by Sarah Berman
The day-to-day workings of the company often seemed impenetrable, even to members and affiliates, but in weekly meetings Raniere’s team regularly rallied around wins and growth. For a select crew of Raniere’s business and secret romantic partners, it seemed as if commissions were coming in like water through a fire hose. Raniere traveled from state to state, hotel conference room to hotel conference room, tapping into yet more social networks. The executive team became something of a family, with Raniere’s father, James, even pitching in with advertising consulting. Complaints and troublemakers were easily explained away by jealousy. Only a few years after his IQ claim had been publicized, it seemed as though Raniere’s genius was paying off.
Natalie noticed that Raniere had a special gift for finding female affiliates with vast resources and networks. All it took was reaching one wife of a well-connected Southern minister, and “her entire flock followed,” Natalie wrote in her memoir The Program. “Keith well knew how a single convert, if sufficiently rich and prominent, could underwrite his entire business.”
Arkansas was one of the first states to catch on that Raniere wasn’t just running a wholesome “buyers’club.” The attorney general filed a complaint in February 1992 alleging that Consumers’ Buyline was an illegal pyramid scheme. By 1993, Raniere claimed to have sold $1 billion in products and recruited nearly three hundred thousand members. Raniere, Cafritz, and Unterreiner signed settlements with Arkansas and other state regulators agreeing to refund all members who asked for their money back.
By 1996, the company was facing investigations and lawsuits in twenty-three states.
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CONSUMERS’ BUYLINE WAS following in the footsteps of hundreds of companies with similar network-based sales structures. Though it went by many names—direct selling, multi-level marketing, chain distribution—a pyramid-like organizational chart wasn’t always a red flag to regulators.
Companies like Amway first came under fire from the Federal Trade Commission (FTC) in the late 1960s and early 1970s. Any business model that relied on exponential employee recruitment was deemed inherently unsustainable and doomed to collapse. They became known derisively as pyramid schemes, and some were shut down for fraud.
The first pyramid scheme ever to be successfully prosecuted by the FTC was Holiday Magic, a soap and cosmetics company run by a flamboyant door-to-door salesman named William Penn Patrick. The government received complaints that distributors weren’t actually making the money Holiday Magic recruiters promised. “More often than not, the hapless distributors ended up with basements or garages stacked to the ceiling with jars of avocado face cream,” wrote journalist Steven Pressman, who charted the early days of sales-meets-self-help in his book Outrageous Betrayal.
Holiday Magic, investigators found, was promising that sellers could easily become millionaires as long as they signed up five new people every month. This sounded great if you didn’t think about it too hard, but the math quickly became unsustainable. At that recruiting pace over the course of a year, each Holiday Magic seller would be overseeing a total of 244,140,625 new recruits, about half the population of North America. Markets across the United States quickly reached a saturation point, leaving some eighty thousand sellers on the hook for piles of products with no income. The company was found guilty of deceptive business practices and was forced to close in 1974.
Patrick’s money-making empire wasn’t just about pyramid selling. As reporter Dann Gallucci recounted on the investigative podcast The Dream, he’s also credited with founding one of the first executive self-help seminars of its kind, called the Leadership Dynamics Institute, in 1967. At the height of the Summer of Love, while young people were challenging authority and leaving society, there was this other “human potential” movement bubbling to the surface, one that traded in ideas of accessing unused parts of the brain and accomplishing the previously unimaginable through psychological transformation. Tapping into the early days of this movement, Patrick claimed that his four-day Leadership Dynamics seminars would teach participants how to build the discipline and trust needed to succeed in a climate of excessive permissiveness.
“If you wanted to succeed at Holiday Magic, you had to attend the seminars,” Gallucci told me. The seminars included bizarre and abusive exercises. Groups were punished for the perceived shortcomings of an individual member. Participants were beaten, mock-crucified, or put in coffins to elicit emotional responses. The company faced its own legal battles and was shuttered in 1973, though it inspired the creators of other leadership seminars, including Patrick’s longtime colleague Werner Erhard, who created est, the self-help method that later became Landmark Education.
Holiday Magic’s implosion did not mark the end of pyramid-shaped sales, as new companies stepped in to fill the gap. Amway changed the game by waging an expensive, politically connected legal battle against the FTC in 1975 and winning the right to continue its chain distribution sales under the banner of “multi-level marketing.” The company argued it had instituted rules that distinguished its dealings from that of a fraudulent Ponzi scheme. The so-called Amway rules became an industry-led response that covered the most obviously exploitative elements of a pyramid: don’t charge a huge upfront fee; don’t require people to endlessly stock up; have some fine print somewhere that allows people to return product, even if restrictions apply.
While the FTC continues to prosecute smaller multi-level marketing scammers who make wildly false claims and run away with money, the industry has gained staying power, if not full-on legitimacy, through the size and influence of players like Avon and Amway.
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RANIERE’S CONSUMERS’ BUYLINE was part of a new wave of multi-level marketing disruptors that seemed committed to pushing the boundaries of these industry-suggested rules. Finding safety in numbers, Raniere and many others thrived in the gray area created by the government’s unclear definition of a pyramid. Today multi-level marketing is a multibillion-dollar industry, even if the same unsustainable math still applies.
Internally, Raniere claimed that his company’s legal troubles stemmed from either a misunderstanding or a political conspiracy to take him down. He said “Bill Clinton’s people” were out to get him—a theory that would be recounted to NXIVM students decades later.
In court documents Raniere claimed that the company spent millions of dollars on legal fees, losing tens of millions of dollars in business along the way. “Throughout this process I had learned how people can cheat and win,” he wrote. “In mathematical game theory cheaters, if undetected, always have the advantage because they have more options.” Raniere added this finding to his “human behavior equation,” later taught in NXIVM lessons.
Consumers’ Buyline settled with several more states before it was forced to fold in 1996. A New York complaint argued that the emphasis of the organization “is clearly not the sale of a product, but on recruiting new organizational rows to boost memberships.” Like all pyramids, read the complaint, this one was “destined to collapse.”
Raniere agreed to pay $40,000 but admitted no wrongdoing. Pam Cafritz, Karen Unterreiner, and Raniere all signed a decree that they would never operate another illegal chain distribution scheme.
From that moment on, Raniere became a nonentity when it came to business records. He told his inner circle that because powerful forces were gunning for him, he needed to protect himself by not having a driver’s license, not owning any property or businesses, and basically staying off the grid entirely. Instead he encouraged the women around him to put their names and bank accounts on the line.
CHAPTER FIVE
When Keith Met Nancy (and Lauren)
The beginning of NXIVM was also the beginning of the end of Keith Raniere’s relationship with Toni Natalie.
In the wake of the Consumers’ Buyline shutdown, Raniere and Natalie redirected their efforts to a new mu
lti-level marketing company that sold discounted nutritional supplements. Because of Raniere’s trouble with state regulators, paperwork was mostly in Natalie’s name. Like Consumers’ Buyline, the business relied on the constant recruitment of new sellers. And although money was coming in, Raniere wasn’t living up to relationship agreements that Natalie thought had been clear. She wanted to settle down, which was why she’d bought the house that she and Raniere shared, a short walk from the Flintlock house. She wanted the workday to end at five o’clock so they could have dinner as a family. But Raniere was too absorbed in his mission to change the world, according to Natalie. He wasn’t giving up his late work nights or, she would later learn, his other girlfriends. If Natalie protested, Raniere would make it clear that the problem was her own insecurity and jealousy.
“According to Keith, the reason we had issues is because I had issues,” she said. “It’s never Keith’s issue.”
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IN LATE 1997, Nancy Salzman was going through her own relationship troubles. Her second marriage had recently ended after her husband of six years came out as gay.
Salzman had worked as a nurse and a hypnotherapist trained in NLP. Another outgrowth of the human potential movement, its creators have claimed that it can be used to break addictions, resolve phobias, and even treat “psychosomatic illnesses.”
Salzman studied under NLP’s two founders, John Grinder and Richard Bandler, who based their techniques on the published works of psychiatrist Milton Erickson. Erickson’s method was sometimes called “covert hypnosis” because it resembled talk therapy and didn’t require access to deep trance states. Patients could carry on a conversation without knowing or realizing that an induction was happening.
Grinder and Bandler taught anchoring and reframing techniques in live hypnotherapy seminars. Bandler later bragged to audiences that he made up the field of NLP so that nobody could tell him he’s wrong and often recounted stories of covertly manipulating and harming adversaries using hypnotic suggestion. Bandler rejected experts, and experts rejected his life’s work as unscientific. But that didn’t seem to slow NLP’s growth in popularity throughout the 1980s and 90s.
Salzman started her own hypnotherapy practice called the International Center for Change, which she maintained until 1997. Her second husband was a doctor who had referred patients to her therapy practice. When he left, those shared clients went with him. Salzman was going through a depressive episode, according to people who knew her, and friends were eager to find her a new source of purpose and inspiration.
In a 2009 deposition, Salzman said that she and Raniere had been introduced by a woman named Sandy Padilla, who’d married Salzman’s first husband, Michael Salzman, and sold supplements for one of Raniere’s companies. When Raniere put a call out to find a skilled neuro-linguistic programmer, Padilla suggested Nancy, who was already teaching communications courses based on NLP principles.
Raniere, who was still refining his “human behavior equation,” began testing out various self-help methodologies on the women in his orbit, including Karen Unterreiner and Toni Natalie and then Nancy Salzman herself. “I watched him work with some individuals,” Salzman recalled. “And when I asked him to mentor me, he said that if he mentored me, I would never be able to resume my career in the same way.”
Raniere set up a video camera to record his early conversations with Salzman. He gave her a document that outlined the terms of his mentorship. It took her several days to make sense of the heavy-handed noncompete agreement Raniere was asking her to sign. “It just seemed like he was asking something of me that I wasn’t sure…how to handle,” she recalled. Part of the agreement stipulated that if Salzman ever left the partnership, she could never again sell self-help or counselling services. Salzman said she was convinced Raniere was onto something groundbreaking, and went on to test his theories in her consulting work in the spring and early summer of 1998.
What sales and human behavior theories was Raniere pulling from? People who knew Raniere then say he talked about Werner Erhard, the now-infamous creator of est leadership training, which later became Landmark Education. In the 1970s Erhard had carved out a path in the “human potential” movement. The likes of John Denver, Diana Ross, Buzz Aldrin, and Hollywood exec Ted Ashley had all publicly boasted about taking est’s weekend leadership seminars, which promised personal transformation. The classes taught that suffering is optional, that the power of positive thinking creates reality, and that there’s no such thing as a “victim.”
Heidi Hutchinson recalls that in his pre-NXIVM days Raniere was also researching Scientology and neuro-linguistic programming. At one point he handed her a book on NLP, and later, when she lived in Los Angeles, he asked her to mail him all the teaching materials she could find at the Church of Scientology’s renowned Celebrity Centre in Hollywood. In letters to his inner circle he used Scientology terminology and later adapted some of it into NXIVM teachings—though in court battles, he later denied being influenced by Dianetics, L. Ron Hubbard’s pseudoscientific theory of mental health. Both NLP and Dianetics were marketed as “tech” that could be used to eliminate bad thoughts and behaviors and replace them with good ones.
Raniere claimed that he first became interested in establishing his own human potential school long before Consumers’ Buyline or NXIVM—that back in the 1980s he’d raised almost $50,000 to fund it and had interviewed potential instructors. He abandoned the idea, though, because he couldn’t find people who were ethical enough to learn and carry out his teachings. Until he found Salzman.
She was, according to his affidavit, “the ideal person to learn, duplicate and apply my model.”
Salzman was already familiar with the culture of NLP-adjacent leadership training and had even led a goal-setting seminar called Advanced Neurodynamics. After months of mentorship and testing she finally agreed to launch a human potential school with Raniere. Executive Success Programs (ESP) was officially incorporated in July 1998. On January 23, 2002, it would become NXIVM, the company that connected the various parts of Raniere’s self-help empire.
Nancy Salzman’s coming on board was a huge win for Raniere. It wasn’t just her skills; she also had a wealth of connections. Salzman would later bring in her own daughter, Lauren, as well as friend and former client Barbara Bouchey, as major advocates for NXIVM. Both would be central figures in Raniere’s organization, as romantic partners and true-believer workhorses.
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LAUREN SALZMAN WAS a senior at Oswego State college when she met Raniere in June 1998, a month before Executive Success Programs became official. At one point, while at home over summer break, she stopped by Toni Natalie’s supplement store to meet Raniere’s growing team. Nancy then hosted a dinner party to formally introduce her new business partner and friend.
Lauren knew right away that her mom admired Raniere. She learned that Nancy had been implementing some of his “innovative ideas” at one of her consulting jobs and that she was “getting good results.”
Nancy made it clear that she wanted to share these good results with her daughter. “When I graduated, my mom told me they were going to teach classes that were going to be good for helping people achieve their goals,” Lauren said on the witness stand at Raniere’s trial. “She made a deal with me that if I came to classes for six months, then she would support me, no matter what I did after that.”
Nancy and Raniere began developing therapies and coursework right away, much of it combining elements of existing psychological and self-help therapies. Raniere later claimed that traditional therapists only addressed people’s reactions to the outside world, whereas his methods aimed to change the underlying meaning of the “stimulus” in people’s minds. To that end, the early building blocks of the NXIVM curriculum took the form of one- or two-hour lessons, called “modules,” each of which featured guided group discussion that prob
ed and destabilized basic definitions of concepts like honesty, value, self-esteem, trust, good and bad. Raniere would file a patent application for the first twenty modules in September 2000 and develop hundreds more by 2003.
Twenty-five people, including Lauren Salzman, participated in an early trial run of classes held two times a week over six weeks at Nancy’s hypnotherapy office, located in a low-slung brown brick complex that was converted into NXIVM’s Albany headquarters. “At the end of the six weeks, I decided I wanted to stay,” Lauren said.
NXIVM later compressed the six-week format into five- and sixteen-day “intensives” that packed five or more modules into ten-hour days, plus homework, or “outside practice.” Sessions were at first facilitated by Raniere and Nancy in person, and then later taken over by coaches like Lauren, who played videos of Nancy explaining the psychological concepts.
New students were encouraged to arrive with open minds, ready to let just about anything unfold. This helped ease recruits into a set of curious rules and rituals introduced at the beginning of every class. Students were instructed to take off their shoes, put on a colored sash that signaled their rank in the organization, and bow when entering and leaving the teaching room. They learned that Keith Raniere was the leader of a philosophical movement and therefore held the title Vanguard.
When whoever was leading the session arrived, students were encouraged to stand up as if they were showing respect for a judge entering a courtroom. Everyone in the room recited a twelve-point mission statement, which began with “Success is an internal state of clear, honest knowledge of what I am, my value in the world and my responsibility for the way I react to all things. There are no ultimate victims, therefore I will not choose to be a victim.” The statement ended with a hearty “Thank you, Vanguard.” Then participants huddled in a circle and in unison said, “We are committed to our success!”