What is benefit fraud?
If you put that question to anyone in the UK, where I live, then the only answer you are likely to receive from them is that benefit fraud is purely claiming Jobseeker’s allowance (unemployment benefit) whilst working.
However, there are many other types of benefit fraud which, amongst other areas, relate to child benefit, tax credits, income support, housing benefit, incapacity benefit (maybe drugs can get them back into work?) and many, many others.
Professional fraudsters
A fairly large proportion of benefit fraud is committed by seasoned professionals who treat their crime like a career and make vast sums of money from it. I myself have been parked near a job centre and have witnessed various people rummaging through a whole host of paperwork for multiple identities before going in to the job centre to make a claim in an obviously false identity.
However, there are also a great number of other people committing benefit fraud daily, via other means, such as through non reporting of circumstance changes or what they may deem to be ’small white lies’. Either way, it is still fraud and theft.
For reasons I cannot comprehend, the omission of certain facts in claims, or non reporting of changes to benefit entitlements, seems to have become socially acceptable in the UK.
Types of benefit fraud
Here are a few examples of how the man in the street commits benefit fraud -
- claiming for children who have left home
- not advising that a partner has moved in
- incorrectly reporting amount of savings
- not declaring other benefits that are being claimed
- not declaring paid work
- non disclosure of inheritances
- failing to notify changes of address
Are things the same in America or do you have tighter controls over benefits, who can claim them and how they are administered?
A couple of days ago I wrote about how the Fraud Discovery Institute (FDI) had issued a press release, citing Herbalife’s Top 5 Misrepresentations.
In order to keep a balanced view of things, here is Herbalife’s response -
We have confidence in our direct-selling business model, our integrity and transparency as a NYSE-listed company and the fundamentals of our business. With regard to our business in the People’s Republic of China, the Chinese government thoroughly reviewed our company, our global operating model and our specific operating plan in China as part of the licensing process. We received our first direct-selling license in China in March 2007 and subsequently received an expanded license in July 2007, which further validated the legitimacy of our operating plan in China. We believe our China marketing plan is compliant with all applicable laws, as are our marketing plans and business practices worldwide.
Barry Minkow states in the footnotes to his letter, he is hoping to use video gathered during his investigation as a stepping stone to a weekly television show that will benefit him financially. Minkow is a convicted felon trying to create a sensational story by drafting a 90-page letter, cobbling together one-party consent undercover video and calling it “evidence.”
We stand behind the integrity of our company.
About Herbalife
Herbalife Ltd. (NYSE:HLF) is a global network marketing company that sells weight-management, nutrition, and personal care products intended to support a healthy lifestyle. Herbalife® products are sold in 65 countries through a network of more than 1.6 million independent distributors. The company supports the Herbalife Family Foundation and its Casa Herbalife program to bring good nutrition to children. Please visit Herbalife Investor Relations for additional financial information.
I’m still looking to compile my own report on Herbalife but what do you think - are they another multi level marketing scam?
The next MLM that I intend to write about is Herbalife.
During my preliminary research I came across this recent press release to whet your appetites with -
For Immediate Release
SAN DIEGO/EWORLDWIRE/Nov. 15, 2007 — Fraud Discovery Institute (FDI) issues the following statement about its review of Herbalife (NYSE:HLF) presentations by CEO Michael Johnson and CFO Richard Goudis.
First, on November 7, 2007, Herbalife CEO Michael Johnson defended allegations that over 90 percent of Herbalife distributors fail by stating: “We believe that 58 percent are discount buyers, that 22 percent are small retailers and customers, and that 20 percent are potentially future supervisors. Let me repeat that - 1.3 million distributors based on average order sizes, we believe that 58 percent are discount buyers, 22 percent are small retailers and 20 percent are potentially future supervisors.” (Quote from Seeking Alpha transcript)
However, on November 14, one week later to the very day, the figures that were repeated with the, “Let me repeat,” assurance by CEO Johnson, Herbalife CFO Richard Goudis changed the discount buyer to 52 percent in slide 15 of his presentation at Morgan Stanley. Asks FDI’s Barry Minkow, “What happened to those discount buyers from 2006 within that seven-day period from November 7, 2007, to November 14, 2007?”
Second, excuses for over 90 percent annual attrition and collapse rates are intentionally distorted appears clear when one compares the 2005 Herbalife 10-K to the 2006 10-K. The 2005 10-K discloses: “For the latest twelve month re-qualification period ending January 2005, approximately 60 percent of our supervisors did not re-qualify and more than 90 percent of our distributors that are not supervisors turned over.” Yet, in the 2006 10-K, no such disclosure is made. Continues Minkow, “Did the attrition rate drop to 80 percent? How about 70 percent? No, it is nowhere to be found because the company stopped disclosing the reality of its ever-collapsing distributor base after 2005. Herbalife determined that if the public knew that all sales come from an ever-collapsing pool of distributors that must be rebuilt annually, Herbalife would not be an attractive investment. That non- disclosure is nothing compared to the blatant distortion of the ’supervisors’ which are the very core of the Herbalife business model.”
Third, multi-level marketing expert Robert FitzPatrick notes that to achieve supervisor status in Herbalife, the distributor must “invest” approximately $3,000 to $4,000 in one to two months. At the same time, according to Herbalife’s own gross annual compensation figures found on its Web site, the average annual commission paid to a supervisor is $549, and only 42 percent of supervisors remain in that position for more than one year. Now consider the 408,000 supervisors reported in 2006. With a minimum “investment” of $3,000 each, that totals over $1.2 billion or at least 63 percent of Herbalife’s net sales for 2006. “It is easy to see how dependent Herbalife’s revenue is on the ‘investments’ of future supervisors,” adds Minkow. “Yet by Herbalife’s own documentation it is clear that almost none of the supervisors ever earn enough in commissions to recoup the $3,000 to $4,000 investment they made to move up - on average they receive $549 per year and about 60 percent don’t remain a supervisor for more than one year. That’s not much of a return on their ‘investment’.”
Fourth, in both SEC filings and Wednesday’s Morgan Stanley presentation, Herbalife executives provide a figure that distorts the perception of distributor earnings. The company cites that distributors can earn “73 percent of retail sales.” According to Minkow, this figure is mythical because: (1) almost none of the distributors ever reach a level high enough to actually earn this percentage, as only those at the very top of the distributor pyramid could qualify for all of the commissions included in this figure, and (2) the figure assumes that distributors are able to sell the products to an end-consumer at the full suggested retail price. “This figure attempts to cover up the fact that 98.5 percent of distributors earn an average of less than $10.50 per week from the company, and less than 1 percent of the distributors receive a full 82 percent of the compensation paid by Herbalife.”
Fifth and finally, concludes Minkow, “For the CEO and CFO of a public company to stand up and tell the world that 77 percent of those who sign up to be distributors (slide 15 in the Morgan Stanley presentation breaks out 52 percent and 25 percent who are happy product users and not business builders) are not a part of Herbalife to make money but simply love the benefit of the products is untenable. If the above is true, why are so many quitting? If the expectation of these product lovers is not to build a business and just use the product, why are they collapsing? The reason is that the 77 percent is fictitious and of Herbalife’s 1.7 million distributors, few - if any, joined for reasons other than building that dream ‘home-based business’. Especially those multi-level marketers in China who do not appear to be in need of weight loss products.”
To view details about FDIs news and to view other reports, visit http://www.doomedbydesign.com, http://www.cheatinginchina.com or http://www.frauddiscovery.net.
I’m sure, as with all multi level marketing opportunities that I look at, that there will be much more information to uncover and that there will be more than one side and interpretation to the above.
Return soon for my report on Herbalife…
Thanks to this site’s top commentator, Aruna, for pointing me towards this sad story that shows that email and internet hoaxes can, and do, cause problems.
For Megan Meier, the hurt caused by a fake MySpace profile eventually led to her taking her own life.
JOSH
It may be fair to say that Megan Meier was not a particularly happy child when she met ‘Josh’ on the internet.
A 13 year old girl with attention deficit order, she was also suffering from depression at the time when Josh began corresponding with her through the social site MySpace.
The two of them exchanged messages regularly for over a month before Josh suddenly ended the relationship, stating that he had heard that Megan wasn’t nice to her friends.
Tina Meier, Megan’s mother, knew that her daughter was upset and decided to take a closer look at her daughter’s online communications.
She was quite disturbed by some of the messages, both those received by, and sent by, her daughter. She asked Megan to log off from MySpace, a site she wasn’t old enough to be using in the first place.
SUICIDE
The next day, October 16th 2006, Megan hanged herself in her bedroom.
The day after Megan’s death, her father found a subsequent message sent to her through MySpace, stating that the world would be better off without her.
Several weeks later the family learned that the whole concept of Josh had been an elaborate hoax, crafted by a neighbour, her daughter and another child.
It would appear that this was done in response to some sort of feud between the two families.
CONSEQUENCES
Unfortunately, according to law enforcement officials, such a hoax and the subsequent suicide of Megan, does not fit into any existing crime and so the people behind ‘Josh’ will not be prosecuted.
Tina Meier accepts that no-one ever intended that the hoax should lead to Megan’s death.
However, this hoax does go to show that hoaxes are not always harmless fun, or without victims, whatever their original intent may have been.
The latest embarrassment for the British government was revealed today in the House of Commons. Chancellor of the Exchequer, Alistair Darling, stood before the House to inform the country that computer discs containing information about 25 million people had gone missing.
The computer discs, which store data concerning 7.25 million families in receipt of Child Benefit, offer a potential identity thief everything they could ever possibly need in order to assume the identity of any one of the people contained within the database.
The information held includes -
- Child benefit numbers
- National Insurance numbers
- Names
- Addresses
- Dates of Birth
- Bank/Building Society account numbers and sort codes
The two password protected discs were originally sent to the National Audit Office back in March by a junior official. However, they never arrived and the disappearance was covered up not reported for 3 weeks.
While the Metropolitan Police continue to search for the discs, Mr Darling assures the nation that banks and building societies are aware and are monitoring accounts for suspicious activity. How they intend to determine what is suspicious, or not, when the disc holds information on almost half the population of the UK, is unclear at this time.
With politics being what it is, Alistair Darling declined to resign. However Paul Gray the chairman of Her Majesty’s Revenue and Customs, who lost the discs, was scapegoated did the honourable thing.
Whilst banks monitoring accounts may offer some peace of mind in terms of immediate fraud, it does little to ease the concerns of long-term issues that may arise should the discs fall into the hands of identity thieves.
If anyone reading this in the UK has any concerns then there is an official Child Benefit helpline available - 0845 302 1444.
Good luck!
And be sure to recognise the signs of identity theft, just in case.
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Thursday, November 29, 2007
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