Madoff-ravaged Mets enter into a stadium deal with ... Amway
The imagery isn't great for the Mets, to say the least. Amway, a business known for false promises of riches, was busy settling a class action lawsuit alleging the company is a pyramid scheme at the same time Mets' ownership group was fighting a lawsuit by the trustee for the Bernie Madoff victims over its role in Madoff's Ponzi scheme.
But the cash-strapped Mets, who only recently contemplated putting a casino next to their stadium, seem to have made the calculation that whatever money they're getting from the deal trumps any cosmetic problems that might stem from the association.
The Citi Field outpost is Amway's first storefront in America.
On Saturday, Amway staged a grand opening (or "grand opening": it got no coverage, as far as I can tell) with the Amway sign just a few feet away from a Mets ticket booth.
Amway is a multilevel marketing opportunity, to use the euphemism, or a pyramid scheme, to use the terminology of its critics. Individuals sign up as "Independent Business Owners", or I.B.O.s, to sell an array of Amway products, buying them up front while simultaneously recruiting others to join Amway as well.
The Federal Trade Commission differentiates between legitimate MLMs and pyramid schemes using a set of criteria that came into being in part because of complaints about Amway going back decades. The most basic requirement is that participants sell a reasonable percentage of the products to outsiders, meaning the company is not subsisting primarily on new backers buying in to pay the old backers.
When a class-action lawsuit against Amway's now-defunct North American distribution arm, Quixtar, asserted that products were almost always sold to the next level of distributors, that Amway participants were asked to pay exorbitant up-front costs, that well over 99 percent of Amway participants lost money and that any effort to recoup losses were only possible in an expensive arbitration process, a judge allowed the lawsuit to go forward, calling the Amway contract stipluations "a weapon to harass ... and ultimately bankrupt their opponents."
A year later, Amway settled the suit for $155 million.
Amway's troubles aren't over; there's been renewed focus on MLMs of late, with Herbalife, a company operating using Amway's business model, declared a pyramid scheme in a European court last year.
The company revealed that the Securities and Exchange Commission is now investigating it. The Federal Trade Commission recently shut down Fortune High-Tech Marketing, another MLM, in January.
Coincidentally, David Einhorn, the hedge-funder who came close to becoming a Mets owner, is helping to lead the fight against Herbalife here in the United States. He asked questions about Herbalife's business practices on a conference call last year that dropped the company stock from $70 per share to $56; today, it sells for just over $36 per share.
"These are bad signs for the MLM industry," Robert FitzPatrick, president of Pyramid Scheme Alert and expert witness in the class action suit against Amway, said in a telephone interview Monday. "There are about 500 MLMs. I've looked at many of them. Not one would have passed the [Federal Trade Commission legal] test. Obviously not Amway. It did not pass that test."
FitzPatrick said he didn't know why Amway would open a retail storefront, the first of its kind in the United States, other than to provide legitimacy for the brand by associating it with a known commodity like a Major League Baseball franchise.
(Several years ago, Amway also procured naming rights to the home arena of the N.B.A.'s Orlando Magic, whose owner is an Amway co-founder.)
Neither Amway nor the Mets provided any additional information about the storefront, including how much Amway is paying the Mets for the space.
A spokeswoman for Amway confirmed for me that the opening took place on Saturday.
The Mets have yet to respond to multiple calls and emails asking for comment.
At the website promoting the new storefront, Amway describes it this way: "The Amway™ Business Center at Citi Field is a dynamic, one-of-a-kind facility. It was created to provide all IBOs with a dedicated space to freely connect, learn new valuable insights, and share the exciting Amway opportunity with prospects. From reserving meeting rooms to learning about upcoming training events – everything you want to know about the Business Center can be found on this page. Just be sure to check back often for new and exciting announcements!"
Within the I.B.O. guidelines, there's this caveat: "Our lease with Citi Field states that no solicitation shall take place outside of the Business Center. Handing out samples, business cards and / or literature on Citi Field property is not allowed."
A Mets home schedule, complete with team logo, is prominently featured on the site's home page.
UPDATE: The Mets have sent over the following statement: "We designed the ballpark with approximately 40,000 square feet of retail along 126th Street and are pleased that Amway has joined McFaddens as a retail tenant at Citi Field."
UPDATE: Amway provided me with some details about the deal in an interview, which I wrote up here.