MLM Law: FTC Press Release on SkyBiz Settlement:
April 1, 2003
Pyramid Settlement to Provide $20 Million for Consumers
Showed Over 96 Percent of Recruits Lost Money
Distribution of $20 million dollars in consumer redress
will begin in the near future for victims of SkyBiz, an alleged
massive international pyramid operation based in Tulsa, Oklahoma.
The money for consumer redress is part of a settlement between the
pyramid's promoters and the Federal Trade Commission, which charged
that their scheme violated federal laws. The settlement also bars
the defendants from participating in pyramid schemes in the future,
and bars them from misrepresenting business ventures. It bars one
defendant from engaging in any multilevel marketing programs for
life and bars three others from engaging in multilevel marketing
programs in the for periods ranging from seven to 22 years.
In May 2001, the FTC filed suit in U.S. District Court
in Tulsa, Oklahoma charging that Tulsa-based SkyBiz and its principals
promoted a pyramid scheme with claims of quick riches. The FTC alleged
that in sales presentations, seminars, teleconferences, Web site
presentations and other marketing material, the defendants touted
the opportunity to earn thousands of dollars a week by recruiting
new "associates" into the program. The cost to join the
SkyBiz program was $125, ostensibly used to buy an "e-Commerce
Web Pak." The company's sales presentations, however, focused
on the huge sums of money that could be made by recruiting additional
participants. Participants were urged to invest in more than one
"Web Pak" to maximize their earning potential.
The FTC claimed that the program was a classic pyramid
scheme. The agency charged that the claims that consumers who invested
in SkyBiz would make substantial income were deceptive; that the
defendants' failure to disclose that most people in pyramid schemes
lose money is deceptive; that the defendants provided the means
and instrumentalities for others to deceive consumers by providing
speakers and promotional materials that made the false and misleading
claims; and that SkyBiz was actually an illegal pyramid scheme.
The FTC alleged that all four actions violate the FTC Act.
The case was scheduled to go to trial January 6, 2003.
By that date, the FTC had also fought the case in the courts of
Ireland and Bermuda, participated with law enforcement agencies
in Australia, South Africa, New Zealand, Canada, and the United
Kingdom, and partnered with consumer agencies in Hawaii, Michigan,
North Carolina, Oklahoma, Wisconsin and Wyoming.
The defendants agreed to a settlement, reached in
principle January 4, and entered by the court on January 28th, to
end the litigation as to these nine defendants.
The FTC filed the suit in U.S. District Court in the
Northern District of Oklahoma. The corporate entities named in the
suit include: SkyBiz.com, Inc; World Service Corporation; Nanci
Corporation International; and WorldWide Service Corporation. The
FTC also named several individual defendants, including: Elias F.
Masso; Nanci H. Masso; Kier E. Masso; James S. Brown; Stephen D.
McCullough; and Ronald E. Blanton. Blanton settled the FTC charges
in January 2002. The trial of Stephen McCullough is scheduled to
start April 14, 2003.
who believe they qualify for redress can visit
http://www.skybizredress.com for further information.
The settlement will provide $20 million for consumer
redress and will bar all the defendants from participating in pyramid
schemes or misrepresenting the amount of sales, income, profits
or rewards of any future business venture. Nanci Corporation is
permanently barred from engaging in, advertising, or selling any
multilevel marketing program. The settlement bars Elias F. Masso
from engaging in any aspect of multilevel marketing for 22 years,
James S. Brown for 10 years, and Kier E. Masso for seven years.
All of the defendants are barred from providing others with the
means and instrumentalities to make false and misleading statements.
In addition, the settlement requires that when the defendants make
any claims regarding earnings, profits or sales volume for future
marketing programs, they disclose the number and percentage of participants
who have made a profit through the program and disclose the average
and median amount of money made. The settlement bars the defendants
from sharing their customer lists and contains record-keeping provisions
to allow the agency to monitor compliance with the order.
The Commission wishes to acknowledge the substantial
assistance provided by the Royal Canadian Mounted Police; Australian
Competition and Consumer Commission; South African Department of
Trade and Industry; New Zealand Commerce Commission; United Kingdom
Department of Trade and Industry; the attorneys general of Wyoming,
Michigan, North Carolina, and Wisconsin; the Oklahoma Department
of Securities; and the Hawaii Securities Enforcement Unit of the
Department of Commerce and Consumer Affairs.
NOTE: A stipulated
final judgment is for settlement purposes only and does not
constitute an admission of a law violation. Stipulated final judgments
and orders have the force of law when signed by the judge.
Copies of the complaint and stipulated
final judgment and order are available from the FTC's Web site
at http://www.ftc.gov and also
from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania
Avenue, N.W., Washington, D.C. 20580. 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.
Claudia Bourne Farrell,
of Public Affairs
Jim Elliott, Kristin Malmberg or Bradley Elbein
(FTC File No. X010046)