Monday, July 14, 2014
A class action lawsuit alleging a $240-million fraud was filed this week against Michigan-based weight-loss shake seller ViSalus, Inc., a bevy of its owners, and outside promoters. According to claims made in the complaint, brought on behalf of individuals who lost money after buying rights to distribute the company’s products, the operation was a pyramid scheme in violation of both state and federal law including the Racketeer Influenced & Corrupt Organizations (RICO) Act.
Plaintiffs Timothy Kerrigan, Lori Mikovich, and Ryan Valli assert that more than 100,000 people paid up to $999 to join ViSalus’s “Individual Promoter Sales Force” and the right to sell the company’s powdered weight management products marketed under the brand names Vi-Shape meal replacement shake, ViSalus Go Instant Energy, and Vi-Trim Clear Control Drink Mix. According to the lawsuit, however, the alleged true purpose of the company was to induce as many people as possible to sign up as independent promoters to fuel the profits of those at the top of the pyramid. Once enlisted, the lawsuit contends, the plaintiffs and other victims discovered that the only way to get back their money was to recruit other people into themselves becoming independent promoters – a type of fraud that the federal RICO act is intended to prevent.
The complaint alleges that ViSalus successfully recruited some 100,000 new distributors in two years before its sales plummeted, after which the company’s principals then pulled out more than $80 million generated by the pyramid scheme.
The named plaintiffs, both individually and on behalf of the class, seek to recover their investment and statutory damages from the company, its promoters, and a group of professional marketers who participated in the massive recruiting effort.
The lawsuit (Case No. 2:14-cv-12693-MFL-DRG) was filed in the U.S. District Court for the Eastern District of Michigan by Andrew Kochanowski of Sommers Schwartz P.C. in Southfield, Matthew Prebeg of Prebeg, Faucett & Abbott, PLLC in Houston, and Ed Wallace of Wexler Wallace LLP in Chicago. Sommers Schwartz and Prebeg, Faucett & Abbott are also currently engaged in litigation on behalf of victims of a Texas-based energy sales pyramid scheme.