BULLETIN: Massachusetts Charges Purported Top 20 Shaklee MLM Distributor, Amid Allegations He Drafted Downline Members Into $10.4 Million Ponzi Scheme He Ran Through His Private Companies
John William "Jack" Cranney
BULLETIN: (UPDATED 5:03 P.M. EDT (U.S.A.) The office of Massachusetts Secretary of State William Galvin has alleged that a man who described himself as a Top 20 distributor for Shaklee Corp. — a multilevel marketing firm — drafted members of his 50,000-strong downline into a $10.4 million Ponzi scheme and promissory-notes scam that he was operating through his private companies.
John William “Jack” Cranney, 70, of Belmont, Mass., has been named in a cease-and-desist order that alleges the sale of unregistered securities and a fraud scheme affecting at least 36 people in 14 states through at least five businesses he created. The scheme was targeted at people Cranney got to know through Shaklee — and senior citizens were among the victims, Galvin’s office said in a complaint.
Cranney had been a Shaklee rep for 45 years, and the “Cranney family brought the Shaklee business to New England,” investigators said.
Investigators identified the businesses as Cranney Capital I LLC, Cranney Capital I Employee Stock Ownership Trust, Cranney Capital II LLC, Cranney Capital III Inc., and Cranney Industries, d/b/a Belmont Industries.
“Cranney used his affiliation with family, friends and colleagues at Shaklee Corporation . . . many of whom he has known for fifteen (15) to twenty (20) years . . . to gain their trust and solicit investments,” investigators charged. “The majority of Cranney’s victims are affiliated with Shaklee and many are senior citizens.”
And Cranney, according to investigators, falsely told his Shaklee victims that he was a “financial advisor and/or investment fund manager.”
In reality, investigators said, Cranney was at the helm of a scam that began in 2002 and “enticed unsuspecting victims with promises of high returns on safe investments.”
Some victims believed they were investing in a retirement plan, investigators said.
Named in the complaint as a “related party” but not charged was Howard Musin, whom investigators said was the registered agent of three of the Cranney companies.
“Musin has prepared tax returns for Cranney and his related corporate entities and other distributors for Shaklee up until 2011. In July of 2011, a federal court permanently barred Musin, his wife Jill Schwartz-Musin, and their three companies (SSC Services Inc., M-S Services Inc. and Schwartz’s Systems Corporation) from preparing tax returns for others after engaging in misconduct and fraud in preparing tax returns,” investigators said.
That fraud, according to investigators, involved the fabrication of “deductible business expenses” for clients, including Shaklee distributors.
Musin was in Cranney’s Shaklee downline, investigators said.
Read the complaint.
If Mr. Cranney had a “50,000-strong downline”, my assumption is that he’d be making tons of money as a result. If so, it’s hard to understand why he’d risk his empire by creating a Ponzi scheme. Am I missing something?
-PWD
Greed?
Hi Pat,
Perhaps this evidence exhibit coupled with the info in the complaint (complaint link in story above) will help you analyze this situation, Pat.
https://patrickpretty.com/wp-content/uploads/2012/07/cranney_exhibits.pdf
As time permits, please share your analysis. This is a very interesting case.
Patrick
I’ve reviewed the exhibit linked above, as well as the complaint. I see details about what he’s alleged to have done, but no direct answers as to why.
I have no idea how Shaklee works. Is there a minimum monthly purchase requirement? If I assume his 50,000 downline members averaged, say, just $25 per month in purchases and his override was just 3% (it’s reportedly 3-6%), his monthly gross income would be $37,500. Add to that the income from his educational seminars and training materials and it seems his monthly gross could have easily approached $50,000 – or $600,000 annually. Probably more.
Perhaps the answer to the question of why the Ponzi is that it enabled him to turn his decades-old good reputation into a large amount of capital NOW, vs. waiting for the money to come in as income over time.
Seems like Tony H may be correct in his comment above.
-PWD
Based upon the info below, I may have dramatically understated Mr. Cranney’s Shaklee-related income. Here are reportedly Shaklee’s requirements for being paid, according to one website:
“In order to receive a monthly commission check through the Shaklee compensation plan, you and your group – which includes you, your customers, and your downline members and distributors – must order a minimum of 250 PV (Point Value), with 100 PV or higher being purchased by you, personally. Almost all Shaklee products have a point value attached to them. Each time you add a new product to your online shopping cart, you will see your point total.
It certainly isn’t hard to find 100 PV worth of Shaklee products that you will want to order monthly…
At 250 PV, you will earn 4% commission on product sales; at 500 PV, your commission goes to 8%; at 1,000 PV it is 12%; at 1,500 PV it is 14%, and at 2,000 PV it is 20% (note: this is part of the new Shaklee compensation plan which only went into effect in 2010). There are also additional bonuses paid, but it would be too difficult for me to try to explain it here.
There are also additional bonuses for those who join as a GOLD Ambassador for $299 or as a Shaklee Super GOLD Ambassador for $750. As your business grows and you sponsor others into the company as GOLD Ambassadors, you can earn bonuses for each new GOLD.”
Source: http://www.natural-nutrition-vitamins.com/shaklee-compensation-plan.html
MLM companies traditionally show all distributors who joined since the time
of the great ice age. I had 60,000 in my downline, but now have just 18,000 who are
purchasing product. My company started purging the downline print-out two years ago whichis an unusual move in our industry.
I knew Jack Cranney from way back when he did several management training seminars for my Amway organization. (sold my Amway business in the 80’s)
Jack did an outstanding training event. I introduced him to his wife (if still married) after one of his training seminars. Jack liked to live well. There never is enough money. I haven’t talked to him in 20 years.
LH
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