The Federal Trade Commission (FTC) has once again utilized its authority to issue an ex parte Temporary Restraining Order (TRO), an asset freeze and the appointment of a receivership against MLM Success by Health (SBH) and co-founders James and Lina Noland.
James Noland has been the subject of an FTC investigation previously, settling with the agency in 2002, at which time Noland agreed to being permanently restrained from participating in any way whatsoever in another multi-level marketing company.
The FTC alleges in the new suit, filed Jan. 8, 2020 that the Nolands and two additional officers, Scott Harris (president) and Thomas Sacca, Jr. (chief visionary officer), have violated Section 5(a) of the FTC Act, and brings this action under the authority of Section 13(b).
According to the complaint, SBH, which began selling coffee, tea and nutritional supplements through independent distributors in July 2017, promised distributors they could replace their incomes in six months and become financially free—never to work again—in 18 months if they followed the company’s instructions.
The FTC complaint includes a claim from a video posted to Facebook in which Noland says his company is a “literal golden goose … a perpetual money and health machine.” In another video, Noland describes the lifestyles of SBH distributors: “You see their million-dollar homes they’re buying. You see the Lamborghinis, you see the Ferraris. …you see them donating $100,000, $200,000.”
The complaint also says that Noland trained distributors to avoid regulatory scrutiny by talking about “lifestyle enhancement” instead of making specific income claims. According to the suit, Noland said, “Instead of telling people how much we make, we just go, okay, last week I made enough to buy that Maserati cash.” Marketing images cited by the FTC include images of luxury cars, yachts, piles of cash and exotic vacations.
The FTC states in the lawsuit that an investigator used an undercover identity to enroll as a distributor in SBH, and then made sales and purchases that entitled him to commissions. The company, however, never actually paid the commissions and did not respond to his inquiries.
The FTC also cited the company’s insistence that success comes with the purchase of large, up-front inventory packs ranging from $125 to $1995. The FTC states this practice is evidence of inventory loading and requiring distributors to buy products only in order to rank up or receive bonuses.
In fact, the complaint alleges that Harris told distributors specifically at the end of monthly sales periods to buy products in order to achieve a higher rank.
SBH is alleged to have violated another FTC red flag with its aggressive posture towards refunds and returns. The complaint alleges the company buries its no-refund and chargeback policies in small font hyperlinks in the back office web pages.
The fine print informs distributors if they attempt to return products or dispute credit card charges (chargebacks), they are subject to fines from the company, up to three times the amount of the disputed charge, or $1,000 each, whichever is greater, plus the amount of the original charge, collection costs, court costs and attorney’s fees.
The FTC has asserted in its court filings that the Nolands fled the U.S. last summer after becoming aware of the FTC’s interest and that they now reside in South America.