A Utah-based multilevel marketing company, many of whose representatives are Utah County residents, is temporarily out of business pending a civil suit filed by the state attorney general's office.
The suit, filed Wednesday in 4th District Court against Family Star and its promoters, contends the business is a pyramid scheme. The 40-page suit also maintains the company violated the Charitable Solicitations Act and accuses the business of two counts of deceptive sales practices. The defendants in the suit are also accused of false representation with the intent to deceive and accused of saying the program had the approval of the attorney general's office.A temporary restraining order was also filed prohibiting anyone in the company from promoting, offering, accepting consideration or participating in the Family Star program until the suit is resolved. Orders were served on Sally Ann Hall, Gary Ford, Stan Smith, Val Atwood, Matthew Peterson, Neda Peterson, Rulea Brooksby, J. Blaine Rupp, Vickie Rupp, Vae E. Dansie, Angus Heaton and John Does 1-10 serving as sales representatives of Family Star.
The allegations in the complaint are based on an investigation by Pamela Hunt, investigator for the Division of Consumer Protection. The investigation began last month after the Division of Consumer Protection received a complaint and an official from the Division of Investigation was approached by one of the company's representatives about joining the organization.The investigation involved joint action by the Division of Investigation, American Fork Police, Murray Police, Pleasant Grove Police, Mapleton Police, the Secret Service and the Internal Revenue Service. Investigators attended several sales meetings of Family Star and made video and audio tapes of the proceedings.
Investigators said company representatives would sell a business letter to investors for $19.95, which entitled each investor to sell the letter to five other clients. An investor would move up to a different level every time he or she had 30 more clients under his or her chain of authority. In one meeting a Family Star representative said the company had more than 2,000 investors from several states.
Family Star promoters say the company is doing nothing illegal and sells a legitimate product. However, according to Sgt. Scott Mann, an investigator with the Division of Investigation, the products offered by the company were inconsistent and changed every time the organization held a meeting. Once it was a health package, another time a travel package and once a computer package, he said.
"The difference from meeting to meeting was just unreal," Mann said. "From our investigation we drew up that people were just signing up people, who were signing up people, who were signing up other people. Some people were even signing up again."
Sheila Page, assistant attorney general in the fair business enforcement unit representing the Division of Consumer Protection, said the purpose of the suit is to get Family Star to cease operations and for it to repay money lost by investors. The amount of damages sought by the suit has not been specified. A hearing on the case is set for Feb. 26 before 4th District Judge Boyd L. Park.
No criminal charges have been filed against any Family Star representatives.