On the June 23 episode of Martino TV, the paid-programming/news-magazine-style hybrid that debuted last month on KDVR/Fox 31 and KWGN/Channel 2, Tom Martino was hyping Efusjon, an energy drink made with the acai berry and other vitamins that also comes with "a business opportunity," he told his audience.
Martino's guest was Efusjon rep Loren Middag, who was hosting a party the next night where people could learn how they could become part of the Efusjon Energy Club. And on his KHOW radio show that afternoon, Martino devoted nearly forty minutes to Middag and Efusjon, calling the company an example of a legitimate multi-level marketing business that, unlike such outfits as Herbalife, doesn't need ploys or games to get people to show up for a presentation.
"You shouldn't have to trick people into listening to a presentation," said Martino, who built his reputation in the '80s and '90s as television's "Troubleshooter," a crusader who turned his camera on shady businessmen, scammers and delinquent landlords.These days, though, while Martino still positions himself as a consumer advocate, he's also paid by the companies he endorses. But he's up front about such deals, he insists.
To see video of Tom Martino in action, go to the Latest Word.
"So I'm telling you straight up — and by the way, this is not a commercial," Martino told listeners who heard him praise Efusjon that day. "I'm telling you this because I've gotten over 350 people [who] are just crazy about this. Why? Because it's a great drink."
The website where listeners could RSVP for the party, www.efusjonmilehigh.com, features the heading "Personally endorsed by Tom Martino" and suggests that visitors "take advantage of the Tom Martino community — JOIN NOW!" And for several weeks before the June 24 event, a Twitter feed called "efusjon denver" had been excitedly describing the partnership between Martino and the drink. The author of the feed is Kelly O'Connor, an advisor with American Guaranty Financial, whose owner, Matt Klaess, is bankrolling the Efusjon events in Denver and plans to devote his entire office and staff to the effort for the next four months, O'Connor says.
Efusjon launched just ten months ago in Bend, Oregon, joining an already crowded field of multi-level marketing companies pushing juice/energy drinks with funky names like Zrii, Xango and Noni. Each relies on drinks with seemingly exotic ingredients and a similar "get healthy and get paid" sales pitch to enlist independent distributors. Denver has its own multi-level marketing company, XELR8, that's selling the wonder drink Bazi through a distributor-recruitment model. As reported in "Magic Potion" (May 20), that model relies on a sales pitch that essentially urges potential distributors to sign up four friends, who sign up four friends, who sign up four friends, until we're all rich and healthy.
That's because distributors earn compensation off the products purchased by people in their "downline." The more people who sign up, the bigger the checks collected by those early distributors.
As with Bazi and most of these other elixirs, Efusjon's promoters hope it proves as much a liquid asset as MonaVie, an acai-based juice that costs roughly $40 per bottle and recently logged more than one million distributors. But according to MonaVie's 2008 income disclosure statement, the majority of the roughly $1 billion it paid in compensation last year went to less than 1 percent of its distributors. Of the rest of the distributors, half ended up working for an average of 25 cents an hour.
Efusjon hasn't been around long enough for the company to have filed reports that would indicate how many distributors in the company actually end up making money. And while it's widely believed that MonaVie has hit a "plateau" of growth - making big-money earnings next to impossible for those entering late in the game - Efusjon distributors are being sold on the notion that getting in early could potentially translate to hundreds of thousands of dollars in commissions every month.
Efusjon also hopes to differentiate itself from other ventures by using social-networking technology to grow its rank of distributors, many of whom assert on web pages and YouTube videos that the company has teamed up with Mark Zuckerberg of Facebook to create an exclusive application for Efusjon that will soon stimulate "explosive growth." This buzz alone has inspired distributors to set up shop in new regions, in hopes of being at the top of their own Efusjon network. In a conference call to distributors on July 4, Middag claimed that 22,000 new distributors had signed up for Efusjon in a 24-hour period.
Klaess signed on for Colorado. The Efusjon spots on Martino TV were paid slots previously reserved for American Guaranty Financial. A longtime sponsor of the Troubleshooter's shows, Klaess has frequently been featured as an expert in real estate and finance. His various real estate and mortgage companies have long been a mainstay of Martino's pay-to-play endorsement website, www.referralist.com.
Over the years, the friends have partnered on several real-estate deals, and now they've created what the Mile High Efusjon blog calls the "Martino Matrix." Klaess supplies the money and manpower, and Martino propels the product with the promotional muscle of his name and shows. Martino's wife, Holly, who makes regular cameos on the Troubleshooter shows, is also a distributor and has her own Efusjon recruitment website. (Neither Martino nor Klaess returned Westword's calls for comment for this story.)
And the Martino Matrix is growing rapidly. To build the ranks of distributors, O'Connor says they plan to host monthly Efusjon events that will be heavily promoted on Martino's shows on KHOW and KDVR. The June 23 promos certainly did the trick: More than 400 people — including Tom and Holly Martino — showed up for the Efusjon presentation at the Soiled Dove on June 24.
The Martinos didn't make it to Klaess's July 16 presentation, held on the rooftop bar of a swanky restaurant at Park Meadows mall, which disappointed several of the Troubleshooter's fans who'd signed up for Efusjon after hearing about it on his shows.
"I am always looking for big-time opportunities; Tom sees it, I see it," Klaess explained to the forty or so people who came to the party. "On this whole Martino thing: As I throw these events and run the TV shows and do the radio, Tom produces an enormous amount of leads. So everybody joining our group, leads will come in like you wouldn't believe. But a lead is just a lead; it's what we do with it that's critical."
Following the talk, attendees mingled and sipped from black-and-purple cans of Efusjon Edge, which tastes like a thick grape juice with carbonation and caffeine. Brian Parker, an employee at American Guaranty, told prospective distributors that this Efusjon network could soon be making everyone a lot of dough, particularly Martino. "He has the potential to make a boatload of money off of this," he said. "He knows that when this thing takes off, he could be making $250,000 a month."
The pyramid structure that defines income distribution in these networks has helped promulgate two views of the multibillion-dollar-a-year multi-level marketing industry. The first is that these are legitimate businesses that have chosen to bypass marketing and distribution costs by incentivizing everyday people to sell their merchandise or services. The other is that multi-level marketing is a legal scam that allows a small number of people to reap massive profits by building what amounts to a Ponzi scheme around a bunch of overpriced crap.
Companies from Avon to Nu Skin to generic get-paid-from-home programs may vary in the number of recruits that distributors are asked to bring in to build a "downline" and the way all those levels of distributors are compensated. But strip away the rhetoric, and you essentially have a bunch of people paying money up a ladder: The only way to recoup the cash you've put in is to get others to climb on below you, and then they have to do the same to get their money back.
The way that such pyramids avoid becoming schemes, according to the Federal Trade Commission, is to market a product or service that has actual value. Then, presumably, people are paying into the system because they like the product or think they could sell it retail and make a profit — or both — and not just because they want to solicit others to become distributors.
To qualify as an "associate" distributor with Efusjon, you must pay an initial fee of $150, recruit three others into a level below you, then maintain purchases of at least four twelve-pack cases every month at a cost of $156 (with shipping). That comes out to a wholesale price of $3.25 per can — or 38 cents an ounce. (Distributors also have to pay for their own sales and marketing materials, such as shirts, business cards, banners and fliers.) By contrast, a 24-pack case of Red Bull at Western Beverage in north Denver goes for $15 – or 62 cents per can wholesale, just 7 cents an ounce.
But the hefty price is okay, as Middag explained in his June 23 interview on Martino TV, because Efusjon distributors don't really sell the product retail: "You drink it with your family, give it away to your friends, give it to athletes. It's good for everybody!" On the radio program later that day, he noted that some distributors unload their monthly quotas of Efusjon by donating cases to school programs.
Not everyone was as effusive about Efusjon that day. When one man called into the live Martino TV program to comment on the "marketing ploy" and "pyramid matrix" behind such companies, Martino interrupted the caller. "What you're talking about is network marketing, and it's a proven concept," he barked, then cut off the critic.
Facebook officials wish they could cut off Martino as easily. "There is not, nor has there ever been, a deal between Facebook and Efusjon," Barry Schnitt, senior manager of communications for Facebook, wrote in response to Westword's inquiry about Efusjon claims that the company is working with the social-networking site. Facebook has even blocked Efusjon content. "Their press release has absolutely no basis in fact," Schnitt said. "We are actively working to dispel this myth."
So is Efusjon a way to potentially earn "incredible" money while working from home, as promotional materials created by the Martino Matrix suggest?
Perhaps it was the Troubleshooter who put it best on a recent Martino TV segment that focused on "work-from-home scams." As Martino told his viewers: "Some of these plans are legit. Most work-at-home plans are scams! I'll tell you that after thirty years in Denver doing my radio show, it's one of the most common complaints."
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He made no mention of these complaints in the show's spot touting Efusjon, which is marketed as a work-from-home opportunity on hundreds of websites.
Martino also listed some red flags that consumers should watch for before signing up with a work-from-home company: "Anything that would require a registration fee. Up-front money. Don't do it. Also, mandatory purchase of supplies. You have to assemble something. You have to buy the supplies to assemble it, and they buy it from you. No way. Remember, if it's a job, they're the ones who should be paying you.
"Any company, a real company," he continued, "has bricks and mortar, and they want you to do a job and assemble something, and you know this company, that's fine. But when you've never laid eyeballs on this company, please, do me a favor and don't fall for it. It is a scam. I can't tell you how many people get burned. And they get burned when they are at their most vulnerable positions."