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Zanco, a Network Marketing company that was created to sell products backed by Suzanne Somers, has decided to lay off its ten employees and transfer all of its assets to Youngevity, a health and wellness company based in California.

The Grand Rapids based Zanco was founded in 2006 by a former Amway executive and although they had high hopes about the products and their alliance with Suzanne, the company never really took off. At their peak of operations, they had 20 employees, although for the last month or so, they’ve bee operating with only 10 as they have been winding down operations. The remaining employees will be let go in the next week.

Sales reps for Zanco will automatically be transferred to distributors for Youngevity. The strategic alliance between the Zanco and Youngevity will allow for the continuation of sales of Suzanne Somers products.

Robin Crossman, former president and chief operating officer of Zanco LLC, said, “We had great hopes that we’d grow faster than we did, and we didn’t grow as fast as we wanted,” Crossman added that Somers herself contributed to the decision to end the Grand Rapids operations and pursue a partnership with Youngevity.

Although it was not discussed, word on the street is that Somers never actually visited the Grand Rapids based Zanco and had no active participation in the company. Perhaps that is part of the reason that the company did not take off the way Zanco or Somers had thought that it would. The company rested primarily on the Suzanne Somers name and if she did not participate and have an active presence, then it is no wonder that the company didn’t survive.

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The SEC has just obtained a court order to stop an illegal pyramid scheme that has been operating in the U.S, Canada and other countries. The Las-Vegas based company, Gold-Quest International, has been charged with misusing investor money and making promises of large paybacks and incentives that it did not deliver. The founders were also charged with misusing funds for their own personal expenses.

Gold Quest, and its founders promised those who recruited their friends and family into the program, large paybacks over a short period of time. The company invested the pooled money into foreign currency exchange trading and claimed they would generate annual profits of almost 90%. The SEC claims that no investor money was ever actually invested in any foreign currency exchange trading.

Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement, released a statement saying, “This emergency action shows that the Commission, together with foreign securities regulators, will move swiftly to stop ongoing frauds and protect investors…. By preying on the mutual trust in such relationships, the alleged perpetrators in this case were able to easily expand their network of victims, even across international borders,”

The SEC order effectively froze the assets of the company’s owners, froze all company assets, prevented the destruction of documents, and temporarily, until a formal hearing, prohibits the owners from engaging in any unlawful multi level opportunity. The first hearing against the company will be held May 14th 2008.

This is another in a sting of cases lately of fraudulent pyramid schemes. It’s great that the SEC is quick to act and to investigate. While many might be frustrated at the Commissions constant prying into the MLM world, it is important that they keep out the illegitimate and fraudulent companies. There are so many network marketing companies and MLM companies that are legitimate and do good work, its essential that those that are damaging the industry’s reputation get flushed out.

Gold-Quest’s owners David M. Greene ( who refers to himself as Lord David Greene ), John Jenkins, and Michael McGee allegedly used funds from investors to compensate investors who brought in new investors. It sounds confusing, I know, but basically, it’s your average illegal pyramid scheme. Investor A brings in investor B and instead of using those funds to invest in the foreign currency exchange, investor A and everyone below him, (those people who brought A into the company) gets the money. Over 80% of each new investors principal was paid to the chain of people responsible for bringing that new investor in. The remaining funds were used by the owners for personal expenses.

We are happy to put these idiots in the DEAD POOL!

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The news keeps getting worse for Home Interiors & Gifts Inc. The company, which sells candles, artificial flower, artwork and other home décor items was forced to file chapter 11 Bankruptcy last week, and now the company announced that they will shutter two subsidiaries at the end of June. The closing of the two facilities will lead to over 200 people losing their jobs.

The two subsidiaries closing are, Dallas Woodcraft Co and Laredo Candle Co. A spokesman for the Laredo Candle Co said they are actively looking for a buyer for the candle company to save it.

Home Interiors and Gifts was founded 51 years ago in 1957 by Mary Crowley. Mary and her son, Don Carter built the business by primarily selling home goods to those will a small budget. In 1988 the $500 million dollar company was sold to some financial big wigs in Dallas. Among them, finance firm Hicks, Muse, Tate &Furst, Inc and now known as Highland Capital Management.

Rather than maintaining the core values instilled by Mary Crowley and her son, to sell home decorating items at discounted prices to those who are on a budget, the new finance companies had a plan to sell more upscale products to a higher clientele. The plan failed. Another factor that has led to the gradual decline has been the advent of discount mega stores like Target, Wal-Mart and Kmart. That coupled with the shift from what Home Interiors original goal was, which was to sell discounted home goods to those on a budget, has led to the company’s decline.

Today the company still employs 500 people in its Carrollton Headquarters, half the number it had 2 years ago. Employees and independent “decorating consultant” now fear losing their jobs. Currently there are 70,000 distributors working for the company.

This company is just another in a long list of companies that are having a hard time in this tough economy. Other big companies such as Sharper Image and Linen N’ Things, two large retail stores, are having a hard time keeping up with discount sellers like the Wal-Marts that cater to people on a budget, which these days is almost everyone. The shift from budget home goods to upscale products might ultimately be this company’s downfall.

While they are not in the dead pool just yet, there are very few direct selling companies that emerge from Chapter 11.

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One of the darker sides of the MLM world, is the occasional pyramid scheme which can rob people of hard earned cash. Unfortunately, as in every business, there are often unscrupulous people who take advantage of others. Foneclub, a prepaid phone card company was one of those companies. Now, Attorney John Aquino, an attorney appointed by the U.S. Securities and Exchange commission is looking to give back nearly $2 dollars of money that was stolen from innocent people.

The Foneclub scheme, founded by Sanderley De Vasconcelos and Victor Sales, targeted mainly Brazilians. The company, which was operating in Brazil and the U.S, used its Brazilian subsidiary, Universo Foneclub Corp, to con investors. Sales, a preacher, lured Brazilians to invest in the company by telling them that “God does not want Brazilians to be poor.” Sales and Casconcelos promised investors that they would see returns of close to $20,000 after a year with the company.

In May of 2006, the SEC filed a complaint against the company which had made $3.2 million and paid out only $1.4 million to investors. Foneclubs $1.8 million in assets were seized. The SEC formally ruled that Foneclub was operating an illegal pyramid scheme.

The company is still up and running in Brazil, hopefully with new management. The founders were ordered to pay a $25,000 fine to the SEC and then signed a settlement in which they were ordered to give up $1.8 million obtained from Foneclub. The founders faced no civil penalty.

Aquino researched company records and contacted investors with the amount owed to them. So far 1,300 investors have responded to the letters to claim their settlement. Letters were sent out in English and Portuguese to ensure that everyone owed money would have the ability to make a claim.

The company still maintains its website in the U.S, but the site is inactive. Another company which we gladly put in the Dead Pool.

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