High-flying Vegas firm
under fireHawaii is among the states alleging that
By Greg Stohr
Equinox International is a pyramid scheme
Bloomberg NewsWASHINGTON -- A federal judge froze the assets of Equinox International Corp., a Las Vegas-based company once described as the fastest growing in the nation, while she considers federal and state claims that it owes its success largely to widespread fraud.
U.S. District Judge Johnnie B. Rawlinson also appointed a receiver to run the company, which uses a network of distributors to sell products ranging from water purifiers to vitamins, and froze the assets of company founder William Gouldd.
The civil charges are the most serious yet for a once high-flying company now beset by legal difficulties.
The Federal Trade Commission and six states, including Hawaii, claim Equinox and two related companies deceived people out of $220 million, and they want that money returned to consumers.
In a lawsuit filed in a federal court in Las Vegas, government officials portrayed Equinox as nothing more than a "pyramid scheme" that illegally uses new investors to reward early participants. According to the complaint, Equinox tells would-be participants they can earn tens of thousands of dollars if they become distributors -- a status that requires them to buy at least $5,000 in products.
Distributors then learn at a training program that "the real way that people make money in the Equinox system is through successive recruitment of others, rather than selling products at retail," the complaint alleges. Although the company promises the prospect of quick wealth, the vast majority of Equinox distributors have little or no success selling products, government officials say.
Equinox officials weren't available for comment. A recording at the company's Las Vegas headquarters today said that "due to special circumstances outside of normal operating business procedure, the company is unable to take your call at this time."
Equinox topped the 1996 Inc. Magazine list of the fastest growing U.S. companies. At the time, Inc. said that Equinox's 1996 revenue was almost $200 million and that the company had 218 employees. The magazine pictured Gouldd alongside Microsoft Corp. Chairman Bill Gates.
This isn't Gouldd's first brush with the law. In 1990, he agreed to pay $75,000 in civil penalties to settle a consumer deception lawsuit connected to his work for another company.
Equinox, founded in 1992, agreed in 1996 to pay $455,000 to resolve a 14-state investigation into the claims it made to distributors about the success of its products. The company also was the focus of a report on "20/20", the ABC television news magazine.
Besides Hawaii, other states joining the FTC lawsuit were Maryland, Nevada, North Carolina, Pennsylvania and South Carolina. Government officials are seeking consumer redress and a court order barring Gouldd and Equinox from engaging in similar deception in the future.
U.S. consumer protection agencies frequently seek asset freezes and receiverships to prevent companies and hiding funds needed to compensate consumers.
Gouldd, who reportedly added an extra "d" to his name because a spiritual adviser told him he was "out of balance," reportedly owns at least four luxury homes, a yacht, a jet and a collection of expensive cars.
