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Diet Pill Distributor Sued for Alleged Scheme

Nov 17, 2002 | Newsday

For months, members of the Suffolk County legislature and diet pill distributors have locked horns over a bill to ban the sale of products containing ephedra, a controversial ingredient in a variety of weight-loss pills.

But while discussions about health risks associated with ephedra products continue, one of the leading opponents of the ban, Collins County, Texas, -based Wellness International Network Ltd., distributor of the supplement BioLean, is fighting a different sort of battle.

Wellness is trying to deflect a lawsuit brought by former associates who allege that the company is no more than a pyramid scheme that bilked them out of hundreds of thousands of dollars.

In Suffolk, operators of Wagner Associates, an arm of Wellness International, have spearheaded the effort to vote down the ephedra ban, which is sponsored by Legis. Jon Cooper (D-Lloyd Harbor). The principals, Bob and April Wagner, declined to comment on the Texas case.

In state civil court papers filed in eastern Texas' Texarkana District, an attorney for a half a dozen plaintiffs involved in distributing BioLean called Wellness International "an artfully disguised pyramid scheme, which has managed to succeed primarily because most unsuspecting victims are too embarrassed or broke to pursue [president Ralph] Oats and his company."

Wellness International communications director Shannon Camp said in a statement that the company's "policy is not to comment on pending litigation," although in the past when "disgruntled distributors have initiated suit, Wellness has successfully defended its program."

She added that "the issues raised in the East Texas litigation have nothing to do with the proposed legislation on ephedra in Suffolk County."

Court papers tell the story of plaintiff Ginny Murphy, whose husband, Tom, faced financial ruin after entering into the BioLean business and committed suicide, $250,000 in debt.

After responding to an ad, Tom Murphy had attended a multilevel marketing course in Dallas, and later pulled his wife into the mix. The couple sent Wellness a check for $200,000, and a senior Wellness distributor told Tom that he would make his money back in three months.

Over the next two years, Murphy's efforts to recruit other distributors were unsuccessful and he was asked to make increasingly large payouts to the company.

"He had been doing this for two or three years and he had not been successful," said Nick Oliva, 49, a friend of the Murphys from Henderson, Nevada and a former BioLean distributor. "The man talked to everyone. Murph was looking for credibility."

After years of little success, Murphy, a former craps dealer in Las Vegas, put some money into stocks, hoping that a good return would lead him out of debt, Oliva recalled in an interview.

On March 30, 2001, the stock plummeted. The next day, Murphy called his wife and left a message saying "No matter what happens I love you very much." Later that day, Murphy put a handgun to his head and ended his life, according to the lawsuit.

Wellness launched a countersuit which sought to recoup lawyers' fees and cited the fact that all distributors must sign an agreement before embarking on their BioLean careers.

The agreement states: "I have read the [Wellness International] rules and regulations and... certify that neither the company or my sponsor have made any claims of guaranteed earnings."

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