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Summarized by Kent Larsen
LDS Man's Buyers Club Collapses After Suit by State of Ohio
COLUMBUS, OHIO -- A buyer's club started by an LDS man and based in
Westerville, Ohio, closed September 1st, a week after Ohio Attorney General
Betty Montgomery filed a lawsuit to force the company to return to its
customers $100 million. The Attorney General claims that the Purchase Plus
Buyers Group was a ponzi scheme that prayed on relationships, primarily in
the LDS community.
The group was started by LDS businessman Gene Arnold in October 1997 to
offer discounts on services like Health coverage and phone cards, but with a
twist; members were told they could earn back their $400 membership fee in
90 days and earn up to $11,0000 in commissions over several years by signing
up new members and investors. But while initial investors did make a lot of
money, consumers began complaining about defective merchandise and unpaid
commissions, leading the Attorney General to investigate.
The growth of the company even led local LDS Church leaders, including stake
president Samuel Kiehl, to warn members to do their homework on investments
and not invest just because LDS Church members run the business. "It's
inappropriate to take advantage of church membership or knowledge of other
members to build a business," Kiehl said. "As a church leader, it was of
grave concern to me. I am concerned anytime a member could get hurt." Kiehl
even spoke to one of the wards in his stake about the issue, reminding
members that they have a responsibility to deal fairly with one another and
to not use the Church to advance their businesses.
Local leaders said they began to fear that Purchase Plus was a pyramid
scheme early this year as many Church members began to join. A pyramid or
ponzi scheme uses money invested by new investors to pay money to previous
investors, instead of using the money in money-producing activities.
Meanwhile, founder Gene Arnold, 51, says he sold the business in April to
California lawyer Ted Lindauer, who has been involved with the company since
its inception. Arnold claims to be a victim himself, saying in a written
statement released Friday that he hasn't been given all the money he was
supposed to get from the sale. "I have received only one payment since
selling the company," wrote Arnold. "In all likelihood, I will never receive
another payment and have also lost a great deal of money as a result (of)
the company's current problems." But Lindauer is apparently also claiming to
be a victim, since his team told employees and customers that the previous
owners were "guilty of mismanagement." And an article in the Columbus
Dispatch indicates that Arnold and his wife have started more that a dozen
companies since the late 1970s, many of which have gone out of business
leaving thousands of dollars in debts.
Meanwhile, the involvement of LDS Church members was significant. The
company's president, Steve Moss, a vice president, Christ Beddoes, and
George and Janitye Vaile, who helped form the limited liability corporation
for Arnold, are all LDS Church members, according to the Columbus Dispatch.
In 1998 and 1999 as the company apparently prospered, local LDS leaders even
steered jobless Church members to the company, since it was paying good
wages. The company also spread through Mormon circles as it managed to reach
across the US. Utah Better Business Bureau president Russ Behrmann says that
he has recieved more than 100 complaints and inquiries regarding Purchase
Plus from Utah residents.
Church members that lost money in the company seem to believe its their own
fault, according to statements in the Dispatch. Lee Padula, a member from
New Albany, says that he wasn't guaranteed anything, "Nobody coerced me.
It's unfortunate that people lost money, but there was never a guarantee.
They were selling a business opportunity." Retiree and LDS Church member Ann
Jensen agrees, "We believe we make our own choices. I don't blame anyone. I
believe it was founded under honest principles. That's what I choose to
believe."
But part of the company's sales message was either aimed at LDS Church
members or used their membership to make the sale. Arnold reportedly told
some consumers that he wanted to give families an opportunity to make more
money so that mothers would be able to stay home. A non-member employee,
George Wagner, says that while the Church wasn't mentioned in official
company documents or presentations, the membership of the company's leaders
was mentioned to get credibility.
Local Church leaders are still taking a cautious approach to the issue,
saying that they will wait for the outcome of the Attorney General's lawsuit
and other lawsuits before deciding if action is warranted against Arnold and
other LDS Church members involved in the company.
Sources:
Purchase Plus investments cost Mormons millions
Columbus OH Dispatch 10Sep00 B4
By Stephanie Brenowitz: Dispatch Business Reporter
Now Mormons are confronting a disturbing question: Were they preyed upon by their own?
Company's collapse painful to Mormons
Akron OH Beacon-Journal (AP) 10Sep00 B4
Founder of Purchase Plus has a history of failures
Columbus OH Dispatch 10Sep00 B4
By Stephanie Brenowitz: Dispatch Business Reporter
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