Web Scam Operators Agree to $20M Penalty
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Consumers who were victims of a pyramid scheme widely promoted on the Internet will get $20 million from SkyBiz, an alleged massive international operation based in Tulsa, Okla. The money is part of a settlement between the pyramid's promoters and the Federal Trade Commission (FTC), which charged SkyBiz with violating federal deceptive practice laws.
In May 2001, the FTC filed suit in U.S. District Court in Tulsa charging that 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 Skybiz's failure to disclose that most people in pyramid schemes lose money is deceptive; and that Skybiz provided the means and instrumentalities for others to deceive consumers by providing speakers and promotional materials that made the false and misleading claims.
The case was scheduled to go to trial Jan 6. 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 Caroline, Oklahoma, Wisconsin and Wyoming.
The defendants agreed to a settlement, reached in principle Jan. 4, and entered by the court on Jan. 28, to end the litigation. The FTC released the settlement information on Monday.
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 multi-level marketing programs for life and bars three others from engaging in multi-level marketing programs for periods ranging from 7-22 years.
The corporate entities named in the suit include SkyBiz.com, Inc; World Service Corp.; Nanci Corp. International; and WorldWide Service Corp. 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.