### Amway: The Untold Story

Lavoie v. Yager et al

Elizabeth Lavoie and John Lavoie v. Yager et al, U.S. District Court for the District of New Hampshire, 12/29/98

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Elizabeth Lavoie and John Lavoie

v.

Dexter Yager, individually and d/b/a Yager Enterprises, Continuing Distributor Education, InterNET Services Corporation, Network Distribution Marketing Technologies, Network of Business Opportunity Entrepreneurs, National Business Opportunity Entrepreneurs, Donald Storms and Ruth Storms, individually and d/b/a Storms & Associates, Frank Mazzeo and Joan Mazzeo, individually, and d/b/a F & J Enterprises and Mazzeo Enterprises

Civil Action No. C-98-710-SD

COMPLAINT

Parties

1. Plaintiffs Elizabeth Lavoie ("Beth Lavoie") and John Lavoie (together "the Lavoies") are residents of Hudson, New Hampshire. The Lavoies invested substantial money and time in the Defendants' unfair and deceptive network marketing schemes. The Defendants also induced the Lavoies to invest substantial time and money in a distributorship for Amway Corporation ("Amway"). Amway is not a defendant in this action. Amway is a Michigan corporation engaged in the manufacture, distribution and sale of consumer goods, as well as the promotion of Amway distributorships throughout the United States, including the State of New Hampshire.

2. Defendant Dexter Yager is a resident of 821 SW Bay Point Circle, Palm City, FL 34990. He is an executive member of the Amway Distributor Association ("ADA") and operates an Amway Distributor Network as Yager Enterprises. Yager promotes Amway Distributorships and distributes Amway products through a network of thousands of individuals who are within his line of distributorship in the Amway organization. Yager does business under various names, including Yager Enterprises, Continuing Distributor Education, InterNET Services Corporation, Network, Distribution Marketing Technologies, Network of Business Opportunity Entrepreneurs, National Business Opportunity Entrepreneurs. Yager produces, distributes and sells audio tapes, video tapes, and written materials, known in the business as "tools." Yager organizes and participates in rallies, and claims to train distributors in his network how to build a successful Amway distributorship. Yager sells these tools, rallies and distributorships solely to and through his downline distributors. This is known as the "tool business.

3. Defendants Donald and Ruth Storms are residents of 8615 Bonds Grove Church Road, Waxhaw, North Carolina 28173. The Storms operate as "Executive" direct distributors subordinate to Yager within Yager's Amway line of distributorship. At all times relevant hereto, the Storms acted individually and as agents of Yager with the scope of their authority.

4. Defendants Frank and Joan Mazzeo ("the Mazzeos") are residents of 2600 Tecumseh Drive, Bear Lakes Estates, West Palm Beach, Florida 33409. They are Diamond Direct distributors within the Yager line of distribution within the Amway organization. They do business as Mazzeo Enterprises and F & J Enterprises. At all times relevant hereto, the Mazzeos acted individually and as agents of Yager and the Storms within the scope of their authority. In addition, Frank Mazzeo at all times relevant hereto acted as an agent for Joan Mazzeo within the scope of his authority. Finally, at all times relevant hereto, Joan Mazzeo acted as an agent for Frank Mazzeo within the scope of her authority.

5. The Defendants identified in paragraphs 1 through 7 are collectively referred to herein as "the Defendants." Their method of business operations, described below, is known as the "Yager System." Yager, the Storms, and the Mazzeos comprise the Lavoies' "upline." The people below anyone in the distribution chain are their "downline." Each branch of downline distributors is known as a "leg."

JURISDICTION AND VENUE

6. This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. The amount in controversy exceeds $75,000.

7. This Court has supplemental jurisdiction of Counts I through IX under 28 U.S.C. § 1367 in that the claims therein asserted are so closely related to the claims asserted in Count X that they form a part of the same case or controversy.

8. This Court has jurisdiction of Count X under 28 U.S.C. § 1331 (Federal Question) and 28 U.S.C. § 1337 (Regulation of Commerce).

9. This Court has jurisdiction of Counts X through XI for violations of 18 U.S.C. § 1962(c) and (d) under 18 U.S.C. § 1964(c).

10. The Lavoies reside within the District of New Hampshire. In addition, the Lavoies' investments were solicited within the District of New Hampshire and all of the Defendants conduct business within the State of New Hampshire.

11. Accordingly, venue in this District is proper under 28 U.S.C. §§ 1391(b) and (c) because the events giving rise to the Plaintiffs' claims occurred and continue to occur in New Hampshire.

Facts

12. In December of 1989, John Lavoie received a call from Steve Prevost, a stranger to the Lavoies. Prevost said that he was a friend of Mark Francouer, an acquaintance of the Lavoies. Prevost told John Lavoie that he was looking to expand a "business" in the area with some "sharp people" and asked if John had ever looked at "business opportunities." John agreed to meet with Prevost to listen to what he had to say. In fact, Prevost was acting as an agent within the scope of his authority for Yager, the Storms, and the Mazzeos. Prevost arranged to meet John at John's office.

13. At the time, John Lavoie worked for a New Hampshire bank that the FDIC soon would put into receivership. This left his prospects for continued employment there highly problematic, with little opportunity for lateral moves within an industry spiraling downward in financial crisis. John was very active in the community. He served as an elected official in Hudson, taught at a local college, played on a softball team, and fathered his three children. Beth Lavoie worked as a stay-at-home mom with a one-year old and was, at the time, eight months pregnant with a third child.

14. Prevost met John and showed him a thumb nail sketch of a business Prevost left unnamed. It peaked John's interest enough that he invited Prevost to provide the Lavoies an expanded presentation at their home. John asked to see some catalogs in advance, but Prevost declined. Prevost also showed John figures representing that the business opportunity would generate an income of $2,000 per month. John asked if Prevost was making that. Prevost responded he was. In fact, he was not.

15. Prevost referred to the business as "network marketing" but never mentioned Amway, the tools business, the Yager System, or any of the Defendants. All Prevost told Lavoie was that he would show them how to save money and generate income by ordering from catalogs.

16. The morning Prevost was to meet the Lavoies, Prevost called to ask whether his uncle could attend. Prevost explained that his uncle, a former dentist, was very successful in the business.

17. Later that day Steve and Lee Prevost, Mark and Marybeth Francoeur, and Prevost's uncle, Frank Mazzeo, came to the Lavoies' home. After introductions, Mazzeo took over. Frank had Steve Prevost set up a white board and began explaining the "business opportunity." He intended all of his representations to induce the Lavoies to invest in the "Yager System.

18. Mazzeo derided regular jobs and the "rut system" of going to work, coming home, going to work. Jobs, he said, left you "running out of money before running out of month." He promised to show how to gain personal and financial freedoms where money would be no object.

19. Mazzeo described the road to personal and financial freedom--a shopping program where distributors buy products from their upline suppliers that they used to buy elsewhere and recruit others to do the same.

20. Mazzeo represented that constant expansion of the levels of recruits would generate more and more income. The Lavoies would sign up others, who in turn would sign up others, all of whom would generate income for the Lavoies.

21. Mazzeo illustrated the financial gains the Lavoies could expect. He represented they could earn six-figure annual incomes. Mazzeo represented that when the Lavoies reached the "Diamond" level in the business, where six of their recruits had themselves recruited enough subordinates to become direct distributors ("Directs"), they would earn $15,000 to $20,000 each month, "and a whole bunch more." Mazzeo represented that it took no more work to earn at this level than to earn $120. The key was establishing a downline network of recruits that in turn recruited others, exponentially multiplying revenue for the recruiters. Mazzeo also explained that all figures he showed the Lavoies were "minimum mandated numbers" by the Federal Trade Commission. Mazzeo explained that he would not give up golfing for merely $3,000 a month, but he would for $15,000.

22. Mazzeo's promises mesmerized the Lavoies. Mazzeo made the scheme seem to be a logical and foolproof way to make lots of money for little more work. Mazzeo asked the Lavoies for names to fill in on the six downline circles from the circle that represented them on his diagram. Even as Mazzeo spoke, the Lavoies began making mental lists of potential recruits. The Lavoies believed the Mazzeos' representation that they would earn very large money by enrolling in the program Mazzeo described, and by enlisting others to do the same.

23. Not until the end of his presentation did Mazzeo mention that Amway was involved in this networking scheme, when he explained that what he had just presented had evolved from the original Amway business of selling soap door-to-door.

24. Mazzeo emphasized that the most important aspect of the evolution was that the Lavoies really would not have to sell products. Mazzeo told the Lavoies that "if you found enough people to buy $200 a month, threw all the product out the windows, we'd all make money, and then we'd do it again. We'd all get rich." According to Mazzeo, all the Lavoies would have to do to realize wealth beyond their dreams was to find others who wanted to be part of a growing network of people who buy things from themselves and recruit others to do the same.

25. Mazzeo mentioned that there was only one small expense for this opportunity of a lifetime: $95.16 for an Amway kit. The kit included some products and paperwork. To close the sale, Mazzeo returned to his promises of wealth. Mazzeo showed the Lavoies a glitzy book entitled PROFILES OF SUCCESS, which purported to illustrate ordinary people who had acquired extraordinary homes, cars, boats, jewelry, and bank accounts by joining the networking scheme. Mazzeo left this book with the Lavoies so they could relish all these rags-to-riches stories for themselves. PROFILES OF SUCCESS impressed the Lavoies. Before Mazzeo left, he told the Lavoies that a system was in place of tapes and meetings to let them be as successful as the people shown in the book.

27. Mazzeo alluded to a training methodology, but did not disclose it as a source of significant cost to the Lavoies and of significant profit to the Mazzeos. Although he described the methodology as technically "optional," he indicated the opposite was true, asserting, "The system is optional but so is success.

28. As Mazzeo and his entourage departed, they also left the Lavoies tapes to study and to hand out to recruits. He also showed the Lavoies a PERSONAL SHOPPERS CATALOG, and left an InterNET brochure entitled "Your Next Move" and other InterNET literature. Mazzeo told the Lavoies to think it all over. He left one, but later told them that they should not leave catalogs with their prospects because that allowed comparative shopping.

29. Finally, Mazzeo left an Amway form SA 4400. This form purports to illustrate the income and revenue generated by distribution chain prospects like the Lavoies could establish. The form shows the recruits at the apex of their distribution pyramid, with six subordinate legs. Each of the six is shown to have four subordinates downline, and each of the four downlines is shown to have two further downlines apiece.

30. That night, excitement kept the Lavoies from sleeping. They listened to the tapes, read the brochures, and absorbed the PROFILES OF SUCCESS. They envisioned themselves enjoying the wealth that awaited those who followed the Yager System Mazzeo had presented.

31. The literature provided by Mazzeo represented that:

> a) The business opportunity permitted individuals to earn income by distributing consumer goods produced or marketed by Amway and by recruiting others to do likewise;

> b) An individual need only pay Amway approximately $95.16 to earn the right to distribute Amway products and recruit others;

> c) A distributor who recruits another individual is designated an "upline distributor" of the person whom he has recruited. The recruiter is designated as both the "downline distributor" and the "personal sponsor" of the "upline distributor";

> d) Every individual a personal sponsor recruits to become a distributor within the downline network of the upline distributor;

> e) Every upline distributor has the potential to earn profit from the sale of Amway manufactured and marketed products ("Amway Products") to all the individuals in his downline network. Thus, an investor earns residual income by recruiting other individuals who purchase Amway products and who recruit other individuals who purchase Amway products;

> i) Amway pays distributors an increasingly larger percentage of profit, termed a "performance bonus," as they recruit greater numbers of individuals who purchase an increasing volume of Amway products;

> j) An upline distributor earns the status of "Direct Distributor" by recruiting individuals and having the group collectively purchase approximately $15,000 worth of Amway products each month for six months within a fiscal year;

> h) In addition to a performance bonus, Amway pays Direct Distributors a "profit sharing bonus" based upon Amway's profitability during the year.

> i) The Direct Distributor is the only person authorized within his "downline network" who may order products directly From Amway and who receives a performance bonus. (Sometime later, Amway relaxed this policy.); and

> j) A distributor may cite only "lifestyle examples" where such benefits were actually accrued as a result of building a successful Amway business.

32. The literature Mazzeo gave to the Lavoies also represented that:

> a) The business opportunity presented was a legitimate business opportunity that Amway assists and supports through group insurance rates, advertising, public relations, releases and other means of legitimizing Amway in the public eye, by providing extensive rules of conduct that Amway enforces to protect distributors from coercive or illegal behavior by other Amway distributors;

> b) The opportunity provided individuals a unique business opportunity because the "upline" is required to support and assist the "downline" and because the "upline's" income is dependent upon the success of his or her "downline;"

> c) In accordance with Amway's rules and regulations, Amway insures that distributors and the recruits are trained because it requires the Direct Distributors to conduct "at least weekly" training and "inspirational" meetings of their recruits or "downlines;" and

> d) Distributors should emulate their sponsor, stay involved with their upline network and all its various activities, take advantage of the experience and successful track record found in their Line of Sponsorship and there are leaders in their Line of Sponsorship who can show their proven path to building a successful Amway business.

33. Mazzeo left the Lavoies with much written material. Based on Mazzeo's presentation, they believed these materials were all Amway produced. In a conversation they had later with Mazzeo they asked if they should read the "Amway Business Reference Manual." Mazzeo told them he had never read it and not to bother. Mazzeo explained that reading Dexter's Handbook would be much more helpful because Amway is a manufacturer and supplier, but they know nothing about building a network of people. On Mazzeo's advice, the Lavoies did not read the Business Reference Manual, which contained some of the following information:

> a) An Amway distributor may not sell any non-Amway product to another Amway distributor whom he has not personally recruited;

> b) An Amway distributor may not take advantage of his knowledge or association with other Amway distributors to promote or expand his non-Amway business;

> c) An Amway distributor may not require his downline distributors to purchase either Amway or non-Amway products or attend rallies as a condition of receiving assistance in building an Amway business;

> d) An Amway distributor may not represent that there are exclusive franchises or territories available in the Amway system;

> e) An Amway distributor may not engage in unfair or deceptive trade practices;

> f) An Amway distributor may not engage in unlawful business enterprises or activities;

> g) An Amway distributor may not engage in high pressure selling tactics;

> h) Direct Distributors must insure that every distributor within their "downline network" sells Amway products to a minimum often retail customers per month (the "Ten Customer Rule"). Amway rules prohibited the Direct Distributor from paying a performance bonus to any individual within his network in the absence of proof of such retail sales each month;

> i) Direct Distributors must insure that every distributor within his "downline network" sells or personally uses, at least 70% of the Amway products he purchases each month (the "Seventy Percent Rule"). The Direct Distributor may not pay a performance bonus to any individual in his network in the absence of proof of such sales each month;

> j) Direct Distributors must enforce the Rules of Conduct; and The Amway Rules of Conduct would be enforced by the Amway Distributors' Association.

34. Amway's own rules require distributors to make retail sales, and prohibit the "tool business" where it does not ultimately sell tapes to retail consumers. Similarly, Amway rules prohibit the use of unauthorized materials in recruiting. Mazzeo knew or should have known of those rules. Upon information and belief, Amway had not authorized PROFILES OF SUCCESS for use by Mazzeo.

35. Relying upon Mazzeo's representations and directions, the Lavoies joined the networking scheme. They were sponsored by Mark and Marybeth Francouer, who had helped Mazzeo sell the Lavoies. During the Lavoies' sign-up meeting, the Francouers showed the Lavoies Amway's "Ten Customer Report," which Amway rules require distributors to use to document that they are actually making retail sales to customers. Mark Francouer tore it up in front of the Lavoies. He explained that they all now were in Dexter Yager's Distribution chain, and that Yager's people do not need to retail because they make their money by building networks of downline distributors. At all times relevant hereto, the Francouers acted as agents within the scope of their authority for the Mazzeos, the Storms, and Yager.

36. Over the ensuing days, Frank Mazzeo called the Lavoies at home, telling them they were "sitting on a gold mine," that they would "make it big" in the business. He instructed them to begin listening to all the tapes and to attend all the meetings of distributors in his network.

37. John Lavoie immediately began attending local seminars and showing the Plan. He was very excited.

38. Some of the seminars John attended Mazzeo dubbed "circle drawing sessions." In these sessions, Mazzeo taught distributors how to show the Plan. Mazzeo also provided instructional tapes produced by Dexter Yager and his various enterprises. One of the tapes featured a "Dr. Lucky Garvin" teaching distributors to use the name of their upline principal's business when prospecting recruits so they do not at first suspect the business is Amway. Mazzeo taught distributors to conceal the Amway name until late in the presentation because he wanted them to see the promised revenues and hear the success stories with an "open mind." Mazzeo also distributed summary sheets describing financial numbers to show recruits about commissions earned from downline distributors one recruits.

39. Mazzeo soon began pressing the Lavoies to attend national meetings of distributors. The first one he pushed, a "Storms Leadership Weekend," was to be held in Nashville, Tennessee, organized and sponsored by the Defendants Storms. Attendees would be members of the Storms' distribution chain, which included the Mazzeos and the Lavoies. Although the Lavoies expressed reservations about spending the significant money needed to attend this affair, and although they had yet to earn any revenue, Mazzeo pushed them hard. He told them they were new "1000's" their first month in the business, but did not explain what that meant. He also told them that they were on their way to a "big business" and that meetings like this would teach them how to build their business. He explained that they wouldn't hear anything about products, but would get a lot of information on building a network of people.

40. The Lavoies believed they were on a roll. They succumbed to Mazzeo's pressure to attend Nashville, and after only six weeks in the business flew to their first Amway Major Function.

41. Arriving in Nashville, the excitement of the Storms Leadership Weekend meeting at first startled the Lavoies, but soon the electricity in the air excited them too. Everywhere in the hotel festive distributors yelled "Fired up!" and promised the Lavoies the meeting would be better than their honeymoon. By the end of the first night Beth Lavoie's hands throbbed from nonstop clapping. She was excited to see so many couples who were excited about being married, excited about this business, and excited about being Christians. The Lavoies soaked up success story after success story of people who had gone straight up the distributor chain--Silver, Gold , Profit Sharing Direct, Ruby, Pearl, and Emerald. The new Emeralds were introduced with balloons and confetti filling throughout the air. The Storms showcased them like celebrities.

42. The Diamond level distributors that Amway had brought in as guest speakers amazed the Lavoies. They were funny, charismatic, and persuasive about how every distributor could reach the Diamond level. These speakers convinced the Lavoies that they had what it took to reach that level in a couple years, too. Euphoric, the Lavoies decided to attend the next available function.

43. Mazzeo had told the Lavoies that they would not hear anything about products and selling at the Function. Mazzeo was right. The entire Function stressed relationships, motivation, loyalty to upline distributors, and the Yager System. Speaker after speaker offered witness that God Himself had directed them to the business and that the business epitomized legality and morality.

44. Nashville provided the catalyst that induced the Lavoies to follow the "eight step pattern" promoted by Dexter Yager in the tapes Mazzeo had provided. They loyally began to order and listen to tapes, to buy and read books only off the recommended list, and to attend a gaggle of meetings. These included the Mazzeos' open meeting in Nashua, the Storms' open meetings in Westford, Major Functions and rallies, the Mazzeos' Leadership Meetings, and every other "nuts and bolts," pot luck, product demonstration, or circle drawing session promoted by the Mazzeos, the Storms, or Yager. They had little time for anything else.

45. By this time, the Lavoies had signed up fourteen new recruits ("personals") in three months, one of whom had managed to recruit fifteen personals.

46. As the Lavoies' commitment to the business opportunity grew, their commitment to everything else dwindled. John quit his softball team to dedicate more time to the business. His job became secondary. Relatives cared for the children. When their family complained about how much time they spent away from their children, about how Amway dominated every conversation, the Lavoies ignored them, as their tapes and seminars and meetings had taught them to do. They had learned to expect this and to ignore all "negatives" expressed by others.

47. The Lavoies worked very hard for the next several months, earning recognition and awards for their efforts. Their legs of downline distributors grew. They loyally followed directives from their upline principals. When they deviated even slightly from upline expectations, they suffered immediate consequences. For example, the Francoeurs held a home meeting with several prospective recruits. John Lavoie asked Frank Mazzeo several questions about negative reactions he and Beth had received as to whether the business they were promoting was Amway. Frank dodged the question and later pulled John aside. Frank told John that John and Beth should keep negative questions to themselves to be asked in private because they only raised doubts to new recruits.

48. One weekend Mazzeo had scheduled a seminar and rally on Saturday and a Product Fair on Sunday. The Lavoies decided to skip the Product Fair to spend some time with their family. Mazzeo called immediately and scolded John: "I thought you were going to be a leader in this business." John replied that was his goal. Mazzeo answered that leaders attend everything. It did not look good to miss when your downlines attended because they could find they know more than you do. Mazzeo told the Lavoies that to succeed in this business total obedience and perfect attendance were mandatory. Mazzeo added, "Do you want an ego or a wallet?" "To eat pheasant under glass," he instructed, "you have to eat a lot of crow.”

49. After that episode, the Lavoies attended every "recommended" event and purchased every "recommended" book and tape. They decided not to let pride or ego get in the way of success. Mazzeo "counseled" them regularly, and they always provided him the information he needed, such as how many on "SOT's" (Standing Orders Tape--orders placed by downline recruits for Yager's motivational tapes), and how many downline recruits attended various functions. Mazzeo regularly counseled them not to focus on the Point Value awarded for selling products. The Lavoies regularly filled out goal sheets with Mazzeo and reviewed their progress in meeting goals with him.

50. In June of 1990, John lost his job at the bank as it spiraled downward toward failure. For the next five months he remained unemployed. The Lavoies received income from his severance package, but worried about their immediate needs. They lived more frugally than ever.

51. When John lost his job, Mazzeo asked John whether the Lavoies would continue to buy tapes. John felt Mazzeo was testing their commitment to the business. Despite their distressed circumstances, the Lavoies felt compelled to continue buying the tapes. They continued to participate in the System. Eventually John found another, lesser-paying job, but the Lavoies redoubled their efforts to succeed in the Amway business. They achieved "Silver Producer" status in December 1990, "Gold Producer" status in April 1991, and "Profit-Sharing Direct" status in June 1991.

52. Frank Mazzeo told the Lavoies they were starting to be recognized as up and coming stars in the Amway business. After they achieved Profit-Sharing Direct status, Yager, the Storms and the Mazzeos began to allow them to share in the coveted and lucrative "tool business" that the Lavoies had developed downline. The "tool business" is the selling of Yager's motivational tapes to distributors recruited downline. The Francouers provided them with price sheets from Mazzeo's office that varied price with sales volume. Mazzeo told them that the tool bonus would offset expenses they were incurring. They were glad for the extra income since their Amway bonus was proving to be less than what they had expected it to be.

53. Seeing the Lavoies as "rising stars," the Mazzeos and the Storms expected them to speak at meetings. Frank Mazzeo taught them to never say anything negative about their upline, whether in jest or not. The Mazzeos sometimes gave little notice about speaking. John mentioned this one time from the stage and Frank Mazzeo immediately chastised him. Mazzeo told John that even humorous criticism might scare people about speaking and induce them to quit.

54. At Frank Mazzeo's request, the Lavoies put on their first seminar in Braintree, Massachusetts in the summer of 1991. Before Mazzeo allowed them to speak, he gave them an outline of what to cover during the seminar. It covered prospecting recruits, showing the Plan, and getting people to follow the System. It covered nothing about retailing products. Nevertheless, the Lavoies did not question the absence of retailing because all of the meetings they attended, all the training they received, and all the materials they purchased focused only on recruiting and network building.

55. The Lavoies attended a Direct Distributor Seminar put on by Amway at the corporate headquarters. They toured the manufacturing facilities and saw how Amway dealt with suppliers. They met with a coordinator who showed them data about their business.

56. Over the following months the Lavoies' efforts persisted. Great things seemed to be happening in the business. The Mazzeos became Diamonds in 1993, making the Lavoies' dream of success seem that much closer. The Lavoies were good students of the business and good teachers as well. Despite their efforts, however, their downline recruits' business began to decline. The Lavoies found they were doing most of the work to maintain the business.

56(a) A few years after being in the business the example the Lavoies had been taught to show prospects was changed from a 6-4-2 scenario to a 9-4-2. This change was mandated from the upline. The explanation given was that other MLM groups were showing more income than we were and in order to compete for recruits we in turn needed to show an example with greater income than before. The plan changed from the 2-5 year program to the 5-7 year, but the end result showed income of 25,000 to 40,000 a month. The Lavoies and their group were even told which open meetings in other states they should not send their prospects to, because at these meetings the speakers were still using the 6-4-2 scenario. As Mr. Mazzeo liked to say, "I don't sell products, I sell lifestyle. How much of it do you want?"

57. Despite downline problems, the Lavoies continued to spend time and money trying to expand their Amway business. During this period, one downline distributor refused his bonus check because he did not have ten retail customers. The Lavoies were confused about what to do because this never had happened before. The distributor said he had read in Amway's Business Reference Manual that retail sales must be made to ten different individuals in order to receive a bonus check. Beth Lavoie contacted Frank Mazzeo. Mazzeo replied that Amway implemented the Ten Customer Rule because a few states required it, but New Hampshire was not one of them. Beth noted the explanation and the check was mailed off to the distributor by their sponsor without further question.

58. As their concern about their downline grew, the Lavoies began to lose upline support From the Mazzeos, who began to favor nephew Steve Prevost. The deterioration of the upline support accelerated once the Lavoies began to push for Ruby level status.

59. In May of 1994, the Lavoies finally hit Ruby status. In addition, the Lavoies maintained almost 100 downline distributors on Standing Orders Tapes status (which meant the downline automatically received Yager's tapes every week) and were selling roughly the same amount at events. Despite their success, no one below them was making enough money or showing a profit after expenses.

60. During this time, the Lavoies left the Catholic Church, in which they both had been raised. They sought a church they thought was more like the Protestant churches the Diamonds distributors attended. They found that the religious influence within Amway was very strong in the business and seemed unfavorable to Catholics.

61. By late 1994, the Lavoies' business began losing downline distributors. One downline group that had more than forty tickets ordered for a Seminar one month ordered less than twenty the next. Downline distributors seemed unable to expand their networks. It became impossible for the Lavoies and their downline distributors to even
maintain levels they had achieved.

62. The Lavoies continued to qualify as Direct Distributors, but grew increasingly concerned that no one in their downline group was making money. They feared this would cause them to leave the business. Some months they had to order extra products and overstock their shelves to maintain the necessary volume.

63. However, the Lavoies and their downline group continued to be loyal to the "System." The tapes, books, and functions promoted by the Defendants constantly bombarded the Lavoies with messages promising success and damning failure: "You can do it"; "99% loyalty is 100% disloyalty"; "Quitters are losers"; "You must never, never quit because your time to succeed could happen next"; "Quitting would be a big, HUGE mistake"; and other similar messages. These messages told the Lavoies and their group that the only way they would succeed is to remain in the System.

64. Social relationships structured by the Yager System reinforced the message. Yager, the Storms and the Mazzeos demanded total commitment. The Lavoies offered it, sacrificing their community involvement, John's career, their outside friendships, their family life, and their faith. The System replaced these relationships with those within the distribution chain. The Yager System conditioned all of these relationships on continued commitment to the System. When the Lavoies questioned any aspect of the System, Mazzeo and the other Defendants shunned them or threatened to shun them. Having stripped the Lavoies of relationships outside the Amway System, the threat of shunning powerfully reinforced the ideology of "success through total commitment" to keep them in the Yager System. And as the Yager System preached, the Lavoies believed that failure to achieve the success the Yager System promised was nobody's fault but their own.

65. In pursuit of Amway's promise of success, the Lavoies had piled up enormous debt. In July 1996, they finally calculated that they had incurred $75,000 of debt for the business, in addition to the tens of thousands of dollars of expenses they had made for the business. They were floored. Believing the Defendants' promises of success and making the sacrifices they demanded had not moved the Lavoies ahead financially. Instead, they had fallen further and further behind.

66. By the end of 1996, the Lavoies began to fear that they would not make it to Diamond. Their fears were fueled by the realization that in all the years they had been in the business, they had not saved any money for their children's education or added to their retirement account. Instead, believing the Defendants' claims that Amway was their future, they had poured all their money into the business. Despite the relentless message and coercive threat of shunning, their dreams of financial independence started to become nightmares. Despite their hard work and devotion to the System, the promised success remained illusive. They feared they soon would be unable to meet their mortgage and other commitments to their creditors, their children, their parents, and their own retirement. The Lavoies began to realize that the promise of the motor home, in-ground pool, the house on the lake, the house in Florida, and paying cash for everything seemed hollow compared to the freedom of being able to enjoy and care for their family. They tired of always putting the Amway business first. For the Yager System and the Defendants, they had sacrificed soccer games, baseball games, weddings, family events, vacation time, and friendships. Family obligations tugged at them: Beth's sister was afflicted with multiple sclerosis and needed help; her mother contracted leukemia and needed regular care; and her father suffered from Parkinson's disease. When Beth's mother died, the Lavoies cared for her father and sister. Despite their Herculean efforts, the promises of the Yager System was becoming the Curse of Sisyphus.

67. The Lavoies shared their concerns with the Mazzeos, looking for guidance and help in working their concerns out. They asked for a brief leave of absence. The Mazzeos' response shocked them. Instead of helping the Lavoies, the Mazzeos threatened to totally cut them out of the System. Frank Mazzeo told them if they cut back at all, they would lose all income from selling Yager's tapes and books--the tool business. Joan Mazzeo told them they would be prohibited from doing any "pick-up" business, which would cut the Lavoies out of the tool business. Joan Mazzeo said the Lavoies had to be fully committed to the System or fully removed from it.

68. Stunned by this treatment, Beth Lavoie contacted the Mazzeos the next day to suggest that she and John must not have explained themselves, and that since the Lavoies continued to be qualified as direct distributors, their group had to continue to name them on the applications and renewal forms submitted to Amway. The Mazzeos responded that they would take it up with the Storms and get back to the Lavoies.

69. Before receiving any response from the Mazzeos, however, the Prevosts immediately began contacting the Lavoies' downline distributor legs directly by sending messages around the Lavoies, circumventing the Lavoies and formal protocol. Frank Mazzeo told the Lavoies' downline distributors to deal directly with the Prevosts, and to no longer name the Lavoies as their sponsors on paperwork to Amway. Upon hearing this, the Lavoies were concerned that this would have a direct effect of eliminating commissions otherwise payable to the Lavoies.

70. Beth contacted Amway to determine whether the Lavoies were required to turn over the identity of their downline distributors as the Prevosts demanded. She called Amway Distributor Relations and spoke with Distributor Relations. Distributor Relations responded that they did not technically have to turn over the names, but that the Mazzeos and Prevosts would find a way to determine their identity, so she should turn over the names. This was in direct violation to Amway's own rules.

71. The stress and duress made Beth Lavoie physically ill. She suffered in bed for days with a migraine headache. The Mazzeos and Prevosts were undermining and trying to take over their business. The only support networks the Defendants and System had left them were turning on them. They decided they must get out and begin to piece their lives back together.

Causes of Action

Count I
Unfair and Deceptive Trade Practices

72. Paragraphs 1-71 are incorporated by reference herein.

73. The conduct of the Defendants described in paragraphs 1-65 constitute unfair and deceptive trade practices in violation of N.H. RSA 358-A:2. To the extent that the conduct alleged occurred more than three years prior to the date of this complaint, the Lavoies had no reason to know that the conduct was deceptive, unfair, or unlawful. Moreover, the Defendants represented the conduct to be lawful, and actively concealed that it was not.

74. The Lavoies suffered damages from the Defendants' conduct in an amount within the jurisdictional limits of this Court.

75. The Defendants willfully and knowingly violated this statute within the meaning of N.H. RSA 358-A:10, entitling the Lavoies to double or treble damages.

76. The Lavoies are entitled to recover their costs attorneys' fees in accordance with N.H. RSA 358-A:10.

Count II
Illegal Chain Distribution Scheme

77. Paragraphs 1-76 are incorporated by reference herein.

78. The conduct of the Defendants described in paragraphs 1-70 constitutes the offering, promotion, granting of participation in, and operation of an illegal chain distribution scheme in violation of N.H. RSA 358-B:2 and N.H. RSA 358-A:2. N.H. RSA 358-B:5.

79. The Lavoies suffered damages from the Defendants' conduct in an amount within the jurisdictional limits of this Court.

80. The Defendants willfully and knowingly violated N.H. RSA 358-B:2 within the meaning of N.H. RSA 3 58-A:10, entitling the Lavoies to double or treble damages.

81. The Lavoies are entitled to recover their costs attorneys' fees in accordance with N.H. RSA 358-A:10.

Count III
Fraudulent Misrepresentation & Concealment

82. Paragraphs 1-81 are incorporated by reference herein.

83. By the conduct alleged in paragraphs 1-75, the Defendants intentionally misrepresented and concealed material facts. The Lavoies relied on these misrepresentations and silence to their detriment. Their reliance was reasonable.

84. The Defendants owed the Lavoies a duty to disclose those material facts that they concealed.

85. The Lavoies suffered damage caused directly and proximately by the Defendants' fraudulent misrepresentations and concealments in an amount within the jurisdictional limits of this court.

Count IV
Negligent Misrepresentation

86. Paragraphs 1-85 are incorporated by reference herein.

87. By the conduct alleged in paragraphs 1-79, the Defendants negligently misrepresented material facts. The Lavoies relied on these negligent misrepresentations to their detriment. Their reliance was reasonable.

88. The Defendants owed the Lavoies a duty to not misrepresent those material facts that they misrepresented.

89. The Lavoies suffered damage caused directly and proximately by the Defendants' negligent misrepresentations in an amount within the jurisdictional limits of this Court.

Count V
Breach of Contract

90. Paragraphs 1-89 are incorporated by reference herein.

91. By the conduct alleged in paragraphs 1-83, the Defendants promised the Lavoies they would attain compensation in the amount of at least $15,000 to $20,000 per month if they worked hard and complied with the rules and conditions stated by the Defendants.

92. The Lavoies invested approximately $75,000 and thousands of hours in reliance on the Defendants' promises, and substantially performed every term and condition required by the Defendants.

93. Although the Lavoies performed by conducting the tools business, the Defendants compensated them far less than promised.

94. By the conduct alleged in paragraphs 1-83, the Defendants constructively terminated the Lavoies' distributorship and tool business, precluding them from receiving the compensation the Defendants had promised them.

95. The conduct described in paragraphs 1-90 breached the Defendants agreements with the Lavoies, causing them damage in terms of lost compensation, loss of a promised stream of earnings, and expenses incurred in reliance upon the Defendants' performance, in amounts within the jurisdictional limits of this Court.

Count VI
Intentional Interference with Advantageous Relations

96. Paragraphs 1-95 are incorporated by reference herein.

97. The Lavoies enjoyed contractual relationships with their downline distributors by virtue of the Amway Distributor Agreements, Amway's rules and regulations, and oral agreements between the Lavoies and their downline distributors.

98. The Defendants knew of these agreements.

99. By the conduct alleged in paragraphs 1-90, the Defendants intentionally interfered with the contractual and advantageous relations the Lavoies enjoyed with their downline distributors.

100. By the conduct described in paragraphs 1-95, the Defendants directly and proximately caused the Lavoies damage in terms of lost compensation, expenses incurred, and reputation in amounts within the jurisdictional limits of this Court.

Count VII
Intentional Infliction of Emotional Distress

101. Paragraphs 1-100 are incorporated by reference herein.

102. The Defendants intentionally and with reckless disregard for the Lavoies' physical and emotional well-being subjected the Lavoies to psychological manipulation, humiliation, and abuse.

103. The Defendants knew or should have known that their conduct would subject the Lavoies to severe emotional and physical distress.

104. The Defendants' conduct was extreme and outrageous in that they acted solely for their own economic gain while purporting to promote community, family, and religious values.

105. The Defendants' extreme and outrageous conduct directly and proximately caused the Lavoies to suffer severe emotional distress and physical manifestations thereof.

Count VIII
Negligent Infliction of Emotional Distress

106. Paragraphs 1 through 105 are incorporated by reference herein.

107. The Defendants owed a duty to the Lavoies to not harm their physical and emotional well-being.

108. The Defendants' conduct subjected the Lavoies to psychological manipulation, humiliation, and abuse.

109. The Defendants knew or should have known that their conduct would subject the Lavoies to severe emotional and physical distress.

110. The Defendants' conduct violated their duties to the Lavoies and thereby directly and proximately caused the Lavoies to suffer severe emotional distress and physical manifestations thereof. The extent of the Lavoies' damage is within the jurisdictional limits of this Court.

Count IX
Securities Fraud

111. Paragraphs 1 through 110 are incorporated by reference herein.

112. Investments in the business opportunity scheme and tool business as set forth above constitute investment contract securities under New Hampshire RSA Chapter 421-B:2 and for the purpose of the registration of anti-fraud provisions of New Hampshire RSA Chapter 421-B in that

A. Different income positions in the network marketing plan and tools business are investments in a common enterprise, with profits to be derived from the essential managerial efforts of the Defendants and others in the network; and

B. The Defendants represented that the Lavoies' financial success was dependent upon Amway's, Yager's, the Storms' and the Mazzeos' reputation and integrity as communicated to the public and potential recruits through Amway's trade name, and the public relations, advertising, promotional literature, superior products, rules of conduct and enforcement mechanisms of Amway and the Defendants; and The Defendants further represented that the Lavoies' financial success was dependent upon Defendant Yager's, Storms', and Mazzeos' products, assistance, and promotions.

113. The Defendants represented that their efforts made the business opportunity and tools business a superior investment opportunity and that the Lavoies would not obtain profits from participating in the business opportunity and tools business without those efforts by the Defendants.

114. The Defendants directly and indirectly, severally and in concert, participated in a continuous course of conduct, offered for sale and sold and were responsible for selling the securities in violation of the registration requirements of New Hampshire RSA Chapter 421-B:11 and that the offering for sale and sale of such securities by the Defendants was not exempt from the registration requirements set forth in New Hampshire RSA 421-B:17.

115. Between 1990 and 1997, the Lavoies have been induced to pay thousands of dollars to purchase the subject business opportunity and tools business securities as a direct and proximate result of the Defendants' violations of New Hampshire RSA Chapter 421-B. The Lavoies accordingly seek to recover the full amount of consideration paid for these securities, with interest thereon, upon tender of such securities, which tender is hereby made, or, in the alternative, seek damages sustained as a result of the sale of such securities pursuant to New Hampshire RSA Chapter 421-B:25.

116. In the course of their offer for sale and sale of securities to the Lavoies, the Defendants made untrue statements of material fact and omitted to state material facts necessary in order to make statements they made, in light of the circumstances under which they were made not misleading.

117. Each of the Defendants at various times made or assisted other Defendants in making the untrue statements and omissions of material fact set forth above in connection with the offer to sell and sale of securities to the Lavoies. As a result of the material false representations and omissions of the Defendants, the Lavoies have been induced to purchase the business opportunity and tools business securities.

118. The Lavoies relied on the untrue statements of material fact and material omissions made by the Defendants in connection with the offer to sell and sale of securities to the Lavoies.

119. By virtue of the Defendants' actions, the Lavoies have suffered losses, costs and money damages including, but not limited to, their investment in products, their investment in the business opportunity, tools business, and motivational rallies, severe emotional trauma, and injury to their reputations.

120. Pursuant to New Hampshire RSA Chapter 421-B:25, the Lavoies are entitled to recover their consideration paid, interest at the legal rate, costs, and attorney's fees, as adjusted pursuant to law.

121. The Lavoies assert their claims under New Hampshire RSA Chapter 421-B for all representations and transactions made or entered into within the six years prior to the filing of this Complaint.

Count X
Civil Rico (18 U.S.C. § 1962)

122. The Lavoies reallege each and every allegation contained in Paragraphs 1 through 121 above, and further allege as follows:

123. In all the times material hereto, the Defendants were associated with an enterprise engaged in and whose activities affected interstate commerce.

124. The Defendants have conducted, and participate directly and indirectly in the conduct and the affairs of the business opportunity and tools business schemes through a pattern of racketeering activity in violation of 18 U.S.C. §§ 1962(c) and (d). This pattern of racketeering activity consisted of repeated acts of mail fraud, violative of 18 U.S.C. § 1341, repeated acts of wire fraud, violative of 18 U.S.C. § 1343, and repeated acts of fraud in connection with the purchase and sale of the subject securities. Mailings were included but not limited to letters, materials, brochures, and checks to the Lavoies and other Amway distributors and to the other Defendants. The use of the wires included, but was not limited to, the use of the Amway AMVOX Messaging System to promote and carry out the business opportunities and tools business schemes.

125. The Defendants have participated in the conduct of the Yager System and conspired with each other by, among other things, offering the investments to the public without registration or qualification, making misrepresentations and omissions of material fact to standardize promotional materials and scripted sales presentations, concealing the fact that their profits are derived from the recruitment of new members rather than through retail sales, concealing the fact that distributor profits are derived from the recruitment of new members to purchase tools and rallies, and further promoting the sale of business opportunity and tools business securities through the techniques described herein.

126. These acts occurred after the enactment of RICO and within ten years of one another.

127. Each of these acts had similar purposes, involved the same similarly situated participants and methods of commission, and had similar results impacting similar victims. These acts therefore constitute a pattern of racketeering activity within the meaning of RICO.

128. Through said pattern of racketeering activity, the Defendants, individually and collectively, conducted or participated directly or indirectly in the conduct of the business opportunity and tools business affairs.

129. The Defendants participated in the operation of the business opportunity and tools business enterprise. The individual Defendants through their positions as high ranking participants in the marketing scheme, exercised direction and control over the affairs of the enterprise. The individual Defendants further participated in the conduct of the affairs of the marketing scheme through active participation and influence over decisions made by the Defendants concerning the conduct and operation of the business opportunity and tools business marketing scheme.

130. As a direct and proximate result of Defendants’ RICO violative activities, Plaintiffs have suffered substantial loss and damage to their business and property. This loss entitles them to recover treble damages against the Defendants, and the costs of suit, including reasonable attorneys fees pursuant to 18 U.S.C. § 1964(c).

131. At all relevant times, the Defendants knowingly agreed and conspired with each other to conduct or participate in the conduct of the affairs of their own enterprises and each other's enterprises and to commit the predicate acts set forth herein with knowledge that such acts were in furtherance of the violative conduct of each enterprise, and the scheme to engage in unlawful securities transactions.

132. The Defendants' conspiracy is further evidenced by the mutual benefit obtained by the Defendants from the tools business within the Amway system, including but not limited to:

> (a) Utilizing the income earned from the tools business to deceive prospective distributors of Amway products into believing that income was earned from a legitimate Amway distributorship and thereby inducing potential Amway distributors, including the Lavoies, to invest in the Amway system;

> (b) Utilizing the potential income earned from the tools business to induce Amway distributors to purchase large volumes of Amway products in order to gain an interest in the tools business and to increase their profit percentage within the tools business; 133.

133. In addition, the Defendants agreed to act in concert for their mutual benefit in that the financial success and credibility to the Yager motivational business depends upon one's position within the Amway hierarchy.

134. The Lavoies have been injured in their business and their property by reason of the conspiracy to violate 18 U.S.C. § 1962(c) in that the Lavoies have lost their investments and incurred additional business related losses.

WHEREFORE, the Plaintiffs Elizabeth and John Lavoie respectfully request that this Honorable Court:

A. Award compensatory damages for their lost principal investments, together with interest thereon at the contract or legal rate plus additional general, incidental damages;

B. Award double and triple damages for the Defendants' unfair and deceptive trade practices;

C. Award double or triple damages for the Defendants' conduct in violation of RICO;

D. Award compensatory damages for the emotional distress inflicted by the Defendants for their conduct;

E. Discharge from the Defendants and award the Lavoies restitution for lost profits, compensation and benefits obtained by the Defendants as a result of their false advertising and unfair business practices;

F. Award costs incurred in bringing this action including reasonable attorneys' fees to the extent allowable by New Hampshire RSA Chapter 358-A, Chapter 358-B, Chapter 421-B and other provisions of New Hampshire law, as well as 18 U.S.C. § 1964; and

E. Grant such other relief as may be just and equitable. The Plaintiffs demand trial by jury.

Respectfully submitted,

JOHN LAVOIE and ELIZABETH LAVOIE
By their Attorneys
UPTON SANDERS & SMITH

Dated: December 28, 1998

Charles W. Grau, D.N.H. 987
P.O. Box 1090
10 Centre St.
Concord, NH 03302-1090
(603) 224-7791