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Judge puts legal freeze on Equinox

Published Sep. 29, 2005

A receiver is appointed to run the company after a fraud complaint is filed. Florida also may consider action.

A federal judge has frozen the assets of Equinox International Corp. in response to charges by federal and state officials that the multilevel marketing program is a giant fraud.

Florida is not part of the current case, but state officials say they could take action if evidence shows the company violated the terms of a 3-year-old agreement reached to settle earlier charges. Equinox affiliates are active in the state, including in the Tampa Bay area, and one of the Las Vegas-based company's top salespeople lives in Clearwater.

Equinox distributors working with Environmental Solutions Marketing Group in Clearwater run numerous classified ads in Tampa Bay area newspapers aimed at people who want to earn high commissions. Those who respond are recruited to sell Equinox products _ which include water purifiers and vitamins _ and to recruit other distributors. Environmental Solutions did not answer telephone calls Tuesday.

U.S. District Judge Johnnie B. Rawlinson in Las Vegas froze the assets of Equinox and founder William Gouldd and appointed a receiver to run the company based on a complaint filed last week by the Federal Trade Commission and six states. The allegations include fraud, misrepresentation, deceptive trade practices and operation of a pyramid scheme. A lawyer for Equinox denied the charges.

"Equinox is not a legitimate multilevel marketing company but rather is a disguised pyramid scheme that promises potential recruits they can earn vast wealth by recruiting other participants into the scheme," the court filing said. "Like all such schemes, wealth is achieved only by the very few at the top, and the vast majority of the participants lose most or all of their investment."

One of those at the top is Laurie Rubidge of Clearwater, who claims in company testimonials to be a former waitress who made it big. The company's Web site refers to her as an "international marketing director," which federal officials say requires sales of $500,000 a month. Rubidge's telephone number is unlisted, and she could not be reached for comment.

Few Equinox distributors are so successful. The FTC says people are lured into becoming part of the Equinox network by false and misleading claims of the financial gain that awaits them. Only a very small percentage earn more than they are required to spend up front, the complaint says.

To make money by recruiting others, participants in the program must become "managers," which requires the purchase of $5,000 worth of products. On top of that, the complaint says participants are charged $300 to $500 a month for desk space in a local office, must pay for a telephone line and classified ads and are encouraged to attend seminars that cost $300 to $1,000.

"Once you get into it, you realize how much everything costs," said Laura More of Clearwater, who said she paid $5,000 last month to become an Equinox "manager" but quit after a week. Now she is trying to get her money back. "One day you realize that the product is not herbs, or water filters, but recruits."

Equinox topped the 1996 Inc. magazine list of the fastest-growing U.S. companies with revenues of nearly $200-million. The magazine pictured founder Gouldd alongside Microsoft Corp. chairman Bill Gates.

Gouldd, who reportedly added an extra "d" to his name because a spiritual adviser told him he was "out of balance," allegedly owns at least four luxury homes, a yacht, a jet and a collection of expensive cars.

Equinox agreed in 1996 to pay $455,000 to resolve a 14-state investigation into the claims it made to distributors about the success of its products. Florida was a leader in that case. As part of the settlement, the company agreed not to sell distributors more than $5,000 worth of products and to refund 90 percent of the purchase price to distributors who want to get out.

"They were getting people to buy in at $20,000 and $30,000," deputy attorney general Jack Norris said. He said the company is not permitted to run employment ads and is supposed to discipline distributors who do.

Hawaii, Maryland, Nevada, North Carolina, Pennsylvania and South Carolina all joined the FTC in the lawsuit. In addition to consumer redress, government officials are seeking a court order barring Gouldd and Equinox from engaging in similar deception in the future.

_ Information from Bloomberg News and Times files was used in this report.