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Hart v Gooch (cont'd)

The Defendants' motive in making these unfounded attacks upon the Plaintiff, and in particular, the Harts, was to undermine and alienate the Harts from their downline and gain control of their BSMs business, while damaging the Harts' Amway business, ultimately resulting in downline BSMs distributors leaving the Hart Organization's respective line of sponsor-ship, quitting Amway and/or turning to other BSMs sponsors. In substance, the Defendants sought to disrupt and erode the Hart Network to their ultimate benefit.

On knowledge and belief, similar tactics, but for differing purported reasons, were taken by some of the Defendants acting in concert with others respecting Ken Stewart and Charlie Schmitz with the designed purpose of seizing Stewart's and Schmitz' tool and function business.

ProNet postures itself publicly to recognize and honor the essential line of sponsorship within the tool and function business, as established by and through the Amway distributor network. For example, "ProNet's Policy and Procedure on Line of Sponsorship or Existing Line of Affiliation," used by Paul Brown in soliciting ProNet members, provides in part:

It is the policy of ProNet that distributors within the ProNet system shall adhere to, work within, and honor their line of sponsorship . . . . No change in line of sponsorship will be made without the approval of the Steering Committee.

However, ProNet, under the leadership of Gooch, the control of the ProNet Steering Committee and the support of the conspiracy, has served to violate the BSMs rules and create absolute chaos within the essential line of sponsorship. As a result, many Diamond distributors and initial members of ProNet have left ProNet to set up their own BSMs business outside of the lines of sponsorship.

ProNet has solicited and sold BSMs to any willing Amway distributor, disregarding the essential line of sponsorship. ProNet's website virtually invites Amway distributors to circumvent their line of sponsorship for BSMs while giving purely pretextual observance to the importance of the lines of sponsorship:

What are the Principals? [sic]

Teamwork -- ProNet leaders began with an attitude in which teamwork is a priority.

Doubt and confusion are our enemies. We design a strategy and environment where all active participants subscribe to the same philosophy of network building. The foundational basis is core.

The tools of teamwork are:

Counseling
Edification
No Cross-lining (respect for line-of-sponsorship)
. . .

Your line of sponsorship works together- Yes, your immediate sponsor should help you as they have the most direct benefit as you succeed, but what if they are distracted, or lack commitment, or are at a distance, or are very new and inexperienced? The concept of a system has provided you with an entire team of people who will be available to assist and train you for maximum results.

The conspiracy, through ProNet, has been quick to point out to a distributor a "lack of commit-ment," "distance," or "inexperience" of his/her sponsor, then they drive the "wedge," and the line of sponsorship is averted and the long-standing rules, to assure fairness and order, contra-vened. And, of course, the rules being avoided, members of the conspiracy have stood to profit. That was the plan. That was the scheme. ProNet was the instrumentality.

ProNet also postures itself publicly to supposedly operate for the benefit of its "members," the same being Amway Diamond distributors. Yet, ProNet in reality seeks to promote and preserve, over the interest of its "regular members," the interest of its "founding members," the same being the aforementioned Defendants and co-conspirators who seek to control the BSMs industry within the Yager Group.

In signing up ProNet members, two different application forms were used -- one for "regular" members, and one for "founding" members -- and the "regular" members were not told up front that they would have no vote in the Association, according to Paul Brown.

On knowledge and belief, since its inception, ProNet has not conducted and operated as a valid corporate entity in accordance with its bylaws; Board of Directors' meetings have not been properly convened; and the purported actions of the corporation are and were ultra vires acts. In substance, the corporate entity known as ProNet is and was a legal nullity -- a sham. In effect, ProNet has served as the puppet or instrumentality of the Defendants and co-conspirators herein to further the objectives of the conspiracy for the personal gain and profit of the co-conspirators. Any notion that ProNet exists or existed for the universal benefit of its Diamond members is unfounded and purely pretextual.

The ProNet member meetings, attended by Diamond members, afforded the conspirators the opportunity to undermine and discredit the Harts with their downline. On knowledge and belief, this was done on numerous occasions. In fact, members of their downline reported to the Harts that it was being done and quite unfairly.

The ProNet Board's Conflicts of Interest, Self-Dealing and Breach of Fiduciary Duties

Each of the ProNet directors and members of the ProNet Steering Committee owed a fiduciary duty to each member of ProNet, as well as each distributor company purchasing BSMs through ProNet.

Gooch and his fellow Board co-conspirators formulated the ProNet compensation plan and, in so doing, directed and/or approved and/or acquiesced to the compensation each of them was to receive from tools and functions, when their participation in such decision constituted a flagrant conflict of interest, inherent self-dealing, and a breach of their fiduciary duties to the membership.

For example, Defendant Gooch received initially 18 cents for every cassette tape purchased through ProNet. This compensation was paid to him periodically by Global. On knowledge and belief, Defendant Gooch's "cut" increased to at least 20 cents per cassette tape later. All the while, this information was not disclosed to "regular" ProNet members.

In substance, these Defendants (that constituted the ProNet Board and Steering Committee), set their own compensation for tools and functions without input from ProNet "regular" members, and then conveniently didn't disclose that information to the ProNet membership.

The compensation taken by these Defendants for tools and functions was unfair, exorbitant and legally unauthorized by and through ProNet for various reasons, including the inherent self-dealing, conflicts of interest and violations of Delaware and Florida law.

The machinations undertaken by the conspiracy respecting tool orders by ProNet members are quite revealing. An order once submitted through ProNet would be filled by Global, which shipped the tool to the recipient. Global then invoiced, in many if not all cases, a member of the conspiracy, such as Defendant Childers or TNT, who ultimately remitted payment to Global, who at some point remitted payment to Defendant Gooch. The ultimate tape consumer would remit payment upline until Childers received payment.

A cassette tape typically cost about 40 cents, but was sold to the ultimate consumer for $6.00 or more.

The Final Boycotting of the Harts.

April 1998 Hart Meeting with the ProNet Steering Committee in Orlando -- the Loss of the Woods Organization Tool Business.

Soon after ProNet was organized and operating, Brindley and Gooch called Brig Hart and asked him to meet with the ProNet Steering Committee in Orlando so that a new tool compensation plan could be presented to him. This meeting took place in April 1998, and the following participated: Gooch, Childers, Foley, Woods, Brindley, Paul Brown, Brig Hart and Mark Wells.

The tone and direction of this meeting were decidedly different than the previous Orlando meeting in September 1997. Gooch led the discussion. Brown drew the compensation plan out on a board.

Hart and Wells were told the following:

Woods would henceforth deal directly with Childers for tools, leaving U-Can-II, although Woods was a part of the Hart Network;

U-Can-II, having now lost the Woods and Foley tool and function business, would receive a 20-cent increase on audio cassette tapes for their remaining downline (already depleted); and

U-Can-II would receive an additional dime (from 10 cents to 20 cents) on audio cassette tapes sold by Childers to the Foley network.

Brig Hart told the group "no," that he would not agree to their proposal, that it violated the BSMs rules and course of dealing, and that it wasn't fair.

Whereupon, Gooch stopped the meeting, and he and Brindley took Hart into a separate room. Gooch told Hart, "You're either going to accept this or lose everything -- either way, Woods is gone." When they returned to the group meeting, Hart again said "no." The meeting terminated.

Thereafter, Woods dealt directly with Childers for tools, thus boycotting U-Can-II, completely contrary to the BSMs rules. For a period of time, Childers paid U-Can-II for tools sold to Woods but, ultimately, no compensation was paid to U-Can-II by Childers for the Woods network's tool business. And, of course, Childers, having taken the Woods function business earlier, had now succeeded in taking everything from U-Can-II.

The Harts, having bucked the ProNet Steering Committee at the April 1998 Jacksonville meeting, soon found themselves in increasing disfavor.

August 1999: One-Year Suspension of the Harts at Midnight Meeting at Uwharrie Point, North Carolina.

In August 1999, at a ProNet Diamond meeting at Hal Gooch's home in Uwharrie Point, North Carolina, the Harts were summoned to a meeting at midnight by Defendant Brindley where they were confronted by members of the ProNet Steering Committee and others with unfounded charges calculated to undermine the Harts with their downline Diamonds. At this meeting, the Harts were accused of violating a rule of ProNet by printing a piece of literature (a tool) and selling it without ProNet's approval. The ProNet rule focused upon the conspiracy's attempt to control all tools and functions by requiring advance approval of the content of same through the ProNet Steering Committee, as well as Amway. Yet, one or more ProNet Steering Committee members openly and flagrantly violated that same rule without repercussion. The alleged violation by the Harts involved a small pamphlet put together by the Harts for their downline for which the Harts received $1,300 in reimbursement. As a result of this purported "rule violation," the Harts were told by the ProNet Steering Committee that they were suspended from attending ProNet functions for one year. This suspension, a separate boycott in and by itself, was calculated to deny the Harts any opportunity to refute the ongoing and concerted efforts of the conspiracy to discredit them and take their downline. With the suspension in effect, the stage was set for the final unfettered interference with the Hart Network by the conspirators.

The Harts vigorously protested this suspension, and told the ProNet Steering Committee that such action made it virtually impossible for the Harts to provide leadership and direction for their remaining network.

The hypocrisy and illegal intent of the ProNet Steering Committee's action in August 1999 in sanctioning the Harts for the purported "rule violation" is at least partially evidenced by and through Defendant Foley rolling out about that same time, without the knowledge or advance consent of the ProNet Steering Committee (excepting himself, of course), a website and internet service provider (ISP). On knowledge and belief, Jeff Starkweather and a technician of Family Connect, Inc. built the ISP for Foley which subsequently was sold by Foley to his downline at functions for hundreds of thousands of dollars. The Foley website and ISP was/is a "tool." On knowledge and belief, Foley did not seek permission or approval of same from ProNet. His profiting from the "tool" dwarfed any reward realized by the Harts from their "unapproved pamphlet." Yet, Foley was not sanctioned.

February 2000 ProNet Function in Indianapolis.

At the ProNet-sponsored Extravaganza 2000 Free Enterprise function held on February 4-6, 2000, in the RCA Dome in Indianapolis (when the Harts were "suspended" from attending), Defendant Gooch and co-conspirator Paul Stanley sought to undermine the Harts before numerous of their downline Emeralds, who were concerned that the Harts were absent from this high-profile function. Stanley sought out the Hart Emeralds for a meeting with Gooch. Gooch spoke to these Hart Emeralds and represented the following, in part:

that the Harts had taken themselves out of circulation;
that he (Gooch) was not sure what the future held for the Harts, and he was not sure that the Harts would any longer be involved with Amway;
that his suggestion to them, under the circumstances, was that they (the Hart Emeralds) "plug in with us" (the Gooch group); and
that Paul Stanley would be supervising the affiliation of the Hart Emeralds into the Gooch group

The representations made about the Harts by Gooch to the Hart Emeralds in February 2000 were untrue, and calculated to lure or entice them to begin dealing directly with Defendant Gooch respecting their tool and function business. Gooch didn't tell the Emeralds that the ProNet Steering Committee, which he led, suspended the Harts at his house in August. Instead, he did all he could to infer to the Hart Emeralds that the Harts had abandoned them. This effort by Gooch and Stanley constituted unabridged solicitation of and tortious interference with the Hart Emeralds, contrary to the BSMs rules. And such was made possible by Gooch engineering the suspension of the Harts from the ProNet functions for one year beginning August 1999.

February 2000 ProNet Function in New York.

Gooch and Stanley didn't stop their solicitation, tortious interference, and under-mining efforts after Indianapolis. They continued. For example, during a subsequent Emerald-Diamond function in New York on February 24-25, 2000, Paul Stanley again arranged a meeting between Hart Emeralds and Hal and Susan Gooch. This meeting took place between 2:30-4:00 a.m. one morning. Of course, the Harts were not present -- they were under "suspension." Stanley introduced Gooch, who made the following comments:

that the Harts had decided to become inactive in the Amway business for a while;

that the Harts' future in Amway was uncertain;

that the Harts were focused on other agendas and, because of this, the Gooches were willing to help and do what they could to "fill that void in leadership";

that they (the Hart Emeralds) "should plug into the Gooch group"; and

that they (the Hart Emeralds) should not disseminate to their downline messages from the Harts because Paul Stanley would coordinate all messages from the Gooch group directly.

Once again, the representations made by Gooch in New York about the Harts were untrue and/or inherently misleading. The meeting constituted yet one more effort to undermine the Harts while "suspended," and to solicit and seize their downline tool and function business. Stanley worked in concert with Gooch in pursuing this activity. Moreover, they sought to do all they could to cut off the Harts from their downline. This was malicious, outrageous conduct.

Following this ProNet function in New York, the Metcalfs, Hills, Nealis, Pasternacks, Kalbs, Auls, Chrischilles, Sorrensens and Murphys, who were all downline Emeralds or above within the Hart Network, left U-Can-II with their tool and function business.

Although suspended by ProNet from functions, the Harts endeavored throughout to remain active in the Amway business, attending Amway-sponsored meetings, and maintaining their Double Diamond status. While their tool and function business was being actively solicited and converted by the Defendants, the Harts' Amway business remained intact and functioning, despite Gooch's ongoing representations to the contrary.

ProNet Accomplishes the Total Boycott of Plaintiff.

On knowledge and belief, throughout this time, the ProNet Steering Committee, with Gooch in the lead, repeatedly instructed Paul Brown to rework the "pay scales" for tools to the advantage of the Defendants and to the inherent disadvantage of U-Can-II; ultimately, Brown was instructed to "cut him [Hart] out" completely.

As time passed, monies from the function business due U-Can-II stopped, and monies from the tool business dwindled as the conspiracy continued to whittle away at taking and/or destroying U-Can-II's business and business expectancies regarding the tool and function business.

By September 2001, all monies due U-Can-II arising out of the tool and function business of its downline ceased. The conspiracy had succeeded in engineering a total boycott or severance of U-Can-II respecting the tool and function business.