How energy drink firm ended up in feds’ sights

Most of the voice mails are garden-variety bullying: You’re ugly. You’re stupid. Shut up.

But then there’s this one: “You and your family better watch your backs because I’m coming for your heads.” That caught Austin Neff’s attention.

“It came from Oregon,” said Neff, pointing out the area code on the stored message’s Caller ID. “That’s pretty close to where I live, so that one scared me.”

The voice mails were left for Neff, a 23-year-old recent college graduate from Portland, because someone had figured out his secret: He was one of the people behind an anonymous Twitter account called @YPRbroYPR, which was critical of the controversial energy drink company Vemma.

Last week, the Federal Trade Commission had Vemma shut down – at least temporarily – when it filed a lawsuit and an injunction declaring the multilevel marketing company an illegal pyramid scheme.

All eyes now are on the court case as it unfolds in Arizona, where Vemma is headquartered. The next hearing is scheduled for Sept. 15, during which Vemma representatives are expected to try to get the temporary injunction lifted so affiliates can continue selling products while the suit proceeds.

The FTC action could have broader implications for the controversial industry, and it’s sparked renewed calls for tighter industry regulations – even from people who support multilevel, or “network,” marketing.

“I have been pushing for more standards that lead to a more predictable marketplace in network marketing,” Kevin Thompson, a lawyer who represents multilevel marketing companies, said in a video he posted online about Vemma. “This is what happens when you push for an environment of no standards, no regulation. When there’s no regulation, the regulators can sue anybody.”

Daniel Cao, a University of Cincinnati student who sold Vemma for about six months in 2013, is happy the company has been targeted. But his celebration is tempered: He thinks that shutting down Vemma is akin to treating the symptom rather than finding a cure.

“Many Vemma affiliates jumped ship but were lured” by similar companies, Cao said.

The Young People’s Revolution takes hold

For years, Vemma flew under most people’s radars. The line of energy drinks was launched in 2004 and at first barely made a blip, according to the company’s own sales reports.

In 2008, Vemma heightened its profile by partnering with the Phoenix Suns to sponsor a swanky lounge at the U.S. Airways Center.

About 2011 and 2012, interest began to pick up. Vemma started zeroing in on college-age recruits and launched its so-called Young People’s Revolution. (That’s #YPR in Twitter parlance.)

Young adults were encouraged to leverage their social media networks to become their own bosses and sell the drinks to their friends. They also were told by the ever-upbeat Vemma founder B.K. Boreyko and other company leaders that college was a waste of time.

“Last week, I read this article in Forbes magazine and they were calling the college education system in this country a pyramid scheme,” Boreyko said in one YouTube video. “Do you realize that 40 percent of those college graduates that have found jobs work in jobs that don’t require a college degree, yet they’re still stuck with the debt?”

That message caught the attention of parents – and the media. Truth in Advertising, a nonprofit consumer protection agency in Connecticut, began posting stories and gathering evidence that later would help the FTC in its case. The Enquirer published an investigation about Vemma’s growing presence on Cincinnati-area campuses.

Other national media outlets followed with stories of their own: the Today Show, Al Jazeera America, Rolling Stone.

In hindsight, the Young People’s Revolution was “not very smart,” multilevel marketing proponent Richard Bliss Brooke, of Idaho, said in a video encouraging Vemma followers to stand by Boreyko.

“It’s not very smart to be telling those kids that you’re stupid, you’re going to be a slave, you’re wasting your money,” Brooke said. Parents responded harshly, as did college administrators, he said. Vemma was no longer under the radar.

Other countries took note: The Italian government declared Vemma a pyramid scheme in April 2014, and a spokesman for Switzerland’s State Secretariat for Economic Affairs confirmed this week to The Enquirer that prosecutors there are investigating the company. Consumer protection agencies in Austria are also warning young adults to steer clear.

“A huge campaign was waged against Vemma,” Brooke said. “It backlashed.”

It also prepared Vemma devotees for an us-against-the-world showdown.

Boreyko did not respond to The Enquirer’s requests seeking comment. In social media posts, he addresses “Vemma faithful” with encouraging messages that include the hashtag #IAmNotDone.

“Just last week, Vemma was the number 1 trending story on Facebook,” Boreyko posted in a message on Instagram. “Not quite the way I thought we’d get there, but an epic stage has been set for us to defend Vemma, this amazing industry and the millions that count on it along with myself.”

Vemma case ‘not blowing over,’ critic says

The industry that Boreyko so staunchly supports is a controversial one, but not inherently illegal.

Multilevel marketing draws comparisons to pyramid schemes because both rely on members recruiting other people to make money for those above them. In legal companies, participants are paid more for sales unrelated to recruiting, unlike pyramid schemes, which are illegal.

Some people try to boil the legality down to whether a company sells a real product, but that’s too simplistic, said William Keep, a pyramid scheme expert and dean of the School of Business at the College of New Jersey.

“The issue of product efficacy is by and large a non-issue in court. It’s a red herring,” Keep said. “Real companies sell real products, that’s true. But so do schemes.”

It’s impossible for everyday people to determine whether a business is a pyramid scheme because you’d need a complete disclosure of the company’s finances – which companies aren’t required to provide the general public – to accurately make the call.

The FTC has the power to declare a company a pyramid scheme, but FTC investigations aren’t a matter of public record. The agency’s action against Vemma only became public when a lawsuit it filed last month was unsealed.

That suit spelled out several pointed allegations, specifically that Vemma officials were operating an illegal pyramid scheme, had falsely represented that Vemma members were likely to earn hefty incomes, and had failed to disclose that most people who join the company would earn little, if anything.

The FTC highlighted income claims of $50,000 per week compared with a far-more-modest reality: More than 97 percent of Vemma’s active affiliates earned $12,000 a year or less.

The suit had a lot of people saying “I told you so” – including Neff and Rob Liggins, the curators behind @YPRbroYPR, which has more than 14,000 followers.

The parody account was borne of frustration. Both Neff and Liggins had been invited to numerous college parties that were Vemma sales pitches in disguise.

“It got to a point where we would tell people we weren’t down with the idea of the business, and people would be so pushy about it,” said Liggins, 23, who described being driven to Vemma recruiters’ houses under the guise of going out to a friendly lunch.

“I’d say, ‘Where are we going,’ and they’d say, ‘You should just come to this meeting. It’ll be, like, 30 minutes and then we’ll go do whatever.’ I’d say, ‘Let me out of the car.’ ”

It’s hard to describe to outsiders just how pervasive Vemma became on campuses nationwide, said Neff, who described sales affiliates as being “cult-like.”

The Twitter account was simply meant to level the playing field. Neff and Liggins would hijack hashtags that the official Vemma account was using in an effort to mock them. One sample post: “How to ruin a friendship in 5 words: ‘Have you heard of Vemma?’ ”

“We felt there needed to be a representation of people’s actual stories and experiences,” Liggins said. “A lot are funny, and some are over-the-top, but it really was with the purpose of spreading awareness.”

Now that the FTC has spoken, Neff and Liggins think their job is done. The Phoenix Suns terminated their Vemma affiliation, Suns spokeswoman Maria Baier told The Enquirer this week. The court case could drag on for years, said Shana Mueller, a spokeswoman for Truth in Advertising.

“This is not going away,” Mueller said. “Vemma could get the order lifted, they could go back into operations, but it’s never going to be the same. It’s not blowing over.”

But Neff and Liggins are done. They confirmed their identities to The Enquirer – their first public acknowledgment that they were behind the popular parody account – just as they announced plans to suspend it.

And maybe even delete all those threatening voice mails.