Republican presidential candidate Donald Trump has been paid $1.35 million since last May for three speaking engagements for a network marketing company that has been accused of being nothing more than a pyramid scheme.
Trump’s presidential financial disclosure, which was released on Wednesday by the Federal Election Commission, shows that he has been paid $450,000 each for three speeches given on behalf of ACN Inc., a North Carolina-based “multi-level marketing” company. The celebrity and real estate billionaire spoke most recently at ACN’s annual convention which was held in Charlotte in February.
Trump first became involved with ACN in 2006. In 2009 and 2011, company executives appeared on the mogul’s NBC reality show, “Celebrity Apprentice.” During one of those episodes, a video phone ACN was selling was a featured product.
But former sales agents who worked for ACN have claimed that selling goods and services is not the company’s main goal. Instead, the emphasis is on pushing its existing sales agents to recruit new ones. That creates a lucrative revenue stream for ACN since sales agents pay $499 to join the company. They must also pay annual fees and training expenses.
“The essence of the whole thing is kind of a card trick,” says Robert FitzPatrick, who operates the website Pyramid Scheme Alert and is the co-author of the book “False Profits.”
Of the many multi-level marketing companies that exist, ACN is “one of the more predatory and aggressive,” FitzPatrick told The Daily Caller. He said that the company not only charges its agents hefty up-front fees, it also forces them to sign lengthy contracts for products and services that the company sells.
To prop up its business, ACN relies heavily on Trump to recruit news salespeople into the fold. The author of “The Art of the Deal” is featured prominently on the company’s website and speaks regularly at its conventions and training events.
“When evaluating a business opportunity people need to look for strong leadership, a solid track record, success stories, a strong product people need and want and a clear plan for the future. ACN has all of these things,” Trump says in an ACN-produced video.
“ACN has a reputation for success, success that’s really synonymous with the Trump name and other successful names, and you can be a part of it,” the company’s website states.
But while Trump has padded his pockets through his relationship with ACN, many of its sales agents and customers have not fared so well in its dealings with the company. It is likely that a majority of the tens of thousands who have attended Trump’s ACN talks will never turn a profit.
FitzPatrick, who has monitored multi-level marketing companies for years, says that only about one percent of sales agents who sign up with companies like ACN ever make a profit.
“The opportunity that is presented is the opportunity to sell the opportunity,” he said, describing the multi-level marketing business model.
ACN uses what’s called a “warm market” marketing concept. Independent sales agents can make money by selling products — such as energy services, high-speed internet, and video phone services — to their friends and family. But the bulk of their income comes from recruiting friends, family members and other acquaintances to become sales agents too.
Businessmen like Trump are the perfect face for a company like ACN, FitzPatrick says. Not only is his reputation as a successful businessman with his “win-or-lose” philosophy a big draw for dues-paying recruits, his association with the company helps legitimize it.
“With a name like Trump behind it people would think this can’t be a scam,” FitzPatrick says.
But scores of people who have worked for ACN or purchased its products say it is just that.
The website “Pissed Customer” has 369 complaints against ACN for issues ranging from its sales techniques to its recruitment practices to the quality of its products.
The Better Business Bureau has handled 237 complaints against ACN within the past three years. Of those complaints, 116 concerned problems with products or service. Another 89 concerned billing and collection issues while 32 involved advertising and sales problems.
The company has landed in legal hot water, too.
Last year, a class-action lawsuit was filed in North Carolina against ACN and an affiliated company, Xoom Energy. The suit, which was based on a WABC News expose, alleged that the two companies worked together to perpetuate an elaborate bait-and-switch scheme. ACN marketers would convince customers to switch energy service to Xoom by promising lower energy costs. But the complete opposite happened, according to the suit. Customers saw their energy costs rise dramatically. Worse yet, Xoom and ACN made it difficult for customers to cancel their contracts.
ACN also settled a case filed against it by the state of Montana in 2010.
According to Ethan Vanderbuilt, who operates a popular scam-busting website, the state’s attorney general claimed that in 2008, ACN recruited 91 sales affiliates there. Those participants paid around $62,000 to sign up with the company. All but two made money from the deal, according to Vanderbuilt. He also reported that in 2009 more than 300 representatives paid approximately $235,000 to sign on with ACN. The company paid out only $896.86 to participants.
In a statement to TheDC, Michael Cohen, the executive vice president of The Trump Organization said that Trump “has no affiliation to the ACN Company except for once a year being highly compensated for a motivational speaking appearance.”