By Bryan Kramer,
Read Part 1 of this series before you read Part 2 below :Part 1: Hoprocket is real or a scam?
Part 2: Hoprocket : Is it real or scam?
Part 2: Hoprocket : Is it real or scam?
This is part 2 of a three part series of articles looking into Hoprocket the latest craze to hit the streets and villages of PNG.
There were hundreds of comments in response to my initial article whether Hoprocket is a great deal or steal? The frenzy of responses left me baffled just how many people have already bought into these scheme. While there were many who appreciated my findings - in the least confirming their doubts about whether to sign up there were just as many who took offence to it. This included two of the company's US representatives who have been in PNG peddling Hoprocket namely Danny Licciardi and his partner Tina Lacangelo.
I explained in my last article Hoprocket claims to be travel company offering wholesale rates on travel deals to people who sign up as a member, giving them access to its online travel search engine (internet website that searches for specific travel deals or packages -similar to Google but specific to travel deals available over the internet). However it also promotes this product using a pyramid style scheme offering commissions to members to sign up other members.
So when did the company actually start and who is behind it?
It was only launched on 15th July 2015 making it a relatively new venture or start-up company. However it's management certainly isn't, its made up of former executives of JM Ocean Avenue a Mulit-Level-Marketing (MLM) company based in Hong Kong and operations in the US (Utah),
JMOA was formed in June 2014 after a joint venture merger of JM International and Ocean Avenue. JM International is another MLM company run by Chinese nationals and based in Hong Kong while Ocean Avenue was based in the US Utah. Following the merger the company changed its name to JM Ocean Avenue.
Ocean Avenue was established in 2012 and founded by Fredrick Ninow and Kenn Dunn. The company sold health and life style products using an extensive direct sales and network marketing.
JMOA was operating in PNG, Seba Sapau who was an active member stated:
"I was an active member of JM Ocean Avene..it hit PNG like Hoprocket and we all joined. It went bazooka and now??? My sister told me about Hoprocket I Goggled it and Bang! I didn't even want to read the contents..the face was the founder of JMOA. How can he ditch us and start another scam? I feel like putting a buckshot in his head. Now F%#k off you believers. Of course I was getting bonuses..of course products were unreal, longevity??? Nope.. it does not last trust me"
In July 2015 JMOA's CEO Tim Richardson and its US executives namely Fred Ninow and Gregory (Tuffy) Baum left the company taking over one of its recently launched brands Hoprocket.
It is unsure why Ninow and other top executives abounded JMOA to join Hoprocket, whether there was a fall out or deliberate to set-up a new scheme as is the case with most pyramid schemes.
Danny Liccardi opposed by article suggesting Hoprocket was not a pyramid scheme claiming its a Multi-Level Marketing company.
So is Hoprocket an illegal Pyramid Scheme or a legitimate MLM company.
Danny Licciardi joined Ocean Avenue in December 2013 as a Master Distributor (a person has established networks built up over a number years who sell a company's products and services through his sub-distributors or networks exclusively in a geographical area. Master distributors are provided a financial incentive to join a business via some sort of financial incentive, which is always in addition to their payout via the compensation plan. These incentives range from small percentages on gross revenue, receiving pre-existing volume in a position, cash signing bonuses etc.
So what is Multi-Level Marketing?
According to Wikipedia it is one type of direct selling. Most commonly, the salespeople are expected to sell products directly to consumers by means of relationship referrals and word of mouth marketing. MLM sales people not only sell the company's products but also encourage others to join the company as a distributor.
"Companies that use MLM models for compensation have been a frequent subject of criticism and lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price fixing of products, high initial entry costs (for marketing kit and first products), emphasis on recruitment of others over actual sales, encouraging if not requiring members to purchase and use the company's products, complex and exaggerated compensation schemes, the company and/or leading distributors making major money off training events and materials, and cult-like techniques which some groups use to enhance their members' enthusiasm and devotion."
"The U.S. Federal Trade Commission (FTC) states: "Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors. They're actually illegal pyramid schemes. Why is pyramiding dangerous? Because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. And when a plan collapses, most people—except perhaps those at the very top of the pyramid—end up empty-handed."
It is my view MLM is best described as Mis-Leading Marketing.
So what is the difference between legitimate MLM and illegal Pyramid Scheme?
US Attorney Jeffrey Babener, a network-marketing legal expert and attorney based in Portland, Oregon identified red flags that may cause law enforcement agencies to investigate a business:
"The last thing you want to do is become part of a multilevel system that is, in reality, an illegal pyramid scheme. According to the Direct Selling Education Foundation, a pyramid scheme is an illegal scam "in which large numbers of people at the bottom of the pyramid pay money to a few people at the top. Each new participant pays for a chance to advance to the top and profit from payments of others who might join later."
Both MLM and pyramids have multilevel payment systems, but that is where the similarity ends. Network marketing is a legal, ethical manner of doing business. Pyramids are illegal, fraudulent con games. In MLM, you are a legitimate seller of a product or service and business opportunity. In a pyramid, you are a crook.
Programs that pay fees for recruiting. "A legitimate MLM opportunity will have compensation based on product sales and not on recruiting," Babener states. If money is paid for signing up new distributors rather than for product sales, the business is likely to be a pyramid scheme.
"Recruiters who misrepresent potential earnings. If the opportunity is sold as a "get-rich-quick" scheme, beware. The only people who do well are those who can sucker others into buying into a criminal confidence game."
"If you’re selling a product or service and it stands on its own in the marketplace and people would buy it because they want it, then you have a real, legitimate direct selling company. If on the other hand, the quality of the product is low, the price is high, then it merely becomes an excuse for people to buy the product because they want to qualify for the program in order to recruit others, make money, and earn commissions."
So two simple questions that needs to be answered to determine whether Hoprocket is in fact a legitimate MLM company or an illegal pyramid scheme are;
1) Are people in PNG signing up or investing in Hoprocket for the claim of wholesale travel fares or more specifically the opportunity to make fast money?
2) Is Hoprocket product low quality and the price high?
To answer the first question I believe if anyone has been approached to sign up by an existing member the key selling point is the opportunity to make money.
Is Hoprocket product of low qualify and priced high? Well the same travel deals it offers through PNG are also offered free on a number of existing travel company sites - the likes of Expedia etc. The fact you have to pay for something that is already offered for free confirms the price is already too high and thus no value in the product.
According to one of it's websites Hoprocket is an online membership based travel company claiming to use the worlds premier travel booking engine "offering discounts or wholesale rates on accommodation; condo's, car rentals, cruises, vacation packages; basically anything travel related" -well that's according to its promotional video.
This is where it gets interesting most of it's members swear by the company, claiming they have already benefited from the significant savings on domestic and international airfares. When I asked them to produce a copy of the ticket I received no response.
What I was able to confirm from both Hoprocket's website and Danny Licciardi is that it does not offer wholesale discount rates on airfares.
"Our savings aren't promoted with airfare. The airlines do not offer any savings so we can't pass any on to our members" However the savings we promote is Hotel, condos cruises and car rental" Licciardi said.
When I contacted the premier hotels in PNG the likes of Lamana and Holiday Inn they explained they had no direct affiliation or pre-existing arrangement with Hoprocket.
This is concerning because when you read Hoprocket PNG testimonials it claims its members enjoyed significant savings in airfares from Air Niugini and accommodation at our premier hotels.
When further questioned on this fact Liccirardi replied you tried being open minded? Do you know the definition of a pyramid scheme? "People that don't travel don't join, it's pretty simple."
I wonder if Licciardi emphasised this point during his seminars throughout PNG when encouraging people to invest in Hoprocket
Part 3 of this article will discuss the interesting conversation I had with Danny and his partner Tina, why Danny started deleting his own comments and Tina shut down or changed the privacy settings of her facebook account. We will also analysis the written response by their CEO to my article, the Mis-Leading Marketing tactics they adopt. Lastly we will look at the potential margins of profits Hoprocket executives and representatives will profit from PNG versus what they offer in return.