Tele-Sales, Inc. (TSI) Responds to `Malicious and Untrue' News Release of Arizona State Attorney General's Office

OKLAHOMA CITY, Feb. 12 /PRNewswire/ -- Stan Dennison and Eddie Keith are not easy men to rile. But they are finally angry, and industry analysis in both the direct selling and telecommunications industry say they have a good right to be.

What has so upset the co-founders of TSI -- an Oklahoma City-based direct seller of prepaid calling cards and other long distance services -- is a press release by the Attorney General's office subsequent to TSI's agreement with the State. "The press release entirely mischaracterizes the content and the spirit of the agreement," TSI President Stan Dennison says. "It is the result of some mean-spirited people in the Attorney General's office who were unable to demonstrate or enforce their prejudices regarding TSI so they are hoping the media will carry the water for them."

More than a year ago TSI received an "inquiry" from the State of Arizona. Ever since then, they have been cooperating with the State of Arizona, answering questions, responding to requests for information. TSI has even agreed to pay for the State's "investigation" of the company, and to make minor changes and modifications of its marketing plan to satisfy the requirements of the State. TSI has not been fined. TSI has not been found guilty of doing anything wrong in Arizona. TSI has not admitted to any guilt. TSI is currently legally selling its products and services in all 50 United States and in Canada. It was recently recognized by Premier Telecard magazine -- the largest prepaid calling card magazine in the United States and Canada -- as "one of the fastest growing direct selling companies in the United States and Canada...Tele-Sales has set itself and its standards to lead the pack in the telecard industry."

In other words, not only is TSI a tremendously successful direct seller of long distance phone products and services, it's a good citizen. But now TSI is not sure it has done the right thing. "Being a good citizen doesn't seem to be very safe in Arizona," Stan Dennison now says.

"Disregarding the facts of who we are and what we do and the nature of our agreement," Stan Dennison says from his offices in Oklahoma City, "the Arizona State Attorney General's office issued a press release the headline of which characterized TSI as 'A Pyramid.' Well, the last time I checked, pyramiding is illegal in Arizona. I'll tell you, if a private citizen had said the things this press release says, I'd be suing him...and I'd win!"

The reason for his and Eddie Keith's sense of chagrin is a February 11, 1997, press release from the Office of the Attorney General Grant Woods. Dennison and Keith say the press release makes the following untrue statements and allegations about TSI:

  1. The press release describes TSI as a "pyramid," a charge which Dennison and Keith say the Attorney General's office knows is untrue. "Pyramiding is a crime, and it is the sort of charge that must be proven in court," Stan Dennison says. "TSI is not a pyramid! We're proud of our products and our sales force, and we won't allow them to be slandered in this way."
  2. "The press release from the Attorney General's Office is willfully and egregiously incorrect in stating that it costs $100 to become an independent representative of TSI," Dennison says. "There is no way the AG's office could have been reviewing our materials for nearly a year and a half and not know that the only cost to become a TSI Independent Representative is $40 for an Independent Representative manual and marketing kit, sold to the Independent Representative at cost, which is in complete agreement with the laws of the State of Arizona!"
  3. The press release from the Attorney General's Office alleges that "In order to make money, the representative is required to recruit two new 'independent representatives.' " Stan Dennison completely denies this characterization of TSI's marketing plan. "No one has to recruit anyone to make money with TSI. You can sign up as a distributor today, never ever sign up anybody but yourself, and make money half a dozen ways. You can buy the TSI prepaid calling cards at wholesale and sell them at retail. You can sign up one-plus long distance customers and earn residual income on their long- distance usage. You can market our new paging program. Only if a person wants to build a sales organization and earn overrides in the TSI commission structure will that person sponsor and train others to sell our products. The Attorney General's office knows this! They have to know this!"
  4. The news release of the Attorney Generals office goes on to say: "The consumer is paid in phone cards and dollars when a specified number of recruitments are complete." Again, Stan Dennison is adamant: "Consumers of our products and services don't get paid anything! They pay us! That's what we're in business to do: sell competitively-priced products and superior services to satisfied consumers! And nobody -- NOBODY! -- in TSI makes any money for any number of recruits! The only way people make money in our company is by selling our products!"
  5. Rule number 5 of the Tele-Sales Policies and Procedures appears to support Dennison's Statement: "The Company's program is built upon retail sales to the ultimate consumer." Rule number 6 goes on to state: "Any representative, who sponsors other representatives, must fulfill the obligation of performing a bonafide supervisory, distributing and selling function in the sale or delivery of product to the ultimate consumer..."
  6. According to the February 11, 1997, "News Release" by the Office of Attorney General, Grant Woods is alleged to have said: "The sale of phone cards was secondary here... The real goal was to recruit more people to sell the cards. As with any pyramid scheme, the opportunity to make money stops when the pool of available 'representatives' dries up." The news release goes on to infer that " consumers will lose money" with TSI.

TSI markets long distance products and services -- including prepaid calling cards, one-plus long distance service, pagers, etc. -- in a direct selling fashion substantially similar to Amway, Mary Kay, Shaklee, Discovery Toys, etc. Distributors buy for resale to retail customers. The company's marketing program has been structured to fit within the "Amway safeguards" applicable to direct selling companies which were approved in the landmark 1979 Amway decision. Among the safeguards the company enforces to maintain strong ethical standards are:

  1. 70% rule prohibiting reorder before sale or use of 70% of previously-purchased inventory
  2. Prohibition of inventory loading
  3. Industry-standard buyback policies for terminating distributors
  4. Prohibition of hypothetical earnings representations
  5. Requirement of distributor supervisory responsibilities of sales organizations
  6. No purchase requirement to become a distributor other than the industry-standard requirement of a modestly priced sales kit sold to the distributor at company cost
  7. Ongoing Retailing Requirements and usage of the product by the end consumer (as evidenced by TSI excellent "bum rates," etc.) The more than 200,000 Independent Representatives of TSI generate the sale of more than 250,000 minutes of long distance service each day!
"I really believe," Stan Dennison responds, "that this news release is an effort by the Attorney General's office to undermine the spirit of the Assurance. The Attorney General specifically asked TSI not to publicize the Assurance. We were faithful to that agreement...only to find the Attorney General's office had issued this inflammatory new release which mischaracterizes the Assurance. The Attorney General's office could have made any of these charges anytime in the year and a half we've been talking. Only after our good faith agreement do they start splashing these lies everywhere! TSI sells long distance services! That is our primary goal. Without the sale of long distance, no one makes any money, because there is no money in just recruiting! And the long distance services we sell get used: We have an 85% burn rate on prepaid calling cards alone. That means that every month, 85% of the minutes purchased are used by the end of the month."

TSI is a high-tech, people-friendly response to the need for non-traditional avenues for selling and advertising long distance services. This sort of direct sale is part of a marketing trend that is not isolated to the telecommunications industry. Advertising Age predicted that a major share of media advertising budgets would shift from mass advertising to "point-of-purchase" sales-advertising on a more personal, one-on-one basis that maximizes the effectiveness of advertising and reduces costs. That's exactly what TSI does. "Instead of spending thousands of dollars on advertising," Stan Dennison says, "we pay our Independent Representatives commissions on their sale of our prepaid calling cards, one-plus long distance service, and so forth."

And the resulting retail sales are impressive. TSI sells more than 250,000 minutes of long distance service every day. Since beginning business more than two years ago, TSI has fulfilled the purchases of more than 500,000 customers. One-Plus customers are billed for their long distance usage subsequent to the usage occurring, and prepaid calling card minutes are escrowed against usage as soon as they are purchased. "We have never hurt anybody," Stan Dennison exclaims, "and we've taken steps to make certain we never do. We pay commissions to our representatives for their retail sales every day. Millions of dollars of sales commission have been earned by the citizens of the State of Arizona, and this sort of slander by the Office of the Attorney General is an affront to these fine citizens and their honest home-based businesses."

"From the very first contact of the State of Arizona with TSI, we have acted in good faith," Stan Dennison says. "We told the Attorney General's office that we would correct any minor policy or procedure they asked us to correct, and the Assurance of Discontinuance we have agreed to confirm our earnestness. But we will not be characterized as villains. Not by the Attorney General. Not by anyone. TSI looks forward to the opportunity to present our side of this rapidly developing story, and we will respond to all media inquiry."

SOURCE Tele-Sales, Inc.

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