ACN sales success challenged
swatson@wcnc.com
You may not recognize the name ACN. It was once short for American Communications Network, now billed as the world's largest direct seller of Internet phone service and now based in Concord. But you will probably recognize ACN's pitch man: Donald Trump.
Trump is scheduled to visit Charlotte this weekend to speak to 20,000 independent sales reps who will gather for a kind of pep rally and international training session at Time Warner Arena. Trump enthusiastically endorses ACN's desktop video phone, dubbed the "Iris 5000," as well as the company's sales plan. He placed the video phone prominently in a March 2009 episode of the NBC show in which he stars, "The Celebrity Apprentice."
But there is a legal cloud on the horizon for ACN.
Montana Securities Commissioner Monica Lindeen has accused the company of running a "pyramid scheme" and has filed a temporary cease-and-desist order there. ACN officials say the company will fight Montana's order, calling the allegation "a big misunderstanding" based on misreading company sales figures.
ACN charges $129 for the video phone but collects $499 for each new sales rep. A company spokeswoman says ACN has sold 300,000 of the phones and the company reports 200,000 current sales reps, half of them in the U.S.
In legal filings, Montana's Securities Commissioner accuses ACN reps of fraudulently stating income opportunities. "Folks look for a way to make money and in these hard times it's always good to find a way to try to make some," Lindeen said. "But in the case of a pyramid scheme 99.9% of the folks aren't going to make anything." Lindeen backs up the claim in legal filings with sales figures from Montana residents.
"We completely disagree, as well as our legal advisory team, which is made up of former attorneys general, and we will fight the case," says ACN Executive Vice President Dave Merriman, who promotes the company's sales plan. Merriman insists Montana officials are misreading the company's own numbers. He says, "It appears it's just a misunderstanding."
ACN refuses to release income statements or sales figures for independent sales reps or to disclose the so-called "churn rate," how quickly sales reps drop out and are replaced by new recruits.
But Merriman says most sales of phones and service - as well as satellite television and other products - are made to an estimated 1.5 million end-use customers, and not to sales reps buying products themselves to become eligible for sales commissions from their so-called "downline."
Welcome donor, employer
Two years ago, the state of North Carolina, Cabarrus County and the city of Concord offered ACN $600,000 in tax credits to relocate from Michigan to the former Concord Telephone Co. building prominently visible from Interstate 85. Merriman says the credits helped but did not cover the moving costs. He said the company has yet to take advantage of them.
The company brought with it more than 500 jobs that serve as support for what it claims are 200,000 sales reps and 1.5 million customers in 20 countries. Local officials celebrated the ribbon-cutting for the company, calling it a "silver lining" in the dark recession.
ACN also has promoted itself as a good corporate citizen, pledging $2 million to Charlotte's Ronald McDonald House, more than any other corporate contributor. The company collected contributions from sales reps at an international training session in Charlotte last year and Donald Trump wrote a check for $10,000.
But some of ACN's top salesmen have not always been such good citizens.
Masers convicted of felonies
An investigation by Newschannel 36, the Observer's television partner, has learned that two of the company's "Circle of Champions," brothers Michael C. Maser and Patrick D. Maser, were convicted of federal felony charges in 2003. The Masers are holding their own sales training at Ovens Auditorium this weekend, called "Wealth Institute."
Federal DEA agents connected the Maser brothers to an international drug ring that smuggled hundreds of thousands of ecstasy pills from Holland to their native Pennsylvania, and then laundered the proceeds. U.S. Drug Enforcement special agent Andrew Petyak says the Maser brothers' Dutch co-defendant Stefan Stricker was connected to organized crime in Europe.
Federal records show Michael Maser pled guilty to possession of ecstasy with intent to distribute and conspiracy to launder money. He received a 54-month prison sentence. He was released from prison in September 2006, according to Bureau of Prison records.
Patrick Maser pled guilty to conspiring to launder money, and was sentenced to five years probation.
The Masers did not respond to phone messages or e-mails. ACN Senior Marketing Manager Katie Mapel said in an e-mail that ACN's owners and senior managers were disappointed in the brothers' conviction - which occurred while they were ACN sales reps - but found no legal reason to terminate their agreement. "In the past 8 years, the Masers have focused on building their business and have had an outstanding record of operating ethically and professionally, and have since been appointed to ACN's Circle of Champions," Mapel wrote.
"The beauty of the ACN Opportunity is that someone's past doesn't determine their future or their level of success."
The Maser brothers are pictured in promotions for ACN, one inside a private jet. Patrick Maser appears in a video on Youtube pointing to a string of Mercedes-Benz vehicles and touting the "ACN lifestyle." Each brother claims to earn more than $100,000 a month from ACN.
Montana: ACN 'fraudulent'
Montana sales reps didn't have it so good.
The cease-and-desist order reports that, of 91 ACN sales reps in that state in 2008, none made more than $700.
The next year, the order reports that Montana sales reps paid almost a quarter of a million dollars in fees and memberships and for conventions, such as the one in Charlotte this weekend. The Montana reps earned back an average of 7cents on the dollar, the order says. Montana has set a hearing in the case for Oct. 25.
Read more: http://www.charlotteobserver.com/2010/09/11/1682953/acn-sales-success-challenged.html#ixzz10TDr7XgL
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