SUIT CALLS NU SKIN A PYRAMID SCHEME

Published: Tuesday, March 23 1993 12:00 a.m. MST

A Canadian woman has sued Nu Skin International Inc., saying the multilevel marketer of personal products is violating federal securities laws by operating a pyramid scheme.

In her suit filed Monday in U.S. District Court, Natalie Capone of Toronto says she lost $5,000 to Nu Skin, based in Provo, Utah. She asks her suit be considered a class action on behalf of Canadian Nu Skin investors who allegedly lost money in the company since Jan. 1, 1990.While the suit does not specify damages sought, it does claim to represent 50,000 or more people who lost more than $25 million to the lotions, gels, hair and nail care products company.

In addition to Nu Skin International and Nu Skin Canada Inc., Capone names as defendants Nu Skin President Blake Roney and top-level, "Blue Diamond Council" Nu Skin distributors Clara McDermott and Richard Kall.

Ray Beckham, Nu Skin's managing director for corporate communications, had not seen the lawsuit late Monday.

"It comes as a complete surprise to me, but we have answered such allegations before. Nu Skin is not a pyramid scheme," he said. "We absolutely do not operate that way."

Still, Capone argues in her 59-page suit that Nu Skin is a "classic pyramid scheme" because participants pay money for the right to sell products, receive rewards for recruiting other participants and earn commissions when those recruits bring others into the company.

"The result is a chain scheme in which product sales are secondary to recruitment efforts," the suit states.

Beckham said such allegations have been made and disproved before.

"We've been looked at by attorneys general in several states and found to be operating legal and above-board," he said. "We've answered every challenge, so I am surprised that this would come at this particular time."

Along with allegations of various securities violations, the suit charges Nu Skin with fraud and deceit in maintaining and promoting itself.

In addition to compensatory and punitive damages to be determined at trial, the suit seeks recognition of its class-action status; return of plaintiffs' purchases, plus interest; prohibition of further sales in alleged violation of securities laws, and legal costs.

Nu Skin also was sued in federal court last December by six women who said the company denied equal pay, promotions and high-level executive jobs to female employees.

The plaintiffs, five of them former employees, sought a class-action designation on behalf of all current and former women employees. The case is pending.

Nu Skin officials denied they discriminated on the basis of sex.

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