Hart v Gooch et al (cont'd)

Amway's Recognition of and Tacit Consent to the BSMs Industry.

50. Amway has acknowledged in the Amway Sales and Marketing Plan the independent nature of BSMs apart from Amway, as well as their utility and benefit:

To assist you with your own training and motivation, as well as training and motivating others, some distributors produce and distribute Business Support Materials and support services independently of Amway Corporation (independently-produced Business Support Materials or BSMs). These may include books, magazines, and other printed materials, audiotapes, videotapes, rallies, meetings and educational seminars. While these BSMs are not required by or produced by Amway Corporation, you may decide that they can play a useful role in building a profitable Amway business.

51. The Amway Sales and Marketing Plan also encourages distributors to purchase BSMs and to attend functions:
    

Merchandising products and sponsoring others is the way you build a truly successful business . . . You can also sponsor others as distributors and train them to merchandise products . . . As your business begins to grow, you will want to buy products and you may wish to acquire training aids. You will also want to attend motivational and business-building meetings. Typically, you may attend one distributor meeting a week.

52. Amway has recognized the applicability and necessity of the "lines of sponsorship" to the BSMs industry consistent with the course of business practices and dealings over years. Amway states that the failure to adhere to the line of sponsorship governing BSMs would constitute an "unwarranted and unreasonable interference in the business of other Amway distributors." However, Amway has not sought to enforce the rules governing BSMs; at least, not in any consistent or aggressive manner. Amway's more recent apparent ambiva-lence has made it easier for abuses within the BSMs industry to occur. The Defendants herein have taken Amway's ambivalence to manipulate the BSMs industry as hereinafter described to their own pecuniary benefit.
    

The Myths Created and Fostered by the Upline Defendants.

53. The Upline Defendants, in recent years, by and through their conduct and purported "leadership" as distributors at or near the top of the Amway pyramid, have created and fostered myths among the many lower Amway distributors. The first myth is that by working hard to build the Amway business, an Amway distributor can build his/her Amway network to a point where they can achieve the Amway dream or "riches" like those touted by the Upline Defendants. Very simply, one cannot achieve comparable "riches" by selling Amway products. It is only through the participation in the BSMs industry that ultimately can lead to the attainment of the "riches" like those of Upline Defendants. The second myth is that those engaged in the BSMs industry (Direct level and above), will be treated fairly with the BSMs rules, including the line of sponsorship and the servicing agreement rule, honored. The reality is that the Upline Defendants, as well as Defendants Foley and Woods, with the "riches" at the top of the Amway pyramid control the destiny of those below them, and they control and manipulate the BSMs business in such a way that one cannot attain these "riches" unless they so elect. And few do attain these "riches," regardless of the size of their downline.
    
    
54. Stated differently, without fair access to the BSMs industry through the fair and consistent application of the heretofore stated rules governing same, it is not possible for an Amway distributor to attain the "carrot" or "Amway dream" of riches and financial independence -- at least nothing near the level of that of the Upline and Downline Defendants, which they espouse openly and often as being attainable by others, through hard work and commitment to selling Amway products. One objective of the conspiracy herein was and is to deny the "Amway dream" to qualifying distributors.
    
    
55. The Upline and Downline Defendants, with the aid of their co-conspirators, have tarnished, if not substantially impaired, the Amway business and the principles upon which it was built by those before them through their manipulation and circumvention of the long-standing rules governing the BSMs industry to ensure and enhance their own pecuniary benefit, to the inherent detriment of those distributors down line. Their actions have threat-ened the well-being of the Amway business they purport to serve and pretextually share with other distributors.
    
    
56. On knowledge and belief, the Upline and Downline Defendants take such a disproportionately large share of the tool and function business profit that little is left for the participating downline distributors. For example, on knowledge and belief, Defendant Childers endeavors to secure a 25-30% profit margin on his "cut" or "break" on tools.
    
    
57. On knowledge and belief, 85% or more of the income of the Upline and Downline Defendants is attributable to the tool and function business.
    

The potential abuse of the BSMs industry was addressed by Amway co-founder Rich DeVos, in an audiotape produced by Amway for pin level distributors in 1983. DeVos stated:

Directly Speaking, January 1983, Rich DeVos, Amway Cassette Series VA-2160, Side 'A.'

At that time, DeVos also addressed the necessity of honoring the "line of sponsorship" within the BSMs industry. DeVos asked distributors involved in the sale of BSMs to:

. . . unplug from any group, up or down, which is not in my line of sponsorship. You know, a lot of you, got your fingers dirty. You got your hands a little bit into somebody else's group, or you're dealing into somebody else's group that's not in your line of sponsorship, or you're getting stuff from somebody. I'm just asking you to unplug it. Tend to your own business. Stay in your own line. Deal only with people you sponsor. The other people who are not in your group -- they are not your business, and if you are a believer in this Plan, then you'll believe in this principle. If it's okay for you to intrude somebody else's group, then it's okay for them to intrude yours. If it's okay for you to intrude somebody else's group, then it's okay for somebody above you to go around you and intrude your distributors below you. You and I know you can't tolerate that.

The Upline and Downline Defendants, and their co-conspirators, have engaged in the very conduct of which DeVos earlier warned.

The Hart Organization enjoyed an exceptional level of achievement in Amway. It represented one of the largest downline legs in the Yager Group.


From 1978 until today, Brig Hart, and later Brig and Lita Hart, expended substantial time, resources and effort into building Hart Enterprises and U-CAN-II, making Amway and/or the promotion of Amway their full-time job, and relying on their Amway and BSMs income as their primary means of support.


From 1987 until today, the Harts/Hart Enterprises repeatedly qualified at the prestigious "Diamond" pin level (or higher) each and every year. In 1992, the Harts/Hart Enterprises attained "Executive Diamond" status, and in 1993, "Double Diamond" status. As a "Double Diamond," the Harts achieved a pin equal to or higher than many of their upline, including Upline Defendants Childers, Gooch and Setzer at that time. The Hart leg in their down-line is by far the largest. For example, the Hart leg within the Childers downline network is at least as large as all other Childers legs put together.


The Hart Network included its vast United States network, as well as international networks based in Brazil, Mexico, England, Argentina and Greece.


By 1993, Brig Hart became one of the most popular speakers in all of Amway and the BSMs function circuit. Amway featured the Harts' success story in its official magazine Amagram on several occasions, including but not limited to, stories in 1987, August 1993 and September 1994.


Beginning in/about 1989, the Harts/U-CAN-II began conducting their own major functions with the consent of Hart Enterprises' upline, including Defendants Childers and Gooch. The Harts and U-CAN-II utilized Hart Enterprises' downline network in sponsoring, organizing and holding these major functions, which regularly drew thousands of Amway distributors in attendance, and in the case of their "Free Enterprise" functions held in conjunction with their upline, often over 20,000 distributors.


Amway statistics confirm the unique status held by the Harts. "Generally speaking, less than 10% work their Amway business as a full-time job and as their primary source of income over time. Naturally, because these people spend the most time and effort to build their own business and are the most committed to it over time, they typically make more money." (Official Amway website)


According to Amway statistics, about 3% of all American "direct" sellers earn more than $50,000 per year. About .6% (six-tenths of 1%) make more than $100,000 per year. (Official Amway website) Based upon Amway's statistics, the Harts and/or Hart Enterprises occupied the top six-tenths of one percentile (.6%) of all direct sellers in the United States.


The Harts and U-CAN-II, working in concert, participated in and were highly successful in developing their BSMs business. U-CAN-II purchased and resold independently-produced BSMs in accordance with the implied contract of the parties formed by instruction from the Upline Defendants and confirmed by years of business dealings with its upline, and also conducted functions in the same manner. The Harts were usually featured at these functions, and their popularity as speakers within Amway grew and grew.


All along, the line of sponsorship was recognized and honored by the Hart Organization respecting the BSMs rules, including servicing agreements, just as the Harts had been instructed and directed by their mentoring upline. For years, the Harts and/or U-CAN-II personally sold tools directly to the distributors whom they had personally sponsored, pursuant to the course of dealings between the parties. Similarly, they purchased their tools in accordance with this course of dealing. Likewise during this time, the essential line of sponsorship and the rules pertaining to functions were recognized and honored by them in promoting and sponsoring functions.


The Harts were proponents of respecting the essential line of sponsorship and the rules within the BSMs industry.


On knowledge and belief, the Hart Organization's huge success ultimately led to the Upline Defendants' envy, greed and decision to seize it. The Hart Organization was capable of generating, and did so generate, over $42 million over 18 months in tool business volume for the Foley network alone. In addition, the Hart Network generated on an ongoing basis tens of millions of dollars in functions volume.

The Conspiracy.

73. The exact date the conspiracy was formed is unknown to the Harts. By 1996, the conspiracy was very active and, at that time or soon thereafter, until the present time, ultimately included all of the Defendants acting in concert, conspiring among them-selves. On knowledge and belief, by 1996, Childers and Gooch led the efforts of the conspiracy as it embarked on new tactics. At one time or another, others joined in the concerted activity with one or more of the Defendants by engaging in conduct injurious to the Hart Organization. On knowledge and belief, these non-party co-conspirators included Dexter Yager, Angelo D'Amico, Barry Joye, Robert Blanchard, Parker Grabill, Ron Rummel, Paul Stanley, Hona Childers and others.
    
    
74. The objectives of this ongoing and evolving conspiracy were to ignore and/or circum-vent the essential line of sponsorship respecting the Harts, to boycott the Harts, to impair the Hart Network, and to convert the Hart Organization's tool and function business to their own pecuniary benefit and advantage, all in violation of the BSMs rules.
    
    
75. The conspirators shared a community of interest in the pursuit and furtherance of the objectives of the conspiracy; they exercised joint control or right of control; they shared a joint proprietary interest in the conspiracy's objectives and the fruits thereof to some extent; and they profited from their efforts.
    

The Hart Organization began participating in the tool business in January 1980 upon attaining the Gold Direct pin level, and then the function business in August 1982 upon attaining the Emerald pin level. It was at that time, and over the course of the next few years, that Brig and Lita Hart were initially instructed on the foregoing BSMs rules by their upline, including Childers, Gooch and Yager. The Harts, in good faith, believed that the rules would apply equitably and uniformly to them, and continued to build their distributor organization in detrimental reliance thereon.


From this time, when the Harts began participating in the tool and function business, until the advent of ProNet in February 1998, on knowledge and belief, the substantial part of tools sold to the Hart Network in the United States came from Yager's company, Internet Services, Inc. ("Internet"), located in Charlotte, North Carolina.

The Boycott of the Harts by Childers Regarding the BSMs of the Foley Organization.

For some time, contrary to the BSMs rules, the representations of the Upline Defendants, and the continuing protests of the Harts to the Upline Defendants, Defendant Childers has dealt directly with the Foley organization (instead of going through the Plaintiff/Harts), for BSMs.


Earlier, Defendant Childers paid the Plaintiff a nickel (and later a dime) for purportedly every audio cassette tape Childers sold to the Foley organization. Such compen-sation was unreason-able and unfair. And Defendant Childers paid the Harts nothing for other tools and functions, except that in December 1995, Childers paid the Harts a token lump sum for past functions for the Foley network. Although Childers continued to pay the Plaintiff/Harts for cassette tapes after December 1995, the sums were not reasonable or fair and, ultimately, Defendant Childers refused to pay the Harts anything for BSMs.


Upon the organization of ProNet in 1998, the Plaintiff received from Global a payment equating to 20 cents for each audio cassette tape sold to the Woods and Foley organizations. These payments stopped in April 2001 when the conspiracy-engineered boycott of the Plaintiff/Harts became final and complete.


On knowledge and belief, Defendants Childers and Foley conspired to accomplish and perpetuate this boycott of the Harts regarding the Foley organization, and did so with the knowledge and acquiescence, if not support, of the Upline Defendants and Dexter Yager. At some point, perhaps by 1998, on knowledge and belief, all Defendants sanctioned and/or con-doned the ongoing boycott of the Harts.


On knowledge and belief, Defendants Childers and Foley made significantly more money by cutting the Harts out of participation in the tool and function business of the Foley organization.


Defendants Childers and Foley owe the Plaintiff an accounting and substantial monies for BSMs (tools and functions) regarding the Foley organization since December 12, 1995.

U-Can-II Loses Prematurely the Function Business of Downline Diamonds

Childers instructed, directed and explained to the Harts earlier, when they attained Diamond, that the BSMs course of dealing required that they refrain from sponsoring their own functions for two years upon attaining Diamond and during that period of time, continue supporting Childers' (their upline Diamond's) functions, meaning they would encourage their downline network to attend the Childers' functions. The Harts complied.


In or about 1993, D'Amico, Joye, Douglas, Terhune and Woods (see p. 14 above), became Diamonds. Three things then transpired which served to damage U-Can-II. First, contrary to Childers' earlier specific direction, these five new Diamonds, all within the Hart Network, were permitted to almost immediately (without waiting two years, as Childers had told the Harts), begin sponsoring their own functions, pulling their downline networks from attending the U-Can-II functions. The Harts protested to Childers to no avail. Respecting D'Amico's departure with his function business, Childers told Hart, "he's [D'Amico] off the deep end, and you're better off to just let him go." Second, instead of the Harts being asked to speak at these functions and U-Can-II being compensated therefor, as was the established course of dealing, these new downline Diamonds brought in Childers to speak, paying him and bypassing the Harts, whose protests to Childers once again were futile. Third, Childers quit paying U-Can-II for the downlines of these Diamonds attending Childers-sponsored functions. Childers should have pre-cluded these actions, but didn't.

These events then led to other Hart downline Diamonds doing the same, with the knowledge, if not consent and encouragement, of the Upline Defendants. Childers in particular sought to first undermine U-Can-II and then take its function business for his own without fairly and equitably compensating the Harts. Childers effectively circumvented the Plaintiff's rights and expectancies in later years that he himself gave rise and credence to in earlier years through his instruction of the Harts.

The Conversion of the D'Amico Tool Business in 1994.

In or about 1994, Defendant Setzer and perhaps others conspired with D'Amico for D'Amico to purchase his tools directly from Defendant Setzer, who, the Harts were told, was going to sell the tools for a lesser cost to D'Amico. Of course, Setzer and the other Upline Defendants and Yager were in a position to determine the cost of the tools sold to U-Can-II.


When the Harts learned that D'Amico had been solicited by Setzer for his tool business, they protested to Yager and Jody Victor, member of the Amway Distributor Association's Board. A meeting to address the situation followed in Jacksonville.


In attendance for this Jacksonville meeting were the following: Bob Kerkstra of Amway, Jody Victor, Dexter Yager, Doyle Yager, Childers, Setzer, Brindley, D'Amico and the Harts. During the discussion which ensued, Kerkstra and Victor told the others that they could not participate in any discussion about "tools" since that is not Amway's business. However, Kerkstra and Victor reiterated the importance of adherence to the line of sponsorship. The Harts thereafter understood (from the discussion with Kerkstra and Victor present), that although D'Amico would be permitted to deal with Setzer on some matters, the tool revenue would be left as is, meaning the tools would remain under the Harts' line of sponsorship. Imme-diately there-after, the Harts were told that D'Amico's tool business was being pulled from them and given to Setzer which, of course, they vigorously protested. Nevertheless, D'Amico's tool business moved to Setzer. Having lost the D'Amico function business earlier, this meant that U-Can-II had now lost all of the D'Amico organization's BSMs business.


Once again, this meant that the line of sponsorship was completely evaded and the Harts, contrary to the BSMs rules, were boycotted respecting the tool and function business of the D'Amico organization. The Harts, per the BSMs rules, should have sold all tools to D'Amico, or at a minimum, been reasonably reimbursed for same. The Harts should have partici-pated in the function revenue as well, in accord with the BSMs rules. The Harts were eventually advised by Gooch, Childers and Yager that, in accord with the BSMs rules, Setzer would equitably compensate the Harts for "going around" the Harts respecting the D'Amico organization's tool business. On knowledge and belief, this statement was made only to tempor-arily appease the Harts without any real intention of compelling Setzer to pay. Regardless, Defendant Setzer refused to do so. Setzer has paid no compensation to the Plaintiff. The BSMs rules preclude this boycott of Plaintiff.


On knowledge and belief, Setzer paid and/or continues to pay Gooch, Childers and Yager for tools sold to the D'Amico organization because they fall within D'Amico's line of sponsorship. But, again, Setzer paid/pays the Plaintiff nothing despite the Harts' direct line of spon-sorship to D'Amico. This tactic, as orchestrated by the Upline Defendants and other co-conspirators, was instrumental in paving the way for the loss of other downline Emeralds and Diamonds within the Hart Organization respecting the BSMs business. The Harts had been effectively undermined by those in control.

The Conversion of the Hayes BSMs Business in 1995.

Hayes (see p. 14), following D'Amico's lead, began dealing directly with Defendant Childers for tools in 1995, boycotting U-Can-II. Still later, Hayes moved all of his tool and function business to D'Amico and Setzer. As with the D'Amico situation, the Harts again protested to no avail.

Manipulation of Prices Through BSM "Pay Scales."

On knowledge and belief, until 1998, the Upline Defendants herein, and co-conspirator Dexter Yager, were in control of the distribution and pricing of all tools. Together they controlled pricing through "pay scales" which set price entitlements and compensation vertically for the tools and functions.


As the Hart Organization grew to mammoth proportions in the early 1990s, the Upline and Downline Defendants conspired among themselves and with others to find ways to manipulate tool prices so as to disadvantage the Harts, to discredit the Harts, and to gradually and progressively take their tool and function business. The tactics included constantly changing the "pay scales" to whittle down the Harts' take despite the Harts' growing numbers. Paul Brown, working as an accountant for Defendant Childers at this time, prepared the "pay scales" and sent them to the Harts.

By 1996, the Hart Network Outgrew the BSM "Pay Scales."

By 1996, and for sometime prior thereto, the Hart Network had grown prolifically to the point where it went five Diamonds deep, something unprecedented within the Gooch/Childers line of sponsorship. The tool money being passed down to the Harts/Plaintiff by the Upline Defendants only went three Diamonds deep. In other words, per the "pay scales," there was only enough money actually flowing to the Plaintiff to pay (at the "pay scale" rates), three Diamonds -- not five; the Hart Network had outgrown the "pay scales." This obviously created problems for the Harts with their downline Diamonds. The Harts sought more money from Childers so that the Harts could pay all of their Diamonds the pay scale rates, but were told that there was no more money to be passed down, which simply made no sense.

August 1996: Meeting at Yager's Internet Offices in Charlotte to Address the Inadequate "Pay Scales."

In 1996, several of the Hart downline Diamonds, including Joye, Douglas, Terhune and Woods, were telling the Harts that they wanted a bigger cut of the tool income because of their pin level. After Brig Hart addressed the subject with Childers and was told by Childers that he (Childers), didn't have any more money to pass down, Brig Hart went to Doyle Yager (Dexter Yager's son), who scheduled a meeting in August at the Yager Internet business offices in Charlotte.


Those in attendance at this meeting included: Dexter Yager, Jeff Yager, Doyle Yager, Gooch, Childers, Paul Brown and Brig Hart.


During this meeting, Childers reluctantly conceded that he was making an approximate 30% profit on his cut of the tools that were being sold to the Hart Network. Hart believed Childers' "cut" to be exorbitant. Hart pleaded for fairness and sought additional monies for his downline Diamonds.


Brig Hart left this meeting without a resolution of the problem confronting his organization, a problem totally within the control of the Upline Defendants and Dexter Yager.

The Interference with and Loss of the Tool Business of Five Hart Downline Diamonds (Joye, Zecher, Douglas, Terhune and Short) in 1997.

In early 1997, Brig Hart was contacted by Barry Joye, a downline Diamond within the Hart Organization. Joye told Brig Hart that Setzer had sent D'Amico to speak to him [Joye] about tool pricing. Joye told Brig Hart that Setzer could offer him [Joye] a better price than the Harts. Joye also told Hart that Setzer himself had spoken with him, and Setzer wanted his tool business and could give him a better price break than the Harts. Joye then told Hart he wanted a larger "tool cut." Again, based upon the Upline Defendants' control of tool prices, they could set the prices to ensure that the Harts could not offer their downline [Joye] the favorable tool prices that the Upline Defendants could. The Harts could not satisfy Joye. D'Amico's and Hayes' avoidance of the line of sponsorship, with the blessing of the Harts' upline, signaled that U-Can-II was vulnerable. Joye and others then went around U-Can-II to Childers, who should have deferred, but he didn't.


Joye and four other Hart Organization downline Diamonds [Frank Zecher, Marshall Douglas, John Terhune and Bo Short], left U-Can-II and started dealing directly with Childers for their tools. The further erosion of U-Can-II's BSMs business precipitated by D'Amico's and Hayes' leaving had reached fruition. Childers had the power and control to effectively engineer the boycott of the Harts, in clear and flagrant violation of the BSMs rules. By "squeezing" the Harts, the Harts' upline could pick off the Harts' downline Diamonds, and they did. Once started by D'Amico's leaving, the gates opened, paving the way for others to avert the essential line of sponsorship.

April 1997: The Prior Litigation.

When the Harts realized the abuses were escalating and that unless something was done, their tool and function business would be gone, on April 8, 1997, the Harts, Plaintiff U-Can-II and B&L Hart Enterprises, Inc. filed an action in the United States District Court, Middle District Florida, Jacksonville Division, the same being Case No. 97-349-CIV-J-20B, against most of the Defendants herein, challenging the tool and function business abuses and violations taking place. The Upline Defendants, particularly Gooch, thereafter assured the Harts they would work to restore the BSMs rules and remedy the abuses if the Harts would dismiss their suit. The Harts once again relied on these representations and their suit was dismissed without prejudice.


It was at this point in time, with the court challenge brought by the Harts, that the Upline and Downline Defendants recognized the need for a new approach in order for them to control the Hart Organization and for them to prevent a mass exodus within the tool and function business from which they profited immensely and which they sought to control. Gooch and Childers urged the Harts to dismiss their suit and promised to embark on a new, fair approach to the BSMs business, which promise was renewed at an Atlanta meeting in July 1997. Regardless, on knowledge and belief, a concerted effort was undertaken by the conspiracy beginning later in 1997, after the Harts had dismissed their suit, to seize the Harts' remaining tool and function business.

August 1997: Childers Decide to Lock in their "Cut."

On knowledge and belief, during a meeting at a hotel in Boca Raton, Florida, in August 1997, involving Hona Childers, Bill Childers and Paul Brown, at the insistence of Hona Childers, the Childers decided not to allow any more BSMs money (beyond that currently being passed down), to flow to their downline, which included the Harts/Plaintiff. Thus, the Childers sought to lock in their then-present "cut" and refused to share any further tool profits.

In 1997, with Gooch taking the lead, the conspiracy conceived a new plan to control the BSMs business within the Gooch line of sponsorship, which included the Hart Network.

September 1997 Meeting in Orlando.

After the July 1997 Atlanta meeting, Brig Hart was invited to a meeting in Orlando. This meeting took place on September 30, 1997. Attending were Gooch, Childers, Foley, Woods, Ken Stewart, Brindley, Paul Brown, Brig Hart and Mark Wells, who worked for the Harts.


Hart and Wells were told that the others had arduously worked on a "new approach" and/or "new system" that would hopefully satisfy the Harts' concerns respecting the tool and function business.


The "new approach," as outlined and presented at that time, entailed contracting with the Hayde Group, an independent consulting firm, to develop a system for sharing profits that was fair, just and equitable to all concerned which would honor the line of sponsorship and pay on all tools and functions.


Additionally, this group led by Gooch at this meeting at that time, told Brig Hart and Mark Wells that Setzer had violated the rules in soliciting D'Amico and others.


Deal Struck in 1997 with Yager, Internet and Setzer Respecting BSMs.


In 1997, Gooch and Childers and perhaps others, including Woods and Foley, struck a deal with Yager and Setzer respecting BSMs which paved the way for them to embark on their new plan to control and distribute BSMs within the Yager Group through ProNet. In other words, before ProNet could be brought to fruition, Yager (Internet) and Setzer, at the top of the distributorship pyramid, had to be dealt with.


On knowledge and belief, Yager still receives compensation for BSMs from one or more of the Defendants.


On knowledge and belief, Setzer still receives compensation for BSMs from one or more of the Defendants.

February 1998: Gooch Incorporates ProNet.

Gooch incorporated ProNet in February 1998 as a not-for-profit trade association and, on knowledge and belief, has served as its Chief Executive Officer since that time. Childers served and/or serves as President of ProNet, Woods as Vice President, and Foley as Treasurer. These individuals, along with Ken Stewart, comprised ProNet's original Board of Directors, as well as what was referred to as the ProNet "Steering Committee."


The Harts were not involved or consulted respecting the organization of ProNet despite the size of their network. Further, two members of their downline were founding members of ProNet, as well as members of the Board of Directors and Steering Committee. Clearly, the conspirators controlling ProNet sought to make the Harts "outsiders."


On knowledge and belief, contrary to the presentation to Hart and Wells in Orlando in September 1997, Gooch, Childers, Woods, Foley and Brindley did not follow the recom-men-dations of the Hayde Group because those recommendations benefited the Harts.


The conspirators next sought to bring (indeed force) all Amway Diamond pin level distributors and higher within the Gooch line of sponsorship into the ProNet membership, such that ProNet could control and direct the tool and function business. The conspirators also arranged to place all decision making and control within the hands of the ProNet Steering Committee which, at that time, became the nexus of power and direction of and for the conspiracy.


The conspiracy's plan was to move the tool and function business into ProNet, subject to their control and manipulation. If a distributor balked at joining ProNet, then the distributor risked the loss of their BSMs business which was significant and, in most cases, took years to build. Hence, it was not practical for a distributor to fight this new plan; the distributor was under duress.


Contemporaneously with the formation of ProNet, Defendant Global was created to supply BSMs to ProNet for sale to its members and, ultimately, their downline distributors. On information and belief, Global, at least for some time, did not supply BSMs to any other Amway-related organization other than ProNet. On information and belief, Global's contract for supplying tools to ProNet is or was with Defendants Gooch, Childers, Woods and Foley, and not with ProNet, and served to foster control of the tool supply. Defendant Don Brindley and non-party Paul Brown served as officers and/or directors of Global, until Paul Brown was ousted in 2001. At inception, Global and ProNet shared the same offices, and ProNet used Global employees to perform its day-to-day operations. Brindley and Brown participated in ProNet meetings, and responded to directions from Gooch and the ProNet Board and Steering Committee.


ProNet is not under the control of or part of Amway.


ProNet purportedly functions as a trade association comprised of members who are distributors of Amway products at the Amway Diamond level or above. ProNet's purported purpose is to promote the common business interests of member companies and businesses engaged in distributing BSMs products or services. ProNet purportedly provides information to its members which is helpful in developing the Amway business of its members.


But, in reality, ProNet has operated for the benefit of the conspiracy, not its membership.


On knowledge and belief, ProNet was calculated by the Defendants and co-conspirators herein as a means and/or instrumentality to seize the remaining tool and function business held by the Hart Organization. ProNet was intended to facilitate gaining direct access to the Hart Organization so that, contrary to the essential line of sponsorship rules, the conspirators could deal with Harts' downline directly for tools. In substance, ProNet facilitated the intended continuing boycott of the Plaintiff/Harts.


Paul Brown was instructed by the conspirators to contact Diamonds and advise them that if they did not sign a ProNet application, they would be stripped of all tool and function revenue.


The Harts were not receptive to becoming ProNet members, but Lita Hart, in Brig Hart's absence, was placed under duress and coerced into signing a ProNet membership upon threat of the Upline Defendants and/or ProNet taking all of the Harts' remaining tool business if she did not sign. On knowledge and belief, similar coercive tactics were taken with other distributors within the Yager Group.


On knowledge and belief, meetings were held among the conspirators and others, to determine ways to unfairly criticize and undermine the Harts with the express objective of seizing all of their tool and function business. The conspirators were intent on orchestrating the demise of the Harts' BSMs business.


The tactics used by the conspiracy to further their objectives are now legend, and began with criticism or attacks on the personal character of the targeted distributor -- in this instance, Brig and Lita Hart. The attacks were unfounded and centered around their alleged "religious fervor" and/or a lack of commitment to the Amway business. The Harts were instructed by their upline not to be so spiritually fervent from the stage at functions. When the Harts inquired as to what rule they were breaking, the response was always "none."