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Amway Forever: The Amazing Story of a Global Business Phenomenon by Kathryn A. Jones

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Turning Point in Wisconsin

Despite the positive public relations buzz, Amway’s troubles with the U.S. government continued. In 1982, Congress and the Internal Revenue Service investigated whether some Amway distributors were using their businesses as tax shelters and claiming large deductions for bogus or inflated expenses. A former IRS revenue agent had become an Amway distributor and, according to Jay, gave other distributors a “cleverly done but distorted and unreasonable interpretation of the tax law.”2 Amway cooperated with the IRS investigation, which cemented Jay’s belief that the federal tax system needed an overhaul with a flat tax and no deductions. The federal government wasn’t the only entity probing Amway, however. State governments had received complaints about the company, too, and attorneys general who focused on consumer protection were taking action.

One of the most aggressive states was Wisconsin. In July 1982, the State of Wisconsin filed a lawsuit against the company and Amway Direct Distributors who were doing business in a group called World Wide Diamond in Milwaukee County. Wisconsin Attorney General Bronson C. Follette, Assistant Attorney General Stephen J. Nicks, and Assistant Attorney General Bruce A. Craig brought the suit, which claimed that Amway had about 20,000 distributors in the state, 192 of which were directs. World Wide Diamond was holding meetings for new recruits twice a week, during which they were told that their incomes from their Amway ...

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