HARRISBURG -- Pennsylvania Attorney General Mike Fisher today announced that his Bureau of Consumer Protection, the Federal Trade Commission (FTC) and five states filed a lawsuit against a Nevada-based multi-level marketing company for allegedly operating an illegal pyramid scheme that falsely promised substantial earnings in the promotion of home, nutritional and beauty products.
"We contend that this company's illegal business practices deceived consumers into spending thousands of dollars when it knew the vast majority of participants would never recover their money," Fisher said. "One Pennsylvania woman spent $41,000 and received little to nothing in return."
Fisher said the suit was filed in U.S. District Court in Las Vegas against Equinox International Corporation, 10190 Covington Cross, Las Vegas, Nevada; Advanced Marketing Seminars, Inc. (AMS) the promoter of Equinox, and BG Management, Inc. (BG) a management company for Equinox. Also named as a defendant is William Gouldd the founder of Equinox, AMS and BG.
The suit was filed under seal on August 3. The seal was lifted August 6, at which time District Court Judge Johnnie B. Rawlinson issued a temporary restraining order, froze the defendants' assets and appointed a receiver to oversee the assets pending trial. The lawsuit seeks a permanent injunction and asks the court to order the defendants to pay consumer restitution, civil penalties to five states, including Pennsylvania, plus the Commonwealth's costs of investigation.
According to the suit, Equinox operated a multi-level marketing company which encouraged consumers to become distributors for products including water filters, vitamins, nutritional supplements and skin care items. Equinox distributors ran classified ads in the "help wanted" sections of newspapers which implied that a salaried position was being offered. Those who responded to the ads were instead given a sales presentation designed to recruit new distributors.
The suit claims that Equinox told potential distributors that they could earn money by selling products or recruiting additional participants but emphasized that the real way to make money is through recruiting, not through sales. New recruits were encouraged to purchase $5,000 worth of products to become a manager, rent desk space for $300 to $500 a month, obtain their own telephone line and attend training seminars that cost between $300 and $1,000.
It's also alleged that participants were told that "financial gains were dependent upon the continued successive recruitment of other participants" and that retail sales are not required to make money.
"Our investigation determined that a very small percentage of distributors actually recoup their expenses," Fisher said. "In reality, the majority of participants drop out of the program with little or no earnings despite the defendants' claims that everyone who participates in the program will receive substantial income."
The Commonwealth is asking the court to:
The Commonwealth's case is being handled by Senior Deputy Attorney General J.P. McGowan of Fisher's Bureau of Consumer Protection Office in Scranton.