THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, July 21, 1996 TAG: 9607200347
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY STEPHANIE STOUGHTON, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: 136 lines
Art Parks smelled opportunity. In his hand was the help wanted ad that could lead to a management position at a fast-growing environmental company.
Parks expected a one-on-one interview with the Virginia Beach business, East Coast Solutions. Instead, he found himself seated in a room along with a small crowd of Hampton Roads residents. Exuberant company representatives talked about the opportunity that could make him rich.
The presentation, Parks said, felt cultish.
``I tried to leave once, and they asked me to stay in my seat,'' Parks said. ``I was trying to be polite and not make a scene. But after the presentation, I ran away as fast as I could.''
East Coast Solutions, he discovered, is the local arm of Equinox International Corp., a Las Vegas-based firm that's racking up complaints across the nation over the way it recruits people and sells merchandise.
Authorities in at least 14 states have investigated complaints that Equinox misrepresents itself during recruitment and engages in unfair business practices such as misleading advertising and high-pressure tactics. Equinox says it has done nothing wrong.
An investigation last month by ABC's ``20/20'' showed former Equinox representatives who said they had lost tens of thousands of dollars. They said Equinox, which sells everything from household cleaners to dietary supplements, lured them with deceptive ads and visions of wealth.
Equinox attributes the complaints to disgruntled ex-sellers or rogue representatives who don't follow the company's stringent policies. Despite its best efforts, Equinox says, it can't be responsible for the actions of each representative.
``With 100,000 representatives, 99.9 percent of them do everything by the book,'' said Sue Stitt, an Equinox spokeswoman. ``But you always have those little rebels, as you do in every business.''
In Hampton Roads, Equinox's sales network is young but rapidly growing. The local offices began operating about a year ago as East Coast Solutions, which is a trade name for TC Destiny Inc. of Virginia Beach, according to State Corporation Commission and Circuit Court documents.
East Coast Solutions is one of about 400 independent distributor offices for Equinox in the United States and Mexico. Through these offices, representatives are recruited to sell Equinox products and recruit other people.
The local company would not say how many representatives it had in Hampton Roads.
There haven't been any formal complaints to local consumer affairs offices or the Virginia attorney general's office, though the Better Business Bureau covering Hampton Roads has received 38 calls from residents inquiring about the company since January.
Equinox founder Bill Gouldd, however, is another story. He paid $75,000 to settle a civil suit brought by the California attorney general several years ago. The attorney general said Gouldd's former company, Advanced Marketing, was an illegal pyramid scheme.
``It's my understanding that he left California after that - at least for the time being,'' said Andi Thomas, a spokeswoman for the state's attorney general's office.
Equinox bills itself as a multilevel marketer like Amway or Avon. Multilevel marketers sell products directly to consumers, with no retailers involved. Representatives receive commissions on their sales.
Pyramids, on the other hand, operate by exchanges of money, with participants getting a big payoff for their ``investment'' only after more people are lured into the scheme. When the pyramid collapses, the people at the bottom tiers lose their money.
In Virginia, any person who operates or promotes a pyramid faces a misdemeanor charge.
The California attorney general's office said in its 1989 lawsuit that Gouldd's Advanced Marketing was a cloaked pyramid scam. It said much of the company's products weren't being sold to consumers. Instead, members were buying much of the products themselves and then recruiting other people to do the same.
Since Gouldd settled the California case, his new company - Equinox - has experienced explosive growth. On an Internet site, an Equinox representative writes that the firm grew from $23 million in sales in 1992 to $240 million last year.
Under the Equinox system, new representatives can be promoted after selling $5,000 worth of Equinox products. But they can make more money by bringing in new blood, which increases their own sales volume.
``The further up we move through the Equinox marketing system, the larger our profits will be,'' an Equinox brochure says.
As Equinox has grown, so have complaints from job seekers and former Equinox representatives. North Dakota officials, for example, have received complaints of high-pressure tactics, misleading advertising and deceptive recruitment.
Some of the state's residents said they were asked to make large investments to buy their way into positions within Equinox's local sales force, said Dave Huey, a North Dakota assistant attorney general.
For example, if Equinox representatives needed $5,000 in sales to get promoted, they might have made a $5,000 investment up front, essentially purchasing the promotion.
``People were advised to make imprudent actions to make the investments - like not paying rent or taking out student loans,'' Huey said.
When Huey called Equinox's headquarters in Las Vegas, he said the company responded that it wasn't responsible for the actions of its distributors.
The Better Business Bureau of Southern Nevada says other complaints include dissatisfaction with Equinox's ``environmentally friendly'' line of products. Equinox sells water filtration systems, household products and body-care items. It also offers a line of nutritional products, including ``Skeletal Support,'' ``Balanced Woman'' and ``Tolerance.''
Nevada was one of 14 states that participated this year in an investigation of residents' complaints about Equinox. The others were Alabama, Florida, Illinois, Michigan, Missouri, Nebraska, North Dakota, Ohio, New Mexico, Pennsylvania, Texas, Washington and Wisconsin.
Attorneys general offices in the 14 states have gotten Equinox to voluntarily agree to certain measures, said Sonya Sanchez, a spokeswoman with the Texas attorney general's office, which spearheaded the review. But she would not release details, except to say Equinox has not admitted to any wrongdoing.
Equinox says it has policies prohibiting people from buying too much merchandise so they can scale the company's ranks. It also allows representatives to return merchandise for a 90 percent refund.
``We're trying to help them make sound business decisions,'' Stitt said.
An East Coast Solutions representative agreed, saying the company has been nothing but good to him.
``I was never pressured to do anything,'' said Todd Hayes, an official with East Coast Solutions. ``I started in Dallas two and a half years ago. I answered an ad. I thank God that I answered that ad. It has literally changed my life.''
At a recent recruitment meeting at East Coast Solutions' offices off International Parkway, job seeker Parks found himself growing warier by the minute. The Norfolk resident thought he was interviewing for a management position. Instead, he found himself in a room with other job prospects.
Parks, who is retiring from the Navy this fall and looking for a new job, said he grew more uneasy as East Coast Solutions representatives discussed the compensation plan. It didn't make sense, Parks said.
Then, there was the talk about Equinox founder Gouldd - how rich he was, how intelligent he was, what wonderful products he had developed.
The message was, Gouldd could make people rich, Parks said. After all, there were the testimonials on employees' successes and demonstrations of the environmentally friendly products.
``It was almost like a cult,'' Parks said. ``They kept saying, `He's a genius.' They acted like he was a god.''
KEYWORDS: EQUINOX INTERNATIONAL INVESTIGATION PYRAMID SCHEME by CNB