MLMSurvivor.com

December 17, 2002

The Federal Trade Commission has released more information about its lawsuit against Trek Alliance. According to a statement from the FTC,

"Trek Alliance was patterned after Equinox International, an operation that paid $40 million in consumer redress to settle charges by the FTC and a number of state attorneys general that it was operating an illegal pyramid. The case was settled in April 2000. Two of the four individual defendants announced today were top distributors with Equinox."

Specifically named as defendants in the suit are Trek Alliance, based in Incline Village, NV, Trek Education Corporation, VonFlagg Corporation, Jeffrey Kale Flagg, also known as (aka) Kale Flagg, Richard Von Alvensleben, aka Richard Von, Tiffani Von Alvensleben, aka Tiffani Von, and Harry M. Flagg.

The company's assets have been frozen, a receiver appointed, and a temporary injunction issued which prohibits the company from doing business until a hearing, scheduled for December 23, in US District Court for the Central Division of California, Western Division.

Why A Temporary Injunction?

The Temporary Restraining Order makes it very clear that the judge believes the FTC will win its case against Trek and prove that the defendants have violated fraud and pyramid scheme laws.

"There is good cause to believe. . . that the Commission will prevail in this action.

"There is good cause to believe that immediate and irreparable harm will result . . . unless Defendants are restrained and enjoined by Order of this Court.

"There is good cause to believe that immediate and irreparable damage to the Court's ability to grant effective final relief for consumers in the form of monetary restitution will occur from the sale, transfer, or other disposition or concealment by defendants of assets or records unless defendants are imediately restrained and enjoined by Order of this Court. . ."

In addition to freezing their assets, the Order also forces the Defendants to repatriate any holdings currently outside the US, and enjoins them against filing for bankruptcy protection.

The Majority of Participants Lose Money

The complaint sets forth Trek's multi-level marketing structure. However,

"Defendants and other Trek representatives fail to disclose that the majority of participants in any given month do not qualify for bonuses and, as a result, that most participants do not receive substantial monthly income from bonuses under Trek's compensation plan." . .

"Only a small percentage of representatives who become participants in the Trek program make more money in bonuses and profits from retail sales than they spend to participate. The majority of Trek representatives do not earn a substantial monthly income, but instead discontinue their participation in the Trek program with little or no financial success, often incurring large losses."

Recruiting Tactics Are Deceptive

The complaint details some of Trek's common recruiting tactics -- placing "help wanted" ads that entice people to apply for "jobs," and contacting job-seekers who have posted their resumes on the internet. They do not disclose that the individual is being recruited for MLM, maintaining the illusion that the recruit is being considered for legitimate employment.

False Income Claims

Recruits and participants are told that anyone can make a substantial profit in Trek, whereas the reality is that the majority earn little or nothing, and many lose substantial amounts.

It's A Pyramid Scheme

The FTC alleges that:

"Defendants operate what is commonly known as a 'pyramid scheme.' In pyramid schemes, each participant pays money to the scheme's promoter in exchange for the right to recruit new participants. Participants then receive benefits for each individual they recruit, or who is added to their downline. Earnings in a pyramid scheme are derived primarily from recruiting other participants into the program, not from the retail sale of products or services."

"Training" emphasizes recruitment over sales of product. "Demand for Trek's products is primarily a function of their value as a prerequisite to earning money. . ."

Federal Trade Commission Announces Action Against Trek Alliance