Following a directive final month of their NetForce case, the FTC has filed a movement looking for a contempt judgment and compensatory civil contempt sanctions.
The FTC first sought NetForce contempt sanctions in opposition to Jay Noland mid final yr.
The courtroom declined to provoke contempt proceedings on the time, pending decision of the FTC’s Success by Well being pyramid case.
To acquire contempt sanctions, the FTC should not solely succeed on its allegations within the Success By Well being motion however show these allegations by clear-and-convincing proof.
That case is nonetheless enjoying out pending the result of a filed enchantment.
Within the meantime with permission of the courtroom, the FTC is once more looking for contempt penalties within the NetForce case.
Of their June twenty third movement, the FTC places forth
Defendant James D. Noland, Jr., together with co-contemnors Scott Harris, Thomas Sacca, Success By Media LLC, and Success By Media Holdings Inc. violated a number of phrases of this Courtroom’s 2002 Stipulated Closing Judgment and Everlasting Injunction.
Till the Courtroom imposed preliminary aid in January 2020, they ran two pyramid schemes—Success By Well being (“SBH”) and VOZ Journey—utilizing false earnings claims to bilk 1000’s of customers out of $7 million.
The FTC, subsequently, requests the Courtroom discover them in contempt and award civil compensatory sanctions.
The NetForce case was filed in 2000 ‘in opposition to Jay Noland for making misleading claims and selling a pyramid scheme’.
The FTC received the case by way of last order, which
bars (Noland) from sure advertising schemes, bars him from making misrepresentations associated to a multi-level advertising program (“MLM”), and bars him from offering the means and instrumentalities to others to make deceptive statements or omissions.
In assist of their contempt movement, the FTC claims Jay Noland (proper) and Scott Harris have been taking part in pyramid schemes courting again to the Nineteen Nineties.
Harris met Noland within the Nineteen Nineties, after they every participated of their first pyramid scheme, Equinox.
A courtroom discovered Equinox probably a pyramid scheme and imposed a preliminary injunction on the corporate.
Harris then joined Noland at Bigsmart, the pyramid scheme that gave rise to the Closing Order.
Thereafter, Harris took a pyramid scheme hiatus, however continued misleading conduct.
He turned a supervisor of Allied Power round 2003, then an officer in 2005 and CEO from 2011-2016.
Regulators discovered Allied Power and/or Harris engaged in misleading acts.
Harris instructed Noland about these orders, but Noland put him in command of Closing Order compliance.
Three months after Harris was discovered to have willfully violated state legislation and a previous order, he turned an SBM director, and in Might 2019, its president, having been SBM LLC’s vice chairman since September 2017.
Noland and Harris boast of their pyramid proclivity.
Noland instructed an viewers he builds pyramids they usually can, too:
Folks ask me what do I do. I stated I construct pyramids, man. . . . I construct some little pyramids, besides I’m on the high of those I constructed . . . . I’ve obtained over 700,000 distributors in my community . . . . [and] you are able to do what I did.
The 700,000 determine Noland boasts about is from Organo Gold. On the time he made the above declare, Noland solely had 6000 distributors below him.
Extra points raised with Success by Well being conduct embody:
- Jay Noland’s “no complaints” coverage;
- diversion of client complaints to uplines with a strict “no SBH electronic mail accounts” rule;
- no assortment or monitoring of client complaints, a few of which have been medical in nature;
- deletion of client complaints from SBH’s official Fb web page;
- Noland referring to customers who complained as “little gnats”;
- Noland instructing SBH associates to not report issues “or be kicked out (together with the associates who recruited them)”;
- Noland blaming complaints on “horrible management”, while excluding himself, as proprietor and CEO of Success by Well being from management;
- Noland suing SBH associates who sought chargebacks over undelivered merchandise and threatening to “refer them for prosecution”;
- in gentle of the above insurance policies, Scott Harris then “proudly” testifying “there weren’t that many individuals that made complaints”;
- pushing the “huge lie” that Noland is a “multi-millionaire” and “millionaire maker” who “practice(s) others to change into wealthy like him”;
- parading “supposed” SBH top-earners round as “success tales”, with out verifying how a lot these distributors has made (one affiliate featured in SBH’s official journal had truly misplaced $9000);
- failing to watch compliance with respect to the unique NetForce last order;
- making “nonsensical definitions of (a) pyramid scheme”, comparable to “a pyramid is “no product being bought” and “you possibly can’t out earn the particular person above you”; and
- misrepresenting the NetForce last order as being restricted to 5 years after it was made.
Whether or not Noland’s curated tradition of concern tied into associates paying $250,000 in SBH authorized charges is unclear.
Two further factors, which can be too prolonged to record as bullet factors, are the failure to display high management roles and SBH’s solely ever board assembly.
The FTC holds Noland and his co-defendants accountable for failing to display high SBH management roles.
This failure noticed Ann Giles and Lu Ann Wallace rise as SBH high leaders.
In screening for high management roles, Contempt Defendants didn’t ask about previous misleading felony acts and took no remedial steps upon studying of such conduct.
They thus didn’t detect high affiliate Ann Giles’ 5- yr state jail sentence for theft by deception.
Sacca stated Giles is without doubt one of the SBH “leaders,” a Founder, and one of many only a few chosen for reward journeys to Hawaii and Aruba.
Noland praised Giles in a March 2018 SBH Fb video for all associates as one in all simply three non-Defendant associates on observe to “by no means, ever should work once more” by the tip of that yr.
Of SBH’s 7,000 associates, Giles is #3 in commissions and Lu Ann Wallace is #11, excluding Defendants.
Giles had at the least 55 direct recruits into SBH—which means Contempt Defendants anticipated these 55 and all these of their downlines to go to Giles and people she educated about compliance points earlier than ever contacting SBH.
In June 2019, the Authorities named Giles and Wallace in a 37-count indictment for felony conspiracy to defraud the USA.
Sacca spoke to them concerning the indictment quickly after, and with Harris and Noland.
Sacca had a “private reference to Giles,” and no information of any effort to extend monitoring of Giles’s and Wallace’s conduct on SBH’s behalf following their indictment.
For reference, Giles and Wallace have been indicted for tax fraud. They pled responsible to the costs in June 2020.
In September 2020 Giles and Wallace have been sentenced to 30 and 33 months in jail respectively.
Along with their respective phrases of incarceration, Giles and Wallace have been ordered to pay $1,595,725 to the IRS in restitution, collectively and severally.
Underneath federal legislation, Giles and Wallace should serve 85 % of their jail sentences.
Then there’s Success by Well being’s first and solely ever recorded board assembly.
Contempt Defendants’ farcical façade of compliance is laid naked when contrasted to the one factor they honestly cared about stopping—the reality.
When an affiliate posted truthful info exhibiting Noland’s super tax money owed and liens, house foreclosures, and lack of property possession, Contempt Defendants instantly held a board assembly— the one recorded SBM board minutes ever—to deal with the “negativity.”
“The priority is . . . dropped gross sales” as such “negativ[ity]” “previously introduced in drastically decrease gross sales and defecting of wholesale Associates.”
Noland then used the board minutes to inform the IRS, below oath, that SBM’s “unbiased and really aggressive and accountable board” — which consisted of Noland, his spouse, his private accountant, and his multi-pyramid scheme accomplice (Harris) — demanded Noland’s public tax liens be hidden as they have been harming his fame and the corporate’s.
The FTC has requested the courtroom sanction the “contempt defendants … within the full quantity of client losses.”
To calculate customers’ loss, the FTC’s forensic accountant reviewed SBM LLC’s financial institution data for July 1, 2017 by way of January 14, 2020.
The principle account obtained $8,563,833.63 (internet of refunds and chargebacks) from fee processors.
It additionally obtained $389,230.98 in wire transfers, excluding these not for client purchases.
This involves $8.95 million.
Accompanying the FTC’s movement is 321 pages of supporting displays.
Keep tuned for updates as we proceed to trace the case.
Replace thirty first March 2022 – The FTC’s request for NetForce contempt sanctions has once more been denied.