In 2009, lots of people were feeling vulnerable. The housing bubble had burst, taking with it millions of jobs. Pensions had vanished. Stocks were slumping. For a shrewd businessman, it was the perfect time for a get-rich-quick scheme.
Enter Donald Trump.
In November 2009, Trump, boasting a Midas-gold tie, took the stage in front of several thousand fans at Miami’s Hyatt Regency to debut his latest venture: The Trump Network™, a multi-level marketing operation focused on nutritional supplements. Trump was, as ever, ebullient: “When I did The Apprentice, it was a long shot. This is not a long shot. . . . We are going to be the biggest in the industry.” The Trump Network’s motto was ubiquitous at the event: Discover the Difference between Opportunity and Success.
In reality, people were about to discover the fine line between a multi-level marketing strategy and a pyramid scheme.
In early 2009, Trump purchased Ideal Health, Inc., founded in 1997 outside Boston by Lou DeCaprio and brothers Todd and Scott Stanwood, who became Trump Network executives. They got to work selling two products: Donald Trump and nutritional supplements. “If you know anything about network marketing — and anything about the power of the Trump brand — you’ll know this is an extraordinary opportunity,” Scott Stanwood wrote on his LinkedIn page. Meanwhile, in a promotional video for the Trump Network, DeCaprio touted the “best nutritional formula in the world.”
That was, as Donald himself might say, hyperbole. It’s far from clear whether Ideal Health’s (that is, the Trump Network’s) products had any substantive nutritional value. Take the centerpiece of the program, the PrivaTest, a urine test that would provide “a scientific window into your personal biochemistry,” as Trump Network’s website advertised. Customers would purchase the PrivaTest kit, collect a urine sample, and ship the sample to a lab, which would analyze it and develop a “Custom Essentials” kit of nutritional supplements “calibrated . . . to reflect your unique nutrient needs.” To burnish its medical bona fides, in its sample “PrivaTest® Test Results” booklet [PDF], the Trump Network cited a 2002 article in the Journal of American Medical Association that declared, “It appears prudent for all adults to take vitamin supplements.”
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Unsurprisingly, the Trump Network did not cite the portion of the article that warned against “special-purpose multivitamins” and diagnostic tests from Internet companies, and it also did not emphasize the FDA-required disclaimer at the bottom of the page in fine print: “The statements on these pages have not been evaluated by the Food and Drug Administration. These products are not intended to dagnose [sic], treat, cure, or prevent any disease.” By the mid 2000s, Dr. Stephen Barrett — founder of the website Quackwatch, which aims to debunk health-care fraud — had criticized the PrivaTest, remarking that “no single test can provide a rational basis for dietary supplement recommendations.” Recently, Dr. Pieter Cohen, a general internist at Cambridge Health Alliance who reviewed Trump Network marketing materials for health-care site Stat News, concluded: “They make an outrageous statement, which is that this testing and supplement regimen, this process, are a necessity for anyone who wants to stay healthy. That’s quite insane.”
But it was profitable. The PrivaTest and a month’s supply of Custom Essentials cost $139.95, an additional month’s supply cost $69.95, and to keep one’s “unsurpassed individual nutritional support” up to date, the Trump Network recommended repeating the PrivaTest every nine months — at a price of $99.95, plus shipping and handling.
In addition to the PrivaTest, the Trump Network sold QuikStik energy drinks, kid-friendly Snazzle Snaxxs, a line of skin-care products (BioCé kit: $302), and the Silhouette Solutions diet program (starter kit retail price: $1,325).
But the salespeople seem not to have been any more reliable than the product they were selling. In the same promotional video, DeCaprio cited Ideal Health’s “long, distinguished track record.” In fact, Ideal Health was distinguished by a track record of consumer complaints.
#share#In 2004, a Freedom of Information Act request turned up nearly 60 pages of complaints about Ideal Health filed with the Federal Trade Commission. “The consumer is complaining on Ideal Health,” reads one. “The consumer states that she was working for this company trying to sell their dietary supplement products. The consumer states that she paid the company $5,412.50 for promotional leads, and marketing programs. The consumer states that the company never did the promotional leads, and took the consumers [sic] money and ran.” That complaint was filed in 2001.
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In 2002: “This company charges $499 to be a member and ask for more money to do advertising for the company. The company asks $5,000 per member for advertising. Consumer has spent a total of $10,000 for this advertising that has not b[r]ought in any money.”
And in 2004: “Consumer states that they have placed pressure on marketers to purchase all the companies [sic] tools in order to succeed. Consumer has purchased direct mail, leadership programs, business starter kits, tv tickets, drive time tapes and all together has invested $8,956.20 in this company.”
There are several other complaints about Ideal Health’s refusal to refund canceled orders.
And recall: This was all before Donald Trump bought the company, made its leaders executives in his own business (“terrific guys,” he called them in Miami; “they really want to make people be successful”), and sold its products under his own name.
Or, more accurately, inveigled other people into selling the products under his name. The Trump Network was, after all, a “network-marketing” strategy organized around Ideal Health’s products. In theory, a seller would convince a buyer to purchase a product. The seller, while earning a commission on the sale, would encourage the buyer, in turn, to sell to others — earning both himself and the initial seller a commission. Ideally, each buyer would turn into a salesperson, and everyone “upline” would receive a cut. The Trump Network offered to interested marketers five investment levels (from “Silver” to “Executive Diamond”) and advertised: “There is no limit to the amount of rewards you can earn. . . . It’s a win/win strategy for everyone!”
Except for the people who lose, of course. Network marketing has had its successes: Avon and Mary Kay, for example. But the line between such programs and a pyramid scheme can be gossamer-thin. The Federal Trade Commission warns that “one sign of a pyramid scheme is if distributors sell more product to other distributors than to the public — or if they make more money from recruiting than they do from selling.”
Trump and his devotees maintain that, because there was an actual product involved, the Trump Network was no scam, and in early 2011, Trump told New York Magazine that he expected the Trump Network to become larger than Amway, then an $8.4 billion operation. Unsurprisingly, that never happened. “The Trump Network had gotten in trouble financially,” Bonnie Futrell, a former Network marketer, told Stat News. “They weren’t being able to pay [the lab]. They weren’t paying vendors. They weren’t paying us.” In early 2012, just over two years after it started, the Trump Network was sold to network-marketing company Bioceutica (which continues to sell the PrivaTest).
#related#If the Trump Network belongs on the ever-expanding chronicle of Trump failures (Trump Airlines, Trump Mortgage, Trump Magazine, and many more), it’s with an important qualification: The Trump Network’s losers were not Donald Trump, but mainly the more than 21,000 people who invested in the company as recruiters, hoping to make it big, swayed entirely by Donald Trump’s promises. Several thousand people believed Kim Stone, a “two-star diamond director” — one of the highest tiers of Trump Network marketer — when she told them that “literally, you will be able to set yourself up for the rest of your life, financially speaking, if you take advantage of the timing right now with this company.” And they believed Lou DeCaprio, when he declared that “the Trump brand is a factor that allows our company and you to rise to great success.” And they believed Donald Trump himself when he told them in the promo video that while “at no time in recent history has our economy been in the state that it is today,” the Trump Network offered a way to “opt out of the recession.” As Lenny Izzo, a Long Island small businessman who signed onto the Trump Network early and gave regular seminars to recruit new marketers, told one audience: “You have to believe in yourself, believe in the products, and believe in Donald Trump.”
Five years later, voters across the country seem willing to follow that advice, and to believe that Donald Trump will protect hard-hit working men and women from predatory “corporate interests.” In reality, when working people were hardest hit, Donald Trump found a questionable business selling a pseudoscientific product, gave it his imprimatur, and used it to prey on people looking for help.
— Ian Tuttle is a National Review Institute Buckley Fellow in Political Journalism.