Equinox affiliate is open amid fraud case

The Center City office was bustling. Six states and FTC allege it is part of a $200 million scam.

Philadelphia Inquirer, August 10, 1999
By Evan Halper

On the day federal authorities announced they were shutting down Equinox International for allegedly running a giant pyramid scheme that bilked people across the country out of $200 million, it was business as usual in the company's Philadelphia office.

Phones were ringing. People were shuffling to and from meetings. A half-eaten buffet sat on a boardroom table. Inside the offices of Owltree Associates, the Equinox affiliate at 123 S. Broad St., there was no sign that a federal judge had moved to close the place, along with about 300 other affiliates of the Las Vegas-based firm.

The Federal Trade Commission and law-enforcement officials from Pennsylvania and five other states got a temporary restraining order to force Equinox to halt operations. A federal judge in Nevada also froze the company's assets and those of its chief executive officer, Bill Gouldd.

Government lawyers say Equinox, which sells environmentally friendly water filters, toothpaste and other household products, illegally operated as a pyramid scheme for the last eight years. They say the company relied on a steady stream of recruits who paid to work there and in most cases never recouped their investments. And thousands, they say, lost big.

Equinox officials vigorously denied the allegations yesterday, and the company's lawyer said he would seek to have the restraining order dissolved.

"Their complaint contains numerous false statements," said Val Miller, an attorney for Equinox. He declined to elaborate.

Gouldd was unavailable for comment yesterday.

Miller said the government's allegations were groundless. He complained that the restraining order had been granted before Equinox could respond in court.

Government lawyers said they did that out of concern that company officials might have concealed records and assets if notified of the lawsuit. The federal complaint alleges that Gouldd had concealed assets in accounts in the Cayman islands in the past.

In court documents filed yesterday in Nevada, Equinox lawyers said the company's track record of cooperation with investigators in previous government inquiries proved they would not hide evidence.

"We feel like the FTC has abused the process," Miller said of the government's latest action.

Among the alleged victims cited in the complaint was Michele Kelly, 27, of Wilkes-Barre, who said she lost $41,000 in eight months with the company.

She said she was living in charlotte, N.C. and had just gotten her master's degree in parks and recreation several months ago when she saw a classified ad for a job with a $40,000 salary. But when she went for the interview, she said, it was an Equinox pitch session.

At the urging of company representatives, Kelly said, she opened offices in Raleigh, N.C., Miami and Los Angeles. She said other Equinox members kept her from talking to anybody who did not support her work for the company, including her family.

"I was constantly getting told that if I just stuck it out, things would be OK," she said. "They would rip on how family members and friends would be against this, but those people will feel different when the money starts coming in."

It never did.

By June, Kelly said, she was destitute. Her brother had to fly out to California to bring her home, she said.

J. P. McGowan, a Pennsylvania deputy attorney general, said thousands of people signed up to work for the company in its Pennsylvania offices. Only a handful left with a profit, he said.

Inquirer staff writer Elisa Ung contributed to this article.