In Texas, the competition for consumers among energy companies is fierce. Instead of vying for small profit margins, one company took advantage of the deregulated market to create what a group of sales representatives contend is nothing more than a pyramid scheme.
In 2004, Stream Energy and its Ignite marketing arm were formed with the intention of reselling gas and electricity to Texas customers. By Stream’s own admission, Ignite operates as a multilevel marketing program, requiring sales representative to purchase a “Services Program” for $329, which purports to entitle the purchaser to sell the Services Program to others, and sign up others to switch their gas or electricity services to Stream. The plaintiffs claim that they and other sales agents are compensated according to the number of people they enlist to purchase the Services Program, not by their sales revenue,
In 2012, Sommers Schwartz attorney Andrew Kochanowski joined an existing lawsuit against SGE Management, LLC and other entities behind Stream Energy, alleging that Ignite is engaged in a pattern of unlawful activity prohibited under the federal RICO Act, and has defrauded is sales representatives to the point that all have lost or will soon lose their investment in the Services Program and additional monies.
After years of litigation, Stream and Ignite filed a motion to de-certify the class action, and the 5th Circuit Court of Appeals heard oral arguments on February 3, 2015. At the conclusion of the hearing, the panel of judges requested that the parties submit supporting briefs to their argument before rendering a decision.
This lawsuit is one of many brought by Mr. Kochanowski and Sommers Schwartz involving fraudulent sales and business practices. In July 2014, Mr. Kochanowski initiated a class action lawsuit against Michigan-based weight-loss shake seller ViSalus, Inc., a bevy of its owners, and outside promoters. According to the complaint, ViSalus recruited 100,000 new distributors as part of a pyramid scheme, after which the company’s principals then pulled out more than $80 million. The only way the plaintiffs could get their money back was to recruit other people – a type of fraud that the RICO Act expressly prohibits.