most troubling diagnoses – let’s call it Acute Adrenocortical Income Claim Carcinoma – seems to have resulted in emergency surgery followed by an aggressive after-care regimen of preventive medicine. Considering the extent to which it has metastasized, the prognosis is guarded.

This is just one example of several where concerns that I raised during the non-public investigative process resulted in a pro-active attempt at resolution. What ever red flags I may present in this review, I am convinced none are deliberate, and all are being, or will be, addressed.

Whether it’s enough, and in time, or too little, too late, only time will tell.

Product Issues

Empower Network offers essentially five products:

1. The $25 monthly “Fast Start” Training
2. The $100 monthly “Inner Circle”
3. The single $500 “Costa Rica Intensive”
4. The single $1,000 “15K Formula”
5. The single $3,500 “Masters Course”⁴

If you want to go “All In”, which is highly and universally encouraged by virtually everyone, from the founders to the newest affiliate, that will cost you $5,125 for all five items, plus a continued payment of $125 monthly. The bulk of this material is related to blogging, Search Engine Optimization (SEO), Keywords, and other high level technical training that most affiliates won’t even get to for weeks, and could simply upgrade to them when they are ready. Perhaps there’s another motive for going “All In” right from the start. But I’m getting ahead of myself

Also, it’s important to understand at this point that using an Empower Network blog primarily to sell the Empower Network products and MLM opportunity is legally problematic. I’ll explain why in the Legal Issues section below. For now, let’s just say there is a good reason why Empower Network adamantly asserts that most of their affiliates are not using Empower Network blogging products and training just to market Empower Network blogging products and training.

The products described below are often revised. This is just an overview of their current contents.

Fast Start Training

The “Fast Start” training includes these eight items⁵:

1. A ready made website just for you – Saving you valuable time, effort and money.
2. Hosting for your website, which is free – Saving you money.
3. “Core Commitments” check list – To begin right away and keep you on track.
4. Lead capture pages – That is ready for you to capture prospects ASAP.
5. A ready to go presentation page – Split tested for high conversion rates.
6. Free automated emailing system – Keep in constant contact with your members.
7. Automated accounting back office – Sort all financial statements accordingly (E Wallet).
8. 8 complete HD video lessons that put you on the FAST track to making money – Free education only on what you need to know, from Leaders who know.

The training consists of 2.6 hours of video that describe the eight “Core Commitments” one must adhere to to achieve financial success with blogging. They are:

1. Activate Your Payment Account
2. Blog Daily
3. Market Daily
4. New Member Coaching
5. Empower Hour
6. Daily Audio
7. Read Daily
8. Attend The Events

The first Commitment is entirely focused on activating your payment account for the purpose of accepting orders for Empower Network products. The text on the title screen states, “Here’s how to setup your e-Wallet, and activate your 100% commission payout…”. Within the first few seconds Dave Wood declares, “You’re going to find here that there is an opportunity to make more money selling our products and services than I’ve ever experienced in the entire affiliate marketing space.” He goes on to say, “In order to pay 100% commissions you’ve got to have a way to process Payments.” So, you’re not setting up a payment solution to accommodate your primary MLM program, or your dog grooming business, or to raise funds to fight cancer (all alleged uses by some Empower Network blog users), but rather to take orders for Empower Network products. All doubt is removed as to whom their indented audience is when Wood suggests, “First thing you need to do is activate your affiliate account…” and then welcomes the viewer “as an official affiliate here at Empower Network… Our goal is to pay you 100% commission on all the products that you sell here at Empower Network, on all our products, that’s what we do.” About half of this first 32:37 training module is devoted to a detailed explanation of the Empower Network compensation plan.

In the second module, Blog Daily, while describing the value of quality blog content, Wood states, “They click on that (Empower Network) banner on your blog – everything on your blog at Empower Network is affiliate coded to you. It means that if you create content and somebody sees it and they click on that banner and they opt in, you get the lead, we do the selling. If the person buys, you get the commission, if you’re an affiliate”. This begs the question, why would anyone who is not an affiliate have the Empower Network banner on their blog?⁶

The third module, Market Daily, begins with Wood’s saying, “If you’re watching this video obviously you’ve written your first blog post, you’ve activated your affiliate account, because obviously you want to make money while you’re blogging, and if you haven’t done those things just pause the video and go back and do them.” Later the viewer is encouraged to reinvest their Empower Network commissions into marketing.

David Sharpe says they’ve created a platform that’s, “kind of an all in house university that has all of the moving parts and the only thing you need to do is send traffic, of course if you’re an affiliate. If you’re not an affiliate I would just take these principles and apply them to your business.”

Within this module there is no actual training on where to advertise and how to do it, other than Craig’s List, and be willing to make mistakes. They say you’ll have to buy the 15k Formula for that.

It is obvious on its face that the fourth and eighth modules, “New Member Coaching” and “Attend The Events”, are exclusive to Empower Network affiliates. “If you’re an affiliate”, Sharpe suggests, “(member coaching) is going to increase your sales two or three times.

Segment 5, titled Empower Hour, refers to “being on every call”. The call they are referring to is their Monday evening call titled “The Empower Hour”. “We talk about what’s most relevant to Empower Network that week”, Wood says. For example, “All of Empower Network’s new product launched are announced on the call”.

Lesson 6, Daily Audio, does refer to the value of listening to great orators like Tony Robbins and others, but eventually Wood suggests, “You need to listen to audio daily. How are you going to do that? You have to be a member of the Inner Circle… I personally will not help anyone who’s not in the Inner Circle.” The Inner Circle is Empower Network’s $100 per month audio product.

The seventh segment commands that Empower Network members should Read Daily. It’s actually a great commitment for anyone looking to improve their life in any way. Between the ages of 18 and 30 I read, cover to cover, two books. Theodore Sturgeon’s “More Than Human” (because it was assigned), and Charlottes Wed (to my step daughter). Between 30 and 54 I’ve read 74. In my single best income earning year during that period I earned more than I did from the ages of 18 to 30. Combined. Sure, there were other factors. But avid reading was definitely one of them.

Within all eight videos the viewer is encourage, at times repeatedly and emphatically, to go “All In”, both emotionally and financially.⁷ For example, in Lesson #4 you’re told, “You’re not going to make big money unless you go all in.”

Their Fast Start training is also seriously obsolete in that it refers to their long since omitted $250 priced product and no mention of the $3,500 “Masters Course”. The last time going All In cost $875 was about a year ago.

I also question how realistic Wood and Sharpe’s expectations are here. This reminds me of my freshman year of high school when, after explaining to an English teacher that my homework assignment was late because I was getting too much homework, she responded, “But this should only have taken you about 30 minutes”. I then reminded her that she was one of six teachers who were giving me “only” 30 minutes of homework. I suspect Daven’Dave found their minimal time recommendations reasonable while compartmentalizing each section of their somewhat ironically titled Fast Start training. But did they ever total them up? I did. The daily time requirements to fulfill these mandatory Core Commitments, per their stated recommendations, conservatively amounts to about four hours – per day! That’s not counting the Monday call, but listening to at least one a day from the archives (they average 1:20 in length). This is aside from the 209 total hours of actual video and audio training one would be overwhelmed with if they went All In. Assuming at least another 30 minutes a day of partaking in this training and a husband or wife with children – will probably soon have neither.

Up until late July Empower Network was catching a lot of online heat from critics for selling a $25 monthly blogging platform based on WordPress, which is free. Although there were other items included in this $25 package, the argument was that it wasn’t worth $25 a month to anyone other than an affiliate, and even then the value was dubiously focused on commission qualification. I would have agreed with this criticisms. Emphasis on the past tense. I’m not an SEO or “Info marketing” expert, but the information provided in the Fast Start training is overtly fundamental and basic, and the marketing tools (templates, banners, sales text, etc.) are clearly Empower Network-centric. And yes, the blogging platform itself was free.

However, I’ve witnessed the video streamed presentation at their recent Denver event where their custom “2.0” blogging platform was unveiled (called ENV²). And it simply rocks. So much so that had I not already went through the hellish process of custom building my own video and audio blogging platform I would seriously consider paying $25 a month for Empower Network’s. As a non-affiliate customer.

Inner Circle Training

For $100 per month ($1,200 over a year) you become a member of the “Inner Circle” which currently provides access to 90 mp3 downloads, totaling over 129 hours of audio, that allegedly contain “life-changing information… not only about the technical side of building your business online but also marketing strategies that will help you create content with the potential to turn your visitors into buyers.”⁸ You also continue to receive a new recorded interview or training each week.

The value to such information is subjective, and who’s to say it’s not worth $1,200 for a year of it? I did listen to a few of these audios and they were too long, of low sound quality, and involved a lot of rambling and back stories. One 90 minute recording about closing techniques didn’t even begin to address the topic until the 30 minute mark. This seems to be a common criticism among online critics. But still, if even a single technique, or one simple strategy, works for the buyer the subscription was probably worth the $1,200 for that year. But what about next year? Or the year after that? How many times, in how many ways, can you recite closing techniques? Or motivate someone to “take action”? Or explain to them how to select the best meta-tags? How will Empower Network justify the value of this product early in year five, when the cost has exceeded $5,000? Yes, there are myriad topics to cover, but the list is finite. The more and more the content becomes repetitive, the harder it could be to show that people are paying into the thousands of dollars for information they find of genuine value, and not just to remain qualified for commissions. I only sampled ten of them and was starting to find them repetitive.

Paid members can access all these audios online⁹ or downloaded as an mp3, thus are easily duplicated and transferrable. How valuable will they be when literally tens-of-thousands of Empower Network affiliates possess them, and offer them for free as part of their own team’s training (as some are already doing)?

The biggest knock on this product is that these audios are just archives of their Monday Empower Hour calls, which are publicly available for free every Monday night at 9:00 pm EST. You’re essentially paying $100 a month for little more than access to an archive of 28 past calls.

So yes, it’s value is subjective. It’s a matter of opinion. In my opinion, after the first month, and all audios have been downloaded, it’s value drops to nil. A call replay line is available throughout the week, so you’re not even paying for the convenience of being able to listen to the Monday call any time you want, rather than live on Monday.

Costa Rica Intensive

The $500 Costa Rica Intensive consists of 11 hours of video training and, according to several online descriptions, a 42 page online manual¹⁰ that appears to focus more on generic blogging, online marketing, and MLM building techniques. No reference to Empower Network is made in the first ten videos (totaling 7.8 hours) considering this was the event Wood conducted at his home in Costa Rica a little before Empower Network was launched (where 13 attendees each paid $2,997).

For $500 I would also expect a much more in-depth exploration of each topic. For example, during a session on Search Engine Optimization training the speaker lists only two objectives that must be mastered. Regarding the first one, related to “page relevance to search terms”, he says, “The details of this part I can’t get into right now”. The topic was revisited, but not in any detail. For 500 bucks, and certainly if I were one of those who paid $2,997 to attend live, I’d want details. Later he introduced the subject of “backlinks”.¹¹ He asks the audience behind the camera if they all know what back links are. I must assume they all said yes. He responds, “You all do? So I don’t need to go over that.” But what about all the Empower Network affiliates and customers who paid for this training?¹² He also suggests it’s highly beneficial to acquire backlinks from “authority sites” who’s domain name ends with .gov and .edu (government sites or one belonging to an educational institution). There was no mention as to how one would accomplish this ambitious goal. Students were instructed to add keywords to their article’s title tag, head tag, keyword tag, and alt tag. Only alt tag was explained (although I did learn a neat trick).

Lesson 10, How to Create a Compelling Story, was nothing more than a series of ten testimonials designed to encourage others to attend future Costa Rica MasterMind evens. It appears they simply took a promotional video and designated it a “product”. Curiously, four of the ten personal websites that were given out as part of each person’s intro are now inactive and, not so curiously, all ten speakers went on to join Empower Network.

The 11th “bonus” video is entirely about Empower Network, it’s history, it’s compensation plan and, of course, how to get prospects to go All In based on the qualification benefits, with nary a word about customers nor the intrinsic value of the products. It’s also suggested that you should allow for 1.5 to 2 hours a day for appointments. So we’re now up to 6 to 6.5 hours a day in recommended success generating tasks.

David Sharpe remarked during a Fast Start session that Empower Network training is “All killer, no filler”. The last two videos of the eleven that make up this product defy that description. Although, overall there is definitely some good information in the other nine. It’s really not that advanced, but it is comprehensive.

15k Formula

The $1,000 15K Formula is described as “an in-depth training course that is a must-learn for every online marketer wanting to successfully make 15k of income every single month.”¹³ According to Dave Wood, as well as numerous affiliates, this product offers “everything you need to know about making money online”.¹⁴ This product includes 13 videos, four “bonus” videos, and another seven “Archive Lessons”, all totaling 54.6 hours of video. Each lesson comes with a “Study Guide” that is downloadable as a PDF totaling 174 pages in all.

Each of the seven “Archive Lessons” includes a disclaimer that reads, “Some portions of archived videos are outdated and no longer apply to marketing methods. Refer to new training for updated methods.” There are no indicators within the lessons as to what is “outdated and no longer apply”.

A sampling of these training videos did reveal somewhat more advanced techniques and strategies, but again there was nothing that went over my head and little that I didn’t already know, so it just can’t be that advanced.

I also found the material much more repetitive than the Inner Circle training, but in a much more productive way. Rather than different people saying essentially the same thing, this product offered different ways of saying the same thing. From an educational and retention standpoint, this is a valid teaching methodology.

Dave Wood introduces this product in lesson one by declaring, “The purpose of this training series is simple. It’s to teach you guys how to get to $15 thousand a month in commissions in the network marketing industry, regardless of whether it’s in Empower Network or whether it’s in another company you chose. The formula is going to apply the same. It might work a little easier and faster in Empower Network, but you can actually use this information anywhere.” A lot of the content was clearly designed for Empower Network affiliates, especially lesson 15 which is described as “Specifically targeted at those people that are affiliates in Empower Network”.

Wood’s Lesson One intro also included a perfectly executed, completely compliant income disclosure (this was recorded in November of 2012).

Just before they introduced the $3,500 Masters Course in September of 2012 they didn’t drop the $250 product, they simply quadrupled its price. The 15K Formula is the same product. It was arguably worth the original $250 cost, but $1,000? Only if it included a trip to Dave Wood’s home in the mountains of Costa Rica – which is almost as breathtaking as that price.

Masters Course (Retreat)

The $3,500 Masters Course is comprised of 41 high-def video training modules shot at an event in Costa Rica in August, 2012, with 100 “Empower Network leaders and affiliates” who reportedly each paid $5,000 to attend. They impart “real insights” into what has made them so successful. This product offers, “the secrets of leveraging a system and automating the ability to produce an income on the internet” and “compelling stories from real people with extraordinary results that will shift you into making $10K, $50k and $100K+ per month for your best year ever.”

This begs two questions: First, after roughly 150 hours of training over your first year, at a cumulative cost of $3,000, is there really $3,500 worth of education about how to “produce an income on the internet” still untaught? After offering four training products for almost a year totaling an upfront cost of $875, how could their 2012 event in Costa Rica have included so much more new (i.e. non-repetitive) material as to have been worth exactly four times the cost of all previous products combined? Second, has a single, actual customer, who had no interest in making money in Empower Network, in the entire history of Empower Network, ever paid $3,500 to listen to Empower Network affiliates talk about how they made money in Empower Network? Even one?¹⁵

This presumably most advanced and comprehensive course includes such strategies as using real numbers when promoting an income claim, like $39,611 rather than “almost $40,000”, because it sounds “more believable”. Sharpe refers to this as “more advanced stuff”. But this isn’t advanced stuff. This is Marketing 101. Maybe 102.

During Lesson 34, which is titled “Cult Building”, Wood asks the audience, “How many people thought just today was worth $3,500?” The audience’s response was not overly enthusiastic. But to be fair, they might have been confused by the question considering they had all paid $5,000 to attend. This lesson teaches “Cult reinforcement patterns”, such as those they openly reveal are employed in the Inner Circle audio series. “The audios create a belief system that is conducive to selling stuff”, Wood explains. The “stuff” he is referring to are all the products after the Inner Circle.

Lesson 39 is titled “Sticking to the Basics: The Basics Make The Money”, which seems like an odd topic to include within a $3,500 product supposedly offering much needed, in-depth, comprehensive, advance training. But then, this 8.5 minute segment had little to do with the title. Other than one short testimonial from an audience member, who said, “It’s [inaudible] doing the basics. The basics over and over again”, and the basic concept of enrolling “two people a day”, the topic isn’t even peripherally touched upon. Basically, the entire segment could have been summarized in two words: Just Do It. Eh, I guess that is pretty basic.

The “bonus” Lesson 41 is over an hour of random commentary by various affiliates, all recorded at a poorly lit restaurant with a lot of background noise. What’s more, the volume was so low it was barely audible even with my own system’s volume cranked up to eleven. One of the snippets, within the context of “making money quick”, encourages the viewer to “get all in – right now.”

Product Summary

During Wood’s interview I confronted him with a David Sharpe produced product called “Marketing Mastery Vault” which purported to offer “everything… the full Monte” as far as online income generation, and which Sharpe introduced just two months before Empower Network’s birth – at a cost of $37 (which Sharpe still offers today for $297).¹⁶ Wood’s pushed back on the suggestion that this in any way can be used to establish the value of Empower Network’s products by exclaiming that, among other things, the information was two years old. Besides the significant technological advances over that time, he explained, both he and Sharpe had learned substantially more since then as well. While I accept his overall rebuttal to the issue of Sharpe’s product’s comparative value, what does this say about the value of all the Empower Network material that was also produced two years ago, such as the $500 Costa Rica Intensive? Or the Fast Start, 15K Formula, and Masters Course, much of which was produced about a year ago?

In my opinion, the entire training program needs to be completely overhauled. Besides the obsolescence of material produced before, and not long after, Empower Network launched, there are numerous blatant, disclosure free income claims throughout all the training products, as well as training that emphasizes up-selling/buying to qualify for higher income. Much of the training is overtly geared towards Empower Network affiliates to facilitate their marketing of Empower Network products, with all the legal ramifications that this entails (to be discussed later).

Their training is overburdened with tangents and anecdotes, and overwrought with back stories and repetition, but I found it not to be nearly to the extent of other critics. Much of the repetition is beneficial, and there’s certainly a place for anecdotes and asides. Just not this much. The beef is there, but for five grand I’d expect a little less bun. I, too, often go off on tangential topics and tend to over-explain things (he says, on page eight of his fifty-one page review). While I’m often called “verbose” (I prefer “prolific”), Dave Wood makes me look pithy.

The R-rated antics of Wood and Sharpe (mostly Wood), which appear throughout their training, and which range from what most may consider mildly off-putting to highly offensive, appear to seem hip and endearing to Empower Network affiliates (and, for the record, I personally have no problem with). However, there’s a wider audience they should consider. State and federal legal authorities don’t have much of a sense of humor, and tend to fall on the more stuffy, conservative side. But it’s not so much the AGs, SEC or FTC they should worry about, it’s the equally deadly and much less pragmatic ABC, CBS and NBC. I recall how CBS’s tabloid television program “American Journal” secretly recorded over 200 hours Amway meetings back in 1997¹⁷ only to render it down to about five minutes of idiots saying things like “I’d rather leave my wife and children than my Amway business!”. One public video displays Dave Wood staring at a white board full of circles and dollar signs while confessing that when he recently ogled the Empower Network compensation plan he “got a boner”. If Dateline ever does a piece on Empower Network, wanna bet that little vignette doesn’t hit the cutting room floor?

Among the most common criticisms of the Empower Network products another is that the same information can be found elsewhere for a fraction of the cost. I found several such offerings that appear to do just that, including “Advanced Online Marketing” and “Blogging for Money” courses, both online and as part of the Adult Continuation Education curriculum offered by various colleges and universities. Costs ranged from a few hundred dollars to as high as $3,500. Many books covering much of the same information can be found for under $50, and in some cases free (at the library). There are numerous other online or audio training resources that appear to cover virtually all the same material as Empower Network’s products but for 10-20% of the cost.¹⁸¹⁹²⁰

A common criticism among Empower Network critics is that their claim of providing higher search rankings for their member’s blogs is, at best, overstated. Yes, traffic to “EmpowerNetwork.com” is phenomenal. As of August 20th, 2013 Alexa ranks it the 366th most visited site on the internet.²¹ However, this has very little to do with where your Empower Network blog is going to rank. Since the large majority of the over 33.500 active Empower Network affiliates do appear to be using their Empower Network blog to market Empower Network, obviously no more than a fraction of one percent of them can rank within the first 100 search results²² Even spot-on searches for terms like “blogging” and “income” together finds only three Empower Network blogs in the first 200 search results, with the highest ranked 103rd. The terms “blogging” and “training” also found just four Empower Network sites, the highest listed 74th. Even “MLM” and “blogging” found only six active sites among the top 200 directly connected to Empower Network’s platform, with Dave Wood’s personal site at #13.²³

When asked about this Dave Wood candidly confessed that he was never comfortable with this particular selling point, agreed that the EmpowerNetwork.com ranking was not relevant to any blogger’s ranking, and that this benefit would be downplayed going forward.²⁴

Another somewhat incriminating factoid is that, according to Alexa, only 4.7% of traffic to EmpowerNetwork.com (or any derivative blog) comes from a search engine, and the most common terms used for such a search are variations of the company name itself. In other words, searchers are not looking for general information about blogging, or making money online, but specifically about Empower Network.

There is no longer any question what-so-ever as to the value of the $25 monthly blogging platform (it would be worth it even without the training), and I could even defend the value of the 15K Formula – before they raised its price by 400%. But I just can’t accept that any significant number of people are buying the other products for any other reason than to qualify in the compensation plan. Not that there’s not a lot of good education here. There is. Just not enough to warrant a first year cost of $6,500 and $1,500 every year thereafter.

And if Empower Network affiliates were to lucidly evaluate them without bias, I suspect they would agree. Of course, the size of that “if” is directly proportional to the size of their commission check.

Legal Issues

Followers of my Inside Network Marketing²⁵ video blog series will recall episode #2: What’s a Pyramid Scheme²⁶ where it was revealed that the Federal Trade Commission cares little as to how much commissionable product is purchased by the affiliates themselves. Rather, they are more concerned with the motive for those purchases. That is, were the products purchased based solely or primarily on their intrinsic value to the end consumer, and would have been purchased even if there were no income opportunity attached? Or, are they being purchased solely or primarily as a means to qualify for income in the compensation plan?

For example, Fortune Hi-Tech Marketing required their reps to purchase a “bundle” of legitimate products ranging in cost from $130 to $400. The more products you purchased, the more commissions you qualified for. Most reps, allegedly, bought more products precisely for that reason. The FTC recently closed Fortune Hi-Tech Marketing claiming it was operating as an illegal pyramid scheme.²⁷

Same with BurnLounge. In the FTC’s complaint they explain:²⁸

Participants join BurnLounge through the purchase of product packages, of which there are three: (1) the Basic Package, which sells for $29.95 per year; (2) the Exclusive Package for $129.95 per year plus $8 per month; and (3) the VIP Package for $429.95 per year plus $8 per month. More expensive packages provide the participant with an increased ability to earn rewards through the BurnLounge compensation program. (emphasis added)

Each of these three packages paid a bonus to the selling rep of $10, $20, and $50 respectively. The FTC, and subsequently the courts, determined that the value of these packages to a non-participant customer (the evidence for which BurnLounge argued was “overwhelming”) was not even “remotely persuasive”.²⁹ The crux of the FTC’s claim was based on the “plethora” of other sources for the BurnLounge product (downloadable music), often at a lower price, and the fact that much of what BurnLounge included within their packages were tools and materials to assist BurnLounge reps in building their BurnLounge business.

Let’s also consider Equinox. This was a quasi-MLM company that offered perfectly legitimate nutritional, personal, and home care products that, based on my personal evaluation at the time, were actually quite good. They certainly had value to a non-participant. So, why did the FTC and over a dozen state AGs gang-gong them back in 1999?³⁰ Because state and federal regulators don’t judge the legality of what the reps are suppose to be doing, but rather on what they are actually doing. Too many Equinox reps were “buying in” for several thousands of dollars in products primarily to qualify to earn more money getting others to do the same.

This explains why it is considered taboo for an MLM program to pay commissions on enrollment fees, distributor kits, sales aids, or program specific training. Who else would be motivated to purchase these items besides those enrolling in the income opportunity?

So, from a commission standpoint, products that have actual value to a non-participant in the income opportunity – Good. Sales tools and training designed to increase those sales – bad. So if one uses the Empower Network blogging platform and training to enhance sales of their personal business, or simply to promote themselves, great. If they are using their Empower Network blog and all the training to simply make more money selling Empower Network blogs and training, to those who are also using it to sell more Empower Network blogs and training to even more people, the Empower Network’s blogging platform is a sales aid, and the training is program specific. It would essentially be a closed loop, somewhat like (in this specific aspect) the mail order programs from the 70s and 80s that taught you how to make money in mail order selling mail order programs about how to make money in mail order.

Purchase Motive

The powers that be at Empower Network vehemently assert that the number of bloggers using the Empower Network system to build other, non-affiliated businesses or activities is massive. Considering over 167,000 affiliates and customers had to be sold or enrolled by someone, there appears to prima fascia evidence that the predominant portion of Empower Network affiliates are using the same system to sell Empower Network that got them to buy into Empower Network.

Considering Empower Network blogs are all adjuncts to the EmpowerNetwork.com URL (or are forwarding from it), a Google search for all sites using the primary domain EmpowerNetwork.com should turn up a few of these sites. So I did that. What I found was that of the top 100 search results 94 were promotional sites for Empower Network and 80 of those 94 were bait & switch “review” sites.³¹ Placing “scam” in the title, such as “Is [fill in the blank] a Scam?” or even “[fill in the blank] is a Scam”, is a common SEO technique designed to bury any real exposés of the subject³² within a sea of bait-and-switch promotions and endorsements. Five of the 100 were actual review sites, all of which were negative (although one was a competitor). Not a single one promoted a business, person, or anything unrelated to Empower Network.

As previously mentioned, I (along with two research assistants) also surveyed and/or interviewed 104 active Empower Network affiliates³³ over the past six months. One hundred and one (97.1%) said they were using their Empower Network blog solely or primarily to sell Empower Network products and promote their Empower Network business. Twenty-two (21.2%) said they were using their blog to at least promote something else peripherally, or “on the side”. Which means 79 (76%) of those 104 were using the Empower Network blogging platform and training solely and exclusively to make money in Empower Network. Only three (2.9%) claimed they were using their Empower Network blog exclusively to promote something completely different. However, one then proceeded to tell me he’s making over $12,000 a month from Empower Network, and the other two subsequently tried to recruit one of us into Empower Network!

Upon this discovery, and to be as fair as possible, I went on a mission to find at least five sites using the Empower Network platform to promote something else besides Empower Network. After about 90 minutes of searching through hundreds of Empower Network blog sites (beginning around 11:00 pm on a Friday night – providing prima fascia evidence I have no semblance of a life) I collected all five (Momentis, EPX Body, Solavei, Essante, and Body FX), plus one that appears to be an actual blog related to the author’s political views. However, all but one also had an Empower Network blog that promoted Empower Network.

So yes, they are out there. But, in my opinion, there’s not enough. Not even remotely close.³⁴

So, what’s the big deal about using the product the MLM company is selling to build your MLM downline selling that product? Once again, that could very well move the product from the realm of commissionable product to that of a not-legally-commissionable sales aid. There is an abundance of legal precedent that demonstrates that web sites used primarily to promote an MLM opportunity or it’s product is considered a “sales aid,” thus neither can it be commissionable, nor even significantly profitable.³⁵

YTB Travel got a one-two punch from the California AG and their home state of Illinois’s AG back in 2008. Both claimed that YTB Travel was a pyramid scheme because about 80% of YTB Travel’s revenue, and about the same percentage of commissions paid, were not coming from the sale of travel but rather the $450 travel booking websites.³⁶ The point being, selling a website to MLM reps that is designed to sell your product makes that website a sales aid. And YTB Travel was, at least to some extent, actually selling travel through their sites. Imagine what might have happened if they were using their YTB Travel sales websites to sell only YTB Travel sales websites.

A legal precedence that’s more on the nose involves Prosperity Automated Systems (PAS). In the SEC’s complaint against PAS³⁷ they specifically cited the closed loop aspect of their commission structure where commissionable PAS websites were sold to PAS members, virtually all of which were used to sell commissionable PAS websites.

In an effort to pull down all the resulting red flags, PAS revised its Policies & Procedures to “require” its members to declare a “primary product” other than PAS that they wish to market on their PAS website. Even with this requirement (which Empower Network does not have) to market something other than the PAS website and advertising program the SEC claimed, “Despite these revised statements… regarding the need for a ‘primary product,’ PAS remains designed to generate returns for existing investors almost entirely based upon the sales of new memberships to downline investors, rather than sales of any product or services… The vast majority of PAS websites offer no goods or services other than PAS memberships or… affiliated products”. They go on to claim that even those who did market some other product also marketed the PAS program and “derive substantially all of their profits from the sale of new PAS memberships, rather than the sale of the other goods or services.” The SEC also cited how all of the “team leaders” who were responsible for producing all of the promotional videos and online materials “have no role in marketing or selling any products other than PAS memberships. They cannot respond to inquiries made on a PAS investor’s website for anything but the sale of PAS memberships”.

Only those who are not familiar with Empower Network will find none of this familiar.

“I don’t want 100,000 customers, or 1,000,000 customers –
I want 1,000,000 affiliates a month to be earning a commission.”
– David Wood; Facebook; March 9th, 2013; 2:14 am PT

So here’s the million dollar question: Are at least the majority of Empower Network product purchasers – even those going “All In” for $5,125 – buying these products because they genuinely want to build a blog to market their personal business, and to learn how to be blogging/SEO/lead capturing/traffic generating experts, and would have paid for it all even if there were no sales commissions to qualify for? Or, are they purchasing them primarily to qualify for the “100% commissions” that are paid for all the products they sell?

On David Wood’s Facebook page³⁸ he claims 33% of all those paying the $25 monthly fee are non-affiliate customers, as of March 8^th, 2013. If true, that would certainly support the notion that people would purchase it based on its actual value. Remember, even affiliates can count as “customers” if their motive for purchasing is proper.

However, there appears to be two Holland Tunnel size holes in this claim. First, let’s revisit Inside Network Marketing, episode #8, “Corporate Hype”.³⁹ You may recall the segment concerning corporate statistics, such as sales growth data, attrition rates, and customer-to-distributor ratios. Specifically, how they can be manipulated to where they are technically true, but not entirely true. For example, if a company claims to have a six-to-one customer-to-distributor ratio that may be impressive depending on how they are defining “customers” and “distributor”. For example, if a “customer” is anyone who has ordered a single product in the last 12 months (an actual definition used by at least one company), and an “active” distributor are only those who received a check for the last pay period (an actual definition used by at least two companies) – that is, define “customer” in what ever way creates the largest number, and “distributor” in what ever way creates the smallest number – then yes, you might arrive at a 6-to-1 customer-to-distributor ratio. When asked, Empower Network reps unanimously and confidently proclaim a “customer” as simply anyone who has not paid the $19.95 affiliate fee. Those that only pay for the $25 monthly blogging system and training have no ability to sell, recruit, nor earn income. Those in that group have to be non-participant customers. Pretty cut and dry, right

Of course not. It never is.

In the Empower Network Policies & Procedures they clearly define seven requirements to be an “affiliate” (i.e. distributor). They include:

“Establish a merchant account for the acceptance of credit and debit cards for the purchase of Empower Network services by customers and the payment of commissions… and Personally sponsor the sale of an Empower Network service to an end consumer customer.⁴⁰

Elsewhere they define the requirements to maintain “affiliate” status:

“If an Affiliate has not earned a commission for 90 days (and thus become “inactive”), his or her Affiliate Agreement shall be canceled for inactivity.”⁴¹

So what happens to all those who have paid the $19.95 affiliate fee but have not yet set up an account to accept credit cards, nor made their first sale? Or is an affiliate but has simply failed to make a sale for three months?

“Affiliate shall be reclassified as a customer.”⁴²

So the questions remains, how many of those 33% are actual customers who just want to pay $25 a month for the blog and training, and how many are doing so with every intention of partaking in the Empower Network compensation plan but are simply failing at it?

According to Empower Network’s current Income Disclaimer⁴³ 91% of all (not just active) affiliates average less than $100 in annual earnings. That is, three or fewer $25 Fast Start sales over the previous 12 months. Therefore, at best, 91% of all Empower Network affiliates experience at least one 90 day period per year where their classification would change to customer. Worst case, if all three or fewer sales occurred in the same month they would have been demoted to customer in 9 of their last 12 months. What’s more, since the Income Disclaimer is only counting active or inactive affiliates, this 91% isn’t even counting those who currently have been demoted to customer for lack of sales. The evidence, albeit anecdotal, strongly suggests that demoted affiliates may account for the large majority of those 33% who are being classified as “customers”.

When confronted with this information Dave Wood claimed, with certainty, that the 33% figure only included those who “never” paid the $19.95 affiliate fee, even once. None are demoted affiliates, per the Policies & Procedures.⁴⁴ Wood confessed, “We originally put that in there because [in the beginning], and I’m going to be straight with you, I didn’t even think we needed customers in network marketing.” This was somewhat confusing in that it suggests an explanation as to why such customer defining policies would not be present. Nevertheless, Wood was explicit in that he was aware this was how most other MLMs manufactured higher customer counts, that no such affiliate-to-customer demotions, per their P&Ps, have ever taken place in Empower Network, and this was not just an assumption. He was certain. Now it’s pretty cut and dry, right?

Of course not. It never is.

Dave Wood stated in an email, and confirmed during the interview, that “most” affiliates start out as customers. He elaborated that they typically buy the $25 blogging platform first, then upgrade to affiliate later. Which makes perfect sense. Those looking to be an affiliate would pay the first month’s $25 and check out the platform and training first, then when satisfied (a day or two, or week or two later) commit to the $19.95 affiliate fee.

So… this now begs the question, how many of that 33% are those who intend to be affiliates, but are still in this initial “try it out” phase? If, in deed, “most” (i.e. more than half) upgrade from customer to affiliate in this manner, the majority of their “customers” at any given moment are simply affiliates-to-be, and not someone who has no intention of marketing the products and just want them based on their intrinsic value. For example, in May of 2013 there were 8,289 affiliate enrollments and 3,901 customer enrollments. So the question is, how many of those 3,901 customers in May were part of the 6,176 affiliates who enrolled in June?

As can be seen from the chart above, the number of affiliate and customer enrollments each month⁴⁵ track almost identically. This strongly suggests there is a direct correlation between customer and affiliate enrollments. If you’re thinking, well, of course there is, because more or fewer affiliates create more or fewer customers, think deeper. If, hypothetically, there were 10,000 total affiliates and 5,000 total customers at the start of June, 2,000 more affiliates and 1,000 more customers joined that month, you’re start July with 12,000 and 6,000. Now, let’s say 1,500 affiliates and 750 customers join in July. Does the affiliate drop account for the customer drop? Really? But, there were 10,000 affiliates trying to acquire customers in June, and now 12,000 in July. How did a 20% increase in the total number of people trying to find customers cause them to be 25% (1,000 to 750) less successful?

Unless, most affiliates and customers were one of the same.

Having said all that, if those who never were/never will be affiliate customers accounted for even 10% of their sales that still puts them ahead of many, if not most, other MLMs, and is still indicative of a product with real world value. But, alas, it’s just not that simple.

Dave Wood’s claim of 33% being those who never paid an affiliate fee first appeared on March 8^th, 2013. The percentage of all sales that went to customers in February was 32.2%, and in March it was 31.2%. Let’s put our thinking caps on and really consider this. If, as of early March, 33% of all sales made up to that point were to customers, going back to their October, 2011 launch, but 32% of their customers as of March 8th joined within the last 30 days, that would suggest that of all the sales made previous to February, 2013, only one percent of them are (stayed) customers! This virtually proves that the large majority of current ”customers” are simply soon-to-be affiliates, not folks who just want the product and have no interest in making money selling it.

Within a July 13th Facebook post Dave Wood cited the percentage of customers as 37%.⁴⁶ However, data supplied to me on August 27th now pegs this at 33.34%.⁴⁷ Let’s generously assume these are all actual customers with no intention of ever upgrading to affiliate. Also, let’s consider, based on actual data provided by Empower Network, that 29% of all purchasers (affiliates and customers) upgrade from the $25 monthly product to the $100 monthly product; 11% also purchased the one time $500 product; 9% upgraded to the $1,000 product, and; 2% purchased the $3,500 product (i.e. went “All In”). Now let’s be extremely optimistic and assume 10% of these customers purchased the monthly $100 product, 5% purchased the $500 product, 2% the $1,000 and 1/2% went “All In” for $5,125. Granted these are my estimates, but surely no one can argue they do not significantly favor Empower Network, if not excessively so in the case of the top three products. Knowing now how the customer-to-affiliate ratio is weighted (33.3% to 66.7%) we know that if these assumptions are accurate the number of Affiliates upgrading would be: 38.5% to the $100 monthly product, 14% to the $500 product, 12.5% to the $1,000 product and 2.8% of affiliates went “All In”. Before I make my point here, keep in mind that the assumed purchase breakdown for customers, even as optimistic as it is, still seriously brings into question the value of all Empower Network offerings above the $25 monthly Fast Start product. To lower these assumptions would only exacerbate this concern.

Here’s the point: Again, for the sake of argument let’s assume all 33.33% of their product users are, in fact, real customers. State and federal regulators don’t give much weight to the percentage of people, they tend to focus on dollars. This overly charitable scenario paints a rather unrosy picture. Of the 50,286 total buyers as of August 27th, 2013.⁴⁸ customers would have produced $4.06 million and affiliates $17.51 million. What’s more, even if we assume all currently active buyers have been on the two monthly product for an average of three month, these products account for just over $11 million in sales, where as the three one time, higher priced products generated sales of $17.88 million.

From a different angle, almost four times as many affiliates upgrade to the $100 monthly product as to customers; almost three times as many to the $500 product, over six times as many to the $1,000 product, and almost fives times as many went All In. Certainly the income qualification motive exists, and can account for something, but it can’t be the primary motive for purchasing. Affiliates purchasing the $100 to $3,500 products three to six times more often than customers, with affiliates generating 77% of Empower Network’s revenue, and the three highest priced products, even being a small fraction of the sales of the lesser two, accounting for 62% of all income, certainly suggests there is something that is substantially motivating affiliates to upgrade over customers. This data does not bode well for the argument that income qualification isn’t it. What else could it possibly be?

And, just to reiterate, this is all assuming 33.33% really are genuine customers with no intention of becoming affiliates, when all evidence suggests it’s a substantially smaller number.

Wood & Sharpe do emphasize adding interesting content of value to one’s blog perpetually throughout all their training products. Based on the several dozen Empower Network blogs I’ve reviewed, few are getting the message. Although it’s not nearly as bad as SkyBiz, a defunct pyramid scheme that sold websites which had to be “activated” by adding “custom content” to prove they were not merely an obligatory purchase just to qualify for income – which created a deluged of websites with “asdfghjkl” emblazoned across their homepage. Empower Network reps are at least putting forth a perfunctory effort to add actual content. But, in most cases, the often bland, cookie cutter commentary seems compulsory.

The income qualification motive to upgrade is clear and pronounced. You must either purchase each of the products yourself to qualify for the commensurate commission on those you sell, or alternatively you can sell one of each to a non-affiliate customer.⁴⁹ If you don’t the commissions from all of your and your downline’s sales on that product are forfeited and get passed upline (see the comp plan section below for additional concerns related to this aspect). Basically, your $100 monthly, $500, $1,000, or $3,500 payment buys you commission eligibility.

This would seem to be the only motive for a new affiliate to go “All In”, as both Wood and Sharpe doggedly recommend. Otherwise, it makes no logical sense to purchase well over 150 hours of audio and video training, plus numerous PDF documents, which includes the very advanced training in the upper tier products, within the first few weeks, or months – except to qualify for commissions from those who also prematurely go “All In” to qualify for commissions. Does it make sense to go for a PhD in medicine your first day of Pre-Med? Or, even more analogous, to pay for those extra eight years of education that’s going to take four years to get to? If you’re buying them for their educational value, why not buy them on an as-needed, or as-ready for basis? Why not see how much benefit you receive from the $25 and $100 products before committing thousands of dollars on the much more advanced training, especially considering Empower Network’s restrictive 72 hour refund policy, and the fact that, from strictly a training/product value standpoint, there’s no downside to waiting? There is simply only one rational reason to go “All In” upon enrollment – to qualify for income.

Within their training products, as discussed previously, Wood and Sharpe have no qualms with explicitly defining the “key” reason one should buy all the products – to qualify for more commissions. For example, in Lesson Four of their Fast Start training dealing with “New Member Coaching” (which could more accurately have been titled “High Pressure Sales Tactics”), Wood states, “If they buy everything, how much are you going to make? I’m going to show you in a second. You want them to buy everything.” Wood and Sharpe then roll play how to up sell a newly enrolled affiliate:

Wood: “How fast do you want to get to three or four thousand a month?… I can show you how to do it right now with what you’ve got (Inner Circle) in six months, a year, or I can show you how to do it in the next five days. If I taught you how to get to three or four thousand a month in the next five days, are you ready to get all in or not?”

He then explains, while still roll playing, that buying the rest of the products will allow Sharpe’s persona to earn “$1,000 this week.” Later in the training Wood says, “Here’s why you need to buy everything and go all in.” He first explains that, “It’s unethical (to sell something you didn’t buy). If you want to sell it, buy it.” Although I completely agree with Wood on this point, and while this should certainly be one of the reasons for buying all the products eventually, how much more income you’ll qualify to earn, and how much you’ll lose if you don’t, shouldn’t be the only other reasons. This can be discussed, within limits, during explanations of the comp plan, but within the context of why you should purchase the products there has to be at least some discussion, if not most of the discussion, about the value of the products. But here, there is literally one sentence, about half way through the 40 minute video, where Wood states, “This is information you can feel good about selling”, after explaining that the value of the products are discussed in the “sales videos”. But this is New Member Coaching. Shouldn’t there be an entire session on how to sell the products based on the actual value of the products? But no. One sentence. That’s it.

Like I said. The training needs to be completely recreated, from scratch.

Of all the different benefits these products provide, I wondered how much emphasis affiliates place on this qualification motive? So I ask them.

Of the 104 Empower-folk I questioned, 87 of them addressed the primary (and in some cases only) reason why one should upgrade to the higher priced products. Of those 87, 69 of them (79.3%) focused on the financial benefit of upgrading, and/or the potential cost of not upgrading. Many declared that you only get paid “on the products you own” – which is technically untrue (as describe above). Which begs the question, are they all genuinely ignorant of the customer sales option to qualify, or are they just being duplicitous?

Wood suggest it may very well be the former, and in response to my findings he and Sharpe have commenced a very proactive campaign to educate affiliates. No, they didn’t just say they were going to do this, they are doing it. At their mid-July event in Denver Wood, Sharpe and attorney Kevin Thompson lectured from the stage at length on this issue. Wood introduced the topic by announcing, “Right now about 70% of the people who are getting asked ‘Why should I buy that product’, they’re responding with – and we have done surveys – they’re responding with ‘Well, of course, to get a commission’. Let’s hope when people ask you that, they’re not a regulator.”⁵⁰

Wood evangelize that, “It is a better sell to sell our products based off the value than it is based off ‘buy the products to get a commission’. It makes us look better. It makes us look more credible to people who are not in Empower Network. And it works better, too.” To sell the product based on the need to qualify for commission, he says, “makes us look bad”, and “When we have a value based message, better people get in”.

It’s unfortunate that after 18 months of offering hundreds of hours of advanced training related to marketing and selling that this so powerful value-based selling proposition is just now being emphasized, and the legal detriment to the qualification motive is just now being mentioned.⁵¹ There is already so much non-compliant material out there, and the clean up will be BP-esque in it’s difficulty, if not impossible. But still, kudos to The Daves for their bold effort to stem the flow of new non-compliant materials and claims. It is indeed better late than never.

However, there is a second legal red flag that’s big enough to carpet all of Costa Rica. This one concerns…

Income Claims

In episode #7 of “Inside Network Marketing”⁵² I broke down the rules and regulations related to income claims. Attorney Kevin Grimes does a far better job in his theses on the topic.⁵³ In summary, the FTC changed the rules back on 2009 to where we can no longer make an income claim, then add a disclaimer stating “results not typical”.⁵⁴ Now we must state what results are typical. That is, if you state someone else’s or your own earnings (i.e. you hold up giant faux checks with large numbers on them, while standing on stage at an event) you must also provide a comprehensive income disclosure that is:

1. Clear and conspicuous;
2. Printed in a type size at least equal to that of the statement of sales, profits, or earnings;
3. Discloses (among other things) the percentage of total reps who have achieved such earnings;
4. Adjacent, or in close proximity, to the earnings claim;
5. Unavoidable by the viewer;

On a state level, both Massachusetts⁵⁵ and Wyoming⁵⁶ strictly forbid any type of earnings claims under any conditions.

The FTC’s thinking on the issue of disclosure is spelled out in detailed, lawmen’s terms within their comprehensive guidance document titled “Dot Com Disclosure” (pub. March, 2013).⁵⁷ Within this report they state:

“A disclosure is more likely to be effective if consumers view the disclosure and the claim that raises the need for disclosure together on the same screen… Requiring consumers to scroll in order to view a disclosure may be problematic, however, because consumers… may miss important qualifying information and be misled… Scroll bars along the edges of a screen are not a sufficiently effective visual cue.”

Therefore, the following two sets of examples would likely not be complaint despite the inclusion of the Income Disclosure link – in fine print, within a sliver of the page not visible without scrolling down just another inch. The “Income Disclosure” link is at the end of the bottom line of text.

 Example 1.1                                                       Example 1.2

 

 Example 2.1                                                       Example 2.2

The FTC includes these comments regarding the use of hyperlinks to direct readers to the disclosure:

“The hyperlink should be proximate to the claim that triggers the disclosure so consumers can notice it easily and relate it to the claim. Typically, this means that the hyperlink is adjacent to the triggering term or other relevant information.”

So besides reaffirming the lack of compliance of the above examples, it also suggests Empower Network promotional pages like this one below are not compliant as well:⁵⁸

http://www.insidenm.com/wp-content/uploads/2013/06/ANOTHER-40000-per-month-earner.pdf

The FTC continues: “If claims requiring qualification are repeated… it may be necessary to repeat the disclosure, too.”

Therefore, the number of blatant income claims throughout the document above, and the “Join Now” links that direct the reader away from the document well before the Disclosure link, also makes the disclosure very likely non-compliant.

Another section of the FTC guidance document states:

“A disclosure in a color that contrasts with the background emphasizes the text of the disclosure and makes it more noticeable. Information in a color that blends in with the background of the ad is likely to be missed.”

Go get your magnifying glass and see if you can find the income disclosure in this popular image used by many Empower Network reps:

It’s at the end of that faint red line at the bottom.

The FTC also makes clear that audio income claims should include audio disclosures.⁵⁹ I’ve listened to numerous video and audio promotions of Empower Network that include explicitly, over-the-top income claims with not one verbal word of disclosure. For example, this online MeetUp that Empower Network co-founder Dave Wood declared there was “a thousand people are on” (edited for brevity):

http://www.insidenm.com/wp-content/uploads/2013/06/EN-MeetUp-Income-Claims.mp3

Within what was likely the most prevalent and widely viewed Empower Network video, which the majority of Empower Network blog sites I visited linked to, a series of flagrant income claims were made.⁶⁰ Here is an edited version rendered down to just those claims:

http://www.insidenm.com/wp-content/uploads/2013/06/EN-Video-Income-Claims.mp3

In the above audio Dave Wood does attempt to make an income disclaimer, but he sandwiches it within two of his own income claims. The FTC also considered “lifestyle” claims, so anything that even implies wealth, such as images of the rep standing in front of his or her million dollar home, driving an exotic car, sailing on their yacht – or writing with a $750 fountain pen – is an income claim worthy of an income disclosure.

And a disclaimer is not a disclosure.

Dave’s Wood and Sharpe can’t plead income claim ignorance. Besides having hired Kevin Thompson.⁶¹ one of the best MLM attorneys out there, to advise them over the last 20 months, they declare their keen awareness of this issue even within the earliest versions of their own Policies & Procedures⁶² where they demand that:

“No income claims or representations may be included in such materials unless a copy of the Empower Network Income Disclosure Statement is incorporated into the advertising or promotional material or the Internet address of the current Income Disclosure Statement is incorporated into the materials.”⁶³

“If there are any income claims or representations contained within an Affiliate’s website, there must be a link to the Empower Network Income Disclosure Statement immediately adjacent to any such claim or representation.” (emphasis added)⁶⁴

“No income claims or representations may be made when participating in a social networking site unless a link to the Company’s current Income Disclosure Statement is provided.”⁶⁵

“An Affiliate, when presenting or discussing the (EN) opportunity or Compensation Plan to a prospective Affiliate, may not make income projections, income claims, or disclose his or her Empower Network income (including the showing of checks…) unless, at the time the presentation is made, the Affiliate provides a current copy of the Empower Network Income Disclosure Statement to the person(s) to whom he or she is making the presentation.”⁶⁶

“…a copy of the (Income Disclosure Statement) must be presented to a prospective Affiliate… anytime the Compensation Plan is presented or discussed, or any type of income claim or earnings representation is made.” (emphasis added)⁶⁷

“The terms ‘income claim’ and/or ‘earnings representation’ include: (1) statements of actual earnings, (2) statements of projected earnings, (3) statements of earnings ranges, (4) income testimonials, (5) lifestyle claims, and (6) hypothetical claims.” (emphasis added)⁶⁸

“A lifestyle income claim typically includes statements (or pictures) involving large homes, luxury cars, exotic vacations, or other items suggesting or implying wealth. They also consist of references to the achievement of one’s dreams, having everything one always wanted, and are phrased in terms of ‘opportunity’ or ‘possibility’ or ‘chance.’ Claims such as ‘My Empower Network income exceeded my salary after six months in the business,’ or ‘Our Empower Network business has allowed my wife to come home and be a full-time mom’ also fall within the purview of ‘lifestyle’ claims.”⁶⁹

Within a May 16th entry on David Sharpe’s Facebook page, he generically warns:

“When ever you show off commissions that you’ve earned, or money that you’ve made – make sure to include an income disclaimer that “these results are not average or typical” and link to your companies income disclaimer (if they have one).”⁷⁰

Yet, on June 19th, 2013, Wood himself posted an image of himself holding a $4,833,394 check on the official Empower Network Facebook page.⁷¹ As late as August 12th, 2013, he posted another image of an Empower Network affiliate holding a $173,475 check with the request to “Share” it.⁷² In both cases there isn’t even an attempt at a disclaimer, let alone a disclosure.

Back in July of 2009, while Wood was promoting another MLM program called iLearningGlobal, he posted a blog entry titled “Are You Wondering if iLearningGlobal is a Scam?” Within he lists a series of nine “points to watch out for when reviewing whether or not a company is a legit business model in the world of MLM”. Here’s the eighth one:

Watch Out for Earnings Misrepresentations
Do the company’s literature and training materials scrupulously avoid claims of income potential that is promises of specific income levels other than demonstrations of verifiable income levels within its program? (The Federal Trade Commission, attorneys general, and postal inspectors all have their eyes on the matter of earnings representations. The acceptable approach emerging is that there should be no earnings representations unless they are based on a verifiable track record of the average earnings of distributors. For instance, a company should have statistics to show the percentage of active distributors and the average earnings of active distributors.)⁷³

In a December 29th 2011 email Dave Wood announced that they have “been in the process of doing a major compliance overhaul.” During the first week June, 2013 – 17 months later – they published their Compliance Training online.⁷⁴ The training is comprehensive and solid. It’s also 22 months too late. And, at least up to their Denver event, was being utterly ignored.

When consulting for start up MLM operations I’ve found the majority have no clue as to what laws or regulations they are violating and honestly believe they are about to do nothing wrong. Once informed they are usually more than willing to make the appropriate adjustments. In the case of Empower Network there is no doubt Sharpe was well aware of the rules regarding income claims and how to properly provide them all along, as was Wood at least two years before Empower Network existed.

All of the income claims presented in the pages above are not cherry picked worst case examples. In fact, they derive from common, current, replicated Empower Network web pages or emails that are part of the standard Empower Network auto-response options. Most of them I have received or viewed literally dozens of times, and am still receiving.

And these are just examples of how the Income Disclosure was used, but used improperly. In fact, of the literally hundreds of income claims I found, or been sent, the vast majority included no disclaimer or disclosure at all! Of the 104 Empower Network affiliates who were surveyed or interviewed 87 of them (83.7%) unabashedly made clear and explicit income claims. Of those there were two who provided access to the Income Disclosure in a way that was very likely out of compliance. Only one affiliate – one – provided a link to the Income Disclosure in the proper manner.

These violative claims are not coming from a small but prolific group of inexperienced or rogue affiliates. Many were provided by affiliates who Empower Network define as their “top leaders”, and the overwhelming majority appear to be corporate condoned, or corporate generated. Nor are these remnants of past digressions before compliance training was initiated. For example, just moments before I began this paragraph I received an email from a top Empower Network affiliate which contained a link to the website below which is chocked full of blatant incomes claims (including within the videos), and does not include even an attempt as an income disclosure.⁷⁵

http://linkprosperity.com/you-ever-watch-a-dream-manifest

If there is any doubt as to the overwhelming number of Empower Network sanctioned income claims, check out the results of this Google image search for the terms “Empower Network” (in quotes) and the word “checks”.

http://tinyurl.com/ENChecks

However, once again, when all this was revealed to Wood during the interview he expressed genuine ignorance as to the magnitude of the problem, and a sincere, deep disappointment.⁷⁶ Within 24 hours I was cced a copy of a very aggressive compliance demand notice that Wood had produced regarding income claims, and other inter-company emails where Wood proposed that the Income Disclosure URL be imprinted on the face of all of the oversized check placards to be presented going forward. Three days later, at their Denver event, the Income Disclosure URL was imprinted on the face of all of the oversized checks.

At that event they devoted 45 minutes of stage time entirely to compliance. At one point Wood commanded the audience to, “Repeat after me. I commit… that from now on… when ever I make an income claim… that I’m going to link… to EmpowerNetwork.com… forward slash income dot php.”

And today, almost two month after this event, and over four months since their compliance training went live, all of the above examples of non-compliant income claims, with the exception of only the company’s main promo video featuring Dave Sharpe, are still available online, and unchanged.

The sheer magnitude of such claims already glutting cyberspace is irreparable. In my Zeek Rewards exposé⁷⁷ I made the comment that their efforts to remove all of their online investment terminology (after they also belatedly hired good attorneys who told them to do so) would be tantamount to “removing the fudge from a Rose Bowl size tub of fudge-swirl ice cream”. Empower Network’s tub is about the size of the Pacific Ocean. And having Empower Network end the production of new online income claims will likely be as effective as Los Angele’s law against graffiti (where it’s so prevalent that taggers now have to paint over old graffiti first before they can paint new graffiti). Especially when your own leaders, from Empower Network CEO David Wood and President David Sharpe, and virtually all of those in the field they place so high on the earnings pedestal, have been so aggressively involved in the practice.

For example, here’s a link to a currently active web page where both David’s themselves declare their “over $6.1 million in commissions” in the “last five months’:⁷⁸ You’ll find the non-compliant Earnings Disclosure in tiny, dark red text over a darker red background, at the very bottom of the screen, about an inch out of the frame.

http://www.newempowernetwork.com/truestory.html

As I’ve stated, their training is riddled with disclosureless income claims. For example, within Lesson #4 of their Fast Star training Sharpe describes an affiliate who went from “a list of 200 to a $20,000 per month income”. In Lesson #5 Wood recites a story about one of their affiliates making $150,000, which he describes as “a ridiculous, retarded number for a part time guy”. This was followed by three other utterly noncompliant, albeit heart wrenching, income testimonials.

The best compliance course ever created isn’t going to put out this fire. It will likely slow down it’s spread, but there’s already 100,000 acres of scorched cyberspace. This is a fire alarm bell that can never be unrung.

Refund Policy

One of the sacred “Amway Safeguards”⁷⁹ that kept the FTC from shuttering Amway (and consequently the entire MLM industry) back in the 70s was their “buy back” (i.e. refund) of all unsold products and sales aids. Such a policy is now commonplace, and to not have one is considered anathematic. In fact, several states including Georgia, Massachusetts, Wyoming, Maryland, Louisiana, Montana, Oklahoma, and Texas, as well as The State Without a Star (Puerto Rico), all have their own refund policies that MLM operations are required to adhere to.

Over their first 18 months of operation Empower Network had an explicit “NO REFUND” policy:

“We have a NO REFUND policy because of the way commissions are paid out to members from product sales on a weekly basis, however, refunds can be requested dependent upon circumstances and only after review by our customer support team.” (caps are original)

Not until May 17tj of 2013 did Empower Network revise their refund policy to the more ambiguous:

“Refunds are handled on an individual basis due to the fact that some transactions are tied to our commission program, which is paid on a weekly basis. Empower Network is committed to providing each customer / member with exceptional service and 100 percent satisfaction. Should you have a request for refunds of purchases please contact Customer Support at…”

Less than two months later the policy was revised again to this:

“Due to the nature of the Empower Network business and the accessibility of our products immediately upon purchase, there is a strict 3-day return policy, which begins on the date of purchase. Therefore, we will not accept return requests after 3-days of doing business.”⁸⁰

There is a federally mandated “Cooling Off Rule” that requires merchants such as Empower Network to allow buyers 72 hours to come down from the ether and make a lucid decision regarding their purchase.⁸¹ So basically Empower Network is back to a “No Refund” policy, except for the first three days when the FTC commands they provide one.

Most of the states mentioned above require a specific refund (at least 90% is acceptable) within a specific amount of time (30 to 90 days, or one year in the case of Louisiana). A policy that essentially says, “We might refund you some amount”, or the updated “No refund after 72 hours” is likely not going to be acceptable by most states.

No matter what Empower Network is actually doing, what legal authorities will focus on is what the participants are telling everyone, and what their newly enrolled affiliates and customers are being lead to believe.

Do a Google search of all online commentary containing the terms “Empower Network” and “No Refunds” (both phrases in quotes).⁸² In spite of the non-definitive “handled on an individual basis” version having been enacted over three months ago, and the “three day” version now in place, word does not appear to be getting out. Of those Empower Network reps I surveyed I had the opportunity to ask 41 of them what the Empower Network refund policy was. Eleven directed me to the online policy. Thirty (73.2%) firmly and confidently declared there were “No refunds”. More than one suggested only “wussies” would even ask for one.

I understand Empower Network’s reluctance to declare a more industry standard, and AG friendly, refund policy early on. Their business model, or more specifically their compensation plan, once placed them in an unusual and unenviable position of having to provide refunds for payments they never received. As will be made clearer in the compensation plan section below, Empower Network’s system pays a 100% commission on most of the products. This was accomplished by the buyer submitting their funds for the purchase which was then directly transferred to the eWallet account of the selling affiliate, or another upline affiliate. Most funds never passed through an Empower Network corporate account. For example, let’s say Alice sponsors Bob, and Bob sponsors Carol, and Carol sells a $500 “Costa Rica Intensive” to Ted. Ted pays his $500 either directly to Carol or, depending on how many previous sales Carol has made, the payment might roll up to Bob, possibly to Carol, or perhaps someone even further upline.⁸³ So if Ted asks Empower Network for a refund they either had to find out which affiliate the $500 went to and try to claw back the funds from them, or just refund the $500 they never actually received and eat the loss. It appears Empower Network was wisely choosing the latter option.

For over a year-and-a-half now they’ve been accepting funds and paying commissions in a much more conventional way, with the funds passing from buyer to seller via Empower Network’s accounts. Thus they now have the ability to refund purchases and deduct the corresponding commission from the individual affiliate that earned it. So the arguably reasonable excuse they once had for having a restrictive (or no) refund policy no longer applies.

The most potent catalyst to a state or federal regulatory investigation are complaints filed by failed participants, or what regulators like to redefine as “victims” (and sometimes appropriately). The number one catalyst to complaints are refused refund requests. For now Empower Network appears to be biting the bullet, providing refunds when requested, and keeping the peace.

Wood claims a refund request rate for the $3,500 product of 1-2% and an overall rate of about 3%, which he claims is the “lowest I’ve ever heard of”.⁸⁴ Actually, this is higher than most MLMs, but not significantly.⁸⁵ Wood also asserts this is indicative of their product’s value and customer satisfaction. Perhaps, in small part, but this assumes the decision to return products is principally based on it’s value and the buyer’s satisfaction, or lack thereof. However, Empower Network is unique in that a single purchase of the $500, $1,000 and $3,500 products qualifies an affiliate for commissions on that product in perpetuity, unlike a more traditional MLM where a Personal Volume (PV) quota must be met every pay period. Returning any product in Empower Network precludes any opportunity to ever again earn a commission on that product (unless you repurchase or sell the same product), regardless of the amount of “PV” you produce. That is, if you return a $500 product you will not qualify for any further commissions on that product even if you subsequently achieve $4,500 in PV by purchase both the $1,000 and $3,500 products Thus, Empower Network affiliates are incentivized to not return product to a much higher degree than in most other MLM programs. They are also unique in that you only have three days to return products and the majority of affiliates seem to believe there are no refunds allowed at all. These idiosyncratic features suggest motives for not returning products than are substantially different to those which Wood suggests.

Any MLM operation that experiences a sales slide typically experiences a reciprocal rise in product returns and refund demands. In Empower Network’s case this could be exacerbated by five factors: 1) The high cost of their three singularly purchased products; 2) the over 36,700 of those products they’ve sold in total, and over 11,000 sold to currently active buyers; 3) Most of the content of each product is provided up front; 4) The ease of duplication, and; 5) The fact that, once it’s been provided, you can’t return knowledge. In addition to that, 91% of all Empower Network affiliates already earned less than $100 over the past 12 months, even during Empower Network’s pronounced upward momentum phase. If (when) Empower Network starts to experience a rise in refund demands for their $500, $1,000 and $3,500 products, with a greater number of them outside the 72 hour refund window, will Sharpe and Wood still be as accommodating, or be willing to part with those funds out of their own pocket (which they did under the original system early on)? If they attempt claw backs from the pockets of those affiliates who were the ultimate recipient of this cash (a large share of which will be their showcased leaders), they’ll likely just transfer the complaint from one affiliate to another. Imagine, in the above example, Ted going “All In”, and the over $4,500 in commissions being rolled up three generations to Alice. Then, Ted demands a refund and Alice’s next check is negative $1,500 instead of the $3,000 she was expecting, due to a refund on a sale she had nothing to do with.⁸⁶ Or worse, Dave & Dave continue to accommodate late refund requests, to assuage unhappy customers and ex-affiliates, and Alice goes ballistic when she finds out her next mortgage payment is not only gone, and she now owes Empower Network $1,500, but it was due to a refund on a return that wasn’t even eligible for one.

Solutions are few, each with their own perils. Empower Network could simply stand firm on the 72 hour refund limit, and piss off more disgruntled “wussies”. The Davids, having positioned themselves at the top of the whole Empower Network organization resulting in them becoming “internet millionaires”⁸⁷ have plenty of their own liquid capital to douse fires with, and they’ve exhibited a willingness to do so, when needed. But for how long? If returns rise even one percentage point annually, resulting in roughly another $250,000 in requested refunds, buying everyone’s satisfaction is going to get costly. The only other option is to return to a No Refund policy, and the resulting deluge of complaints to the Florida Attorney General’s office and the FTC.

State Registration

There are five states that require MLM companies to formally register before they are legally allowed to conduct business in those states. They are Montana, Louisiana, Georgia, Massachusetts, and Wyoming. As of July 5th, 2013, Empower Network had been operating for over 20 months in each of these states without being registered.⁸⁸

I suppose Empower Network could make the argument they are not a multilevel marketing company – but they don’t. Although Wood confesses to not believing they were in the beginning, he was informed by their legal council very early on that, in fact, they are. By even the most narrowly focused definition there are, without question, multiple levels of people marketing the Empower Network products and income opportunity.

Again they can’t feign ignorance of the law. In Wood’s aforementioned 2009 blog entry regarding how to judge an MLM’s legality, he states: “Will the company buy back inventory and sales kit materials from distributors who cancel their participation in the program, as long as these items are in resalable condition? (This policy is required in states that have adopted multilevel distribution statutes.)”⁸⁹

This not only reveals Wood’s awareness, back in 2009, of the need for a generous refund policy, but also that there are specific states with MLM regulations.

When confronted with this information I was told that they believed a previous law firm they had worked with had taken care of these registrations, and that a compliance consultant they had only recently hired (wow, you mean I could actually get paid for doing this?) had “caught it” and “got it done”. Allegedly registration forms were submitted to all states on or about July 2nd.

As of August 8th, 2013, Empower Network was still not registered, thus not legal to do business in, Montana,⁹⁰ Georgia,⁹¹ and Massachusetts.⁹² Louisiana responded that Empower Network’s registration paperwork has been received but had not yet been approved because the information provided was “incomplete” and had been returned. Wyoming said on 8/6 that they had “no record” of ever having even received anything from Empower Network. When I called back the next day to ask if the same issue might have occurred as in Louisiana, I was informed that “Empower Network is now registered in Wyoming” – which doesn’t lend a lot of credence to Montana, Georgia and Massachusetts’s claim of having not yet received anything.

The registration process is obviously underway – albeit 20 months late.

Sales Tax

There is a battle waging on both a state and federal level as to what is taxable online. On a federal level there is currently an effort to push through a bill called the “Marketplace Fairness Act”⁹³ that is designed, allegedly (and in my opinion, ostensibly), to place online sellers such as Walmart and Amazon, who must charge sales tax to all, on a level playing field with smaller online marketers who do not (to those who reside out of state). Yeah. I’m sure this is all about being “fair” to billion dollar mega-corporations, not about the $11 billion⁹⁴ that states lost, just in 2009, by not being able to tax interstate transactions.

But I digress.

Besides this bill, which has already passed the Senate by a vote of 69-27 (but is expected to fail in the Republican dominated House), there are also a number of states that have enacted new law regarding specifically sales taxes on “digital goods”. They are: Indiana, Ohio, Nebraska, Utah, South Dakota, Tennessee, Kentucky, Mississippi, North Carolina, Vermont, Wisconsin, Washington, Minnesota, Massachusetts, and Louisiana. Eight States rejected taxation of digital products, including a few big ones. They are: California, Florida, Massachusetts, New York, Nevada, Virginia, West Virginia, and Wyoming.

So, in those 15 states that do charge sales tax on digital products the question is this: Is access to video and audio training taxable? That is, you only purchase the ability to view the training, but do not necessarily take possession of it (i.e. do not download it). So, once again, I employed the “Ask” technique (a fact gathering strategy so few critics and online commentators seem to be aware of).

Indiana, Nebraska, Utah, South Dakota, Tennessee, Mississippi, Vermont, Wisconsin, Washington, and Minnesota all responded definitively. There response was “Yes.” Most provided direct access to their specific statutes confirming taxability if someone in their state purchases:

1) Electronically transferred digital audiovisual work, digital audio work, or digital book;
2) For “less than permanent use (i.e., streaming)”;
3) Whether for one-time use or through ongoing subscriptions;

The simplest and most definitive clarification, supplied by several states, was that any sales of digital media “are subject to tax when delivered electronically if the same type of products are taxable when delivered on tangible storage media.” That is, would all of Empower Network’s videos and audios be taxable if sold on DVDs and CDs? Obviously, they would.

Ohio also passed digital sales tax legislation, but it does not go into effect until January 1^st, 2014.

Louisiana also responded affirmatively, but their direct response seems to somewhat contradict certain statements in their online language, which in itself is ambiguous. Massachusetts, North Carolina, and Kentucky did not respond to my inquiry.

Keep in mind, this is just a survey of these states that have enacted specific regulations on the taxation of digital product. All other states are still free to impose sales tax on such digital products by applying their existing statutes. According to Wikipedia, “Some states presume that downloads are automatically covered by their existing tax statutes based on the common law definition of tangible personal property, which is anything that holds value on its own that is not real property.”⁹⁵ Although most appear to apply only digital goods that are taken possession of (downloaded), not all offer such an exemption to access only streaming of content.

This issue involves more than just not paying sales taxes, with all that that entails. Although this only applies to about 20-30% of all states, they are among the relatively less populous. If we optimistically assume only 10% of Empower Network’s over $75 million in sales were made to a residence of these states, that’s an oncoming tax bill of around $4.5 million, not counting interest and penalties. Then there’s the cost of adding a tax collection and payment system, and the addition of several hundred dollars to the already challenging cost of going “All In”.

Also, the only thing that’s arguable here is whether or not access to streaming video training is taxable. Even if we discover that I’m 100% wrong – that is, the representatives in each of these states, some of which were the actual auditors who’s desk the buck stops on, are all 100% wrong – there’s still the issue of the downloadable audios and downloaded PDFs which make up almost all of the $100 monthly Inner Circle Training and a good portion of the $500 Costa Rica Intensive. Then there’s all the blogging tools and components that make up the $25 monthly Fast Start program. There’s no question that these are taxable in every state that taxes digital products.

To be fair, the taxation of online digital goods is a living creature in the midst of its metamorphosis, and its DNA still hasn’t been fully mapped. The line up of states just described, and how each interpret the taxation of digital goods, could be very different in a few months (there might even be one or two that have been categorized differently by the time you read this). But there is no question that in, at the very least, ten states, and for as long as Empower Network has existed, they should have been charging, and someone should have been collecting and paying, sales taxes.

Empower Network does not, nor have they ever, charged sales tax on any of their products.

Corporate Issues

Empower Network first incorporated in Delaware in September of 2011⁹⁶ and officially launched the following month, on Halloween. It appears, based on its registered street address.⁹⁷ to have been operated out of a small home in a residential neighborhood. Which means nothing. Apple Computer was started out of a small home in a residential neighborhood. By May 8th, 2012 they moved to what appears to be a low rent office complex, and by February of 2013 their corporate address leads to an office suite with a shares meeting room and receptionist. They also have support facilities in the U.S. and Costa Rica with a staff of 97 (43 employees on site and 54 working virtually).

As the story goes, the Empower Network ovum was supposedly fertilized around late Summer of 2011 when a dozen people paid $2,997 to spend a couple days with David Wood at his Costa Rica home to learn how to make money online. David Sharpe was also in attendance. Online archives suggest a much earlier insemination with an Empower Network Zygote forming in March of 2011.⁹⁸ By September 1^st, 2011, two months before Empower Network’s official launch, there appears to have already been a small member’s list forming.⁹⁹ Wood acknowledges there was a false start earlier in the year.¹⁰⁰

Empower Network was co-founded by both CEO David Wood and President David Sharpe. Their rags-to-riches story basically follows the same arch, going from poverty and homelessness to millionaires in less than four years.

David Sharpe

Sharpe, 29, offers a somewhat incongruous time line where all along his career path, as he documents it online, he seems to have difficulty keeping track of his back story. He’ll join one opportunity as a “Broke 26 Yr. Old Punk Kid” who “Went From Swinging A Hammer To Making Over $10,456.89 A Month”.¹⁰¹ to another, less than two years later, where he had joined MLM “five years ago” and was at the “top of the leader boards”.¹⁰²

Just after joining Bellamora in January of 2011 as one of their founding distributors Sharpe was claiming he had just entered the MLM arena “roughly a year ago”.¹⁰³ A first year he describes as “very successful”.¹⁰⁴ He claim to have joined Bellamora with a “proven track record of success”, yet by the end of April he was using the online headline:

“This is exactly how I went from flat broke to the youngest top income earner in Bellamora…”¹⁰⁵

In his own Bellamora promo videos he claimed he was a “top income earner, a top leader, inside the industry”, yet literally four breaths later he states, “A few short months ago I was broke… I kind of stumbled on the network marketing industry. I had a little bit of experience and exposure but I failed miserably before.”¹⁰⁶

What’s also notable is how quickly Sharpe’s views changed regarding “crucial things to look for when choosing an MLM company”. About eight short months before forming Empower Network he was telling Bellamora prospects:

“I’ll tell you exactly what must be in place for me to look at something, and what I evaluate when choosing a new MLM to build… the product has to be marketable and people have to be using it already. It can’t be a product people have to change their daily routine to use. If they do, it’s not a sustainable product.”¹⁰⁷

Like daily blogging? He continues:

“Ten out of 11 billion dollar companies in the network marketing industry are skin care companies”.¹⁰⁸

Companies, he says, that sell products that resonate with the aging Baby Boomer population – and in this case he’s right. That is, the same 49 to 67 year olds that, as a group, don’t have a great affinity to any form of computer technology, let alone blogging. He then went on to strongly praise Bellamora’s lucrative, high paying Unilevel compensation plan. The very type of conventional MLM plan he and Wood now claim pays “weenie commissions” and should be disregarded.

I wouldn’t put much weight on any of this as all networkers tend to pander to their particular audience at the time, and Sharpe did, in fact, go from poverty to prosperity in a relatively short time period. It just wasn’t quite as short as he sometimes suggested.

I did interview David Sharpe personally for over 1.5 hours, although not on my recorded podcast. He also graciously responded to my email asking for a concise career timeline. He responded (edited only for brevity):

“My first experience in the industry was back in 2005 as a distributor for Market America…My success there would be considered ‘just above average’ though.

“My next company was not for 3 or 4 years later. It was Liberty Freedom Network where I promoted a subsidiary company called ‘Wow Mobile’. Here, I was also an ‘above average’ distributor as far as results… on my way up the leadership levels… until the company stopped shipping products… and they quickly went out of business.

“I then got into online marketing, which is when I began to really thrive. I joined an affiliate company called MLSP (My Lead System Pro) and quickly rose to the top leadership levels.

“My next MLM was a company called Bellamora. I helped launch this company from pre-launch into live launch, and at the time of launch… had an active team of between 2,500 and 3,000… Several months after live launch the company tanked, due to shareholder disagreements (at least that’s what I heard).¹⁰⁹

“This was the straw that broke the camels back for me. After two companies shutting down and seeing the aftermath of what happens in the field to reps and their families when bad leadership is running the company, I decided I was not going to actively promote another company unless I had a major role in the operations and decision making of the companies (sic) future – especially in regards to dealing with challenges that require perseverance and distributor treatment.

“So when Wood and I spent time together at an event he held, and he shared some of the initial ideas of Empower that we could build upon, I knew this was something I could get behind – mostly, because of our motivation, which was never to build to make a huge windfall of cash for the company. It was to give our teams a real fighting chance at success and results. (Hence the fact we launched a 100% commissions comp plan and paid for all the company expenses with our affiliate commissions…”.

Sharpe’s candidness suggests his omissions of both Numis Network and an online quasi-MLM scheme called “A Thousand a Week for Life” were likely innocent brain cramps and not deliberate. During our subsequent phoner he openly described his brief experiences with both.

From September to at least November of 2010 Sharpe was promoting Numis Network (numismatic coins) as his “primary” opportunity. His involvement in Numis appears to have been short-lived, and due to no fault of Numis, which at the time was doing well (Numis was recently merged into WorldVentures).

In June of 2011 Sharpe found his way to “A Thousand a Week for Life” where he made the claim that “Just over a year ago I was in financial ruin”.¹¹⁰ This program offers a series of downloadable internet marketing tools of somewhat dubious value (in my option) for an upfront fee of $149.80 and $124.80 every month thereafter.¹¹¹ Sharpe’s sites related to “A Thousand a Week for Life” appear to still be active and functional,¹¹² although he did confirm that he is no longer actively involved and “should probably take those down”.

Sharpe openly confesses to having once been a drug addict, and to now being clean and sober for almost five years. Other than one minor, albeit felony, arrest for using a fraudulent ID back in 2006¹¹³ he has no other criminal offenses.

David Wood

CEO David Wood, 32, provides us a back story a bit more linear and consistent.

By his own telling¹¹⁴ he ventured into the MLM arena back in 2002 by following his father into Amway. By 2005 he claims to have spent over $60,000 on his Amway business and managed to enroll only 15 people. He takes full responsibility for his failure (“I was unorganized”).

He and a number of his Amway downline then moved into Pre-Paid Legal. He earned $1,500 in his first week, only to see it slowly drop to around $250 a month over the next six months.¹¹⁵

Wood claims he then “took a break from MLM for about a year”, and elsewhere describes an “8 to 9 months break”, before joining Agel in May of 2005. Agel did, in fact, launch in May of 2005.¹¹⁶

Moving on, Wood testifies that he pursued Agel for about three-and-a-half years with his monthly income peaking at around the two year mark at $4,800, then dying off over the next 1.5 years while he was living in Alaska and his Agel downline was on autopilot.

Wood and his wife then moved to Hawaii and lived in a 1998 Dodge van for over two years.

By early 2009, Wood explains, van living (albeit in paradise) “got old”, and the itch for making money returned. I’ve found evidence online of various third parties claiming, around the end of 2012, Wood’s reemergence and quick rise to wealth occurred “2 years ago”, just before Empower Network was launched. Wood himself claimed on May 17th, 2011 that he was still living in his van “18 month sago”.¹¹⁷ So now he’s leaving his van in December of 2009. But there’s clear evidence he was already “the best team to join” in his next MLM venture, iLearningGlobal, in July of 2009.¹¹⁸ A month later he joined MyLeadSystemPRO¹¹⁹ where Sharpe would join him a few months later.

Wood’s achieved his first significant, prolonged success in iLearningGlobal where he was the “number one recruiter” with earnings up to $30k a month. iLearningGlobal abandoned the MLM model (and their several thousand reps) in March of 2010.¹²⁰

From Mid-March, 2010 to at least Sept, 2011 Wood was promoting Numis Network.¹²¹

Wood, like Sharpe, portrays himself as an in-the-trenches egalitarian with no particular advantage over any other Empower Network affiliate. In a YouTube video uploaded a couple months after Empower Network’s launch Wood audaciously states:

“We actually make money the same way everybody else does. We’re not the gurus at the top of the mountain… the reality is, we started like you, maybe even in a worse situation than you.”¹²²

I would defy David Wood to find even one person within their mountain of members who would reject the offer to switch positions and assume his possibly “worse” situation – literally at the top of that mountain!

At a recent live Empower Network event Sharpe exclaimed from the stage:

“I’m a guy, one guy, out of a room full of people who are all at the same place right now, in the same room, with the same tools, with the same chance.”¹²³

The “same chance”? Really? So the apex position of the entire international organization, that is guaranteed to have 100% of all affiliate recruitment and sales volume occur under it, that is occupied by the two very popular co-founders who are literally the faces of the company, has the “same chance” as those in the audience? By setting themselves up in what’s referred to as the “Master Distributor” position, in less than 22 months they’ve made about eight… million… dollars!

Please understand, I have no issue with founders setting themselves up in the top position. In fact, I often recommend this strategy to my start up clients. I also understand, as both Wood and Sharpe have explained, what the spirit is of what they are going for here (i.e. We’re all in this together… we make money from the same comp plan you do, etc.). What I have a problem with is the implication that they’re on a level playing field, with the “same chance”, from an income opportunity standpoint.

Wood and Sharpe have also started taking a “reasonable” corporate salary in recent months, but in their defense the only way Empower Network was funded the first few months was from their pinnacle position’s commissions. That is, out of their pocket, which is still occurring, although to a lesser extent since monthly affiliate fees were introduced. Allegedly this is where much of the $3.2 million came from to develop their new “2.0” blogging technology. Considering affiliate fees over just the last 12 months would have garnered just over $9 million¹²⁴ and the fact they’re selling an ultra-low overhead virtual product requiring no manufacturing, warehousing, or shipping, and with a support staff of only 97 (which is relatively small for a company doing almost $6 million a month in sales), the fact they covered any of it appears to be an act of philanthropy.

Corporate Image & Culture

Empower Network (i.e. Dave Sharpe and Dave Wood) has created an unusual, and surprisingly effective corporate image and brand. Wood walks the stage of every event barefoot, in Bermuda shorts and a sleeveless T, making Sharpe appear overdressed in his ripped, faded jeans and sandals. Their vernacular appears designed to resonate with both Gen-Y, Gen-X, and Gen-XXX. As previously mentioned, within one poorly lit, unscripted training video Wood throws out comments like “I was actually looking at the commission plan the other day and got a boner”.¹²⁵ When congratulating an affiliate on Facebook for having a $40,000 week he exclaimed “Isn’t this shit gangster!”.¹²⁶ During the aforementioned roll playing session within their New Member Coaching training, Wood confides, “That’s kind of why I joined. Fuck the bullshit, I’m getting 100% of the money!”. Sharpe often uses the F-word from the stage, such as his question to an audience in San Diego, “Are you fucking bad ass enough to meet us in Austin?”. In the above referenced Costa Rica Mastermind letter co-authored by both Sharpe and Wood they exclaim, “Most live events SUCK BALLS…”.¹²⁷ The Empower Network theme seems to be based on the premise that if you go “All In” (for $5,125) you are “sexy” and a “badass”, otherwise you’re a “wussie”, or a “weenie”. And being the badasses that they are, Wood and Sharpe will “punch wussies in the face!” (I’d be more impressed if they punched badasses in the face).

Empower Network’s primary demographic, based on the numerous back stories I’ve listened to, appear to be residents of the Island of Misfit Toys. Dave Wood candidly describes them as an eclectic group that includes, “a baby boomer…an atheist… a Christian preacher… an ex-alcoholic.” He concludes, “We have the most diverse group on network marketing.” Yet, in spite of this rogue, rebel-with-a-cause culture Empower Network seems to have attracted no fewer elder participants than any other MLM company. Within the group of 104 survey subjects and those online images of so many others I’ve viewed, boomers abound, as well as quite a few more mature folks who would likely find their company’s CEO openly discussing his erections somewhat off-putting.

And yet, here they all are, and no one seems to be bothered by any of this one bit. In fact, they appear to find it hip and endearing. In spite of an image that would normally invoke trepidation and a lack of confidence in corporate leadership, somehow Wood and Sharpe have managed to induce parents of children to invest their rent money into Empower Network, another to sell her only car so she could go “All In”, and several others to abandon profitable MLM organizations to start over from scratch with Empower Network.¹²⁸

How did they accomplish this? Here’s my theory.

Just a couple weeks before Empower Network launched, Wood & Sharpe conducted a conference call on the topic of “Hyptonic (sic) Selling Secrets”. Within this presentation they covered, “How to use hypnotic selling language to influence prospects and potential customers to buy your products and join your business.” The description of the call goes on to say, “When used and mastered, ‘hypnotic language’ can produce results for your bottom line that will astound you. ‘Gurus’ like Tony Robbins use ‘Hypnotic Language’ and ‘NLP’ (Neuro-linguistic programming)¹²⁹ to influence auditoriums of people and millions of viewers to build million dollar empires… all with the power of words.” You are then asked to, “Download and listen to my partner (Dave Wood) and I train on how to effectively implement these techniques into your daily communication habits… then sit back, relax… and watch how these subtle strategies create massive windfalls of profit.” You’re then asked to enter your email for “more ‘mind control’ and influence secrets.”¹³⁰

“How to ‘Hypnotically Force’ Your Prospects to Buy Now Through the Power of Video.”¹³¹

Wood and Sharpe are masters at more than just creating mantras (e.g. I’m All In, Get two a day) and buzzwords (e.g. badass, wussie). Cultish behavior is exhibited when audience members don Guy Fawkes masks¹³² and chant “The Year of Empower”¹³³ while the leaders on stage fan though huge wads of hundred dollar bills.¹³⁴

“How to create an almost ‘Cult Like’ following of people that are at the edge of their seats,
waiting to hear anything you have to say.”¹³⁵

I wonder, as Wood and Sharpe teach these manipulative, mind controlling techniques to Empower Network affiliates, so they can “Hypnotically Force” their prospects to join and buy – has anyone considered the possibility that this same “hypnotic language” was used on them, to get them to join and buy?

When I confronted Dave Wood with the question, “Are you using these techniques on your own people?”, he candidly responded, without reservation, “Of course. I’d be stupid not to.”¹³⁶

What’s the root word of “culture”?

Policies & Procedures

Empower Network is actually not that unusual in that their termination/suspension terms require affiliates to agree that:

“…under certain circumstances and without prior notice, Company may suspend or terminate your use of the Site or Service, including without limitation, if Company believes, in our sole and absolute discretion, that you have breached a term of this Agreement.” (emphases added)¹³⁷

Their “Terms of Service” go on to state:

“Upon termination, your license to use the Site or Service, and everything accessible by or through the Site or Service shall terminate and the remainder of this Agreement shall survive indefinitely unless and until we choose to terminate them”

It doesn’t get any better:

“Upon termination of any part of this Agreement for any reason, we may delete or assume ownership of any Content or other things-including without limitation URLs, blogs, domain names, and email lists-relating to your use of our Site or Service that is on our servers or otherwise in our possession or control, and Company will have no liability to you or any third party for doing so.” (emphases added)

So, now who do you think actually owns your Empower Network blog?

When confronted with this policy language Dave Wood responded, “Have we ever done that? No. Would we? No. At least as long as I’m alive. Dave Sharpe would never do it.” He conceded, “Maybe we should look at changing the terms and conditions”. To that end, Wood requested that I provide a written list of all language within their terms and policies that I found objectionable for their further review. Which I did on July 16th, 2013. As of August 26th, 2013, no policy language has been revised or omitted.¹³⁸

Empower Network’s restrictions on the sale, transfer, or assignment of an ironically titled “Independent” Empower Network Business (which presumably includes its bequeathment) include Empower Network’s “right of first refusal to purchase the business on the same terms as agreed upon with a third-party buyer.”¹³⁹ Should Empower Network elect not to purchase the affiliate’s business they must still submit a $1,500 transfer fee “to reimburse (the company) for its expenses associated with the transaction.” Empower Network must also approve the sale, which is reasonable as long as such approval is not unreasonably withheld. That is, unless you’re selling to someone who already has an affiliate position in Empower Network (which they refuse to relinquish), or you’re giving it to Charles Manson, Bernie Madoff, or your pet cat. However, besides the obvious fact that a distributorship in an MLM program is yours, not the company’s, and you should be able to sell, give, or will it to whomever you wish without having to offer it to Empower Network first, I’m baffled as to why such an unreasonable and disagreeable policy would even be in place here. There is also a policy against having more than one affiliate position¹⁴⁰ and the “company” is essentially Dave Wood and Dave Sharpe – who already have an affiliate position in Empower Network and thus would be ineligible to acquire another one.

The most egregious part of this policy is the $1,500 “transfer fee” to cover the “company’s expenses”. This process involves a support rep changing a few data fields. Even considering eWallet account transfers this obviously has no significant cost to it otherwise there would be a $1,500 enrollment fee. Most MLMs do have transfer fees, but they’re usually $50 to $250. Anything higher is just gouging. And to suggest this is to cover the company’s “expenses” is insulting.

Within their Policies & Procedures¹⁴¹ Empower Network reiterates that they may deem you in violation at their “sole discretion”¹⁴² and “may also elect not to renew an Affiliate’s Agreement upon its anniversary date.”¹⁴³ This allows them to basically terminate someone on their anniversary date without even having to site a policy violation. This policy also acts as a circuit breaker for damage awards should a wrongfully terminated affiliate sue for back pay and future lost earnings (only back pay from the point of termination to the anniversary date would be subject to such damages).¹⁴⁴ I’m not suggesting they would ever exploit this clause to terminate someone unjustly. I believe Wood when he says they’d never do such a thing. So… why declare in your P&Ps that you can?

They also have strict policies regarding “Online Conduct” that forbids “misleading or deceptive” websites.¹⁴⁵ I wonder if this applies to the 80 websites I viewed (out of 94) that implied they were offering an objective, unbiased review of Empower Network, or exposing it as a “scam”, but were actually bait-and-switch affiliate sites promoting Empower Network?

Wood’s response: “I would have to look at it… We have a full time compliance department monitoring it. It would completely depend, so I would have to look at it. Somebody could say ‘Empower Network is a scam’, and then you click on it and it says ‘Just Kidding – let me show you the reasons why it’s not’, and I just think that’s funny, and I don’t think that’s deceptive.” He summarized, “I’d say that should be looked at on a case by case basis. I know we’ve got a full scale department of people who do nothing but monitor compliance issues and talk with reps and get people to fix things, and we’ve got a gigantic, gigantic log of it.”

Wood’s opinion of this practice was somewhat different a year ago when he produced their Fast Start training videos. Within Lesson #2 Wood’s laments, “Everybody around me was just writing reviews about companies. It was like, ‘Affiliate marketing review – is X product a scam? Network marketing review – is X company a scam? You know what? People see it and say ‘This guy is a boring asshole’.” He continues, “Do you see people liking posts like that on Facebook? Do you see them sharing them on their wall? Do you see people saying, ‘Oh yeah, I want to participate in the discussion under this post. No. What happens is somebody sees the post, they open it, and they hit the X button and they leave the site.” I agree with Dave’s original opinion of this practice.

Reminder: Of the top 100 search results for sites who’s URL’s contain EmpowerNetwork.com, 94 were promotional sites for Empower Network. Of those 94, 80 were bait & switch “review” sites operated by “boring assholes”.

Empower Network’s P&Ps also forbid any suggestion that “one can be successful without diligently applying themselves.”¹⁴⁶ They provide a list of “improper representations” that should never be made (e.g. “It’s a turnkey system”, “The company does all the work for you”, and “All you have to do it buy your products every month”). The list includes the suggestion that one should “Get all in”, presumably because this suggests that by making your self eligible for commissions from all products you might earn effortless income rolled up from those sales made downline to you.

Wood’s questioned, “Is that in our policies and procedures?” Once confirmed, he replied, “We got to look at that then. Because we say that… that’s just a disconnection between departments.”

But the concern really wasn’t about whether the policy against saying “Get all in” should be removed, but rather, should it be enforced?

Corporate Associations and Alienations

It seems Empower Network’s efforts to gain the trust and acceptance from various other symbiotic entities has been challenging.

According to Dave Wood their US based merchant services account (i.e. ability to accept credit cards) was “shut down twice in our first 120 days”.¹⁴⁷ Although, to my knowledge, no clear and definitive explanation has been provided as to why their first MS provider dumped them (First Data), the reasons why they, or the associated bank, would choose to reject such potentially massive revenue are limited. I’ve found no evidence of any unauthorized charges or excessive charge-backs, so it’s more likely that Empower Network’s account was reassessed and found to be “high risk” (as MLM companies, those selling high ticket virtual items online, and any form of start up are often considered). Frankly, I’m impressed they managed to get a merchant services account at all considering they scored the high risk hat trick. Dave Wood’s suggested his own theory as to why First Data “got nervous”, which was “we were bringing in too many merchant accounts…”.¹⁴⁸ Considering First Data has always been a very MLM friendly company¹⁴⁹ and surely the potential number of merchant account applications was fully revealed to them (yes?).¹⁵⁰ I have to believe there’s at least a little more to the story, which Wood and Sharpe may genuinely not be privy to.¹⁵¹

Wood alleges he was blindsided by a “left hook from the middle of nowhere” when CardFlex approved them and then abruptly shut them down. At the time Wood claimed no reason was given other than “business type”. In his interview he opined it was because, “we hadn’t been processing (merchant account applications) for maybe a month…”, then turned them off, “because they got slammed with thousands of applications.” There was some online chatter, never from Wood or Sharpe, about a private email from Wood to affiliates (that I’m not privy to) where he allegedly claimed CardFlex’s rates were too high. Although this was likely true (desperate “high risk” companies are often offered merchant services accounts at excessive loan shark rates), it suggests the separation was voluntary. Such online chatter is incorrect. CardFlex was also on my list as an “MLM Friendly” merchant services provider, so I knew there had to be more to this story. I contacted them and learned that their position regarding “legitimate” MLM companies had not changed. I further learned that Empower Network was rejected due to concerns specific to Empower Network and not simply due to their “business type”. The CardFlex rep would not elaborate (nor should he have).

For their first few months Empower Network was offering a number of payment solutions, including; AlertPay, PayPal, CardFlex, LinkPoint and Authorize.net. PayPal was dropped in January of 2012 allegedly due to Empower Network’s inability to support billing questions.¹⁵² They discontinued the integration of Authrize.net (for those who wished to accept credit cards) in December of 2012 again citing Empower Network’s inability to offer customer support with billing issues.¹⁵³ Although a reasonable reason, this begs the questions, Why were either of these implemented in the first place, and why didn’t this apply to all forms of payment directly between the selling affiliate and buyer (the large majority of them at the time)? The way this was spun seems to suggest it was Empower Network’s decision to voluntarily cut ties with Authorize.net and PayPal. That is very likely not the case. PayPal has a policy specifically forbidding “certain” multilevel marketing ventures.¹⁵⁴ and Dave Wood has brazenly declared, “PayPal sucks, they hate us.”¹⁵⁵ Elsewhere Wood stated, “What I’ve realized is that getting everybody merchant accounts is not a sustainable solution. It is not. It is not going to allow us to continue to do what we’re doing. Working through PayPal is not a sustainable solution. Alert Pay sucks.”¹⁵⁶ Considering nothing more than the risk of massive numbers of complaints when billing is handled by tens-of-thousands of independent affiliates with their own merchant account, one must wonder why this was ever part of their business plan. But that’s what they were doing, not what they are doing. This issue has long since been fixed.

It appears Empower Network is now using a foreign based credit card processor in conjunction with their own in-house eWallet system.¹⁵⁷

During Empower Network’s first three months they faced a lot of challenges that prevented them from processing orders and enrollments, which included multiple server crashes. To their credit they did weather this storm well, and ultimately found all the necessary solutions. However, it appears to have gone without notice that the entire time the large majority of affiliates were unable to process orders due to lack of a payment solution – during the first three critical months when many of the top prospects are enrolled – there were two Empower Network affiliates with their own private merchant account who never lost such enrollment and sales ability. Dave Wood and Dave Sharpe.¹⁵⁸

To be clear, I am not at all suggesting Sharpe and/or Wood orchestrated all of this just to give themselves a tactical recruiting advantage early on, nor do I believe, or even suspect, that they exploited this situation for their own personal gain. Had they, the echoes of pissed off affiliates who lost good prospects to The Davids would still be bouncing all around cyberspace. There isn’t. Not one. However, industry best practices suggest that while placing founders and/or senior management atop the organizational tree is not bad form,¹⁵⁹ allowing them to continue to recruit and sell in direct competition with their own affiliates is – at any time post-launch, let alone when the field’s ability to recruit and sell is crippled. If you had a choice of being sponsored by an inexperienced rookie, or by both Dave Wood and Dave Sharpe personally, which way would you lean? Think, a single Brad Pitt or Angelina Jolie running an online dating service that they were also members of. What’s more, Sharpe and Wood also now take a corporate salary derived from the $19.95 monthly fee used to cover company overhead (they did not for the first several months).¹⁶⁰ In most MLM companies the field would revolt if they found management was recruiting or selling in competition with them. Such corporate cake having and eating scenarios routinely result in a backlash, sometimes so severe it wrecks the company.¹⁶¹ My visit to the corporate office of an MLM company back in the 90s, while looking for an MLM home to build in, resulted in a firestorm when word got out that I and my team (three other well known industry leaders) had joined that company, but none of the founders could find us in their downline. The assumption was that we were given a front line position to the company. Thus, corporate had just recruited us! In fact, we were not in anyone’s downline because we had never joined the company (and went on to join another opportunity instead). I’ve seen such gatherings of torch and pitchfork wielding reps at the gates of the home office many times over the last 23 years for what is usually considered to be such dastardly corporate behavior.

But no one seems to have a problem with this in Empower Network. Not one person. Not even a little. Which is a very unusual… culture.

In August of 2012 Facebook banned Empower Network user groups and Empower Network links from appearing within posts. They did not outright “ban Empower Network”, as some critics have claimed. Facebook does not appear to have any issue with Empower Network itself considering there are still numerous pages devoted to it. It looks like Facebook just got fed up with the prolific spamming and obnoxious hype by a vocal minority of affiliates.

In a personal email to affiliates regarding the Facebook action, Dave Wood declared, “’Move fast, and break things’ has ALWAYS been our motto.” Ironically, and perhaps intentionally so, this remark is borrowed from the quote “Move fast and break things. Unless you are breaking stuff, you are not moving fast enough.” Facebook founder Mark Zuckerberg said that.

“Screw you Facebook!” Dave Wood said that.¹⁶²

Beginning late January, 2013 YouTube began blocking a large number of Empower Network affiliate’s videos claiming they had violated their policies against “spam, scams and commercially deceptive content”, and in several cases (usually repeat offenders) terminated their entire YouTube account “due to repeated or severe violations of our Community Guidelines and/or claims of copyright infringement”. Word on the cyber streets was that YouTube had “banned Empower Network”. Again, this was inaccurate. In fact, several banned accounts were reinstated by the affiliate simply appealing their termination. Besides that, a YouTube search for “Empower Network” back in February 19th, 2013 returned 18,700 results.¹⁶³ As of July 1st it returned 85,300 search results. August 30th, 122,000. Dave Wood claimed this was an organized and malicious campaign to deluge YouTube with “flagged” videos. Actually, considering the number of competing companies and groups they’ve disrupted, I don’t find this far fetched. Wood issued a “BIG, SCARY WARNING” to whomever the perps were, threatening them with a lawsuit.¹⁶⁴ Since then the blocking and banning seems to have subsided.

Empower Network’s relationship with Google is one they can’t live without, and there has already been signs of discontent, albeit small ones. There was a brief time a few months ago when peripherally related searches would have Empower Network lined out within the “More results for…” line (e.g. More results for empower network Google products forum). I have never been able to duplicate this result. I’ve also been hearing complaints about Empower Network sites being deindexed by Google causing them to appear much lower, or not at all, in the search results list. Although Empower Network sites do appear to have been tamped down a notch on search results, I can find no evidence of any orchestrated effort by Google to list their sites substantially lower, at least within the last six months and, at least, for now.

On a BIG, SCARY SIDE NOTE, if Google should ever deindex Empower Network sites resulting in their disappearance from search results, this could be a huge challenge. We already know YouTube is getting annoyed with them, and guess who owns YouTube?

Dave Wood recently quoted an affiliate who said, “We have to be doing something right for the universe to push back at us so hard.” Wood’s response was “Isn’t that true?”.¹⁶⁵ Um… no. It’s not. The “universe”, whether you consider this the laws of physics, nature, or an even higher power, tends to favor the good. Can you imagine a universe that strongly opposes and impedes the positive and favors the negative? Empower Network’s early challenges were clearly due to poor planning resulting in a premature launch, with inadequate servers and no viable, secure, long term payment solution. Yet, reps are lead to believe their leaders are so powerful they can overcome all the obstacles thrown at them by a belligerent “universe”. Say what you will (or I will), these challenges were overcome because Dave Wood and Dave Sharpe are very good at overcoming challenges, even the one’s they created for themselves.

Growth Trends

All MLM companies are either growing or shrinking. They never stay level for very long. At this time circumstantial evidence suggests Empower Network may be approaching the top of their bell curve, but they are not “going down”, as certain critics have suggested. I’ve been tracking the annualized average of a combination of monthly incomes of all those affiliates earning $20,000 or more and those earning less than $500 (for active affiliates only) since mid-November 2011. The overall trend is still clearly tilting upward.

The percentage of affiliates falling within the lowest two income segments (less than $500 monthly) has slowly but steadily risen.

Although I’m not a big believer in using web traffic in gauging a company’s growth, for what ever it’s worth Alexa also shows their mid-July event (where they introduced their new blogging platform) routed a five month downturn in traffic.¹⁶⁶

Both Google Trends and Alexa show the number of searches for “Empower Network” to be gradually dropping over the same period of time, with a spike just after the July event.

The chart below depicts overall member growth (affiliates and customers) since inception. Red arrows indicate event months.

Actual monthly enrollment numbers for 2013 are:

January 9,478
February 10,017
March 12,582
April 15,457
May 12,190
June 9,962
July 11,190
August 11,198 (projected from the 27th)

Dave Wood noted that someone had “tweaked” their order page in June which “massively reduced our conversations for about three weeks.” Normally an enrollment glitch only postpones sign ups and squeegees them into the next period. However, a change that reduces “conversions” implies something caused visitors to not even be interested in enrolling who otherwise would have. However, even giving them that, considering the vast majority of enrollments are directed to the marketing site by a referrer, not “orphans” who just stumble upon it, surely a good portion of those folks would have revisited the subsequently untweaked version of the site, thus migrating their enrollment from June to July. Yet, in spite of this, and the fact there was an event in Denver from the 19th through the 21st that left ten days of heightened enrollment time, July enrollments were the second lowest over the last five months with only June’s compromised enrollments lower. But then, I could also proclaim July enrollments to be “the fourth best month in Empower Network’s history!”. And both arguments would be technically correct.

Wood claims several major hitters with massive lists joined in the first quarter of 2013 and blew up their enrollment numbers in March and April. Circumstantial evidence, such as the number of newer affiliates who started cashing in earlier this year, suggests this is true.

Here’s where I fall on this point: Let’s omit March and April as exceptional months not consistent with Empower Network’s normal growth trend, and June due to the one time negative event. This leaves us with an average of 9,748 enrollments in January and February, and 11,194 in July and August.¹⁶⁷ Looking back, let’s add in a dash of January Boom (a seasonal spice that blooms for most MLMs post holidays) and some July Dip (another condiment experienced during the Summer) and all the more reason to believe Empower Network’s growth hasn’t reached it zenith.

It’s too soon to declare the Empower-Party over, and even the negative indicators may very well flip to a nice shade of Kelly green when the leaves start turning brown. One of Empower Network’s biggest challenges moving forward, besides possible legal scrutiny, are the number of knock-offs and copy-cats that are already forming. They will surely have a strong allure to those who were tardy to EN’s pecuniary party and see the opportunity to flip their organization (get their old upline into their new downline). My prediction: October will be among their best months, perhaps even a record month considering they have four events scheduled.¹⁶⁸ Their growth will form a bell curve with sales coming down not long after Christmas trees do.

Compensation Plan

Empower Network’s “pass up” plan is based on what’s commonly known as an Australian, or “2-Up” compensation plan. In a basic 2-Up the commissions on the first two people you enroll roll up to your sponsor. You start earning from the third sales on. Likewise, the first two enrolled by the third person on that you enrolled get passed up to you. The 2-Up has gone in and out of favor within MLM for at least the 23 years that I have, and has been the plan of choice for many of the more questionable quasi-MLMs and money games. To my knowledge, no high profile, legitimate MLM company with tangible products of value has ever existed more than a couple of years with a classic 2-Up plan, which appear to be virtually extinct today. The few opportunities that still use any variation of this plan have all revised it in some way. For example, they roll up the second and third, just the first (a “one-up”), or they rotate who falls within your first two. For a complete exposé of the 2-Up pay plan, check out my article “The Australian 2-Up Plan: Illusions of Grandeur”.¹⁶⁹

Empower Network has chosen to roll up your second, fourth and sixth sale, and then every fifth sale thereafter (a 3-plus Up). Another unusual aspect is that they apply a completely separate “power line” (or 3-plus up plan) to each product. This is, if you made a sale of a $25 “Fast Start” training to five people you would earn a $25 commission on the first, third and fifth sale. But if #1 is the first to buy a $100 “Inner Circle” subscription and #3 is the second, you would earn $100 on #1, but #3 would roll up since it’s your second sale of that specific product. Same with all other products. Even if the $100 commission was in your “Power Line” (would roll up to you), if you had not purchased the $100 monthly “Inner Circle” program (or sold one to a customer) the $100 commission would skip you and pass further up the line. Same with the $500 to $3,500 products – and Wood and Sharpe exploit this fear-of-loss angle to the hilt in Empower Network training.

It’s very important here that you understand a plan’s “weighting”, so please indulge a little side trip.

A plan can be front, middle, or back weighted. A front weighted plan spreads the payout more evenly. More participants make money, but those who do make less, on average, because it’s spread more thinly across more people. A “compressed” unilevel plan that pays 40% on the second level (e.g. pays five levels, 5%-40%-3%-2%-%1) would be a front weighted plan. A back weighted plan is one where fewer participants make money, thus those top producers that do make more due to the concentration of commissions on that smaller group. Most break-away plans, like those used by Nu Skin, Herbalife, and Shaklee, would be considered back weighted. They have the highest percentage of millionaires, but also the highest percentage of those making no profit at all. Of course, a plan cannot be all things to all people. When you add weight to one part of the plan you must remove weight from another.

In one of the numerous online videos produced by Dave Wood he laments how his income from his previous MLM company was “stuck” at about $30,000 per month.¹⁷⁰ “It just wasn’t a lot of money”, she claims. “So the reality was the amount of money I was getting for my work was miniscule.” He then tips his hand by describing how he rhetorically asked himself, “How can I get myself doing the same thing I’m doing now, but rather than make $30,000 a month make a quarter million, and how can I get the guys making $10,000 making $50,000 and those making $2,500 making $10-$15,000, without doing anything more?” Even if Empower Network really was doubling the payout from 50% to 100% on the products sold (which, as you will soon see, they are not), this only gets Wood part of the way to his goal (e.g. from $30,000 to $60,000, but not even close to $250,000). To get his earnings from $30,000 to $250,000 per month, and other top earners five times the income, all with the same effort and same number of sales, there’s only one way to accomplish this: Heavily skew the plan’s weighting to the back end, so those few at the top will make substantially more – in lieu of the large majority making less. That is the only way.

One of the reasons a 2-Up type of plan has been popular with money games in the past is that it tends to be very back weighted, thus squeegees a lot of cash to the top of the tree where the scheme’s founders sit. In the late 90s a company called Art of Better Living launched with a 2-Up plan. I had worked with its founder for a short time when he operated ABL’s predecessor. During this time he described to me how, once he rose to the CEO position in an earlier company, the first thing he did was dump their 2-Up style plan because “it isn’t fair… it rolls all the commission to the top”. Then when he launched ABL, his own company, he chose a 2-Up style plan. One of the top leaders of ABL at the time indulged me in a relatively friendly on-line debate where he attempted to debunk my claim of 2-Ups being generally poor paying to all but the top few. He citing ABL’s total first month commissions of $60,000 to over 700 reps. He then cited the “top three checks” issued that month – $12,000, $10,000 and $8,000. I then thanked him for completely proving my point. That is, over 50% of all commissions paid to those 700 reps went to the top three people.

Granted the Empower Network plan is not the ABL plan, but the mechanisms that tend to migrate commissions upline are still in place.

If you do a Google search for graphic images of the Empower Network plan you may notice one peculiar monofilament.¹⁷¹ They rarely explain what happens beyond three levels, and if they do they never go wider than the first person you’re paid on (i.e. what happens in the above diagram if Mary sponsors four, who sponsor 12?). If this were to be revealed it would become evident that, yes, you are getting paid a “100% commissions”, but on a rapidly diminishing percentage of those sales in your downline. The above example seems to depict John with a three level team of 19 people, of which he is receiving “100% commission” on eight of them – and 0% on the other eleven. In reality, if we were to assume everyone in this scenario were to enroll four John would have 84 within his first three levels and be receiving “100% commissions” on fourteen of them (16.67%) and nothing on the other 70. Taken another level deeper John now has 340 in his group, and is getting paid on 30 of them (8.82%). By level five it’s 1,364 and 62 (4.55%), and by level ten he’d have over one million sales on his tenth level alone – and would earn a “100% commission” on one-tenth of one percent of them (0.01%).

“This is what’s happening if you ain’t in Empower Network.
You’re bending over and taking it from the rear with weenie ass commissions.”¹⁷²
– Dave Wood

Empower Network reps, and founders, love to mock those “primitive” MLM programs that only pay their reps “20%, 30%, 40%, maybe 50% on one level”.¹⁷³ When Dave Wood made the previous quote he was referring only to commissions earned in traditional MLMs paid directly to the seller from that one sale. He, like most Empower Network reps, are loathe to acknowledge how MLMs typically pay on deeper levels. You’ve already been given a clue as to why. In those archaic, “old school” MLMs, if the plan paid, let’s say, 10% down five levels, and you were to amass the same 4×4 progression to 1,364 people (per the example above), you would be getting paid only 10%, that’s true – but on all 1,364 sales! Not 100% on 62 of them and 0% on the other 1,302. Put another way, you would earn 10% of 100% of the sales rather than 100% of 4.55% of the sales.

Bottom line: In this scenario, if both teams produced $500,000 in volume within those five levels, Empower Network would pay you $22,750. The old, obsolete MLM would pay $50,000. This is in spite of Empower Network applying 100% of most product sales volume into the plan and conventional MLMs only 40-50%. I’ve calculated several different progressions and Empower Network always starts to fall behind in total earnings at about the fourth or fifth generation.

Wood defended this point by resorting to the “that’s perfect math, they never really form like that” argument (I’m paraphrasing), and then cited how many affiliates had earned a check within a series of income ranges.¹⁷⁴ I countered that the progression was not a factor, and that any progression, even a random one, or one extracted from real world data, would create the same results. It’s simply a mathematical fact that the percentage of sales the 100% commissions apply to becomes minute after five or six generations, no matter what the progression is.

In spite of David Wood’s claim to the contrary¹⁷⁵ the rolling up of commissions to the rarified few also seems to be occurring within Empower Network. I cobbled together numerous online claims as to Empower Network’s sales, commission and affiliate numbers at various points in time, and compiled the incomes from images of all those holding their oversized checks at events. From this information I was able to extrapolate income data that shows that, as of Jan. 19th, 2013 (the date of their Austin, TX event) Empower Network had about 80,000 affiliates and customers, had paid out in 2012 about $24 million in commissions, and the top 23 earners amassed approximately $7,865,931. That is, out of 80,000 people, one third of all the commissions paid in 2012 (32.8%) went to 23, or three one hundredths of one percent (0.03%), of them.

In the above extrapolation I included $1,840,833 as Wood’s and Sharpe’s 2012 income based on a video of them holding a giant check for that amount at the Austin event,¹⁷⁶ and a passing comment made by Wood during a video of Wood describing “How to make $1 million in 2013”. In the video Wood asked Dave Sharpe if he’s excited about getting such information, then abruptly answers his own question with “Dave Sharpe isn’t excited about it, he’s like eh, I want to make $5 million. I made $1.9 million last year”.¹⁷⁷ This makes the Wood/Sharpe affiliate position the top earning affiliateship for 2012 by three times the next highest earner (Lawrence Tam at $624,550¹⁷⁸ and income almost as high as the next four highest earners combined.

No extrapolation was needed for June of 2013 as Empower Network freely provided the commission data. Of the $4,032,750 paid in commissions that month $1,418,950, or 35.2% of it, went to the top 25 earners (out of about 30,000 active affiliates). That’s well more than one-third of commissions going to 8 one-thousandths of a percent (0.08%) of comp plan participants. The Sharpe/Wood position earned $333,625, a little less than double the second highest earner’s $179,675, which itself was more than 14% greater than the #3 and #4 earners combined ($98,250 and $59,000 respectively).

According to Empower Network’s own Income Disclosure page, 91% of all affiliates earned less than $75 over the last 30 days (and averaged $27), and 97% earned, at most, $425 with a weighted average income of $29.55 – which means earnings were massively skewed towards the low side of that zero to $425 range. An annual analysis shows 91% of affiliates earning less than $75 in any single month over the previous 12 months, with an average annual income of $36.

Wood’s recital of the number of earners in various income ranges does show a larger than average number of affiliates are making at least something, but this is somewhat misleading in that it only takes a single sale, for a single month of their $25 product to generate a $25 commission. So although it is technically true that almost 7,900 affiliates, or about 30% of them, “earned a commission” in May of 2013, 3,607 of them (46%) earned one $25 commission, and 61% of them earned less than the $125 it would take to pay for their own two monthly products.

While it is true that in most MLM programs the large majority of commissions are paid to a small percentage of distributors, because only a small percentage do what they are suppose to do, well enough, long enough to earn any significant commissions, this doesn’t explain over one-third of the commissions going to a couple dozen reps. Wood offered a valid comeback to the issue of their top position making 86% more than the second highest earner. “I’ve sponsored 5,000 people”, he said. “And the next closest person isn’t even half”. Fair enough. That does explain, in large part, the difference between #1 and #2. But then, why does the #2 earner make 83% more than the third highest, who makes 67% more than the fourth highest earner? Are we to believe 25 people out of 146,000 (total as of May) received 35% of the commissions paid simply because they recruited so many more than the other 145,975? Even assuming this was true it would only raise an entirely new concern – if “anybody” can make megabucks in Empower Network, why are these few at the top so disproportionately successful? What unique advantage does one have to possess to be among them? Extensive blogging experience? A gigantic list? Great writing ability? What ever it is, this would indicate that it absolutely must be something.

But that’s not a concern, because I don’t believe that’s the explanation for this top-heavy income distribution, nor is it just par for the MLM course. It’s simply a top heavy, back end weighted compensation plan that’s designed to do precisely what Dave Wood envisioned – allow top producers to make several times more income from the same amount of effort.

Another serious flaw in these “pass up” style plans is the ability to manipulate how and to whom commissions are paid, or what’s often referred to as “bonus buying”. The most common way this occurs in pass-up plans is to simply enroll a shell (your friend, dog, house plant, etc.) for the lowest priced product in each position that rolls up commissions leaving all the paying positions for actual orders. By separating each product into its own separate pass-up plan Empower Network has cleverly plugged that loophole. But others not only still exists, they are magnified in the Empower Network plan. For example, you can enroll and qualify a shell position using a friend or family member’s identity (or better yet, your own business entity), then enroll yourself under it and have the lower position do all the subsequent enrolling and selling. The result is that all commissions are now captured, no matter where they fall in the series. They either pay your second position directly, or are passed up to your first position. Or, if you know a $500, $1,000 or $3,500 sale is eminent but it will land on one of your first even numbered (passed up) sales, buy the same product using a shell, make the sale under your original position (which is paid to your eWallet account instantly), then demand a refund via your shell position within 72 hours. Both examples require an extreme lack of ethics, if not an almost psychopathic lack of empathy for your sponsor – and an Everest size mountain of chutzpa. These strategies would not be used by “wussies”. One would have to be a real “badass” to even consider them. Nonetheless, such options are made fully available by the Empower Network plan. Sure, there is a strict policy against such tactics.¹⁷⁹ But then, Empower Network also has strict policies against making unqualified income claims.

Another challenge to generating long term, residual income is the fact that all three of their highest commission generating products are one time sales. Continuous income from these products demands a never ending influx of new affiliates, or at least new buyers. This is why we’ve seen non-consumable hard goods (e.g. water purifiers, alarm systems) all but disappear from the MLM landscape. Whereas, selling something once, to one person, that continues to generate ongoing monthly income offers obvious and powerful advantages in the production of residual income.

Yes, there are two products that generate monthly commissionable volume, but one of them generates only $25.00. When an MLM company calculates your commission check here is a number of both sides of the multiplication sign. They multiply those comp plan percentages by commissionable sales volume, and it’s the sales volume side of the equation that has far greater influence on your income. After all, a plan could pay 10% down fifty levels and 500% of zero is zero. The average monthly personal volume generated by active distributors for tangible, consumable products (e.g. personal care, nutritional, etc.) is currently $117.¹⁸⁰ The average payout, based on wholesale (distributor cost) is 44.7%.¹⁸¹ So if the comp plans were equal selling a $25 product would require you to build a downline over four-and-a-half times larger to achieve the same income. Even if the pay out is increased to 100% you would be earning about twice as much, but on about one-fifth the volume. This still puts you in a position of having to build a downline of more than twice as many affiliates and customers to equal the income from those “pills and potions” companies paying a “weak ass” 44.7% – because it’s 44.7% of well over four times the volume.

The $100 monthly “Inner Circle” product does seem to save the day. Except – 92% of all those on the $25 monthly Fast Start program would have to also be paying for the Inner Circle product to average $117 monthly. Empower Network claims only 29% of all Fast Start purchases upgrade to the Inner Circle. This produces an average monthly commissionable volume of $54, or less than half the commissionable volume produced in tangible, consumable product MLMs.

And the above three paragraphs only apply to the ever slimming sliver of commissions that are rolling up to you with no regard to the ever widening wedge of those you are earning nothing on.

Conclusion

This report – the last of which I will ever write (at least for free) – began as a simple 5-10 page review of Empower Network in response to a plethora of inquiries. I got a little carried away. The first draft extended 36 pages. Then I interviewed Dave Wood – for almost seven hours (over four were recorded), and Dave Sharpe for another hour-and-a-half. So I had to go back and incorporate many of their responses. And then, after presenting all of my concerns to Dave Wood, during both our recorded interview and hours of private discussion, he threw me a curve by immediately trying to fix a bunch of it, requiring more revisions. By this time, now over four months later, Empower Network was too close to unveiling their new blogging product to not factor it into this review, and I wanted to see what kind of effect their new compliance regimen would actually have. That took more time, and more revisions. Then, when I thought I actually saw a glimmer of light at the end of this seemingly endless investigative tunnel, Dave and Dave did something unprecedented – they granted me full access to their entire training line – all 209 hours of it! Another three weeks of analysis, and another week of revisions. Then more updated sales, enrollment and commission data. And more revisions.

Without question, Empower Network has been by far the most open and transparent MLM program I have ever formally evaluated. That’s out of over 90, over 23 years. There is little question that they absolutely believe they have nothing to hide. There was literally not a single thing that I asked for that they did not eventually, and usually promptly, provide. My only regret is that I never asked them for a breakdown of percentage of each product sold to only customers. And no, I’m not going to – because they’ll probably provide it, and I’m not making any more revisions!

I confess that I began this review with a negative bias, as I do most of them. I tend to focus my reporting on questionable, risky, or at least controversial review subjects. But this one was unique in that my opinion shifted substantially during the investigative process, and towards the positive end of the scale. Towards it, but obviously not quite making it all the way there. But, wow, you should have seen the first draft.

My position first began to change during the surveying of EN affiliates, but for all the wrong reasons. While they almost universally provided evidence that fully supported my initial concerns and criticisms, my deprecation of Empower Network began to lighten – because they were all so damn nice!

I have long ago abandoned the tactic of going “under cover” by using a pseudonym and pretending I’m a prospect (it was so often heartbreaking to hear the subject’s giddy enthusiasm at the prospect of enrolling my alter-ego). In this case I knew one of my faithful followers, who has assisted me with research in the past, was genuinely interested in finding a good Empower Network sponsor. So I gave him a set of email questions to ask during his sponsor shopping process. The responses he received were extraordinary in their generosity, detail and candor. With few exceptions these folks exhibited a boundless level of gratitude and graciousness. One went so far as to answer all of his questions by posting a personal response on YouTube, and referenced him by name. This was followed by a warning from his current MLM affiliation, which is a company that has allegedly threatened or terminated a number of their reps for their cross promotion of Empower Network. So that was, regrettably, the end of his assistance, and interest in Empower Network. But again, this was due to an Empower Network affiliate trying too hard to be helpful.

I said in an earlier segment that if Empower Network affiliates were to lucidly evaluate there products without bias I suspect they would mostly agree with my assessment. Not only do I not expect them to do so, and in spite of their otherwise benevolent demeanor, I’m anticipating my first death threat since 2002 (my reporting garnered six in the 90s). During the compliance session at the Denver event attorney Kevin Thompson stated, “I’m a nice guy, but don’t piss me off”. I suspect that applies to most Empower Network enthusiasts. Although I’ve tried to make this evaluation as pragmatic, fair and factual as possible with even my criticisms being constructive, I anticipate anything less than 100% approval and praise to be considered an act of sacrilege, and an affront to Empower Network’s… culture.

What most turned me around, at least to the extent that I was, were my conversations with Wood and Sharpe. Perhaps I’m not as impervious to their “hypnotic language” as I like to think I am and maybe a little of their mojo has infiltrated my psyche – but I really like these guys. I’m convinced they are, in their heart and soul, utterly convinced of their own altruistic agenda, their product’s value, and the legitimacy of their income opportunity.

And yes, you most certainly can use “hypnotic language” on yourself.

Len Clements
Founder & CEO
MarketWave, Inc.
http://www.InsideNM.com

---

1. Empower Network was the most requested review subject from January, 2013 through May, 2013, and has only recently been overtaken by Rippln. ↩

2. Involving both telephone, email and online discussions. ↩

3. Three-and-a-half hours of which was a recorded interview which can be heard at: http://www.insidenm.com/podcasts/ ↩

4. This product was introduced in August of 2012 and replaced a $250 product. ↩

5. Text of list taken from Empower Network promotional blogs. ↩

6. In the early months this banner was present on all blogs by default. However, the user has always had an option to omit them. ↩

7. Lesson #1 does not contain the phrase “All In”, but describes in detail the financial benefit of purchasing all Empower Network products, and the detriment to not doing so. ↩

8. http://www.theblogginggenius.com/empower-network-inner-circle-training.html ↩

9. They do not stream and must fully preload before playing, at least for me – might be just a Mac thing. ↩

10. Which I do not currently see anywhere on this product’s page. ↩

11. Links to your website that appear on other websites. ↩

12. No previous training product or lesson contains a basic definition of, or introduction to, backlinks. ↩

13. http://empowernetworkscam.net/tag/empower-network/ ↩

14. http://workwithdavidwood.com/tag/empower-network-3/ ↩

15. Empower Network claims there are many. ↩

16. http://www.blackboxmarketingsecrets.com ↩

17. According to a reliable Amway insider I knew at the time. ↩

18. http://www.becomeablogger.com/courses/ ↩

19. http://startablogthatmatters.com ↩

20. http://andywibbels.com/seasonpass/ ↩

21. http://www.alexa.com/siteinfo/empowernetwork.com#trafficstats ↩

22. First ten pages based on Google’s 10 results per page default. ↩

23. These searches found other sites that mentioned Empower Network, but they were either inactive or not on the Empower Network platform, thus were not effected by any SEO afforded those on that platform. ↩

24. http://www.insidenm.com/podcasts/ (1:57:51 mark)  ↩

25. http://www.insidenm.com/videos/ ↩

26. http://www.insidenm.com/videos/whats-a-pyramid-scheme-v1-n2/ ↩

27. http://www.insidenm.com/wp-content/uploads/2013/06/FHTM-FTC-Complaint.pdf ↩

28. http://www.insidenm.com/wp-content/uploads/2013/06/BurnLounge-FTC-Complaint.pdf ↩

29. http://www.insidenm.com/wp-content/uploads/2013/06/BurnLounge-Statement-of-Decision.pdf ↩

30. http://www.ftc.gov/opa/2000/04/equinox.shtm ↩

31. Ostensibly providing objective reviews of Empower Network, or claiming to be exposing the Empower Network “scam”, all of which were actually a sales pitch for Empower Network. ↩

32. e.g. http://www.youtube.com/watch?v=xDFDsu0_eWs ↩

33. 111 in total, but seven either claimed they were about to go inactive, or just didn’t want to answer my questions (one suggested I was a “wussie” for even asking them). ↩

34. During the interview Dave Wood asserts my searching methods were not random and prone to finding a disproportionate number of Empower Network marketing sites. I have considered his response and reevaluated our methodology and stand by the results. Every effort was made to produce fair and accurate data, and I strongly believe the results were sufficiently randomized. ↩

35. e.g.; FTC vs. Skybiz; Michigan vs. Km.net, and Maine vs. BigSmart. ↩

36. YTB Travel settled both actions by agreeing to $1 million in fines and the removal of commissions paid from website sales. YTB Travel filed for Chapter 11 bankruptcy in March of 2013. ↩

37. http://www.insidenm.com/wp-content/uploads/2013/06/PAS-SEC-Complaint.pdf : Sec. 48-55. ↩

38. https://www.facebook.com/empowernetwork/posts/10200323518785881 ↩

39. http://www.insidenm.com/videos/corporate-hype-v1-n8/ ↩

40. SECTION 2 – 1 – Requirements to Become an Affiliate. ↩

41. SECTION 5 – 2 – 1 – Failure to Earn Commissions. ↩

42. SECTION 5 – 2 – 2 – Reclassification Following Cancellation Due to Inactivity. ↩

43. As of August 20^th, 2013: http://www.empowernetwork.com/income.php ↩

44. http://www.insidenm.com/podcasts/ (2:36:46 mark)  ↩

45. Based on a two month rolling average from March, 2012 through June, 2013. ↩

46. https://www.facebook.com/empowernetwork/posts/10201004265604126 ↩

47. This is based on the current number of Affiliates and Customers being 33,521 and 16,765 respectively. The fact that this results in the percentage of Customers being precisely one-third of all active product users is entirely coincidental. ↩

48. 33,521 of which are Affiliates, and the remaining 33.33% are customers. ↩

49. If you’re customer ever decides to because an affiliate (or cancels one of the two monthly products) they will no longer count towards your personal qualification and you will have to find another customer. ↩

50. The survey Wood referred to was my aforementioned survey, not Empower Network’s, which he gleaned from our interview. The survey actually resulted in 79.3% responding as described. ↩

51. This topic was first addressed in the Compliance video which went live in June, 2013. ↩

52. http://www.insidenm.com/videos/ ↩

53. http://www.mlmlaw.com/saleswatch/incmreps.htm ↩

54. http://www.ftc.gov/opa/2009/10/endortest.shtm ↩

55. https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXV/Chapter93/Section69 ↩

56. http://legisweb.state.wy.us/statutes/statutes.aspx?file=titles/Title40/Title40.htm (Sec. 40-3-107). ↩

57. http://www.insidenm.com/wp-content/uploads/2013/06/DotComDisclosures2013.pdf ↩

58. I have redacted the name of the person receiving congratulations because I know him and know he knows the rules regarding income disclosures. He likely cringed more than I did when he read this. I also redacted the name of the person who sent this because she was simply following the lead of her leaders. ↩

59. FTC Dot-Com Disclosures; Section 5; “Multimedia Messages and Campaigns”. ↩

60. According to Alexa.com 18.5% of all visitors to EmpowerNetwork.com click through to this video. ↩

61. http://thompsonburton.com/attorneys/kevinthompson/ ↩

62. http://www.empowernetwork.com/affiliate-policies.php ↩

63. SECTION 3 – 2 – 1 – General ↩

64. SECTION 3 – 3 – 1 – Affiliate Web Sites ↩

65. SECTION 3 – 3 – 4 – Social Media ↩

66. SECTION 3 – 6 – 2 – Income Claims ↩

67. SECTION 3 – 6 – 3 – Income Disclosure Statement ↩

68. SECTION 3 – 6 – 3 – Income Disclosure Statement ↩

69. SECTION 3 – 6 – 3 – Income Disclosure Statement ↩

70. https://www.facebook.com/dsharpe411 ↩

71. https://www.facebook.com/empowernetwork ↩

72. http://www.tinyurl.com/ENCheck ↩

73. http://web.archive.org/web/20090726061842/http://workwithdavidwood.com/ ↩

74. http://www.empowernetwork.com/compliance.php ↩

75. As of August 20^th, 2013. ↩

76. http://www.insidenm.com/podcasts/ (2:58:44 mark)  ↩

77. http://www.insidenm.com/articles/zeek-rewards-expose/ ↩

78. Also, note again the practice of making the height of the screen image ever so slightly higher than will fit so as to not display the fine print Earnings Disclosure (which is in dark red text on a darker red background) without scrolling down just another inch. ↩

79. http://www.mlmlegal.com/landmark.html ↩

80. http://www.empowernetwork.com/refund.php ↩

81. http://www.consumer.ftc.gov/articles/0176-protections-home-purchases-cooling-rule ↩

82. http://tinyurl.com/EN-NoRefund ↩

83. Commissions from the second, fourth, sixth, and every fifth sale thereafter are rolled upline to the first eligible affiliate. ↩

84. http://www.insidenm.com/podcasts/ (1:46:20)  ↩

85. During 2012 USANA, Herbalife and Nu Skin reported refund rates of 0.8%, 1.1% and 2.6% respectively. ↩

86. Section 3-28 of Empower Network’s Policies and Procedures does provide for such claw backs with affiliates agreeing to be invoiced for the full amount of the refunded product. ↩

87. Evidenced by the above image of their $778,779.20 check depicting their “commissions earned” as of June 6^th, 2012. ↩

88. Montana’s statute requiring registration of MLM companies offers an exemption for companies that are members of the Direct Selling Association. Empower Network is not currently a member of the DSA. ↩

89. http://web.archive.org/web/20090726061842/http://workwithdavidwood.com/ ↩

90. No record of having received registration documents. ↩

91. Not currently registered. No way of verifying if registration is in process. Can take “up to 21 business days” for approval. Assuming a receipt date of Monday, July 8th, 22 business days had elapsed. ↩

92. “No record of receiving it at all” ↩

93. http://en.wikipedia.org/wiki/Marketplace_Fairness_Act ↩

94. http://cber.utk.edu/ecomm/ecom0409.pdf ↩

95. http://en.wikipedia.org/wiki/Taxation_of_digital_goods#cite_note-23 ↩

96. FEI: 45-3306375 ↩

97. 3160 9^th Ave. North, St. Petersburg, FL 33713 ↩

98. http://web.archive.org/web/20110326220409/http://empowernetwork.com/members/ ↩

99. http://web.archive.org/web/20110901214700/http://empowernetwork.com/members ↩

100. http://www.insidenm.com/podcasts/ (1:23 mark ↩

101. http://web.archive.org/web/20101207152159/http://www.insanedownline.com/ (there is a hidden “Terms of Service” link in the lower/right corner of the screen that identifies MLSP). ↩

102. http://web.archive.org/web/20101112084520/http://davidsharpe411.com/, beginning of Oct. 11^th video. ↩

103. http://davidsharpe411.com/tag/bellamora/, Jan. 21^st video, 2:00 minute mark. ↩

104. http://davidsharpe411.com/tag/bellamora/, Jan. 16^th video, 2:33 minute mark. ↩

105. http://web.archive.org/web/20110429032850/http://www.davidsharpe411.com/truth/bellamora/ ↩

106. http://web.archive.org/web/20110429032850/http://www.davidsharpe411.com/truth/bellamora/; Video, 0:17 Mark. ↩

107. http://web.archive.org/web/20110202034851/http://davidsharpe411.com/2011/01/rod-cook-mlms-most-trusted-expert-endorsing-bellamora-plus-crucial-things-to-look-at-when-choosing-an-mlm/ ↩

108. http://davidsharpe411.com/tag/bellamora/, Jan. 21^st video, 3:18 minute mark. ↩

109. Bellamora launched in mid-January, 2011, and was gone by the end of April, 2011. ↩

110. http://www.youtube.com/watch?v=Hmrq9yevP7g&feature=youtube_gdata; 0:22 mark. ↩

111. I see nothing significant here that you can’t also get from Constant Contact or AWeber for half the price. ↩

112. http://www.my1000aweekforlife.com/1000aweek/ (Sharpe’s pitch begins at 9:15 mark). ↩

113. http://pcsoweb.com/InmateBooking/SubjectResults.aspx?id=1224783 ↩

114. http://workwithdavidwood.com/about/; Audio recording. ↩

115. http://empowernetworkcorp.com/ ↩

116. https://agel.com/faqs ↩

117. http://workwithdavidwood.com/bora-bora-vacation-trip-day-1/ ↩

118. http://web.archive.org/web/20090726061842/http://workwithdavidwood.com/ ↩

119. http://web.archive.org/web/20090826092845/http://workwithdavidwood.com/ ↩

120. http://web.archive.org/web/20110322061739/http://workwithdavidwood.com/numis-network-one-year-anniversary-thanks/ ↩

121. http://workwithdavidwood.com/numis-network-review-mlm-network-marketing/ ↩

122. http://www.youtube.com/watch?feature=player_embedded&v=TGNdgNGqHKI (0:36 Mark ↩

123. http://www.youtube.com/watch?v=dDcoVjX91Hs; 9:30 mark. ↩

124. Assuming an annual attrition rate of 50%, extrapolated from their known 71% attrition over their first 20 months. ↩

125. http://www.empowernetwork.com/empower-network-get-money/?id=takemassiveaction (39:30 mark ↩

126. http://www.insidenm.com/wp-content/uploads/2013/06/ANOTHER-40000-per-month-earner.pdf ↩

127. I’m assuming this review is being read by mature adults, so will not insult you by replacing key vowels within all the naughty words with an asterisk. ↩

128. Evidence of these examples are online, but I’m not referencing them here to avoid embarrassing innocent affiliates. ↩

129. http://en.wikipedia.org/wiki/Neuro-linguistic_programming ↩

130. http://davidsharpe411.com/2011/10/hyptonic-selling-secrets-recorded-monday-night-training-call/ ↩

131. Bonus training video only available to members. Here’s a snippet of the page: http://www.youtube.com/watch?v=av_M4CYcs5s ↩

132. http://www.youtube.com/watch?v=zkaZ_V8aAiI ↩

133. http://www.youtube.com/watch?v=RYNL9LoAJIo (2:16 mark)  ↩

134. http://www.youtube.com/watch?v=RYNL9LoAJIo (3:14 mark)  ↩

135. http://web.archive.org/web/20130517031256/http://www.empowernetwork.com/costa-rica-intensive.php (The original page was completely revised sometime after my interview with Dave Wood). ↩

136. http://www.insidenm.com/podcasts/ (34:25 mark)  ↩

137. http://www.empowernetwork.com/TOC.php (Section 16: Termination)  ↩

138. Dave Wood’s response to all P&P issues begin at the 45.35 mark of the interview. ↩

139. SECTION 3 – 18 – Sale, Transfer or Assignment of an Independent Empower Network Business ↩

140. SECTION 3 – 16 – One Empower Network Business Per Affiliate and Per Household ↩

141. http://www.empowernetwork.com/affiliate-policies.php ↩

142. SECTION 5 – 3 – Involuntary Cancellation ↩

143. SECTION 5 – 5 – Non-renewal ↩

144. See, e.g., Market America vs. Ray Rossi, et al.; 97-cv-891; North Carolina; 5/2000. ↩

145. SECTION 3 – 3 – 1 – Affiliate Web Sites ↩

146. SECTION 3 – 6 – 3 – Opportunity Claims ↩

147. https://www.facebook.com/empowernetwork/posts/4207388538270 ↩

148. https://www.empowernetwork.com/video/?seed=merchantaccount&id=timsingleton (3:58 mark)  ↩

149. http://fdismerchantservices.com/home-based-business-opportunity-credit-card-processing/ ↩

150. Empower Network hired an intermediary who was responsible for setting up this account. ↩

151. Having 5,700 independent affiliates all applying for their own merchant account within the first 30 days certainly would have raised a red flag – had First Data not been fully informed of what to expect. ↩

152. http://support.empowernetwork.com/index.php?/Knowledgebase/Article/View/57/5/im-using-paypal—should-i-process-with-another-option ↩

153. http://support.empowernetwork.com/index.php?/Knowledgebase/Article/View/102/4/authorizenet-removed-from-payment-processor ↩

154. https://cms.paypal.com/us/cgi-bin/?cmd=_render-content&content_ID=ua/AcceptableUse_full&fli=true&locale.x=en_US ↩

155. https://www.empowernetwork.com/video/?seed=merchantaccount&id=timsingleton (17:53 mark)  ↩

156. https://www.empowernetwork.com/video/?seed=merchantaccount&id=timsingleton (4:19 mark)  ↩

157. Wood’s full response to this topic can be heard at the 53:08 mark of the interview. ↩

158. https://www.empowernetwork.com/video/?seed=merchantaccount&id=timsingleton (10:20 mark)  ↩

159. Many respected MLM companies partially compensate management and company founders this way. ↩

160. http://tinyurl.com/ksvpmoq ↩

161. e.g. Univite and Charles Givens Organization; to lesser extent Quorum and Karemore; all circa 1990s. ↩

162. From the stage at their July, 2013 event in Denver. ↩

163. http://behindmlm.com/companies/empower-network/empower-network-to-sue-youtube-video-flaggers/ ↩

164. https://www.facebook.com/empowernetwork/posts/4903683345205 ↩

165. https://www.empowernetwork.com/video/?seed=merchantaccount&id=timsingleton (20:38 mark)  ↩

166. http://www.alexa.com/siteinfo/empowernetwork.com# ↩

167. Based on a projected total for August, but only to fill out the last four days. ↩

168. In Anaheim, Dallas, Washington, D.C., and Orlando. ↩

169. http://www.insidenm.com/network-marketing-articles-library/ ↩

170. http://www.empowernetwork.com/empower-network-get-money/?id=takemassiveaction (4:00 mark)  ↩

171. Common Thread – I paid $200 for these Verbal Advantage CDs. I’ve got to use these words for something! ↩

172. http://www.empowernetwork.com/empower-network-get-money/?id=takemassiveaction (54:20 mark)  ↩

173. http://www.youtube.com/watch?v=LqDWOMn_bxE (1:01 mark)  ↩

174. http://www.insidenm.com/podcasts/ (194:35 mark)  ↩

175. http://www.youtube.com/watch?v=aZ0hT79PoCc (26:00 mark)  ↩

176. http://www.youtube.com/watch?v=yXnchprqMa0 ↩

177. http://www.youtube.com/watch?feature=player_embedded&v=1sA9HUmosgE#at=29 (16:27 mark)  ↩

178. http://www.passiveincomeflip.com/wp-content/uploads/2013/04/lawrence-tam.png)  ↩

179. SECTION 3 – 14 – Bonus Buying ↩

180. Based on a MarketWave survey of 23 companies (11 public and 12 private). ↩

181. Based on a 2011 MarketWave survey of 32 such companies. ↩