Everyone in this room wants to be a millionaire. What sets them apart from the rest of the schlubs who want the Big M is they're attending the Millionaire Mindset Conference in the downtown Dallas Hyatt Regency. They have shelled out between $995 and $9,995 for the privilege of hearing bona fide millionaires -- Christian millionaires -- tell their Horatio Algers.
In order to be a millionaire, you've got to think like a millionaire. And the Mindset Conference can offer that to you. Because once you buy into the conference, you're part of an elite Christian wealth-building force called Advantage Conferences. It's run by a guy from Allen, Texas, named Tim Darnell. Never heard of him? Your loss. Because he's got the tools to make you rich. All you need is a check and what he calls SUB: Sustained Unwavering Belief. It's like the Advantage Conferences web site says: "Doubters, skeptics, low self-image individuals need not apply." It's how AC weeds out people who doubt they can get rich. Since all those low-self-image individuals have been bused back to Loserville, you can be assured that everyone here is a go-getter.
And, as with all things, this is all made possible by the grace of Christ. Today's portion of the conference kicks off with a sermon by Darnell's dad, holder of a Duke doctorate of divinity.
David Darnell starts by recapping yesterday's exploration of Numbers 12. That's where God says he speaks to Moses not in riddles or dreams, but face-to-face and clearly.
"Think about that difference," he says, "between face-to-face and riddles."
And now, it's Matthew 6:5-15. That's where, Darnell says, Jesus introduces the word "hypocrite" into Biblical literature. Hypocrites are actors, showboating their religion, making a big deal of how pious they are.
Darnell puts it this way: "Don't practice your religion to be seen by people."
This is just part of the knowledge you get when you give Advantage Conferences your $10,000. It might be worth it, since it turns out that Jesus was a pretty smart guy, what with warning about hypocrites and all. And that wasn't his only warning. David Darnell didn't discuss it, but if he would've jumped ahead one chapter in Matthew, he could've pointed out something else Jesus said: "Beware of false prophets, which come to you in sheep's clothing, but inwardly they are ravening wolves."
Given the histories of Tim Darnell and his current and past business partners, it's a passage that the hundreds of people who have joined Advantage Conferences might have done well to consider.
The first thing you need to know about Timothy Spencer Darnell is that he's not a U.S. citizen. Or at least not when it suits him.
In 2001, three months after a former client sued Darnell, Darnell filed an affidavit in Dallas County Court claiming that he's not a citizen, that the Dallas County Court-at-Law #3 is "an underling corporate fiction of the State of Texas, a corporation and a fiction," and that the court has no jurisdiction over him. Darnell's renunciation of the United States of America was supplemented by supporting affidavits by other Dallas-area noncitizens who claimed that Darnell "cannot receive a fair and impartial trial by jury of his peers by law in County Court-at-Law #3." When contacted by the Houston Press, affiant Mary Lou Starnater declined to say why she filed that affidavit, then hung up. (Darnell's wife's maiden name is Starnater.)
Brett Flagg, the Dallas attorney who represented Darnell's disgruntled client, said his client invested several thousand dollars in a company Darnell ran called Tru Dynamics. Flagg said the affidavit signaled a hard row ahead for his client, who decided to just call it a loss and move on.
Darnell has an entirely different recollection. He says he did not file the affidavit in response to a suit, but as a response to an affidavit filed by someone else that included Darnell's name in all upper-case letters.
Maybe it's best to let Darnell explain in his own words:
"The use of my name in upper-case letters...What that does, when you use uppercase letters, it signifies that you are a state-created entity. In other words...you're not a living human being, you're a corporation. And I was disputing that fact by this affidavit."
Uh, okay. And that stuff about not being a U.S. citizen?
Darnell offers this clear, riddle-free response:
"There is a definition of the United States...the specific definition of that is Washington, D.C. and Guam and some of the holdings of the United States -- I think it's a 17-mile radius, if I remember correctly, around the capital: there's a definition that says that that's what the United States is, and I am clarifying that that is not the case. I do not live there."
Specifically, Darnell lives in Allen, Texas, which has been home base for a multitude of multilevel-marketing companies he's been part of since graduating with a degree in sociology/psychology from Texas Tech in 1980. On the shorter side, with dark-brown hair he wears long in the back, the 52-year-old Darnell has a warm, friendly drawl that no doubt helps sell Advantage Conferences.
And here's a good time to explain exactly what Advantage Conferences is. According to its web site, it's "a higher-learning educational products company that helps individuals on a massive scale improve their thinking as regards 'wealth.'" In the company's online flash presentation, Darnell claims that Advantage's business model is a unique, time-tested formula sculpted by brilliant marketing minds over many years.
"We are federally protected with the official trademark on this type of compensation...so we are the players in this particular kind of compensation," he says.
Well, actually, they're not. There is no federally protected trademark on this business plan, which Darnell calls "reverse margin" and a bunch of other things. Others call it by other names such as "pyramid" or "Aussie 2-Up."
Advantage's products include business books and CDs, but the flagship is the Millionaire Mindset Conference.
Here's how it works: Once Bob pays $10,000 to go to the Millionaire Mindset Conference, he is considered an Advantage "rep." Bob is qualified to make $7,000 off of each person he recruits at the $10,000 level. But that commission doesn't kick in until the third person he recruits. The commissions for the first two go to a person above Bob (hence "Aussie 2-Up").
You can join Advantage for $60, but you don't get the conference at that level. Candidates are encouraged to join at the $10,000 level. This allows them to make the most money by "selling" the conference.
In the flash presentation, Darnell suggests that it's a waste of time for anyone to join at any level other than $10,000. He says that start-up cost is "a joke" when compared to the higher costs of buying a franchise restaurant. And what if a candidate balks at the entire concept?
"This is not for everybody. Most people want to stay where they're at in their mediocrity and their complacency," Darnell explains. But if you don't want to be mediocre, you will do whatever you can to pay that $10,000, even if you have to borrow it. And what of the perceived difficulty of getting your first three recruits? In one case, Darnell suggested that new recruits imagine a gun pointed at their kids' heads, and that their lives depend on getting those recruits. Under those circumstances, anyone will come up with a plan.
But last November, Darnell ran into a problem. When he tried to hitch his remarkable business formula to the Dallas Better Business Bureau's post, the Bureau smelled a pyramid.
The Bureau asked Darnell for proof that ten Advantage reps had made at least $7,000. Darnell provided the names of ten people and no hard financial data, which the Bureau concluded did not constitute "proof." The Bureau also criticized Darnell's advertising claims. So Darnell rejoined the ranks of U.S. citizens and sued the BBB in the very court he previously claimed had no jurisdiction over him. He accused the Bureau of defamation, business disparagement and negligence, among other things.
In October 2005 the Bureau's online report of Advantage included the following: "This company has an unsatisfactory record with the Bureau due to its failure to modify, substantiate or discontinue advertising; concerning copyright and trademark protection claims; earnings; and evidence that the company primarily engages in promoting a pyramid scheme."
In his lawsuit, Darnell accused the Bureau of defamation. In its response to the suit, the Bureau stated: "Not only did the BBB have 'evidence' that [Advantage] is primarily engaged in promoting a pyramid scheme, but that evidence is overwhelming...Any claim by [Advantage] that commissions are paid only on 'sales' of the conference is nothing more than form over substance. These sales occur only inside the pyramid."
The Bureau's response also states: "Unlike Amway, whose compensation plan stressed that retail selling was essential, [Advantage] has no requirements whatsoever that a representative make any retail sales of the conference -- or any other product -- to non-participants...Not surprisingly, there has not been a single retail sale of the conference thus far; i.e., every attendee of the conference has been an [Advantage] representative interested in the income opportunity of large commission income."
And: "[Advantage] exerts tremendous psychological and economic pressure on a new representative to make the large initial purchase...Accordingly, AC itself describes the failure to purchase the conference as 'business suicide'...Playing upon greed and fear of losing a good deal is a common psychological tactic employed by pyramid schemes."
After suing the Bureau, Darnell gave a deposition and several affidavits explaining why Advantage was legitimate and how the Bureau did not have the facts.
Darnell stated in one affidavit: "[Advantage] is not a pyramid because no purchase of the conference or business opportunity is required to be able to sell conference tickets. To sell a conference ticket, a rep needs to pay a $59.95 independent contractor fee...Additionally, it is important to emphasize that [Advantage] screens out individuals who are looking for a get rich quick scheme and that there are many individuals who wanted to purchase a conference ticket and sell conference tickets who were not allowed to."
Advantage begins its highly selective qualification process with an online "interest form," which begins by asking a candidate if they are "serious about earning" $100,000, $250,000 or $500,000 a year. The candidate must then read a "Getting Started" overview touting Advantage's ingenious compensation plan. This overview states that many candidates fail the final selection plan, which is a personal interview with Darnell.
"We don't need 'flakes,' 'whiners' or 'projects' here," the overview states.
So if you're not a whining flake, and you're serious about earning a couple hundred grand this year, there's a very good chance you're Advantage material.
According to the Bureau's response, "Although [Advantage] claims that a recruit can qualify...by paying the application fee of $59.95 and 'selling' three conferences...no one qualifies in this fashion...[Advantage] questions a representative's commitment to building the business if the conference is not purchased."
A Dallas judge granted the Bureau's motion for summary judgment last October. Advantage was ordered to cover the Bureau's court costs.
The lawsuit, and Advantage as a whole, is fodder for discussion on watchdog web site www.scam.com. Since the forum also has its share of Advantage supporters, the Press posted a query to hear from those with both positive and negative experiences with the company.
Satisfied reps flooded an e-mail inbox with testimonials of how Advantage was a life-changing decision. They praised Darnell's integrity and the efficacy of the program. The name Jesus Christ was mentioned quite a bit. They talked about values, leadership, quality and God's will. In fact, they talked about everything except how much money they actually made by selling the program, or if they even had an income stream outside the program. While many of them ran web sites with names like "earn7kathome.com," when asked point-blank what they actually earned, it suddenly became rude to talk about money.
So where did Darnell get his training? Why should you feel comfortable giving him your $10,000? Let's take a look.
After graduating Texas Tech, Darnell toured with his gospel group, Dreamer. He was drawn into the business world of multilevel marketing. He cut his teeth at companies like Amway, and, he says, "I became fairly adept at compensation plans and actually wrote the compensation plan for a company called United Sciences of America in 1986. And that was a big program here in the Dallas area."
Carrollton-based United Sciences sold a nutritional plan that included something called the Fiber Energy Bar. By eating said bar and others in the United Sciences family, the company claimed, one could protect oneself against AIDS, cancer, heart disease, diabetes, arthritis, PMS, acne and dandruff. This was one motherfucking candy bar.
The company relied on reps to sell the product, promising big rewards if they signed on with the United Sciences team. It hired William Shatner to narrate a promotional video. It paid New York Mets pitcher Gary Carter $50,000 to say in the tape, "Join me and hit a financial grand slam."
In January 1987 the Texas Attorney General's office sued United Sciences for allegedly running an illegal pyramid scheme. Attorneys general in New York and California filed similar suits. At the time United Sciences filed for bankruptcy, it claimed to have 140,000 reps. (In October 1987 a permanent injunction against United was issued in a Dallas district court. Under the terms of the agreed settlement, United did not admit any wrongdoing or liability.)
In his deposition for the Dallas BBB suit, Darnell said he also worked for Global Prosperity Group and NuSkin Enterprises.
Global Prosperity reps pitched $1,200 worth of tapes and a $6,200 conference (in "tropical locations") designed to teach recruits how to get rich via tax loopholes. By 1999, authorities in six states filed cease-and-desist orders against Global. Quatloos.com, a fraud watchdog web site run by California attorney Jay Adkisson, states: "The slimy-est of the slimy, Global Prosperity marks the absolute rock-bottom low of the MLM [multi-level-marketing] programs. There simply is no MLM program which is more of a scam, or has such a disreputable background, as Global Prosperity and its many equally-sordid spin-offs...Global Prosperity's reputation is so bad that other network marketers will often add a disclaimer to the bottom of their own spams and advertisements which says 'Not Global Prosperity.'" (Adkisson is an asset protection attorney who has testified as an expert witness before the U.S. Senate Finance Committee on matters of charity oversight and financial fraud.)
Global later operated under different names, including the Institute of Global Prosperity, whose offices were raided by the IRS in 2001. In 2003, two former Institute administrators pled guilty in federal court for tax evasion. (Darnell was only a representative with these companies and was not part of any legal actions.)
As for NuSkin, the U.S. Federal Trade Commission fined the nutritional supplements company $1.5 million in 1997 for violating an earlier order requiring the company to have "competent and reliable scientific evidence to support benefits claims for any product they sell." Under the terms of the payment, NuSkin did not admit any wrongdoing. Today, NuSkin is a thriving company, claiming 820,000 representatives. It also runs two charities which provide food and education for needy children worldwide.
Created by Mormons, NuSkin is based in Utah, which is ground zero for multilevel-marketing companies. Jeffrey Ressner examined Mormons' ties to nutritional supplement multilevel marketing for Time in October. "More than 100 supplement companies dot the terrain alongside I-15 snaking through Salt Lake City, Utah, generating $4 billion in annual sales -- four times the revenue of the state's more famous ski trade," he wrote. Such companies are popular not only among mainstream Mormons, but among their polygamous fundamentalist offshoots just across the border in Arizona as well. Enter Darnell's next business partners.
Darnell met his polygamous buds in 2000, when he was with an Arizona-based multilevel-marketing company called Tru Dynamics, which sold an "Executive Conference Experience." By 2001, Darnell and a handful of coworkers left Tru Dynamics and formed a company called Liberty League International, which sold its own conference. The head of Tru Dynamics sued the defectors in an Arizona court for conspiring to hijack Tru Dynamics' customers. The Liberty Leaguers filed a counterclaim accusing Tru Dynamics of breach of contract.
The suit was eventually dismissed and Liberty League went on to do huge sales. In May, the company paid $115,000 in a settlement with the Arizona Attorney General's office, amid customer complaints. A statement issued by the AG's office indicated that "the majority of participants did not earn enough to cover the amount they paid to buy the products sold to them."
The money, according to the statement, would be used to pay for "consumer education, attorneys' fees and investigation costs, and victim restitution to be determined at a later date."
While Liberty League promised not to make "unsubstantiated income claims" and to "refrain from making any false or deceptive statements in their marketing materials," the company did not admit any wrongdoing.
Darnell was only with Liberty League for a short period; he and his fellow defectors left that company to form their own company. His partners were residents of Colorado City, Arizona, founded by the Fundamentalist Church of Jesus Christ of Latter Day Saints. In 2005, church leader Warren Jeffs was charged with sexually assaulting a minor and conspiracy to commit sexual misconduct by arranging a marriage between a 16-year-old girl and a 28-year-old man. When he fled Arizona, he made the FBI's Ten Most Wanted list and was arrested in Nevada last August. [Check out former Phoenix New Times writer John Dougherty's investigation into the FLDS: www.phoenixnewtimes.com/ Issues/current/polygamy/index.html; and Houston Press staff writer Keith Plocek's examination of Fundamentalists moving into West Texas: www.houstonpress.com/ Issues/2006-04-27/news/feature.html].
Incest, polygamy and statutory rape -- often condoned by and participated in by local authorities who were FLDS members -- are the norm in Colorado City, where it's believed that a man must have at least three wives to enter heaven. Thanks to inbreeding in the community, the Colorado City area has a high incidence of fumarase deficiency, an enzyme disorder that causes profound mental retardation and extreme epilepsy.
Good Christian that he is, Darnell decided to go into business with Colorado City residents Claudia Cawley and Elizabeth Knudson, and form All-Star Entrepreneur. That company was the first to promote the Millionaire Mindset Conference. As proof of how good a business opportunity All-Star was, the company's site showed a picture of two All-Star reps who won a 2003 Jaguar. The car was subsequently repossessed by Ford Motor Credit, which had sued Darnell in Collin County Court for nonpayment. (Darnell accused Cawley of rigging the contest and giving the car to two of her friends who then refused to take on the payments -- even though it was supposed to be a "giveaway." Darnell said that since he had signed paperwork for the car, he was left holding the bag.)
The web site also included testimonials from satisfied reps, although it was not disclosed that most of these reps were residents of Colorado City. (Cawley and Knudson did not return multiple messages.)
Before All-Star went bankrupt in 2005, it staked its reputation on Darnell, Cawley and a guy from Houston named Glenn Green. And just who is Glenn Green?
According to an old All-Star web site, he has "30 years experience in top-level management in Corporate America. His extensive background in major motion pictures and music industry brought him to the development of patented technology."
When the Press asked Green to elaborate on this impressive rsum, he had this to say: "If you're going to print a bunch of crap in the newspaper about me, it better be right."
And this: "You better be right, pal. I ain't threatening you. You just watch."
And, still: "Let me leave you with this: You write your article, just be sure it's right, okay?...I'm not threatening you by any means...but when you write your article, just be sure that your butt's covered. Because if it's not, and you put something in it that's not the case, I'm coming. And trust me, that's no threat."
Green says he got involved with All-Star when he was running a media company. He says Cawley contacted him and asked him to "build some marketing tools." He says he was never paid, which, he says, has to do with Darnell's abrupt departure from the company.
"They told me the reason I didn't get paid was because of Tim Darnell," Green says. Darnell denies owing Green any money.
So Green did what any shrewd businessman would do when a client reneges on a contract: he accepted the company's offer to be its chief executive officer. As Green says: "They offered me a position in the company 'cause I'm a decent business guy."
And just to accent how decent a businessman he is, he advised, "If you're investigating me, then you need to be talking to my attorneys, 'cause I'm going to sue your ass, okay? 'Cause you don't have anything to investigate me about, I will assure you."
For the most part, Green was right. There was nothing in his background worth investigating.
Except the ten-year sentence for theft in 1990, according to Harris County Court records. Green was released after one year. According to an affidavit by a Texas Department of Public Safety officer, the theft worked like this: Green gave an accomplice an American Express card in Green's ex-wife's name. The accomplice charged multiple purchases of $49.99 at a Chevron station, when "in fact, no merchandise had been bought." The accomplice then gave the cash to Green. During April and May 1990, the charges exceeded $20,000.
At the time Green was popped for that crime, he was on probation for forgery for two earlier charges out of Brazos County, according to Texas Department of Criminal Justice spokeswoman Michelle Lyons. He was sentenced to ten years for those, which he served concurrently with the Harris County sentencing.
Also falling short of the Glenn Green Investigative Worthiness Standard was the ten years deferred adjudication in 1993 for fraudulent transfer of a motor vehicle. According to the investigating officer's notes, part of the case record in Harris County Court, Green bought and sold over a dozen cars, promising to pay off the leases, when he had no authorization from the lenders.
All but one of the 20 associated charges were dropped. He was also ordered to pay $31,233 in restitution
Harris County court records also show that the Houston Livestock Show and Rodeo sued Green and his wife, Starla, in 2002. The suit was for nonpayment of $107,000 Glenn and Starla bid on a champion steer and a grand champion barrow pig named Cowboy in the 1999 Rodeo auction.
"I know that the money spent here goes for a great cause," Green is quoted as saying in the Rodeo's press release.
Then Starla chimes in about the 17-year-old Brownfield Future Farmer of America who spent four hours a day after school tending to Cowboy: "[He's] very deserving. We were prepared to do what it took."
Everything, that is, except actually pay what they bid. A Harris County judge ordered the Greens to pay the full amount, plus legal fees.
Rodeo Vice President Leroy Shafer says the Greens never paid the money -- the largest debt of any one entity in the show's history. He says it was the first time in the Rodeo's history that a grand champion was involved in a bad purchase, and the first bad purchase of two champions in one year. (The highest bidder's money goes to whoever shows the animal, any charities the bidder earmarked money for, and the Rodeo's scholarship fund. Shafer says the Rodeo was able to pay the $25,000 promised to Cowboy's exhibitor, as well as the approximately $1,000 Green had earmarked for the Houston Women's Shelter.)
Green now works for a multilevel-marketing travel package company called Your Travel Biz.
As for Darnell, All-Star described him as "a nationally known master trainer in sales and marketing" and a lifelong business owner. It also stated that Darnell "brings unblemished integrity, character and work ethic to the company."
Texas is increasingly becoming a nexus for scams," says Robert FitzPatrick, founder of the North Carolina-based Pyramid Scheme Alert.
He's part of a small network of consumer watchdogs who believe state and federal authorities too often given scammers a free ride. Because FitzPatrick is an expert witness in the Dallas BBB lawsuit, he said he could not comment directly on Advantage Conferences. But he could talk about multilevel marketing and pyramids in general. He could also talk about Texas's anti-pyramid scheme law, which he says was crafted by the MLM lobby.
"It's written in such a way that it would appear that as long as the money is laundered through a product of some kind or a service, it won't meet the definition of a pyramid scheme," he says. He adds, "Whether you legalize a pyramid scheme or not, it will produce exactly the same result."
And that result is proven mathematically, he says. In the case of an Aussie 2-Up, the model has a built-in brick wall. The people at the top of the pyramid will make the dough; the competition will increase exponentially; and the base -- the human population -- will remain the same.
"You can only go 32 levels and you've exceeded the population of the Earth," FitzPatrick says. "That's every man, woman, child, baby, inmate in an insane asylum...the real number is far less than that."
FitzPatrick is a man who understands the headache-inducing, logic-bitch-slapping nature of "business opportunity" programs, because whether it's Advantage or any other "income opportunity," you wind up having the same conversation with the dogged rep. FitzPatrick has both sides down pat:
"What is the real business that you're selling?"/"The business."/"What's the real product you're selling?"/"The business opportunity."/"Opportunity to do what?"/"To sell the business opportunity."
"So," he concludes, "the real product is: I'm making money; you can, too. Doing what? Making money telling people I'm making money."
But Tom Kelley, a spokesman for the Texas Attorney General's office, says the Texas anti-pyramid statute is clear: if there's more emphasis and energy on recruiting people rather than selling a product or service, there's a problem.
According to the statute, a pyramid scheme is "a plan or operation by which a person gives consideration for the opportunity to receive compensation that is derived primarily from a person's introductions of other persons to participate in the plan..."
The Direct Sellers Association echoes that belief. Spokeswoman Amy Robinson says you can determine a business's legitimacy by evaluating the compensation plan.
"If your compensation is not based on the sale of a product or service to the ultimate consumer, you're looking at something that is a fraud," she says. And, "if the money that you're paying to come into the business is really just going to your upline because they brought you into the business, that's a huge red flag."
But for FitzPatrick, frauds can still be perpetrated under the guise of selling products or services -- especially in Texas.
"You can let these predators run loose and engage in this deception of telling people this is an authentic business opportunity, when it is not. You can do that -- it won't change what happens to the consumers in Texas, though...In fact, it will probably result in more of them losing their money."
For FitzPatrick, "Most people don't grasp the math...it is a math trick, at the end of the day."
It's reminiscent of something Darnell says in his flash presentation:
"This is math. This is nothing more than how numbers work."
And then there's how the Book of Numbers works. God speaks to Moses clearly, face-to-face, without riddles. It's a pretty good book. Tim Darnell and his followers might want to give it another look.
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