The Federal Trade Commission cracked down this week on another infomercial marketer, accusing it of running an illegal pyramid scheme to empty the pockets of unwary consumers promised the possibility of riches.
The company, 2Xtreme International LLC, Dallas, aired three infomercials to recruit consumers to sell dietary supplement and personal care products. Some who responded to the infomercials or attended subsequent seminars were asked to spend between $1,000 and $4,000 for a Business in a Box kit to recruit other people into a moneymaking pyramid, the FTC said.
The commission said 2Xtreme made false claims and its business practices violated federal law.
“We filed a complaint and a motion for a preliminary injunction and other equitable relief,” said Mona S. Spivak, an attorney with the commission. “We’ve requested a hearing relatively quickly, within the next 30 days.” The complaint was filed in the U.S. District Court of Baltimore.
While 2Xtreme’s infomercials offered the possibility of earning thousands of dollars a month, 2Xtreme’s founder/president John K. Polk was under investigation by federal authorities for another scam operation.
Polk is now behind bars in connection with Peak Performance International Inc., Baltimore, which also aired get-rich-quick infomercials. Polk sold that company in 1995 and moved to Texas to start 2Xtreme. He was sentenced in July to a 51-month prison term after he pleaded guilty to one count of mail fraud in U.S. District Court of Baltimore.
The FTC last week asked the court to halt the operation of 2Xtreme. In September, it voluntarily dismissed a Chapter 11 bankruptcy petition, which was originally filed in June in U.S. Bankruptcy Court in Colorado. The petition was filed in that state because 2Xtreme had been acquired by the subsidiary of Englewood, CO-based company USAsurance Group Inc.
A former law firm for 2Xtreme said the bankruptcy judge recommended that 2Xtreme file a petition in a Texas court because the company was based there. Several courts in Texas said they have not received a petition from the company.
In addition to Polk, the FTC also named Patrick Farah and Peter Hirsch in its complaint. Harah and Hirsch worked for 2Xtreme or USAsurance, according to one person who signed up for the money-making plan after attending a 2Xtreme seminar.
“The seminar had one of the best presentations I have ever heard. They absolutely said all the right things,” said Dolores M. Garlo, an attorney in Austin, TX, who said she had a favorable experience with multilevel marketing companies in the past, “but they didn’t keep any of their promises.”
Garlo was one of several people who ordered the Business in a Box kit, which was touted as including a computer with software to use in a start-up business. She said the computer was of inferior quality. She also started to receive threatening letters from a collection agency that demanded she make monthly lease payments on the equipment. She responded to the threats last month with a detailed account of her bad experience with 2Xtreme, which she forwarded to the Texas Attorney General.
The FTC said in a statement that it is receiving assistance in its continuing investigation of 2Xtreme’s business practices from the Federal Bureau of Investigation, the Securities and Exchange Commission, the U.S. Postal Inspection Service and attorney general offices of Arizona, Texas and Wisconsin. The FTC’s complaint against 2Xtreme follows recent complaints against other infomercial marketers, including Motor Up Corp. and Jacqueline Sabal’s Sable Hairing Farming System.
