By Matt Stroud and Joseph L. Flatley, with additional reporting by Jesse Hicks
Barron Hansen is a self-employed web developer and researcher in San Diego. Like many people who work from home, he spends a lot of time alone in front of the computer, listening to talk radio. Over time, he began to notice that all of his favorite radio personalities seemed to be endorsing a “business opportunity” called Income At Home.
“Start making money on your own terms,” said one ad, read by Glenn Beck. It sounded too good to be true, the kind of thing most listeners probably dismiss without a second thought. And as long as Hansen had been hearing the endorsements, that’s exactly what he did. That is, until last January, when one of his web development clients burned him to the tune of $50,000. Suddenly, Beck’s offer seemed worth considering. The first step in this exciting opportunity was the purchase of an information packet for $9.95, so he went to incomeathome.com and entered his personal information, including home address and credit card number.
A few days later, the Internet Business Starter Pack arrived. Consisting of a single DVD and a 12 page glossy sales brochure that "could’ve been designed by some high school kid," according to Hansen, what most infuriated him was what the kit lacked: any indication of the actual business behind the business opportunity.
His curiosity pivoted. No longer wondering what sort of opportunity Income At Home might provide, he was now curious about who — or what — might be behind the company itself. Some rudimentary Google research led him to a constellation of nearly identical websites promoting the same info-product he had purchased.
As if that wasn’t convoluted enough, running parallel to Income At Home was yet another business opportunity called Online Business Systems.
Hansen didn't find a writhing mass of competing scammers
Soon, he pinpointed the source of all this confusion: all the websites in this network contained the same small-print notice, stating that the copyright on the material belonged to an obscure firm in Barbados called the Centurion Media Group.
If you’ve read "Scamworld," you may think you know where this is headed — toward that shadowy netherworld of Internet Marketing and pyramid schemes. And you’d be partly right. But what Hansen eventually found was not a writhing mass of competing scammers. Instead the websites, direct sales letters, and the myriad of cookie-cutter landing pages all benefitted a single, seemingly legitimate, multi-billion dollar corporation publicly traded on the New York Stock Exchange.
The Barbados offices of the Centurion Media Group are on the second floor of the Vista Building, a small office complex housing a half-dozen dropped-ceilinged, air-conditioned rooms with phone lines, particle board desks, hard commercial carpets, and windows facing a two-laned street that doesn’t look too busy. It’s just off Worthing Beach in a tourist haven built around hotels with names like Chateau Blanc and Anthurium Suites.
Barbados isn’t a "tax haven" in the most egregious sense: according to The Economist, it doesn’t even make a list that includes such exotic locales as Delaware, Nevada, and Wyoming. But judging from the fact that well over 80 percent of the country’s corporate income is derived from foreign businesses, there must be some advantages to filing your paperwork in the Caribbean. One of those advantages, as The Verge discovered, is that discovering who exactly started the company isn’t just a simple matter of checking out an online database or making a phone call to a Secretary of State — as it would be if the company was located in, say, Nevada.
That isn’t to say that there is some sort of huge mystery surrounding the origins of Centurion, however. There is one name that appears consistently throughout the marketing of both Income At Home and Online Business Systems: that of a Vancouver-area businessman named Shawn Dahl.
Shawn Dahl is a friendly work at home family man with a penchant for polo shirts and new suits, neatly mussed hair, fishing, and snowmobiling
Yet everything connected to Centurion contains some degree of misdirection.
After repeated requests to speak to a company rep went unanswered — numerous phone calls and email messages, sent to Dahl and the company itself — it’s easy to conclude that he doesn’t want to appear on The Verge.
He’s no recluse, however. According to the online bios and snappy YouTube infomercials, Dahl is a friendly "work at home family man" with a penchant for polo shirts and new suits, neatly mussed hair, fishing, and snowmobiling. His Online Business Systems bio page claims his paycheck averages $33,000 a month, and maybe that’s true. He lives on a quaint, secluded side street, mere blocks from Boundary Bay in White Rock, British Columbia, where the average house sells for close to $1 million.
For instance, he's featured in at least one Income At Home ad, always with the very strong suggestion — although it’s never stated outright — that he's simply someone who made money by taking advantage of this opportunity. (A different proposition than, say, getting rich selling the opportunity, which is most certainly the case here). In the endorsement, available as a podcast on the iTunes store, Dr. Laura introduces Dahl as someone who made "millions of dollars in this business." Which is sort of like saying that Dave Thomas made his fortune selling hamburgers, so you should seriously consider taking that job at the Wendy’s on Baum Boulevard.
‘If this opportunity is so great,’ he continued, "what’s there to hide?"
Discovering the source of Dahl’s wealth — and, it follows, the company behind Income At Home — is as easy as performing a Google search for Dahl’s name. Yet Barron Hansen learned that the person trying to sell him on the biz opp (generously designated his "mentor," but merely an Income At Home participant who had purchased his name and contact info) carefully avoided naming the mysterious, billion-dollar company behind all the success stories. In fact, after receiving his disappointing marketing product, Hansen had taken a follow-up call precisely to pose this question.
"If it is such [an] incredible opportunity," he asked, "then why is it so difficult to get you to simply tell me who the big company is that I could ultimately be working for?"
The operator responded, lamely: "Is that all you are interested in right now?"
"Pretty much," Hansen replied. He’d paid the money, read the sales booklet, sat through the DVD, and dealt with a "mentor" who couldn’t even be bothered to make her appointment — finally having another sales rep make the call. And he still didn’t know anything about the company behind Income At Home. He wasn’t asking about Centurion — who sold the biz opps — he wanted to know which multi-billion dollar company they were selling relationships with.
‘If this business opportunity is so great,’ he continued, "what’s there to hide?"
After more prodding, she finally offered a name. To his surprise, it was one he’d heard many times before.
"It’s Herbalife," she said.
As a regular reader of The Verge, you probably know that Herbalife is what’s known as a multi-level marketing company (MLM). Instead of dealing directly with franchises, an MLM distributes products through a network of independent distributors.
To understand how MLMs differ from conventional franchising, let’s go back to Wendy’s for a moment. If you wanted to take advantage of the business opportunity afforded by the home of the Frosty (which is not a pyramid scheme), you’d become a franchisee — you’d pay Wendy’s to use its name and products for your own restaurant. The path would begin in a pretty straightforward way: email the company, and they’ll get you started.
If you wanted to work with Herbalife, however, the company would put you in touch with an independent distributor — someone outside the company. The term itself, "distributor," conjures images of, well, distribution — handling products. And Herbalife would love it if you actually believed that you could earn a great living if only you worked hard and sold the shit out of things like cell activator pills and body buffing scrub. Just like Shawn Dahl did.
The real nature of his success, however, is embodied by two key MLM terms: upline and downline. Simply put, if you signed up for Herbalife today — and please don’t — you wouldn’t interact with the company at all. You’d interact with the person who recruited you: your "upline." (And if you started recruiting distributors yourself, they would be your "downline.") Since you’re restocking through your upline, it’s the person who recruited you in the first place who receives a commission from any sale that you make. Or any sale you fail to make, as long as you keep placing orders.
There’s no guarantee that any of those leads will pan out, of course,
but the opportunity’s there
The first step with Online Business Systems is purchasing something called the Internet Startup Kit. This is the same thing that Income At Home sold Barron Hansen. If you go to either of those websites at the time of this writing, the ordering page clearly states that you can try the kit risk free for 14 days, if you pay $9.95 shipping and handling. After two weeks, if you don’t return the kit, you’re charged the full $39.95 price. According to Hansen and several others, the terms weren’t always that clear: the web is full of complaints made by people who thought they were paying $9.95 for something that cost five times that.
If you’re still with the program, you’ll receive a call from a "mentor," which is little more than someone who was recently in your position. They bought the kit, liked what they heard, and stuck with it long enough to purchase your name from Online Business Systems. Hopefully, they’re having less luck than their mentor did.
The next step in the process is to sign you up as an Herbalife distributor. Outside of Dahl’s "system," this will cost you something in the $100 range. But with Online Business Systems, the price is $399.
And what if you want to start your own downline? In order to do that, you need to become a supervisor. This requires other product purchases, where you’ll spend up to $4,000. With this investment, you’ll receive a ton of sales tools and advice from Shawn Dahl’s team, some of which may be helpful. But unfortunately you won’t get any sales leads. And you can’t really sell Herbalife without anyone to sell Herbalife to.
Cheap leads cost about $6. But if you want the good leads, the Barron Hansen-quality leads — that is, people who have responded to Glenn Beck’s radio ads and typed their credit card numbers into a website purporting to provide business information — you’re paying closer to $100 a head.
There’s no guarantee that any of those leads will pan out, of course, but the opportunity’s there. And, by the way, you’ll also want to buy a website to sell your products and attract new distributors. That’ll run you $79.95 per month.
When a prominent hedge fund manager bets $1 billion that a company is a pyramid scheme, people tend to sit up and notice. As The Verge and many other outlets have reported, Bill Ackman’s three-and-a-half hour December presentation questioning Herbalife’s business practices has brought new scrutiny to a company that’s long had its share of skeptics. Lawsuits have been filed, unverified rumors have swirled about investigations into Herbalife by the U.S. Securities and Exchange Commission and the Federal Trade Commission, and Ackman’s hedge fund released documents comparing Herbalife’s business model to at least one major firm recently shut down after an FTC investigation. (Incidentally, Ackman put a valuation of $8 billion on the company.)
But lawsuits, accusations, and rumors have been bolstered in recent weeks by new claims from people like Barron Hansen who bring scrutiny not only to Herbalife, but also to the internet businesses that seem to support some of Herbalife’s wealthiest and most prominent distributors.
In Herbalife, your value to the company is indicated by your "team" membership. This isn’t a team in the sense of an organizing unit; membership is largely honorary, based on the size of your downline and how much money you’re making the company. The number two spot is the Chairman’s Club, which boasts Shawn Dahl as a member. Number one, if you’re keeping track, is something called The Founder’s Circle.
Throughout our investigation, we’ve seen how building downlines through Internet Marketing biz opps — essentially, recruiting people into your downline, with the sole purpose of having them recruit even more recruiters — seems to be the sole focus of a number of the most successful Herbalife distributors. Among the biz opps of various Chairman’s Club and President’s Team Members, you have Home Business Systems (Michael Boyd), eTeam Marketing (Carla Berg), Financial Success Systems (Doran Andry), 60 Minute Money (David Bevan and Jane Clark), the Freedom Connection Group, and Freedom Lifestyles Group (both courtesy of Kurt and Cindy O’Connell).
But you don’t need to leave Shawn Dahl’s immediate family to find further examples of this kind of thing. In 2004, while Shawn Dahl and his wife Nicole were still getting started in MLM, Nicole’s mother, Deborah Jane Stolz, pled guilty to running a pyramid scheme. As proprietors of a Vancouver-area marketing company called Global Online Systems, Stoltz and her business partner were fined $150,000 by the Canadian government. Part of her guilty plea stipulated that she would "not become involved directly or indirectly in any business operation engaged in a scheme of pyramid selling." Despite that, she is still an elevated figure in Herbalife’s business hierarchy; Debbie J. Stoltz was invited to Herbalife’s "President’s Summit" in Paris this year, an honor extended only to Herbalife’s top distributors. Plus, a cursory look at the now-offline Global Online Systems site shows that it’s conceptually identical to Dahl’s sites — from the worthless information packets to the deceptively hidden association with Herbalife. That would seem to indicate Stoltz is at least indirectly involved in Dahl’s biz- opp-selling world.
"If Herbalife has tracked its 2012 sales data in such granular detail, that should greatly assist the SEC in their investigation."
— The Salty Droid
If this is what it takes to make it to the top of the Herbalife pyramid — establishing your own Internet Marketing-based biz opps, without even the pretense of selling products — then it’s clear that systems like Dahl’s Income At Home must have the tacit approval of the company. And if Herbalife’s immense profitability is "based primarily on recruiting," not on "profits from any real investment or real sale of goods to the public," then we have the Federal Trade Commission’s definition of a pyramid scheme.
When asked about this, Julian Cacchioli, Vice President of Worldwide Corporate Communications at Herbalife, sent an official statement via email.
"In 2012," he wrote, biz opps like Online Business Systems and Income At Home "represented less than one percent of our sales." He added that the number of vendors using "registered business methods" — the Herbalife term for approved biz opps — is "steadily decreasing."
When posed a similar question on a stockholder conference call last year, an Herbalife representative was either unable or unwilling to disclose the percentage of Herbalife products sold to distributors versus the percentage sold to the general public because, the rep claimed, "we don’t have visibility to that level of detail." Yet now, somehow, the company has a sufficient level of detail to determine much more precisely the complicated statistics regarding how many distributors use companies like Income At Home versus those who don’t.
Jason Jones, the lawyer and consumer advocate behind The Salty Droid (and no fan of Herbalife himself) was relieved to hear that the company had become more forthcoming with its data.
"If Herbalife has tracked its 2012 sales data in such granular detail," he said in an email, "that should greatly assist the SEC in their investigation."
And if it is true that very few distributors use the preferred Shawn Dahl sales model, the distributors using this model seem to overwhelmingly belong to Herbalife’s top 1.4 percent of sales leaders at the company. That includes Dahl himself and, relatively recently, the small group of Herbalife distributors behind a scheme called Newest Way To Wealth — a sham biz opp forced to pay victims $6 million as part of a 2004 class action lawsuit settlement.
For years, Herbalife has been keeping a list of approved biz opps — which it calls Business Methods. In fact, a company policy statement urges distributors against "purchasing or using Business Methods (including, but not limited to, advertising and leads) from any person or company that has not registered them with Herbalife."
An anonymous forum post from January 2010 lists 28 such companies registered with Herbalife for its Business Methods list. This list includes Centurion Media Group, Income At Home, and Online Business Systems. As we conducted this investigation, however, an internal Herbalife memo started making the rounds. Titled "Business Methods Registration Advisory," it seemed to show that the list had dwindled down to two in only three years.
It also offered a surprising warning: "Effective immediately, [Shawn Dahl’s Centurion] is no longer a registered provider. This means that you may not purchase, sell, endorse, recommend, promote or use anything from [Centurion]."
We asked Cacchioli, Herbalife’s spokesman, if this might put Shawn Dahl’s status as a Chairman’s Club-level distributor at risk. Instead of answering our question, Cacchioli denied that Dahl was connected to Online Business Systems, Income At Home, or Centurion.
"Mr. Dahl," he wrote, "has advised us that the links you have provided reflect contact details which are long out of date and should have been updated by the respective parties many years ago. He has also confirmed that he has no ownership or financial interest in these businesses."
That’s difficult to believe. As we’ve seen, Shawn Dahl is prominently featured in promotional videos for Online Business Systems, and his biographical information is front-and-center on its website. Dahl’s personal blog connects him to both biz ops, as well as Online Business Systems webinars from as recently as last July. There are also organizational calls he spearheaded as recently as November, his Income At Home "podcast" (it’s more of a radio spot), and a ton of other web links connecting him to Centurion and its "business opportunities."
Again, it doesn’t take much sleuthing to figure out that Dahl is clearly involved with Centurion and its schemes. This is Shawn Dahl the Chairman’s Club member, one of Herbalife’s top .0001% distributors. If Herbalife is attempting to distance itself from Income At Home, it’s doing a terrible job.
Herbalife has been working tirelessly to scrub the web of all connections between itself and the shady firms that use its name to bilk people out of thousands.
Barron Hansen, in the meantime, hasn’t sat idly by while Herbalife experienced this major public shakeup. In fact, he took a page from the Shawn Dahl playbook and started building websites.
In January 2012, after his ill-fated conversation with an Income At Home distributor, he started Income At Home Exposed, which is devoted to telling his story and sharing what he saw as a fraudulent business targeting vulnerable people. The site’s content has continued to branch out. He now owns his own constellation of "exposed" sites, including Shawn Dahl Exposed, Online Business Systems Exposed, and Centurion Media Group Exposed.
As his own network has grown, Hansen says, Herbalife has been working tirelessly to scrub the web of all connections between itself and the shady firms that use its name to bilk people out of thousands. One need look no further than the way that Centurion’s changed the registrar on a number of its sites. While the Better Business Bureau listed Shawn Dahl as a principle of Online Business Systems until February 3, that title now goes to someone named Nicole Whelan. As of December 23, Dahl was listed as the administrative contact for the Centurion Media Group website. That title now goes to Juliana Chambers, who shares a name with the wife of Trinidad and Tobago's former prime minister. That Juliana Chambers died in October.
Ackman’s hedge fund, Pershing Square Capital Management, hired Hansen to do freelance research for the company between January and March of this year. At times, he worked 80 or 90 hours a week, he says, in the hopes that Pershing would help the world would hear his message.
And that message is simple.
"I think they should be in chains," Hansen said, referring to Dahl, Herbalife, and the groups associated with business methods and the misleading lead generation tactics of Income At Home and Online Business Systems.
"I think they should be prosecuted."
UPDATE: Hours after this story was published, Income At Home scrubbed Herbalife from its website. The footer on the biz op site changed magically from "an online method of operating an Herbalife International distributorship" to "an online method of operating a Vemma independent distributorship."
It's embarrassing how little searching it takes to discover that Vemma is basically Herbalife without all the negative media attention from hedge fund managers and federal investigative agencies. Income At Home, for that matter, is not the first biz op brand to flee Herbalife in the wake of recent pyramid scheme accusations. Anthony Powell, a former Herbalife President's Team member, jumped ship in January to the same company.
This should tell you a couple things: First, Herbalife is collectively very pissed that Income At Home is being so flagrantly outed as a pyramid scheme. Second, Herbalife is just part of a much larger point here — namely, that multilevel marketing companies, no matter how legitimate they may seem, often do little other than enable these sketchy biz ops designed to con people out of hard-earned money. Keep that in mind as this story moves forward.
The Verge has reached out to Herbalife's spokesman as several email addresses associated with Income At Home, the Centurion Media Group, and Shawn Dahl. Responses will be posted if and when we receive them.