WORLDVENTURES, a US-based travel company to which thousands of Cypriots are members, is under investigation by the Cyprus Consumers Association following complaints from former members and representatives.
The privately owned company headquartered in Texas, is also embroiled in legal battles with the Ministry of Commerce and with the Association of Cyprus Travel Agents (ACTA), following a series of press releases warning against the company.
Last November ACTA issued a press release warning the public to ‘remain vigilant’ as regards an unnamed travel firm which employs a pyramid system of sales. The press release cited two European Laws – Legislations 41(1) of 1995 and 51(1) of 1998 – which stipulate that the sale of airline tickets are the exclusive right of licensed travel agents only. ACTA’s concern pertained to the influence on the market of sole traders under WorldVentures breaching the exclusive right of travel agents to sell holidays.
The travel association did not directly name the organisation but attached their press release together with a general public police warning on pyramid schemes (24. 03. 10) and a Ministry of Commerce public warning (03. 06.10), which named the company as WorldVentures.
WorldVentures have retaliated with a libel suit against the association, which is currently in the stages of settlement. ACTA were unable to comment but a source disclosed that they had spent tens of thousands of euros in legal fees fighting the case in Britain.
In parallel, the Ministry of Commerce have issued WorldVentures with a fine of 50,000 euros for breaching another legislation which protects consumers: the Unfair Commercial Practices Directive of the EU Consumers Act 103(I) – 2007, a law which was harmonised into the Cypriot constitution and enforced in December 2007.
WorldVentures have failed to pay the fine and according to a source are currently lodging an appeal to the Supreme Court. A spokesperson at the ministry revealed the fine remains in place and is outstanding.
Representing former members, the Consumers Association are investigating whether former recruits of the company are able to recoup their WorldVentures membership fees under the 2007 Unfair Commercial Practices Directive.
The company’s modus operandi may be breaching Cypriot law according to the Consumers Association’s George Stylianou. “According to Cyprus law earnings made from the sale of a product or a service need to exceed earnings made by recruits selling the products. The legal question here is concerns the company’s prime activity; is it to sell the travel product or to recruit more members?” he said.
Stylianou declined to give a firm position on the company pending their legal investigations but has confirmed that members include many of the island’s upwardly mobile new elite comprised of doctors, teachers, young entrepreneurs and public servants, all swayed by the promise of making large sums of ancillary income.
The case highlights the contention surrounding multi-level marketing, a business model employed by the firm, in which the sales force are compensated not only for the sales they personally generate but for the sales of others they recruit, creating a hierarchy of multiple-levels of commission.
Multi-level marketing has been the target of numerous lawsuits in America concerning its similarity to illegal pyramid schemes and has garnered criticism over the potential exploitation of personal relationships, non-transparent commission structure and employment of cult-like techniques.
WorldVentures offers membership to a luxury invitation-only VIP travel club in which the company offers discounted holidays in return for a subscription and a monthly membership free. Members are then encouraged to seek further paying recruits in order to waive their own monthly fee, and make commissions through developing a “tree” of recruits creating a hierarchy of multiple levels of compensation.
A document, which is widely distributed amongst Cypriot members, suggests senior representatives can make up to $18000 per month, averaging $4800 monthly, while higher ranking marketing directors average $59000 a month and regional marketing directors average €178,000per month.
Pete Powderum, one of the company’s self-purported top twenty earners, claims WorldVentures is the next dynasty; a 20 billion dollar company, which is ‘going to sweep the world’. He claims he turns over million dollars a month.
The company offers discounted luxury holidays in return for an initial membership fee of plus monthly payments. Once enrolled, members are tempted by the promise of making large sums of ancillary income by paying a further fee ($99.99) and further monthly subscription of €10.99 to recruit more representatives. On the proviso that these new representatives are ‘active’ i.e: in turn recruit yet more representatives of their own, then the initial recruiters monthly subscription fees are waived. If representatives fail to recruit they are automatically reverted to paying their monthly fee.
Active representatives are given their own World Ventures website and credit card in order to collect commissions from their own ‘tree’ of recruits. According to the company’s Compensation Plan Overview, representatives only qualify for what they call Monthly Residual Commissions having reached senior representative rank. However, according to the company’s latest Annual Income Disclosure Statement for the USA, only 0.582 percent of representatives in the United States have actually reached such a rank.
Their presentation reveals senior representatives must recruit‘30 x 30 members’ in a two-team structure to make Monthly Residual Commissions. The Cyprus Mail asked World Ventures headquarters to clarify exactly how many recruits this entails but the company declined to offer a precise figure.
Weekly seminars and presentations take place island-over. The company employs a tactic whereby recruits are encouraged to bring their friends and family to a presentation without making clear the reason. The visitors are then shown an elaborate video in the style of a Hollywood trailer, which showcases the world’s most desired destinations from Santorini to Las Vegas and Thailand, before finally asking the audience: ‘Do you want to change your life? Are you overworked and underpaid? Do you want to make a living… living?’
Following such a seminar in Nicosia, a presenter and representative was asked whether the business relies largely upon failed representatives who are forced to continue paying their monthly subscription fees. He responded saying that WorldVentures is transparent about the fact that only 23.6 percent of recruits are ‘successful’ however WorldVentures’ headquarters did not confirm this figure responding: “There are no set standards for success, as each person who joins may have a different ‘success’ barometer.”
The organisation advises members to tap into their Facebook contacts. Asked to comment on the ethics of promoting recruitment in this way, a spokesperson in Texas responded: “WorldVentures, like all other direct selling companies, is evolving its policy to keep pace with technology but already has strict guidelines for representatives on social media use.”
One woman who preferred to remain anonymous said her sister’s involvement with the organisation had ruptured family ties. “She was always looking for people to get involved. She would make constant invitations to family members who are over eighteen to meet for coffee without telling them the reason. Finally, she was given an ultimatum never to discuss the subject again or to stay away from the family,” she said.
“In Cyprus we’re obsessed with our social standing so if a product or an idea is sold on the basis of being luxury or VIP or exclusive we will buy into it because it elevates our place in society. This probably explains why this organisation
is so successful here.”
Another ex-representative who cancelled his credit card payments in order to leave the organisation said his prime activity was paying to recruit members in order to make it back by the money made from his recruits.
“In order to recruit you have to go to a seminar. If you’re already a member you’re encouraged to take three or four of your friends, most of which are members already. They go along to get better practised in selling and try to create a happy positive atmosphere for potential recruits,” he said. “When I was a member I had to recruit six people. I received a one-off payment only but had to start paying again because my recruits stopped being “active” and recruiting others. This is why the scheme isn’t about the product.”
WorldVentures operates in 18 other countries including Greece, Austria, Norway, Kenya, Canada, and Russia and is currently expanding to Australia. Last summer they hosted an international seminar of 550 members from 15 countries at the Coral Beach Hotel in Paphos. Following the seminar WorldVentures took out an advertisement promoting their success in the national press.
Commenting on multi-level marketing enterprises, Marios Tsiakkis of the Cyprus Chamber of Commerce and Industry said that the public should be very careful as regards their choices of investment.
“They should examine the business proposition carefully and get professional advice before taking a decision at their own risk,” he advised.
