‘Families were being torn apart, people sold properties to invest in MLM companies and lost all’

The attachment of properties belonging to M/s Amway India Enterprises Private Limited by the Enforcement Directorate (ED) this week is the culmination of years of work, and lengthy and in-depth investigations into multi-level marketing (MLM) companies by a handful of police officers in Telangana and Andhra Pradesh, especially IPS officer VC Sajjanar .

Other IPS officers who tirelessly pursued the MLM companies include Charu Sinha who kept up the pressure on Amway, K Raghuram Reddy who, as superintendent of police (SP) of Kurnool, arrested then Amway India managing director William Scott Pickney, and Dwaraka Tirumala Rao who chargesheeted Agri-gold and Akshaya Gold.

No other state followed the case against Amway like undivided Andhra Pradesh did. Sajjanar, who is now managing director of Telangana State Road Transport Corporation (TSRTC), was a young SP in 2005 when, on a visit to his native Hubballi in Karnataka, he noticed hoardings advertising products of a company called Japan Life, including a magnetic bed.

“I was curious, and asked my friends about the hoardings. I sensed that something was not right, and the next day, without revealing that I was a police officer, I attended a meeting organised by distributors where they were telling people how to make loads of money quickly by becoming a distributor and enrolling members to sell these ‘miracle beds’. When I tried to ask a question about the viability of their business model, I was discouraged. I knew straightaway that it was a scam,” Sajjanar told The Indian Express this week.

“Looking back, I feel it was fortuitous that I became aware of this new kind of pyramid direct selling model scam because a few months later I was posted to the Economic Offences Wing of the Andhra Pradesh CID. By that time police were already aware of complaints from people who felt cheated because they had invested a lot of money but were not receiving the hefty commissions that they had been promised.

“On August 14, 2006, I issued a press release appealing to the public not to fall into the multi-level marketing trap, hoping that as the next day was a national holiday, a large number of people would read it in newspapers at home ,” Sajjanar said.

That appeal to the public led to the filing of the first actionable and most comprehensive FIR against Amway at a police station dedicated to investigating economic offences.

“A software engineer named AVS Satyanarayana came to the EOW office and told me that I was right in appealing to the public because it was nothing but an illegal money circulation scam to which thousands of people were falling prey.
Satyanarayana had read my appeal in the newspaper while he was in Chanchalguda Jail. His story made me realise that not only were people losing money, families were being torn apart and relatives and friends were avoiding each other,” Sajjanar said.

Satyanarayana and his wife, who had started a software company together, had been approached by two individuals who claimed to be Amway distributors, Sajjanar said. One of the men was related to Satyanarayana’s wife, and pestered them to enrol, which they did after refusing initially.

“It soon turned out to be a nightmare for Satyanarayana. Clients started complaining that when they visited his office, instead of discussing work, his wife would try to sell them soaps, dietary supplements, and car wash. Eventually, clients, relatives, and friends started avoiding them. While they kept purchasing products and paying to attend meetings and seminars, they were not making any money. When he tried to persuade his wife to stop, she, convinced that she would make a lot of money, filed a dowry complaint against Satyanarayana, and he was arrested,” Sajjanar said.

Based on Satyanarayana’s complaint, an FIR was filed on September 6, 2006, and police raided Amway’s offices and gooddowns all over AP. “That is how it all began,” Sajjanar said. An FIR had been filed earlier at Chandigarh’s Sector 26 police station, but it was not followed up.

Amway moved court saying its business was legal, and got a stay on further police action. However, when a PIL was filed by retired scientist Umamaheshwar Rao whose two sons had lost nearly Rs 25 lakh in MLM schemes including Amway, the cases were transferred to the court of the Andhra Pradesh High Court Chief Justice, and police started to pursue the case energetically.

During investigations, they discovered evidence of the widespread social impact the MLM craze was having — family members and relatives were turning against each other and filing divorces or police cases, or involved in fights in an effort to enrol more members in order to get commissions.
“Families were being torn apart, and the social fabric was breaking. People sold or mortgaged properties to invest in MLM companies and ended up losing everything,” Sajjanar said.

“I studied their business models thoroughly and found that everyone was a distributor or a business owner, and that there were no consumers. When people started complaining that they were not getting commissions as promised, they were told by their seniors that they were not working hard enough or not enrolling enough people. This started affecting families, relationships, and friendships as people were forcing each other to enrol. They were brainwashed at seminars and meetings that they would make a lot of money quickly, but they ended up losing their investments instead. Unemployed youth, college students, and homemakers looking to earn quickly were targeted,” he said.

Some developments were bizarre, the officer recalled — for example, an entire village in Palakurthy in Telangana had enrolled to sell car wash liquid, but there were no cars in that village.

Realising the impact on common people and localized, he alerted IPS forums, the Union Home Ministry, Department of Consumer Affairs, and the Income-Tax Department, Sajjanar said. Whenever he got the opportunity, he tried to spread awareness about the MLM firms.

But the companies had significant political clout, and senior officers and government ministers often tried to stall the police action. “On one occasion, within five minutes of a raid on an Amway property, I received a phone call from a furious senior asking me to return to office,” Sajjanar said. Family members of top doctors and other professionals, some IAS and IPS officers, and several politicians had become members, and there was implicit pressure not to pursue cases, he said.

Kitty parties would turn into MLM product promotion events, and wives of doctors were marketing magnetic beds and dietary supplement pills, he recalled. To represent their interests, the MLM companies had formed the Indian Direct Selling Association. Sajjanar served notices to several Bollywood actors who featured in MLM advertisements.

“Even now it pains me that there are still many loopholes in the laws which allow MLM companies to operate with impunity. There is no collective effort to prevent such companies from duping innocent and gullible people, by exploiting their wish to earn money quickly. Crores of people across the country still fall prey to these pyramid schemes,” he said.

With regard to the ED action, Amway has said in a statement: The action of the authorities is with regards to the investigation dating back to 2011 and since then we have been cooperating with the department and have shared all the information as sought for from time to time since 2011. We will continue to cooperate with the relevant government authorities and the law officials towards a fair, legal, and logical conclusion of the outstanding issues.

“Amway has a rich history of maintaining the consumer highest levels of probity, integrity, corporate governance, and protection, which are much ahead of time in the interest of the consumers at large. As the matter is sub judice, we do not wish to comment further. We request you to exercise caution, considering a misleading impression about our business also affects the livelihood of over 5.5 lakh direct sellers in the country.”

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