Decembere 16, 2005
Trek Alliance and a group of former Equinox International distributors are among those barred from promoting multilevel marketing programs and operating illegal pyramid schemes in a Federal Trade Commission settlement.
The FTC charged that three corporations and their owners and officers used deceptive practices to promote schemes. The defendants will pay about $1.5 million in consumer redress as part of the settlement.
Three of the defendants, who had been top distributors for Equinox International, a multilevel-marketing firm sued by the FTC in 1999, are permanently banned from the multilevel-marketing industry.
The defendants sold products such as water filters, cleaning supplies, nutritional supplements, and beauty aids through a nationwide network of distributors.
In its complaint filed in December 2002, the FTC alleged that while distributors were told they could make money by selling the products, the defendants emphasized that they could make more money by focusing on recruiting new distributors.
According to the complaint, distributors used deceptive claims to lure prospective participants, including claims that salaried jobs were being offered. The complaint further alleged that the defendants misrepresented that distributors were likely to earn substantial incomes, and that the defendants operated an illegal pyramid scheme.
The defendants -- Trek Alliance, Inc.; J. Kale Flagg; Richard and Tiffani Von Alvensleben; Harry Flagg; Trek Education Corporation; and VonFlagg Corporation -- are a multi-level marketing company, its owners and officers, its training arm, and its parent corporation.
The orders against Kale Flagg, the Von Alvenslebens, and the corporations permanently ban them from multilevel-marketing. In addition, Kale Flagg is ordered to pay $360,000 and the Von Alvenslebens to pay $515,000.
Harry Flagg -- who, unlike the other individual defendants, had not previously been involved in multilevel-marketing -- is not subject to a ban, but is prohibited from participating in illegal pyramid schemes and is required to pay $20,000.
Additionally, as part of the settlement, the defendants have authorized their insurance company to pay $600,000 to the FTC to be used as consumer redress. The payment settles a claim against a Directors & Officers liability policy issued to the defendants.
