Two Isagenix distributors have filed a lawsuit against the company, alleging losses of $170,000.
At the heart of the lawsuit is a secret Amazon and eBay sales racket, allegedly approved by Isagenix management.
Section 4.5 of Isagenix’s Policies and Procedures states
Associates may not (directly or indirectly through any intermediary or instrumentality) offer, display or sell, or facilitate the offering, displaying or selling of Isagenix’s products on a retail basis in any manner (including online auctions websites, such as eBay or Amazon, e-commerce websites, retail websites, social media sites or apps, infomercials, and television).
Turns out that doesn’t apply if you’re in with Isagenix co-founders Jim and Kathy Coover.
As alleged by plaintiffs Bryan Lund and Scott Christensen in a lawsuit filed in Utah;
Back in 2017 Jay Bennett, a top Isagenix distributor, approached Rich Ferguson into his downline.
Bennett purportedly encouraged Ferguson to get Bryan Lund (right) on board, with the aim of of selling Isagenix products through “Lund’s ecommerce activities”.
Lund initially declined because his specialty was as a product reseller on Amazon, and he was aware that multi-level marketing companies, such as Isagenix, generally discourage Amazon and other online resales of their products.
Lund wasn’t wrong. Perusal of eBay’s forums reveals multiple instances of Isagenix’s Compliance Department policing the site.
Despite this, Bennett and Ferguson persisted in their efforts to convince Lund to sign up.
Ferguson arranged for multiple phone calls between Lund and Jay.
In those phone calls, Jay stated that although Isagenix’s general rule was that Amazon resales were not allowed, because of his status as one of the highest ranked Isagenix distributors, as well as his personal relationship with Isagenix’s founders and owners, Jim and Kathy Coover, he had an agreement with Isagenix that it would allow Amazon and other online resales that Jay supervised.
To seal the deal, Bennett organized a dinner meeting between Lund, Ferguson and Jim and Kathy Coover.
Lund sat next to Jim and Kathy Coover. Ferguson and Bennett also participated in the dinner conversation.
Over the course of dinner, Lund explained to Jim and Kathy Coover at length and in detail that he was an Amazon, eBay and ecommerce reseller and that, if he joined Isagenix … it would be solely based upon his ability to resell Isagenix products on Amazon and through other online retail sites.
Upon hearing this, Jim and Kathy Coover informed Lund that reselling of Isagenix products on ecommerce sites was strictly prohibited.
Nah.
As recounted by Bennett, the Coovers were totally into Lund’s proposition.
Jim and Kathy Coover indicated that they understood Lund’s position, and that they supported Bennett’s efforts to recruit Lund and Ferguson.
Jim Coover allegedly was willing to turn a blind eye because “Isagenix US sales volume … had been decreasing”.
Satisfied they had permission to breach Isagenix’s Policies and Procedures from the top, Lund and Ferguson signed up under Bennett.
While the pair prepared to flood ecommerce sites with Isagenix products, a disagreement broke out between Ferguson and Bennett
Ferguson is alleged to have wanted to strike a backroom deal with Isagenix directly and cut Bennett out.
To settle the dispute, Bennett paid Ferguson “at least $50,000” to leave.
Lund then proceeded with the original plan. He purchased ~$20,000 worth of Isagenix products and listed them on ecommerce sites.
Within two weeks, Isagenix’s legal department sent Lund a cease and desist.
Lund withdrew the listings and “withdrew from any further participation with Isagenix”.
The lawsuit doesn’t clarify what, if any, communications took place between Bennett and Lund with respect to the cease and desist.
About a year passed, and in January 2019 Bennett called up Lund to inform him he’d ‘resolved the issues with Isagenix and Isagenix’s cease and desist‘.
Bennett represented to Lund that the cease and desist … was the result of Ferguson trying to go around Bennett directly to Isagenix.
Lund was skeptical but eventually came around.
Bennett represented that, in the future, if Lund were to receive a cease and desist from Isagenix, he should give the letter to Jay and he would “take care of it” through his special relationship with Isagenix.
Nothing slimy at all about that…
Bennett again cited his personal relationship with Jim and Kathy Coover.
He stated that Jim Coover and Isagenix were fully behind e-tail resales of Isagenix products because sales volumes in the United States had declined even further.
Not only had Bennett been given the clear, but purportedly
the top 10 Isagenix distributors had been approved for internet resale as long as they did not allow other distributors to be aware and “kept it under the radar”.
Y’know, the exact thing Bennett was doing by communicating all of this to Lund.
Things got even slimier when Bennett laid out a plan to create multiple distributorship positions.
The aim was to ‘maximize the commission payout from Isagenix‘.
Bennett indicated that given such a combined payout, if Lund’s positions were qualified at easily attainable levels in the compensation plan and the Isagenix products were resold at a breakeven or even a small loss, the monthly earnings would be well in excess of $50,000 a month.
The only caveat was that if Lund proceeded, Bennett would be ‘fully in charge of team placement and operation of the Isagenix positions‘.
In January 2019 Isagenix held a “major convention in Arizona”.
Bennett arranged for Lund to attend the event. At Bennett’s request, Lund brought along Darin Asay
to explain to (him) all that he would be doing and what he would need from (him) to move the project along.
The trio met for “approximately two hours”.
One of the roadblocks Asay explained to Bennett was
Amazon would not accept any Isagenix products for resale unless the reseller was able to provide certificates of “Good Manufacturing Practice” (GMP) with respect to each Isagenix product that would be resold.
Bennett got a hold of the GMP certificates from Isagenix and emailed them to Lunda and Asay on February 12th.
With that roadblock out of the way, the scheme moved forward.
In setting up the previously agreed placed distributorships, Bennett is alleged to have purchased an additional Isagenix distributorship position for $50,000.
Bennett promised in writing that the … position would be transferred to Lund or his designee.
Attached as an exhibit to the complaint is a written agreement between Bennett and Lund.
A part of that agreement was that Plaintiffs would follow Isagenix’s Policies and Procedures.
However, Plaintiff’s understood that clause to mean the Isagenix Policies and Procedures as subject to the personal modifications and understandings that Jay represented that he had with Isagenix as those representations had been supported through Lund’s contact with Jim and Kathy Coover and the actions Isagenix took at Bennett’s request.
To fund purchase of the first round of Isagenix products, Bennett loaned Lund $10,000.
At this point Lund brought Scott Christensen, his business partner, on board.
Through Jennifer Rodriguez, another member of Bennett’s downline, additional Isagenix distributorship positions, to game Isagenix compensation plan as previously discussed, were created.
Possibly to avoid detection by Isagenix’s Compliance Department, product purchases through the gamed positions were made with VISA gift cards.
Using this method, over $10,000 in Isagenix was purchased through the gamed distributor positions Rodriguez created.
Each gamed position had a different shipping address, causing issues with Lund regarding order processing time.
Here things began to fall apart.
Rodriguez complained that the VISA gift cards caused to much work for her when placing each individual order.
Lund demanded all orders be sent to a single address or he was out.
And, perhaps not surprisingly;
commissions paid by Isagenix on the purchases made through the downline organization were much less than the amounts projected by Bennett and Rodriguez.
A few weeks passed before Lund and Christensen received a call from Bennett.
Bennett explained that he had used his special relationship with Isagenix to secure approval for a single credit card and a single delivery address.
This claim was verified when Isagenix accepted a single address across multiple accounts as Bennett represented they would.
To ensure Lund and Christensen stayed on board, Bennett agreed to release Lund from repayment of his $10,000 loan.
Testing of the new arrangement commenced, prompting Isagenix’s Compliance Department to question the nature and placement of the gamed distributor position orders.
As instructed, these enquiries were passed on to Bennett “for handling”.
As the Amazon racket continued, Christensen, at Bennett’s request and coaching, spoke with Isagenix’s Compliance Department.
Bennett represented to Christensen that Bennett had coordingated with Isagenix’s compliance executives to present a rationale to the lower level workers that would allow the normal compliance programs to be circumvented.
As opposed to other Isagenix distributors, I believe “lower level workers” refers to regular Isagenix staff.
The ruse cooked up to satisfy Isagenix’s Compliance Department, was that
Christensen’s development company, Premier Home Solutions, had adopted a wellness program and that Isagenix products were part of that program.
This was relayed to the Director of Isagenix Global Compliance, Kimberly Valenzuela, via conference call.
Satisfied with how things were going, in May 2019 Lund and Christensen agreed to another $50,000 product purchase.
Isagenix’s system accepted the orders but failed to pay commissions to the gamed distributor positions.
Efforts to remedy the situation by Bennett and Christensen saw Isagenix lock the distributor position altogether.
This saw Lund and Christensen inform Bennett that unless the position was unlocked, they were no longer on board.
Bennett managed to get Isagenix to unlock the position. As part of that negotiation, the position was transferred to Bennett’s brother in Haiwaii.
Bennett confirmed with Lund and Christensen that the commissions and bonuses would still be paid to Lund’s bank account.
To sweeten things over, Bennett offered Lund and Christensen a bonus $10,000 a month for three months – if specific volume requirements were met.
Lund and Christensen agreed and, for the month of July 2019, $26,000 was generated in commissions.
This was off $90,000 in Isagenix product purchases. Once sold through Amazon, eBay etc., Lund and Christensen expected to generate a “significant profit”.
This appears to have played out as expected, prompting Lund and Christensen to drop over $100,000 in additional product orders.
This triggered something on Isagenix’s end, causing the company to realize it was losing money on commissions paid out to the gamed distributor positions.
Whether Lund and Christensen were aware of Isagenix’s concerns is not clarified in the complaint.
The pair went on to purchase another $90,000 in Isagenix products on credit.
Those orders saw Isagenix’s Compliance Department contact the Lund and Christensen.
As they had previously, Lund and Christensen forwarded correspondence from the Compliance Department to Bennett.
Instead of handling things with Isagenix, Bennett ghosted Lund and Christensen.
Isagenix’s Compliance Department had requested information about the gamed distributor accounts Rodriguez had set up.
Lund and Christensen didn’t have that information, prompting Isagenix suspended all the gamed distributor positions.
During the course of the Lund’s and Christenen’s involvement in Isagenix, Bennett went from third highest for company-wide sales volume to first.
Lund and Christensen were left with $170,000 in claimed losses. Despite meeting set sales volume targets, Bennett never paid the pair the promised $30,000 bonus either.
Lund’s and Christensen’s lawsuit names Jay Bennett, his wife Siv, Jennifer Rodriguez, Isagenix and the Coovers as defendants.
Causes of action cited in the complaint are
- breach of contract;
- intentional misrepresentation;
- negligent misrepresentation; and
- civil conspiracy.
Lund and Christensen are seeking judgment for $170,000 and damages exceeding $1.7 million dollars.
Despite admitting they knew what they were doing was against Isagenix’s Policies and Procedures, Lund and Christensen paint themselves as victims.
Strictly speaking from a financial perspective, they’re right.
Outside of that it’s going to come down to who represented what – specifically communications between Bennett and Isagenix’s Compliance Department.
Isagenix could throw Bennett under the bus and play dumb, but that might be hard given the dinner meeting. Things will certainly get complicated if the Coovers deny the claim they were in on it.
Depositions of other Isagenix leaders who might have similar deals is a possibility.
Looking at the bigger picture, actions as described in the complaint are company killers.
Honest distributors get screwed over by top Isagenix earners and corporate.
And why this happened certainly suggests that perhaps Isagenix as an MLM opportunity is no longer viable in the US.
This then raises questions about Isagenix’s other markets, and whether those markets are built on retail sales or the hope that local regulators will continue to turn a blind eye.
One particular claim made in Lund’s and Christensen’s lawsuit raises additional questions about Isagenix’s compensation plan.
Plaintiff is informed and believes that thereon alleges that there are many such positions within Isagenix downlines with volume that has not yet earned a full commission.
If each of those positions were allowed to actually earn the fully potential commission, it would make the Isagenix commission system uneconomic as a whole.
This sounds as if Isagenix entire business model is only viable if the vast majority of distributors fail to qualify for 100% of earned commissions.
If the FTC are watching, Lund’s and Christensen’s lawsuit, there might be probable cause for a regulatory investigation.
Is Jay Bennett’s millionaire status within Isagenix the result of retail sales or secret backroom deal shenanigans? And what exactly is his plan of action?
If it’s the latter, marketing Isagenix on the backs of millionaire earners within the company sure sounds like false advertising to me.
Regular Isagenix affiliates don’t have the pull with Isagenix corporate or compliance. Not withstanding they are prohibited from competing with Bennett and other top Isagenix earners on ecommerce sites.
One of the core tenants of MLM is that everyone competes on an even playing field is it not?
How widespread Amazon/eBay/etc. rackets are within the MLM industry I can’t say. In 2017 we covered a similar bust up within Visalus.
That lawsuit ended in a confidential settlement roughly a year later. Money changing hands in favor of the Plaintiff is the only way I could see that lawsuit getting settled.
And it’s a similar story with this Isagenix lawsuit. More so if Lund and Christensen have all their receipts in order.
According to Lund’s Facebook profile, he’s currently a 200K VIP Brand Promoter at Le-Vel. Whether that’s the result of retail sales or more backroom deal shenanigans is unclear.
Unfortunately being a state-level case, I’m unable to track Lund’s and Christensen’s lawsuit in detail. Pending any updates we come across, stay tuned…
Update 22nd March 2020 – Jim Coover has appeared on an Isagenix webinar to deny allegations raised in the lawsuit.
Update 24th March 2020 – Communications and supporting documents have emerged, directly contradicting Jim Coover’s denial claims.
Update 27th March 2020 – Isagenix’s Chief Legal Officer has confirmed the company sells products on Amazon through a partner.