OpTree

This week, the Utah Supreme court heard arguments from a group of investors who are challenging a ruling that dismissed a case they had filed in 2006 and 2007 against six of the founding members of XanGo, LLC.

The investors, identified in documents as Angel Investors, LLC and as “a few neighbors and friends” are a group of friends and neighbors who say they pooled together their savings to invest in the nutritional juice company. Apparently, the Angel Investors grew concerned about the way the founders were spending money.

The legal issue that the justices will consider is whether 4th District Judge Fred Howard rightfully dismissed the case and correctly applied Utah Rules of Civil Procedure when the case was originally brought before a judge.

While original court documents concerning the complaints are sealed, the attorney for the investors, Mary Anne Wood, said the investors “became concerned by evidence of extravagant lifestyle and compensation” of the six founders — Aaron Garrity, Bryan Davis, Gary Hollister, Gordon Morton, Joseph Morton and Kent Wood. Investors, uneasy with the usage of investor funds began questioning spending. It was then that XanGo’s founding members apparently began buying minority interest from the original investors by taking loans from XanGo, instead of the company buying back the interests. The investors want more of the profits distributed to them.

14% percent of the company is owned by minority investors, the remaining 86% percent is controlled by the six founding members. The Angel Investors who brought forth the suit apparently only own 1% percent of the company at most.
The suit was originally dismissed when it was ruled that the Angel investors did not represent the other minority investors, and those other founding members signed affidavits saying that they did not wish to be involved in the suit.

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Unbeknownst to the public, health and Wellness Company, Melaleuca, has been embroiled in a lawsuit with a former employee over allegations that the ex employee violated a separation agreement after leaving the company and recruiting key employees. Melaleuca, afraid that pertinent, private info would be released if the case went public has worked hard to keep the courtroom doors closed.

The lawsuit stems from a case filed against Jeff Wasden, Melaleuca’s former VP of Marketing. Melaleuca claims that after leaving the company, Wasden violated separation agreements by hiring other key Melaleuca employees. Wasden denies these claims and filed a counter claim against Melaleuca CEO and President Frank VanderSloot claiming breach of contract and character defamation.

In the most recent development, Melaleuca sought this week to disqualify Wasden’s lawyer, Ron Swafford claiming that he is keeping copies of tapes that were “surreptitiously” recorded by a former employee of Melaleuca and current employee of Wasden.

It’s all very confusing, but apparently earlier in the summer Melaleuca’s in house counsel interviewed an employee who later went to work for Wasden. That ex-employee without telling the lawyer, recorded that conversation and gave a tape of it to Swafford. There are also claims that that same ex-employee gave Swafford 200 pages of protected information. Melaleuca claims that requests for the return of those documents have been unanswered.

Swafford now has 20 days to respond to these claims and then Melaleuca has 10 days to respond to Swaffords submission.

Aside from this battle, there have been many other back and forth regarding proprietary information that Melaleuca refuses to share, argument over a closed or open trial, claims that the in house counsel at Melaleuca is making it impossible for Swafford to investigate his own case and accusations that Melaleuca’s counsel is not complying with requests for certain company records.

Apparently, requests for the dismissal of a lawyer are extremely rare, but it seems that this case is a pretty messy one on all fronts. Despite Melaleuca’s efforts to the trial keep hush hush, it seems that the case will not go away any time soon. All of the facts are a bit confusing, but we will keep you up to date as the case moves forward.

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Mannatech just announced that the Securities and Exchanged commission has ruled that the direct sales company will not face civil action relating to a complaint filed against it as a result of dismissing its accountant last year.

The SEC announced in September of this year that it was launching an informal inquiry into the dismissal of Grant Thornton, the company’s public accountant. The SEC was looking into whether or not the dismissal of the accountants violated various federal laws. Apparently the firing came after Thornton demanded that Mannatech either remove its chairman and founder Sam Caster or find a new accountant. Mannatech chose the later, and promptly fired Thornton and hired a new accountant. While Mannatech did release a formal statement regarding the firing, they neglected to file the proper 8K within the required time frame.

In early September Mannatech was sent a Wells notice, which was merely an indication that they would look further into the company. The Wells notice gave the company a chance to defend itself to prevent further action.

Upon extensive review of the situation, Mannatech has been cleared of any wrongdoing and will not face any formal sanctions from the SEC.

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YTB has named James M. Tackett as the newest member of their executive team. The company, which has been involved in its fair share of scandal over the last few months, appointed Mr. Tackett as the company’s new Chief Marketing Officer, a role which will no doubt be both important in the near future and difficult, as the company struggles to regain its good name.   With a lot of concern surrounding Florida politician and YTB Board member Burt Saunders, this announcement comes at a good time.

Tackett has an impressive resume within the industry as a talented writer, producer and director with over two decades of experience in TV and video production. Tackett has consulted for some big name direct sales company’s such as Avon, Shaklee, Nikken and Herbalife to name a few. Tackett has also produced in flight programming for United Airlines.

Prior to joining YTB, Tackett worked as a producer with Video Plus, a supplier to the direct sales industry.

“We are excited and honored to include James in our fine executive team,” said J. Scott Tomer, Chief Executive Officer of YTB. “With his broad experience and talent, we have positioned ourselves to take our marketing initiatives to the next level.”

YTB is still dealing with the two class action lawsuits as well as the lawsuit by the California Attorney General.

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