Stewart v Gooch et al (cont'd)

The Amway Business and the Essential "Line of Sponsorship."

18. Amway Corporation ("Amway") is a "multi-level marketing" business, selling consumer goods and products worldwide through a vast network of independent distributorships, many of them based in Missouri. Quixtar is Amway's internet-based business implemented within the last few years by Amway. Today, Amway is often referred to as Quixtar. The Amway "pyramid" marketing program, in connection with this business, is one where any purchase or sale of Amway products by a distributorship financially benefits not only Amway, but also those Amway distributorships that qualify and occupy levels within the Amway distributorship network higher than that of the selling distributorship. Those Amway distributorships that occupy positions below a given distributorship in each branch of the network are referred to as that distributorship's "downline." Conversely, those distributorships that occupy positions in the network above a given dis-tributorship in each branch are called that distributorship's "upline." These respective positions are determined by the essential and important Amway concept of "line of sponsorship." As such, a distributorship's initial place in the Amway network is immediately below the distributorship who sponsors and brings that distributorship into the network, subject to Amway's approval, and immediately above those distributorships that the given distributorship sponsors as new Amway distributorships. New Amway distributors are instructed that respect and observance of the line of sponsorship is mandatory, that they should "edify" and "support" their upline distributors, and that their upline is there to teach and support them. In order to earn significant profits as an Amway distributor-ship, one must develop a sizable downline network by recruiting and sponsoring other distributors into the Amway business. By so doing, the upline distributorships stand to benefit.

19. Defendants Gooch, Childers and Dunn are principals of Amway distributorships located near the apex of the Amway pyramid in what may be referred to as the "Yager Group," and are part of the upline for Stewart Associates (herein the "Upline Co-Conspirators and/or Defendants"). On knowledge and belief, Defendants Tim Foley and T&C Foley, Inc.; Steve Woods and G.F.I. International, Inc.; Parker Grabill and Grabill Enterprises, Inc., are principals of Amway distributorships and related tool businesses "crossline" to Stewart Associates in the Gooch line of sponsorship (herein the "Crossline Co-Conspirators and/or Defendants"). On knowledge and belief, non-party co-conspirators Ronald Rummel & Rummel Enterprises, Inc.; Chuck Orstad and K.C. & Associates; Howard Eckman and Eckman Enterprises, Inc.; Jack Pawlak and Diamond J. Enterprises, Inc.; Joe Broome and Broome & Associates; Kirk Arndt; Michael Martin; Nick Grachanin; and Mark Janer, are principals of Amway distributorships and related tool businesses downline to Stewart Associates in the Gooch line of sponsorship (herein the "Downline Co-Conspirators").

20. Amway considers its distributorships as independent contractors, an aspect that is continuously stressed and touted as an advantage and incentive for every distributorship. Accordingly, each distributorship constitutes an "Independent Business" or "IB," as designated by Amway. If the principal of an Amway distributorship is successful in developing their independent business, that principal (distributorship) can reach various "pin levels" of achievement. The ascending "pin levels" were, until September 1999, Direct, Ruby, Pearl, Emerald, Diamond, Executive Diamond, Double Diamond, Triple Diamond, Crown and Crown Ambassador, and thereafter Platinum, Ruby, Sapphire, Emerald, Diamond, Executive Diamond, Double Diamond, Triple Diamond, Crown and Crown Ambassador. Each pin level entitles the principal and/or distributor to corresponding bene-fits and privileges, which increase at each ascending level.

21. Prior to 1995, once an Amway distributor obtained the "Direct" level (the lowest pin level), the distributor could begin purchasing directly from Amway instead of through the distributor's upline. Hence, "Direct" referred to a distributor's right or advantage to purchase directly. In 1995, Amway initiated a new program called "Direct Fulfillment." Under this program, if a distributor's next upline "Direct" (now referred to as Platinum) would approve by "signing off," the distributor, however new, could order direct from Amway. The objective of "Direct Fulfillment" was to speed up the distribution process. A pin level Amway distributor does not share in the profits generated by the sale of Amway products from other "pin level" distributors in his/her downline, but does obtain monetary and other bonuses directly from Amway because of the increased volume generated by these "pin level" distributors in that distributorship's downline network.

22. Ken Stewart owns and operates an Amway distributorship under the name Stewart & Associates International, Inc. ("Stewart Associates"), based in Tequesta, Florida, but was previously based in Springfield, Missouri, until December 1996. Stewart Associates acquired the status within the Amway distributor network as a highly success-ful distributor, achieving the prestigious "Crown" status. Ken Stewart, the principal of Stewart Associates, became well-known and popular within the Amway network of distributors and, at one time, before the objectives of the conspiracy came to fruition, was in great demand as a motivational speaker at rallies, major functions and conventions.