2023 1129 – LC – Affidavit – Robert L. Fitzpatrick – For Defendant – Primerica vs. Marco Moukhaiber – [Always Marco] – 79p

2023 1129 - Affidavit - Robert L. Fitzpatrick - Primerica vs Marco Moukhaiber - [Always Marco] - 79p

2023 1129 - LC - Affidavit - Robert L. Fitzpatrick, Primerica vs Marco Moukhaiber – [Always Marco] --- [BonkNote] --- 79p
2023 - LC - Primerica vs Marco Moukhaiber – [Always Marco] --- [BonkNote]

3 - Deception: Inherent/Institutional:
- 11. Deception in business is commonly limited to specific statements and enumerated claims made to consumers or investors or reported in financial data to investors, banks and regulators.
  - ⇒ Primerica’s deception, in my view, must be considered in a different category.
- 12. Rather than incidental, occasional or transactional, it is institutional deception. It is fundamental to the enterprise.
  - Instances of the deception can be cited, as the Defendant has offered and which I have reviewed. In my view, each such instance is part of the pattern associated with Primerica’s identity, not as an “insurance” company, but as a recruiting-based enterprise with its advertised “income opportunity” as its primary product.
  - The recruiting of sales representatives is its primary revenue-producing activity with the sales representatives serving as its primary “market.”
3 - 14. In 2013 I assisted in the preparation of a Freedom of Information request to the Federal Trade Commission for records of consumer complaints about pyramid schemes. Consumer complaints about Primerica were among the files provided.
4 - I have provided expert analysis on Primerica to financial analysts through the expert consultants’ network, Gerson Lehrman Group.
4 - 16. Including my stated, long-term background of researching and analyzing the business of Primerica, for this particular case I also recently examined:
5 - 18. Each recruit can recruit more recruits who can do the same, ad infinitum. The “infinite” chain facilitates Primerica’s electrifying promise of the potential for “unlimited” income to all recruits. This promise, not the prospect of personally selling life insurance, is the source of extraordinary hope and excitement Primerica generates, at least briefly, among many participants.
5 - Endless Chain Architecture
5 - MLM and Pyramid Scheme
- 23. Primerica is therefore, by definition, a type of company that frequently serves as a pyramid scheme disguise, requiring institutional deception, and prompting extreme consumer concerns.
6 - MLM and Anti-MLM:
- 26. Reflecting the growing consumer awareness and concerns about MLM, the “anti-MLM” Reddit group has 817,000 subscribers. More than 200 posts refer specifically to Primerica, most warning of its potential as a pyramid scheme or deceptive recruiting or reporting losses they suffered. Some refer to it as a “cult.”
6 - Vital Sources of Consumer Information:
- 27. Because is it widely known and publicly acknowledged by federal and state regulators that millions of people are being solicited to join MLMs, that the ranks of MLM companies include pyramid schemes, and that distinguishing a MLM pyramid scheme may not be possible for many people, the most important and popular sources of consumer information on MLM companies are independently published and publicized on social media, rather than traditional institutional sources. These sources include websites, independently published books, documentaries, and podcasts such as is offered by the Defendant, that offer extensive investigation, gathering of data and anecdotal evidence and interviews with experts
6-7 - Pyramid Scheme Characteristics:
- 30. For my analysis, I identify four key factors in determining if a multi-level marketing company, such as Primerica, potentially violates laws regarding pyramid fraud. These are:
  - a) payment to participate;
  - b) an endless chain structure in which no limit is placed on the number of participants,
    and all are authorized and incentivized to recruit new participants;
  - c) recruiting as the primary way to gain the high returns promised by the enterprise; and
  - d) a compensation formula that transfers the largest percentage of total rewards to a small group at the peak of the recruiting chain from revenue obtained from lower level recruits.
- 31. In my view, Primerica meets these criteria. Participants pay approximately $100 to join plus monthly fees, along with other related costs. In the classic MLM model, Primerica authorizes and incentivizes all participants to recruit ever more recruits in an infinitely expanding chain. Payments are transferred upward from bottom to top.
- 32. Based on the disclosed average sales per sales representative, those gaining significant compensation are those with the most recruits. Recruiting appears to be the primary means of recouping initial and ongoing costs and to gain the advertised high-income.
- 33. Primerica acknowledges to its investors in each annual report, “The volume of our term life insurance products sales will fluctuate in the short term, but over the longer term, our sales volume generally correlates to the size of the independent sales force.”4 As will be shown later in this affidavit, what makes this statement crucial to understanding the identity of Primerica as a recruiting-based enterprise is that the average sales volume for its sales force is just two “life insurance products” per year, far less than needed for sales representative profitability.
7 - Consumer Risk and MLM Legality
- 34. The danger to a consumer from an endless chain proposition exists whether or not the scheme is ever prosecuted or a legal opinion on its legitimacy is rendered by a court. Any enterprise employing an “endless chain” proposition, in which the financial promise of return is primarily based on recruiting new participants will result in extensive loss to participating consumers.
- 35. Of the more than 30 “multi-level marketing” companies prosecuted in the US in the last 25 years, some of them had operated for many years as presumably “legitimate” enterprises only by virtue of having never been investigated. The legal criteria for prosecutions of pyramids are complex. In the USA and Canada, individual MLMs are not positively identified as legal by regulators. Any MLM, potentially, could turn out to be a fraud. The limited resources of regulators for identifying and prosecuting offending MLM enterprises in Canada and the USA leave consumers largely on their own for making judgments about legitimacy when they are solicited.
- 7-8 - 36. A determination of whether Primerica or any MLM violates anti-fraud laws in the US or Canada’s Competition Act or Canada’s criminal code pertaining to fraud would be made by courts. Such determinations are rare, and they do not offer usable consumer guidance concerning other MLMs. An open question of legality, therefore, is applicable and pertinent to all MLMs, including Primerica. Raising the question and expressions of opinion are common on social media and in other public forums.
- 37. In my opinion, Primerica potentially violates Canada’s Competition Act and its practices and consequences could potentially make it a target for prosecution in the USA.
8 - Podcasters as Public Resource:
- 38. I have worked as a consumer advocate and educator, focused on pyramid frauds operating as “multi-level marketing” enterprise for more than 25 years. From my experience, consumers rely almost entirely on independent watchdogs for useful information regarding the legitimacy of any scheme called “multi-level marketing” such as Primerica. Given the scale of solicitations by Primerica, touching millions of people, questioning, examining, and expressing personal opinions and sharing consumer experiences regarding Primerica is in the public interest.
- 39. The role of the Defendant and others performing a similar service is vital to the public. nevertheless, all the podcasters involved in services such as the Defendant’s, openly state they are under continuous threat of defamation lawsuits for making analyses of MLMs, expressing their own views on the public question of MLM legality, and for documenting the negative experiences of consumers.
8 - Pyramid Scheme Evidence on Primerica: Market Saturation
9 - Pyramid Scheme Evidence on Primerica: Massive Recruiting
9 - Pyramid Scheme Evidence on Primerica: Recruiting and Churning
- 44. Unlike Ponzi schemes which also transfer funds from new investors to earlier ones, MLM pyramids do not suddenly “collapse” due to lack of new investors. Participants join, lose – as nearly all must, based on the structure – and then quit. They are replaced by new hopefuls. As long as the scheme can continue to reconstruct its ranks, it can remain in a state of “continuous collapse” for years.
9 - Pyramid Scheme Evidence on Primerica: False, Exaggerated Income Claims or Undisclosed Averages
9 - Pyramid Scheme Evidence on Primerica: Minimal Retail Sales per Sales Rep
- 52. The lack of significant personal sales, on average, reveals that the company’s identity as a “direct selling” company is false and misleading. Consumers that sign up, in general, do not gain profit from personal, direct selling. Actual income for the sales representatives is primarily gained from recruiting other representatives. Without recruiting, the income opportunity is effectively non-existent. The enterprise should properly be defined as a recruiting-for-pay operation. Its “income opportunity” promise is its true product. And the salespeople are its main “market.”
- [Criminal] - 54. The extremely small number of average sales calls into question the "average" income, said to be "typical" and "likely", as the law requires in Canada.
  - Failure to report the "average" that meets the requirements for "typical" is a criminal offense in Canada, making the use of the term "criminal" in reference to Primerica, reasonable and appropriate at least speculatively.