THE ILLUSION OF WEALTH

This is the answer to the question first raised in “The Pyramid is Crumbling” and expanded upon in “The Kingpins of River City”.

In 1998 reporter and political pundit Michael Barone wrote an article titled “A City Where Business and Philanthropy Flourish” about the “public-private partnerships” of Grand Rapids.  He made prominent mention of the key business institutions supporting our culture of cooperation:  Old Kent Bank, Butterworth Hospital, Amway, and Meijer’s.  Seven years later all but Meijer’s are gone, and it’s no coincidence that Meijer’s is the only organization out of the four Amway founders Rich DeVos and Jay Van Andel didn’t have their hands on.  Old Kent, Butterworth, and Amway all disappeared as Rich and Jay’s multi-level marketing pyramid crumbled.  They needed other pots of money to get their hooks around to maintain the illusion of wealth.  (See “How Big is a Billion?”)  They borrowed to the hilt from Old Kent, ruined Butterworth, and restructured Amway into oblivion to re-finance the pyramid and diversify it.  (See “The Fixer”, Part III and Part IV.)

By diversifying the Amway pyramid-builders made themselves kingpins of new enterprises in River City which they sustained by making the taxpayers their “downline” sorta like the suckers buying Amway sales kits and motivational materials -- the difference being that taxpayers can't take a walk when the figure out they're the mark.  The key to erecting new pyramids in town was maintaining the hype that Rich and Jay were billionaires bringing gifts to the City of Grand Rapids.  They were good at this hype.  It was what drove Amway.  After all, who would buy into the fantasy that you can get rich selling Amway soap and vitamins unless the top dogs strutted around in opulence and fabulous wealth?  It’s an old game, folks.  Rich and Jay just stepped it up one huge notch.  Making themselves out to be billionaires was the foundation of their marketing strategy for Amway to sell an expensive dream to their so-called distributors.

But with the Amway pyramid crumbling, it was time for Rich and Jay to move their snake oil business into new markets before they were exposed as something less than the billionaires they claimed to be.  For example, they plunked down a few bucks to become the kingpins for the Van Andel Arena and the DeVos Place Convention Center.  In exchange for these “donations” their family and friends got the use of these places for their other businesses plus operation of the concessions, catering contracts, ticket sales, etc. –- in other words, lots of streams of cash going back into their pockets.  Meanwhile, the taxpayers got stuck with the bill for paying the mortgage for these facilities.  Think about what a great deal this is for them.  It would be like the owner of manufacturing company putting up the downpayment for a new plant and getting the taxpayers to pay for the rest while he gets to use the facility to make money.

Of course, there are only so many public facilities that can be built in downtown Grand Rapids, so Rich and Jay also set up private projects funded by OPM – i.e., other people’s money.  In cooperation with Spectrum Health (chaired at the time by Rich DeVos) and the Butterworth Foundation (chaired at the time by Rich’s son, Dick Jr.), Van Andel founded the Van Andel Institute.  The VAI was supposed to be funded by the Van Andel Foundation, but immediately after Van Andel’s death last year, his kids disbanded the foundation and have refused to make any specific commitment of their inheritance to the VAI.  (Click here for details.)  However, they still run the place as the vanguard in bringing bio-tech research dollars into Grand Rapids and are planning a huge $150 million expansion of the facility to be funded by the public at large.  (Click here for details on the bio-tech boondoggle.)

Meanwhile, DeVos has been making a lot of small-change deals here in River City.  His holding company, RDV Corporation, has more than fifty subsidiaries involved in projects like auto dealerships, fitness centers, and real estate development.  DeVos also lends his name to out-of-towners who want tax subsidies for their projects in Grand Rapids.  The two latest examples are the $5 million tax subsidy he wrangled from the city and the state for Marriott’s new hotel downtown (click here) and the $15 million tax subsidy for the Michigan Street medical towers complex Lansing-based Christman Construction is building (click here).  Trading upon the illusion of wealth he manages to maintain, DeVos has persuaded the yokels on the Grand Rapids City Commission that a billionaire really needs to squeeze the taxpayers for a $5 million tax subsidy for a luxury hotel.  But let’s put that in perspective, people.  If DeVos is actually worth the $3 billion plus that Forbes magazine said he is, that five mill represents only two weeks’ worth of interest on that fortune.

Either DeVos and the Van Andels are rapaciously greedy misers who expect taxpayers and contributors to fund their projects downtown while they sit atop huge fortunes, or they need other people to fund their projects because they don’t have those fortunes.  A review of the available facts points to those fortunes being nothing but an illusion of wealth, the hype Rich and Jay pumped up to sucker people into the Amway pyramid.  When the pyramid began to crumble they ginned up the hype machine again to sucker politicians into committing taxpayers to their new schemes.  The bottom line is that if the DeVoses and Van Andels are the billionaires they claim, they don’t need our money.  If they aren’t, they sure as hell don’t deserve it.

Comments

[anon]

nice non-existant post.

[The Executive Director]

Anon,

Better late than never, the text to the article has been re-posted.

Bill Tingley
Executive Director

[Chris]

If the description is as depicted as such, every business organisation works the same way, businesses and their distribution chain get to keep all the profits while all the consumers pay thru their nose.

[The Executive Director]

Chris,

Of course, the customer pays and the business keeps whatever profit it can make from the transaction. That's free enterprise, and I have no beef with that.

The deceit behind Amway/Quixtar is that its distributors (now rechristened as "IBO's") are part of the business (as a link in the distributor chain) when in fact they are the customers. It matters not to Amway/Quixtar what its so-called distributors do with the products they buy from it, because Amway/Quixtar makes its profit at the point of sale to the distributor. The Amway/Quixtar kingpins further cash in by preceding distributors to buy a boatload of motivational materials.

You can argue that anyone who let's himself get suckered into believing he's a part of the Amway business rather than just a chump customer of that Ponzi scheme deserves what he gets. Maybe, but that doesn't excuse the Amway clans and their kingpins from operating the sleazy business they do that exploits the ambitions, naivety, greed, or foolishness of their "distributors".

Regards, Bill