Lure of easy money,chain of losses in Kerala

In the last two years,Keralas residents have lost an estimated Rs 3,000 crore invested in money chains and direct-selling multilevel marketing firms. And in the last two decades,fake realty investment schemes and chit funds have ruined hundreds.

Kerala police have registered 920 cases against 26 firms involving money chains and multilevel marketing,based on complaints from investors and distributors that their money did not multiply as promised.

Last week,police arrested Amway India CEO William Scot Pinckney and two directors after three persons complained that they had together lost Rs 27,400 in 2011. Amway,which does normal business elsewhere in India,had closed its operations in Kerala after police had raided its offices and seized products in a crackdown on money-chain firms.

Professionals and ordinary people lost money. Housewives invested their husbands remittance, says Crime Branch SP Valsan P A,who heads the probe into such cases. Everybody wanted to become rich overnight,without much toil.

Psychiatrist Dr C J John says,High literacy and stories of past frauds do not work when a get-rich-quick and greed culture governs a large section of Kerala society. John says the middle-class,because of its aspirations,does not take a realistic approach when faced with promises of riches. Kerala is a society where pseudo-needs are created,hence cheating and loss of money will continue. It will increase because of the egoistic approach that Nobody will cheat me.

P Vishalakshi of Kozhikode put Rs 2 lakh into various products of Amway India in 2010. A team leader came to me and gave an inspiring lecture,saying he had become rich after joining the scheme. There were training sessions and pep talks held at posh hotels, says Vishalakshi,a tailor and one of the complainants against Amway India.

Cartons of food supplements,cosmetics and kitchen products were dumped at Vishalakshi8217;s house by the man who had enrolled her into the network. In the first month,I could sell products worth Rs 8,000 and got a commission of 6 per cent. Later,I only made losses as I could not sell products, she says. Even relatives turned me away. To reduce my losses,I had to use some of the food supplements myself. Yet many products expired and the company did not take them back. Besides,I could not enroll anyone down the line.

Amway India spokesperson Sudeep Jain Gupta says the cases against the company are frivolous. We want the government to enact a legislation to allow direct-selling companies to function. Now,Kerala police have clubbed the complaints from multilevel marketing with those from the money chain system.

Gupta says his company does not force anyone to join direct selling or buy any product,and takes back products if they are not sold within a month. Money will not fall into a distributors lap if he fails to meet people and sell products. If a few had failed to sell,there are hundreds who had succeeded, says Gupta.

The way the incentive patterns of such firms work,a person benefits from the toil of members lower down the network. In most firms,a person is offered 8 per cent if she sells products worth Rs 18,000 in a month; the commission is higher if she sells more. But if she sells products worth only Rs 17,500,she will get nothing while the person who had enrolled her will get the benefits from those sales. Reputable firms stay afloat while local ones vanish after pocketing money from investors.

Valsan cites the example of MonaVie India,whose fruit juice,claimed to be imported from Italy,was priced at Rs 2,500 a bottle. At that price,no one will buy it for consumption. It is meant for making money after foisting it on another person. Hence,a chain is inevitable, says Valsan.

The Citu-affiliated Multi-level Employees Union president,K O Habeeb,says direct selling has hit a roadblock after the police action. We have demanded legislation to protect multilevel marketing; at least one lakh persons are involved. It should not be counted as money chain.