With Tempe's Vemma under attack by the FTC, founder BK Boreyko’s notorious young sales crew is rapidly jumping ship. Could that, in the end, be what saves the embattled captain of network marketing?
Alex Morton is speed walking down the Parc du Champ de Mars in Paris on a Sunday night, taking a video selfie of himself with a sparkling Eiffel Tower as the backdrop. Tourists and Parisians turn their heads as the Hollywood-handsome young American flashes by, talking loudly and passionately into his smartphone as if addressing an enormous audience somehow held in the palm of his hand.
Which, given Morton’s unique brand of fame and rabid following, is not far from the truth.
“Yo-yo-yo, this is Alex, we’re coming to you live from Paree,” he says, tilting the phone up to take in the landmark behind him, which he’s smartly capturing while 20,000 strobe lights – remnants of the city’s Millennium Celebration in 2000 – blink furiously on its beams and girders, an occurrence that takes place for only five minutes on the hour. “And guys, this is just one of those moments, and I want to share it with you all, and talk about the journey.”
Morton just turned 26 in October, but already the Arizona State University graduate is a major rock star in multi-level marketing, or MLM. Often simply called network marketing by those in the field, it’s a business where salespeople make money not only from the product sales they generate but also through a commission from the sales of the other people they recruit. Think Amway, but with YouTube, Facebook and Instagram now replacing door-to-door selling and, thanks largely to a new generation of hotshots like Morton, with energy drinks and other youth-oriented products replacing shoe polish and spot remover.
Actually, the product being sold doesn’t much matter, as Morton is proving on this European tour of training events and marketing conventions. A few weeks ago, Morton was pitching Verve, a vitamin-infused energy drink billed as a healthier alternative to Red Bull or Monster, made by Tempe company Vemma. He’s now selling anti-aging creams and supplements for Jeunesse Global, a Florida-based MLM powerhouse he signed with this past summer, but the spiel is essentially the same.
As one veteran of five MLM ventures puts it, in this industry, the product being sold is really the opportunity to make money – powered by an evangelical profit fervor that has been known to go sideways. To mutate into an illegal pyramid scheme. That may have happened at Vemma, a longtime mover in the MLM world led by charismatic founder and CEO Benson Keith “BK” Boreyko. In the wake of a highly-publicized case of alleged college-campus usery, Vemma saw its bank accounts, real estate and global assets frozen by a federal judge last year.
“I was 21 years old, I had goals and dreams,” Morton says, his cadence growing faster and more intense with each step. “I didn’t know what I wanted to do in my life, but I knew I wanted to make money. I wanted to travel to places like this, and experience life and meet people and party all over the world and have nice things. And I’ll tell you what, it’s all worth it. It’s 100 percent worth it when you make it.”
“We’re on a European tour right now, this is our eighth country, we’re finishing off in Paris, France. And – look behind me right now, guys,” he says, hurrying to wrap up his pitch before the Eiffel Tower’s twinkling lights go dim. “That is your future, glistening in the night sky.”
Back in Phoenix, Marty Wewerka keeps up with Morton’s video updates on Facebook, and views his new post-Vemma success with a mix of pride and, he says, “heartbreak.”
It was Wewerka, a former VP of investments with Prudential-Bache Financial and Shearson Lehman Brothers, who originally persuaded Alex, son of friends Marc and Sandi Morton, to get into network marketing. “Alex had huge dreams and was looking for something to do,” Wewerka recalls. “Both his mom and dad were extremely successful, and he didn’t want to be just average or typical.”
Having exited the financial services industry, the 58-year-old Wewerka himself had recently become a Vemma distributor, or “affiliate,” and immediately recognized in the energetic Morton a natural salesman. But in watching the younger man pitch the opportunity to his friends at ASU with a rainmaking attitude that perfectly connected with the frat mentality (“I see something in you, bro, I can’t let you be average!”), Wewerka also happened upon a bigger discovery: College kids were a vast untapped market for multi-level marketing, previously thought the realm of desperate housewives and strapped blue-collar dreamers.
“Many college students want to have their own money,” Wewerka observed. “They’re partying out on Mill Avenue on a Friday night; if they’ve got mommy’s credit card, that’s just not the same as if they’ve got their own money. They want to be successful on their own.” Pairing Morton with another young high achiever, Brad Alkazin – son of Vemma’s top seller, Tom Alkazin – to teach Morton the ropes, Wewerka inadvertently ignited a movement within the company that eventually came to be called YPR, short for Young People Revolution. Other twentysomethings came onboard, first at ASU but quickly from around the globe, mobilized by recruitment events promoted as campus parties with “#YPR” on Twitter and Instagram. Despite the Maoist-sounding moniker, the Young People Revolution was a moneymaker, boosting Vemma to over $200 million in global sales by 2014 and expanding to 50 countries. Today Wewerka himself tweets by the handle “@yprgodfather.”
It was a game-changer for Vemma and CEO Boreyko, an industry legacy whose own parents were highly successful Amway distributors, schooling him on network marketing from a young age. But in grasping for the sun, Vemma lost its wings.
The Federal Trade Commission began investigating the Arizona company in 2014, alerted by what it said were some 201 complaints filed with the FTC’s Bureau of Consumer Protection. To the FTC, any business where the product to be sold becomes secondary to the goal of enrolling other people to sell it smacks of an illegal pyramid scheme; that’s why the agency has always dutifully monitored MLM companies that tread that line, from Amway down to Herbalife. It’s not strictly an American concern. Around the same time as the FTC investigation, an Italian watchdog authority slapped Vemma with the pyramid scheme label and prohibited the company from further practicing business in that country.
Finally, in August of last year, the FTC secured an ex parte temporary restraining order from a federal judge in Phoenix to freeze Vemma’s domestic operations, alleging the company violated federal law by using deceptive and inflated earnings claims to lure new distributors.
As Boreyko battles the FTC over Vemma’s aggressive recruitment of young sellers, his YPR crew is rapidly jumping ship. Since Morton’s abrupt departure – presciently, he left about a month before the injunction – many of his recruits, called his “downline” in industry lingo, have left with him to join Jeunesse, a bigger company with a worldwide distribution network and sales estimated to top $1 billion this year. By early November, Boreyko’s other golden boy, Brad Alkazin – who had just partied on Halloween in a movie-worthy Batman costume with his own black Lamborghini Aventador, bought with roughly $400,000 of his Vemma earnings, as his personal Batmobile – had apparently defected as well, headlining a recruiting event in Austria for the competing MLM energy drink company XanGo, along with his dad.
Wewerka now also sells for Jeunesse, but he stands by his admiration for Boreyko, even as Vemma struggles to stay afloat under severe restrictions imposed by the judge in the FTC case. “I love BK, he did a lot for me and I think he’s a phenomenal individual. I think his heart’s in the right place, and I pray for him that things work out,” he says.
But loyalty is hard to cultivate though hard times in an industry that sells outsized success as its prime product. “We just found something that we thought was better, and sometimes you just have to make those hard decisions in life,” Wewerka adds. “It’s not personal. It’s business.”
Boreyko declined comment for this article.
Susan Blanton remembers the morning the FTC arrived at Vemma headquarters on Rio Salado Parkway just west of Priest Drive in Tempe.
“It was around 10 o’clock in the morning, this guy who sat next to me had just been out to get coffee, and he came back and said there were, like, six lawyers carrying boxes that just walked into the building,” says the IT professional, who had been working at Vemma for about nine months. “And we were like, ‘Oh, that doesn’t sound good!’”
Boreyko’s lawyers would later describe the FTC’s surprise visit, which actually involved 15 agents, as an “ambush.”
“About an hour after we saw them come in, an announcement was made that every employee in the building was to assemble in this large conference room,” Blanton says. “At the time, they told us, ‘Don’t be alarmed, we’re just here to gather information.’ But they also told us not to go back to our workstations or log in to the computers at all.” A couple of hours later, employees were told to go home. By the end of the following day, managers called employees to inform them they were all on temporary layoff.
After a September hearing, a judge ruled Vemma was allowed to reopen its doors, but under significant restrictions: Affiliates would have to sell more than 50 percent of their inventory to customers outside the organization to be paid, and Vemma could no longer require new affiliates buy $500 “startup packs” in order to sell, a typical hallmark of pyramid schemes. In November, Vemma agreed to even tighter compensation rules, including the stipulation that affiliates could no longer qualify for commissions through their own purchases. “Basically they’re having to change their structure to be less pyramid-ish,” Blanton encapsulates.
Bonnie Patten, head of the nonprofit advertising watchdog organization Truth in Advertising (TINA.org), whose website has been closely analyzing Vemma’s claims and business structure since 2013, says what Vemma’s being required to do is simply act like the regular business Boreyko keeps insisting it is.
“Right now what Vemma’s allowed to do is sell product to people and make a profit off the selling of that product,” she says. “Distributors can also do that.” What they can’t do under the FTC’s rules is operate a compensation system where the product is immaterial, where recruiting other people to sell is rewarded more than actual customer sales. Patten’s unsure Vemma can operate that way.
“They’re built on being a multi-level marketing operation,” she says. “They’re not GMC. They’ve really relied on this distributor model to get their product out. And right now, that system isn’t working. They haven’t been able to come up with a plan that the court can say is not like a pyramid scheme.”
Vemma’s forced restructuring has sent shockwaves through the rest of the MLM industry, where the company was generally held in high regard. “Vemma had some issues, but in my opinion the punishment didn’t fit the crime,” says Kevin Thompson, a leading MLM attorney with Nashville-based Thompson Burton, who says this was the most aggressive action the FTC has taken against any multi-level marketing company in nearly 20 years. His law partner and fellow MLM attorney Kevin Grimes contends the FTC sought to make an example out of Vemma. “It’s a lot more impressive to take down an elephant than a prairie dog,” he says.
Both Thompson and Grimes – who are not on Vemma’s defense team –believe Vemma came under the FTC’s radar largely because of its young recruiters’ activities on college campuses. “The consumer complaints spiked during the YPR activities,” Thompson says. “You had kids saying, ‘Drop out of school, build this business to pay off your student loan debt,’ and making these outrageous income claims. And that made some parents irate, as well as some college deans.”
Len Clements, a Las Vegas consultant to the multi-level marketing industry who frequently serves as an expert witness in court cases, has studied the 201 complaints filed with the FTC’s Bureau of Consumer Protection, and confirms most started in late 2012, when the YPR first began gaining traction, peaking in late 2014, after a Rolling Stone feature brought national attention to the movement.
“In 2010, there were only about 6 or 7 complaints,” he says. “There were maybe 2 in 2011. And then in 2012, the complaints go up to almost 30, then 50. And over half of them were from relatives, usually parents, of college kids who were concerned their kids were getting duped by a pyramid scheme.”
Thompson says Vemma’s biggest mistake was not reining in all the bro braggadocio promising unrealistic riches and emphasizing recruitment over actual product sales – the two big no-no’s in multi-level marketing. “The moment you have mom and dad upset, that’s when you’ve got to take serious measures to make the bleeding stop,” he says. “And I’m not sure Vemma moved fast enough. In fact, it sort of looks like they encouraged the activity when they should have been pumping the brakes.”
There’s already been residual fall-out from the case. The Phoenix Suns and Phoenix Mercury, which in 2008 adopted Verve as their official energy drink and carved out a Verve Lounge in the US Airways Center (now Talking Stick Resort Arena), has confirmed to PHOENIX that Verve is no longer the official energy drink of the Suns or the Mercury and is no longer available for purchase in the arena.
The big losers in all this, however, are the older mom-and-pop sellers who were actually doing decent sales in Vemma before the YPR movement took over. “This period of aggressive selling on college campuses is actually a small part of Vemma’s history,” contends Clements, pointing out that the company has been around for 11 years. “Before that, a lot of affiliates were doing fairly well selling Vemma products.”
People like Mark and Pat Palumbo, for example. On their Facebook page, the Palumbos say they’d been in business with Boreyko for 24 years (starting with his previous MLM venture, New Vision, which ran afoul of the FTC for falsely claiming it could cure attention deficit disorder), but have been having trouble weathering the current legal storm along with him. The 50-ish couple say they live in an RV moored at a mobile home park off the I-17 but have had to start a GoFundMe.com page after the transmission went out on their truck. “This has been a most difficult decision to make, but we need to make an income, and I don’t see that happening for a while under the current circumstances,” Mark writes. They’ve now signed on with another MLM making a competing energy drink.
“We are moving ahead,” the Palumbos say, “with our Plan B.”
If the first rule of selling is “always be closing,” the mantra of the YPR seems to have been “always be hurrying.”
Todd Searle, a 26-year-old ASU graduate who tried selling Vemma for about six months while in school before eventually landing a stable job with a Scottsdale private equity firm, remembers how distributors were taught to intentionally disclose few details about the “parties” they were inviting others to attend.
“You’d hype it up,” he recalls. “Make it sound urgent: ‘Hey, I’ve got something really cool that’s going on. I can’t tell you a ton about it right now but come on and check it out!’ The strategy was to get them to this place and let someone who was making a lot of money at it tell them about it.”
The smartphone and 140-character message became the new tools the YPR brought to the game, and the millennials’ preference for brevity provided the opening.
“You could sell someone easier on it if you got them in front of someone that was making $100,000 a month, and was high-energy and knew how to get the endorphins up in the room, and make everyone envision amazing riches,” Searle says. “Rather than yourself, who was not making anything.”
For Searle and other ASU-based Vemma distributors, that person was Morton. “Alex was the star attraction, he was the one. He went to ASU, he was making really good money doing it. If he was throwing an event, you’d get 100 people packed into a house.”
Morton, whom Searle says he’s still friends with, was at the top of Searle’s “upline,” as they call it, the big earner at the top of the unspoken pyramid. Morton had already enrolled enough people under him to reach Diamond level, or what’s commonly known as “car level,” where affiliates are awarded a $400 monthly bonus toward a lease on either a BMW, Mercedes or Mini Cooper, as long as they can maintain that status.
The “free car” lure was enough in itself to attract many millennials to a Vemma presentation, and helped the YPR spread from ASU to campuses and youth hangouts all across the country. Nick Gagliano was a young college dropout from New Jersey who was drifting from one job to another, waiting tables and selling shoes in Soho, when a girl he knew gave him the rushed pitch about this great opportunity where he could earn a company-paid BMW.
“At the time I didn’t have a car and I was commuting to work in New York from New Jersey,” he says. “So it sounded like a good opportunity to me.” After attending a Vemma party headlined by another top performer, Gagliano was sold. “It seemed like a product I could relate to. I had heard about multi-level marketing companies like Amway and Avon before, but selling energy drinks was something that appealed to the younger generation.”
Gagliano soon found out, however, that while he personally liked Vemma’s Verve, selling an energy drink to peers that cost $44 for a 12-pack of eight-ounce cans was not easy. Nor did the non-confrontational Jersey boy have the right personality to hype enough others up on selling it. “Not everyone is the right kind of person for it,” says Gagliano, who admits he had trouble hounding friends to attend presentations (and laments that those he did pressure too much are no longer close friends). After purchasing the $500 starter pack and putting in about seven months of buying monthly $150 reorders to stay qualified for bonuses, Gagliano estimates he made about a $350 profit. He eventually got his car — but through working a regular job to qualify for the loan.
Searle had trouble selling Verve, too, and even more trouble selling the successful lifestyle he was personally unable to attain. “It was a quality product, but it cost way more than Red Bull, and Red Bull is already ridiculously overpriced,” he says. “I think maybe my parents bought most of it, just because they wanted to help.”
Zac Bissonnette, a University of Massachusetts Amherst graduate whose 2010 book Debt-Free U shared tips on how he paid for college “without loans, scholarships, or mooching off my parents,” in the words of the subtitle, believes Vemma appealed to the young person’s somewhat false yearning for independence. “I think the appeal of something like Vemma is they were hitting people at this weird age where they want to say ‘Screw my parents and screw school!’ but they also kind of want somebody telling them what to do. And I think MLMs in general manipulate that impulse pretty well.”
Applying that theory, it’s easy to see how BK Boreyko served as a richer, cooler father figure. The birthday parties the now-divorced father of six throws for his own kids are legendary — Boreyko once constructed a mini state fair featuring a petting zoo with live llamas, a real Tilt-A-Whirl and a mini Ferris wheel in the family’s backyard — and he strove to create a fun atmosphere at Vemma headquarters. “It was very modern and hip,” says Blanton, who was also impressed with Boreyko whenever she passed him in the office. “He was nice and pretty funny. A very likeable guy.”
Optimistically, some industry insiders believe that the mass exodus of Vemma’s YPR stars may signal a necessary correction for the company, and that by refocusing his efforts on Vemma’s older core audience, Boreyko may yet salvage the company. “Mary Kay and Avon were targeting Gen-Y and millennials probably before Vemma even launched,” Grimes says. “But they weren’t going at them with the aggressive rape, burn and pillage strategies that Vemma allowed its distributors to pursue. And I think this case is making MLM companies take a very hard look at themselves and asking, ‘Do we even want to target this demographic?’ While they are adults, they’re really this special category. Just as some state legislators have found the need to offer increased protection to seniors, in terms of longer rescission rights and things like that, we may see some special legislation coming down the pike for college students.”
Whether young ex-Vemma sellers come out from under Boreyko’s tutelage with transferrable selling skills is debatable. Gagliano says the experience helped him in his current sales job; Searle has since started up three business ventures with the same former Vemma affiliate who enrolled him in the program. But Bissonnette worries Vemma vets are really learning something else.
“I’ve heard people try to make this argument that they’re learning sales skills, but I’m skeptical that they’re learning skills that are transferable to legitimate careers in sales,” he says. “What they’re really learning is deception.”
Back in Paris, Alex Morton is coming up close to the moment when the Eiffel Tower’s 20,000 flashing lights go dark for another 55 minutes. Watching the video counter on his smartphone, Morton makes a strategic spin precisely two seconds before the recording hits the five minute mark, so that his followers never see the “glistening” lights – which he had earlier cast as an inspiring symbol of their bright future in MLM – ominously stop twinkling.
He’s speed walking back in the direction of the slightly darkened tower now, but all viewers see is the mounting intensity on his face as he wraps up the pitch.
“Go after your goals, go after your dreams, go after every single thing that you want,” he says breathlessly. “And I’m telling you, if all these people can have success, if all these people can make it happen, if all these people can live out their dreams, You. Can. Too. I’m promising you.”
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