You Can't Cheat an Honest Man - James Walsh [117]
Trudeau and business associate Jules Leib also sold self-help and motivational tapes from a related company called Nightingale Conant.
Nutrition for Life president David Bertrand tried to distance his company from Trudeau, referring to Trudeau as just one of several distributors the company used. He argued that none of his distributors were pyramid schemes. “You don’t have to sign anybody up to make money,” Bertrand said.
But Trudeau was clearly a big part of Nutrition for Life’s growth. About one-third of the vitamin company’s 82,000-person salesforce had been brought on board by Trudeau—who remained a handsomely-compensated independent contractor. In an advertising campaign that aired on syndicated television and radio shows, he promised investors big money for recruiting new members into his program.
Trudeau encouraged his distributors to recruit others to become socalled “instant executives.” The phrase itself suggested an illegal pyramid scheme to investigators. One Illinois lawyer said, “Unless you’re rolling out of Harvard Business School with honors, you don’t usually become an executive instantly anywhere. And these guys weren’t dealing with a lot of Harvard grads.”
Regulators at both the federal and state level were watching Trudeau. Among the challenges his company faced: Two people associated with the marketing operation were also convicted felons. They’d met Trudeau in a federal prison in California.
On a simpler business point, many of the regulators believed that— regardless of Trudeau’s background—relying so heavily on one distributor could spell serious trouble for the Nutrition for Life.
The SEC wanted to know how Nutrition For Life recruited its distributors. Investigations on the state level were more aggressive. Illinois Attorney General Jim Ryan made a particularly pointed effort; part of a lawsuit he filed against Trudeau cited a state law that required anyone who sold marketing plans for $500 or more to register with the state and disclose any criminal convictions. The Instant Executive program required participants to buy a $35 Nutrition for Life distributor kit, $1,000 worth of products and allow automatic credit card or checking account debits of $135 a month for new products.
In short, Ryan was accusing Trudeau of running an illegal pyramid scheme.
In April 1996, Trudeau agreed to a temporary restraining order prohibiting him from recruiting instant executives until Ryan’s lawsuit was resolved. As part of the settlement with Ryan’s office, Nutrition for Life would no longer use Trudeau’s “instant executive” designation. “The confusion was that some people did not realize that to be in Nutrition for Life, the only requirement was to purchase a $35 sales kit,” Bertand said.
But the agreement would hurt. Since Trudeau had become involved with the company, the Instant Executive program had accounted for well over half the company’s revenue.
Close to a hundred of Trudeau’s distributors packed a courtroom in Chicago to hear the details of the temporary restraining order being hammered out. The distributors drew an early rebuke from the court when they responded angrily to the state’s description of the program as a pyramid scheme.
Trudeau’s lawyer claimed that Trudeau Marketing Group was only a “shell corporation” that didn’t transact business. “It is therefore incapable of being a pyramid sales scheme,” he argued. However, the addled argument didn’t accomplish very much.
Even though he agreed to the temporary court order, Trudeau insisted that: “the allegations are 100 percent totally untrue.” In messages on the Internet, Trudeau wrote, “There was NO HEARING before the court!!!!!” and “The court DID NOT rule that anyone is running an illegal anything!” And, technically, he was right.
He put a positive spin on the changes in his marketing plan: “We encourage all distributors to continue selling Nutrition for Life products and