MLMIA Legal Mentoring Bulletin Thirteen

Gifting Programs are Illegal


I have a file containing quotes in legal documents from grand juries, prosecutors, and district attorney’s across the United States taking criminal actions against operators of, and participants in, gifting programs. (Available upon request, email me at [email protected])  The creators and defenders of such programs state:  “You should be allowed to give your money away to anyone you choose.” It appears to be a valid argument, but it is  only true up to a point. The Regulators and prosecutors define the “point” (after which the law is broken) as the REASON the participant “gives.” Gifting programs are all designed to provide this (illegal) reason - the expectation that you will get back over time more that you give. There is NO WAY such a program can withstand legal scrutiny. Creators and participants in such programs are at significant risk. It is written about in this MLMIA bulletin because (unfortunately) there are some similarities between gifting programs and direct selling with a multi-level form of compensation. Our very legitimate and time tested business model of MLM is NOT a skirt behind which a gifting program can hide. Participants in our industry do the industry a significant disservice by going anywhere near a gifting program.


The above is provided as general information and, although written by MLMIA Board Member and Direct Selling Specialist Attorney Gerald Nehra, is NOT provided as the rendering of legal advice. Readers are urged to seek the counsel of attorneys or firms with special knowledge of direct selling laws. The four firms that devote their practice exclusively to counseling corporations about direct selling legal issues are, in alphabetical order: Babener & Associates, Jeffrey A. Babener, 503-226-6600, [email protected]; Grimes & Reese, PLLC, Kevin D. Grimes and Spencer Reese, 208-522-2600, [email protected]; Nehra & Waak, Attorneys at Law, Gerald Nehra and Richard Waak, 231-755-3800, [email protected]; and D. Jack Smith Law Firm, D. Jack Smith, 901-292-5225, [email protected].