Maryland, FTC, and Five Other States Sue Equinox International Corp.

Law Enforcers Allege that 'Multi Level Marketing' Company is Illegal Pyramid Operation

August 9, 1999

Attorney General J. Joseph Curran, Jr. announced today that the Securities Division of his office has asked a U.S. District Court in Las Vegas, Nevada to halt the alleged illegal operations of Equinox International Corp., its president Bill Gouldd and two affiliated companies. The lawsuit, filed jointly with the Federal Trade Commission and five other states, alleges that the defendants operated an unlawful pyramid scheme in violation of a variety of federal and state consumer protection, deceptive trade practice, false advertising, pyramid and securities laws.

On Wednesday, August 4, 1999, U.S. District Judge Johnnie B. Rawlinson issued a temporary restraining order, froze the defendants assets, and appointed a temporary receiver, pending a hearing. The states and the FTC asked the court to permanently enjoin the alleged illegal pyramid operation and order consumer redress. Maryland also asked the court to award civil penalties for violations of Marylandís securities act.

Equinox, based in Las Vegas, Nevada, purports to sell environmentally friendly products such as water filters, nutritional supplements and skin care products through a network of independent distributors. In 1996, Equinox was rated by Inc. magazine as one of the fastest growing companies in America. According to the lawsuit, Equinox distributors ran ads in "help wanted" sections of newspapers implying that salaried positions were being offered. People often responded to what they believed to be job interviews, only to be led into a high energy sales presentation designed to recruit new distributors.

The complaint also alleges that Equinox told recruits that they could earn money by selling products but emphasized that the real way Equinox distributors make money is through recruiting. New recruits were encouraged to purchase $5,000 worth of products so they could enter the program at a level where they would receive commissions from sales made by their recruits. Distributors also were encouraged to rent desk space in local offices for $300 to $500 a month, to subscribe to a phone line so they could begin recruiting others, and to attend training seminars costing $300 to $1000 plus travel and lodging expenses.

The complaint alleges that a very small percentage of distributors who became participants in the Equinox program actually made more money than they expended for front-end expenses, and that a vast majority of distributors discontinued their participation in the program with little or no earnings. According to the complaint, "the result of the structure and operation of the program is that financial gains to Equinox participants are primarily dependent upon the continued, successive recruitment of other participants, and retail sales are not required as a condition precedent to realization of such financial gains."

Curranís Securities Division received a number of complaints about Equinox, which operated in Maryland from a number of locations, including Baltimore, Bel Air, Silver Spring and Gaithersburg, using business names such as "Paramount," "Infinity Group" and "World Solutions." Curranís office obtained information that Equinox recruited more than 400 Maryland residents into the program since 1997.

Curran said "this law enforcement action should serve to warn consumers that illegal pyramid schemes can come in different forms." Operating a pyramid scheme is illegal under a number of Maryland laws, including Marylandís securities act. Curran notes that "many multi level marketing companies are legitimate businesses, but people should avoid any program that pays commissions based on the recruitment of new members, and walk away from any opportunity that seems too good to be true."

The complaint was filed in U.S. District Court for the District of Nevada, in Las Vegas on August 3, under seal. The seal was lifted on Friday, August 6, 1999. The filing of a complaint is not a finding that the defendants actually violated the law. The case will be decided by a court.

For Further Information Contact:
Frank Mann
Special Assistant to the Attorney General
(410) 576-6357