Why Such Hysteria?
Why Such Hysteria Over A Few Amateur Websites?
Amway is a company which has experienced phenomenal growth. In its 40 years, it has seen only two significant growth downturns; in the early-mid 1980s, and now. In 1982, a former distributor and author named Phil Kerns wrote a book titled Fake It Til You Make It, about the Amway business. In Fake It Til You Make It Kerns described the motivational tools business that he saw, and made some comparisons between what he saw as the cultlike aspects of the Amway business and the Peoples Temple.
Early in 1983, CBS did a 60 Minutes segment on Amway, titled Soap and Hope. In this piece, Mike Wallace pointed out the losses incurred by some distributors because they were pressured to purchase motivational tools and attend functions. He contrasted these losses with the lavish lifestyles of distributors like Dexter and Birdie Yager, and pointed out some of the inconsistencies between Amway's rules and distributor conduct in the field.
Fraud in Canada
In 1983, the Canadian government charged Amway, DeVos and Van Andel with tax evasion. A fine of $45 million was paid -- the largest ever imposed in Canada -- and Amway sent frantic statements and advertisements to the press and letters to distributors in an attempt at damage control. The case hinged on Canada's accusations of a systematic system of fraud -- extending over more than a decade -- perpetrated by Amway, DeVos, Van Andel, and two other executives on the Canadian government.
Amway's public relations effort after the settlement claimed that "Unfortunately, in this highly complex area of customs regulations in a foreign country, a combination of misunderstandings and poor advice resulted in decisions which caused the corporation these difficulties." It went on to state that "They [DeVos and Van Andel] chose to make a tremendous personal and financial sacrifice in order to end the ordeal and eliminate this impediment to the future growth and potential of the business... They chose to make this sacrifice by settling now and thus preserving the Amway business opportunity for millions of individuals."
The settlement was reached only after Canada started extradition proceedings against DeVos and Van Andel, who, along with two other corporate officers were under criminal indictment by the government of Canada. When the Amway defendants did not appear for a hearing, Canada started extradition proceedings. Pleading guilty, the fine, and dropping criminal charges were all part of the plea bargain. The judge's decision referred to "the premeditated and deliberate course of conduct" and the steps in a "sophisticated fraud" by Amway's owners.
The $25 million fine was the penalty for Amway's criminal actions; the civil case to determine the actual amount of duty owed by Amway to Canada was not resolved until 1989. At issue in the civil suit was up to $148 million in customs duties, taxes, and penalties. This does not jive with Amway's description of "a combination of misunderstandings and poor advice."
DeVos and Van Andel's strategy of damage control worked well, at least as far as their US distributors were concerned. By the time a settlement was reached in the civil suit, US distributors had pretty much forgotten about the case.
