Consumer Protection
YOUR EDITOR'S COMMENTS ON THE NEW FTC BUSINESS
OPPORTUNITY RULE BELOW THAT WILL HURT THE LITTLE GUY
AND
NOT EVEN REMOTELY SLOW DOWN CROOKS
Two comments I have gotten said that the new FTC proposal "may be good" because it would stop crooks! FAT CHANCE! The current rule that is in effect could be used to stop crooks - has it? NO! Why did the FTC jump on hitting Equinox, a case listed in their proposal? Because your editor and the old MLM Insider Magazine had Equinox featured as a scam on ABC's 20/20! It embarrassed the FTC, but it still took almost a year for the FTC to get off their buns to do anything. Equinox was selling $10,000, $20,000 and $30,000 packages and not returning money when product was returned. The FTC had reports from each person on the 20/20 show. When the FTC hit Equinox, nowhere in the court case did they even mention that Equinox violated the $500 Business Opportunity Rule. The FTC did not use it and hasn't used it when they should have!
Your editor got Global Prosperity on TV. Nightline featured their $100,000 scam. Did any court case the Feds file mention the Business Opportunity Rule and Global Prosperity's failure to register because they exceeded the $500 limit currently in effect? NO!
Has the FTC hit Liberty League, a take off of Global Prosperity above, (every Aussie 2-up sale of theirs is over $1200 now) for their failure to register under the current $500 limitation? The Liberty League Offshore meeting is $63,000. Isn't that a little bit over the current $500 requirement to register with the FTC (sarcasm intended)? Has Liberty League registered? NO!
The new, nutty FTC proposal wants to hire more bureaucrats to shuffle paper in Washington. We need people with guns and badges, not paper shufflers!
Lowering the registration point to zero dollars is nuts. The FTC can't and hasn't stopped crooks at the $500 level of requiring registration and disclosure. Let the FTC prove they can enforce the $500 limit before they drop it to zero and require that millions of pieces of paper be shuffled.
I was disgusted with the 2extreme performance out of Dallas. These crooks used money hype infomercials to get retired folks to put $10,000 to $30,000 into stocking product, video tapes for mailing, and worthless names to mail the video tapes to. I personally helped over 10 of the older folks scammed by 2extreme file complaints with their state AG, the Texas AG in Lubbock who was handling it, and the FTC regional office in Dallas. Despite repeated calls to all the preceding = NOTHING. Did each one of these complaints exceed the $500 limitation? Did we tell the FTC that in letters? Yes, and that it was a Pyramid Scam. The information packages were sent U.S. mail to all regulators. When did the FTC take action?? 2.5 years later! By then 2extreme had been looted of all money and sold. The FTC hit got an empty bag! None of the folks I helped send to the FTC got a single cent back! Doesn't over 10 complaints from $10k - 30k, with no money back in returns, establish a scam track record over the FTC Business Opp rule of $500?
I personally felt bad about the 2extreme case above. Why? I didn't go to the major television media and embarrass the FTC into moving faster. After exposing Equinox on major television, it only took the FTC a year to do something. If I had done that with 2extreme, some of my poor old folks would have gotten some of their money back! That still leaves me with a sense of guilt because I did not go through the thrash (a lot of work and time) to embarrass the FTC!
Rod Cook
Ur Editor
Terrible! This would require another piece of paper for new distributors to sign. The five areas to be enforced below only appear to have one deterrent (honoring refunds) to Pyramid Schemes that plague our industry and cause us to lose distributors or potential distributors in the millions.
Also by implementing this rule the FTC can slip in and make harmful changes to our Industry without it being noticed.
For Release: April 5, 2006
FTC Proposes New Business Opportunity Rule
The Federal Trade Commission is proposing a rule to protect consumers from bogus business opportunities and further enhance law enforcement efforts in this area. The rule would cover business opportunities commonly touted by fraudsters, while minimizing compliance costs for legitimate businesses. Currently, the FTC brings law enforcement actions against fraudulent business opportunities under two laws, the Franchise Rule and the FTC Act. Neither is specifically designed for the unique scams that occur frequently with business opportunities.
The FTC has brought more than 200 enforcement actions against business opportunities using the Franchise Rule since it took effect in the 1970s, and numerous cases against work-at-home and multilevel marketing companies under Section 5 of the FTC Act. Since 1995, the Commission has conducted 12 sweeps on business opportunities
.
The proposed rule would eliminate the $500 minimum investment requirement from the Franchise Rule, meaning it would apply to all business opportunities, even if they have a smaller start-up cost. The proposed rule also would eliminate many of the 20 disclosures that are required for franchises (trademarks, for example), but do not apply to business opportunities. Instead, the proposed rule would require a one-page disclosure addressing five items: whether or not sellers make earnings claims; a list of any criminal or civil legal actions against the seller or its representatives that involve fraud, misrepresentations, securities, or deceptive or unfair trade practices; whether the seller has cancellation or refund policies and such policies’ terms; the total number of purchasers in the past two years and the number of those purchasers seeking a refund or to cancel in that time period; and a list of references.
The proposed rule would not require any business opportunity seller to make an earnings claim. However, if they did make an earnings claim, they would be required to provide additional substantiation in the form of an “Earnings Claims Statement.”
The proposed rule also would prohibit unfair or deceptive practices that are common among fraudulent business opportunity sellers, including:
•
misrepresentations about the material terms of the business relationship;
•the use of shills;
•misrepresentations of endorsements or testimonials;
•failure to honor territorial protection guarantees; and
•failure to honor refunds.
The proposed rule takes into consideration the comments from the Advance Notice of Proposed Rulemaking issued by the Commission in 1997. The Commission is seeking comment on the proposed rule for 60 days after the Notice of Public Rulemaking is published in the Federal Register, followed by a 20-day period for rebuttals. The comment period will close on June 16, 2006, and the period for rebuttal comments on July 7, 2006. Comments should be addressed to the FTC, Office of the Secretary, Room H-135, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.
The Commission vote to approve a notice of proposed rulemaking was 5-0.
The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov/ftc/complaint.htm. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
MEDIA CONTACT:
Jacqueline Dizdul
Office of Public Affairs
202-326-2472
STAFF CONTACT:
Steven Toporoff
Bureau of Consumer Protection
202-326-3135
TREK ALLIANCE THEN SEA SILVER HIT BY FTC!
Pyramid Scheme and Health Claims Primarily!
END OF TREK ALLIANCE AN “MLM PYRAMID STORY”
Ed Note: I have good folks that call me and want to start an MLM Company as inexpensively as possible. With that, they say they want to get a running start. They will come back when the money is rolling in and worry about being legal later. OUCH! This is a "documented story" of what happens to those kind of folks. Success, then boom! They get hammered for their past sins. That is why many top leaders in MLM call me with legal questions when they want to join a company. Remember, this happens on the state level more often than federal.
It’s a sad story. Trek Alliance started out badly, run by top ex-Equinox distributors as a model of Equinox, the Evil MLM Empire. After 2 years of operation they internally decided to clean up their act. They quit all the bad acts and hired an ex-FBI officer as compliance officer. However, the FTC had investigated them and built a case before the changes. After a year of “clean operations” the FTC came in with “old” information and shut them down. The FTC did not allow for changes! So let this be a learning lesson to all companies that want to start out a little “wild”
News release FTC: Alleged Pyramid Scheme Operators Banned from Multi-level Marketing
$1.5 Million in Consumer Redress Required to Settle FTC Charges
The Federal Trade Commission has settled charges against three corporations and their owners and officers that the defendants used deceptive practices to promote their multilevel-marketing program and were operating an illegal pyramid scheme. The Commission will receive 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, training arm, and 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. The orders for all of the defendants also prohibit the violations alleged in the Commission’s complaint. 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.
The Commission vote to authorize the staff to file the stipulated final orders was 4-0. The stipulated final orders for permanent injunction were entered in the U.S. District Court for the Central District of California on December 13, 2005.
NOTE: These stipulated final orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Stipulated final orders require approval by the court and have the force of law when signed by the judge.
#30 MLM WATCHDOG
SEA SILVER - BAD HEALTH CLAIMS
News Media
San Diego TV & News
North County News With More Detail
FTC COMPLAINT
On Friday, June 13, 2003 the Federal Trade Commission ("FTC") filed a Complaint in the United States District Court in Nevada against Sea Silver USA, Inc. and Americaloe, and certain of their corporate officers. The suit claims that Sea Silver has made false claims about the benefits of its products in marketing materials and on product labels. The FTC also applied for and was granted a Temporary Restraining Order ("TRO"), which prohibits Sea Silver from selling or distributing its product without significant changes to the labeling and marketing materials.
As part of the TRO, the Court has appointed Thomas W. McNamara as Temporary Receiver for both companies. The Temporary Receiver is a neutral party who serves as an agent of the Court. Over the next several days, The Receiver and his staff will be examining the business in detail and reviewing plans to respond to and deal with the matters raised by the FTC. In the interim, the company has substantially curtailed operations. We will provide further updates on the website
--------------------
COURT APPOINTED TEMPORARY RECEIVER
Email to Distributors
June 17, 2003
To: All Seasilver Business Associates
Re: Immediate Recall of Packaging and Labeling Materials Demand to Cease and Desist from any Unsubstantiated Marketing Claims
The Federal Trade Commission has filed a Complaint against the Company claiming that Seasilver has made unsubstantiated claims regarding the health benefits of the Seasilver product. The FTC has secured a temporary restraining order which prohibits the Company from selling or distributing its products without significant changes to its labeling and marketing materials. The FTC has also secured a court order appointing me Temporary Receiver.
Effective immediately, you must cease and desist from making any false or misleading statements or representations in connection with the marketing, distribution or sale of any Seasilver product, specifically including but not limited to representations that Seasilver cures or treats cancer, enables 9 of 10 diabetes patients to stop insulin, leads to weight loss without dieting, treats or cures typhoid or anthrax, is proven to e non-toxin, and/or provides any other health benefits without competent and reliable scientific evidence.
In order to comply with the TRO, we are also today recalling all packaging and labeling including all descriptive materials and brochures which contain any representations as to the health benefits of Seasilver. This specifically includes the current Seasilver Product entitled Seasilver USA / The Leader in Foundational Health. If you have copies of that brochure, please do not use them for any purpose and immediately return them to the Company. We hope to be sending you revised materials soon.
You must also immediately terminate any marketing activities of any kind which use materials which have not been approved by the Company. If you have any such materials in inventory, you must destroy them immediately. Please refer to the Policies & Procedures adopted by Seasilver, an additional copy of which is enclosed. Paragraphs 15 and 17 expressly prohibit any independent Business Associate from advertising or offering for sale Seasilver Dietary Supplement in any way other than through the advertising and promotional materials made available by the Company, or except as otherwise expressly approved and authorized by the Company in writing before any dissemination, publication or display. Failure to abide by these procedures may result in your termination as a distributor.
Thomas W. McNamara
Temporary Receiver
Full FTC Press Release
