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Posted 24 Feb 2001   For week ended September 10, 2000
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News about Mormons, Mormonism,
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Sent on Mormon-News: 11Sep00

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.


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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