Ryan's Sweeping Settlement With Trudeau Protects Consumers & Nets $185,000 For Eight States

CHICAGO--Illinois Attorney General Jim Ryan has engineered a sweeping settlement with informercial personality Kevin Trudeau and a Texas-based corporation that will reform their future marketing efforts and protect consumers across the country.

The settlement, entered to day in Cook County Circuit Court and simultaneously in seven other states, eliminnates the "Instant Executive Program" Ryan had alleged was an illegal pyramid scheme in his April 17 lawsuit. Additionally, the settlement requires Trudeau and Houston-based Nutrition for Life International Inc. to adhere to a series of reforms aimed at making sure their marketing efforts comply with laws in Illinois and other states.

Also, Trudeau, co-defendant Jules Leib and Nutrition for Life will pay a combined $185,000 to the eight states, including $125,000 to Illinois.

Ryan described the settlement as a huge win for Illinois consumers because it accomplished all the goals set forth in the civil lawsuit without taking the matter to trial.

"This agreement provides a shield of protections for Illinois consumers," he said. "It provides a significant new layer of disclosure that gives participants a clear picture of how the program works and a realistic estimate of income possibilities. Also, it makes sure that products will be sold and those who do not or cannot sell them are entitled to most of their money back."

Under Illinois law, a marketing scheme must be based primarily upon the sale of products rather than the recruitment of new members or else it might be considered an illegal pyramid. Pyramids are illegal across the country because they are mathematically doomed to fall apart. Those who enter the pyramid last always lose money.

Also today, Trudeau agreed to dismiss his lawsuit against Secretary of State George Ryan and the Secretary of State's cease and desist order entered May 28 against Trudeau will be vacated.

Ryan praised his Consumer Protection Division, under the leadership of Patricia Kelley, for its weeks of intense negotiations resulting in the settlement. Ryan also gave credit to Nutrition for Life, which entered into the negotiations voluntarily. Nutrition for Life was not a defendant in the lawsuit.

"Both the state and Nutrition for Life worked hard at making sure this agreement protects consumers across the country while at the same time allowing the company to move forward under new guidelines," said Ryan. "The stae received the relief it asked for and more under this agreement and did so without a protracted and costly trial. That amounts to a victory for the people of Illinois."

Ryan's suit and motion for temporary restraining order alleged that Trudeau, Leib and the Trudeau Marketing Group, Inc., 5940 Touhy Ave., Niles, violated the state's Consumer Fraud and Deceptive Businesses Practices Act. In addition, the suit alleged that Trudeau failed to comply with Illinois' Business Opportunity Sales Law of 1995.

Trudeau and Leib purported to operate a multi-level marketing plan centered on marketing of Nutrition for Life (vitamins and health) products and self-help and motivational tapes from Niles-based Nightingale-Conant. The lawsuit alleged that the defendants attempted to entice individuals to attend the recruitment meetings, where they were asked to purchase membership in the "Instant Executive Program."

The lawsuit contended that Trudeau's plan promoting the "Instant Executive Program" focused mostly on the recruitment of new members rather than the sale of products. That is one of the primary distinctions under Illinois law that makes a marketing plan an illegal pyramid. The "Instant Executive Program" required participants to buy $1,000 worth of products, a $35 start-up kit and $135 worth of product each month. The program promised substantial commissions if others were recruited.

The consent judgement signed by Trudeau and Leib and the Assurance of Voluntary Compliance signed by Nutrition for Life (NFLI) include the following provisions:

  1. The NFLI "Instant Executive Program" will be terminated.
  2. Compensation will not be based primarily on recruitment of new distributors but rather on retail sales. NFLI will require an executive distributor to make at least five verifiable retail sales during the preceding month in order to receive commission. NFLI will conduct random audits to assure compliance.
  3. NFLI will publish an official Marketing and Compensation Plan Explanation that will be used in all recruiting materials.
  4. NFLI will make available written disclosure of distributors earnings so accurate judgements can be made about income potential.
  5. No distributor will create or use his own distributor agreement.
  6. NFLI will maintain an Internet Web site detailing its official compensation plan and listing distributor earnings. NFLI will monitor the Internet and other mediums to make sure "renegade" advertisements are not appearing.
  7. NFLI will maintain its policy on repeat orders that distributors certify that 70 percent of their purchases are being used to build, promote and fulfill retail sales.
  8. NFLI will increase awareness of its 90 percent product buy-back policy through its procedure manual and on its order forms.
  9. Distributors no longer will be able to stockpile inventory certificates. If a distributor fails to "take" his monthly product order, his automatic contributions to the plan will be stopped.
  10. There will be no "home-spun" advertising by independent distributors. All pamphlets videos, cassettes and other promotional materials will be produced and distributed by NFLI and will include its official compensation explanation.
  11. NFLI will create a progressive disciplinary policy. Repeated recruiting or advertising violations will result in commission loss and may result in expulsion from the program.
  12. Recruitment meetings will be monitored by NFLI through announced and suprise visits to ensure accurate information is being relayed to consumers.

The other states participating in the settlement are Hawaii, Idaho, Kentucky, New Jersey, Michigan, Missouri, and Pennsylvania.

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