What the Texas Attorney General Says About BioPerformance
"The defendants' dramatic markup on their worthless product, coupled with their downline marketing strategy, indicate they were organizing an elaborate, illegal, and unsustainable pyramid scheme."
BioPerformance ordered to return more than $7 million to victims of pyramid scheme
AUSTIN - Texas Attorney General Greg Abbott today stopped a
Dallas-based pyramid scheme from illegally marketing the so-called "top
secret gas pill" that it falsely claimed would increase fuel efficiency
in automobiles. The Attorney General's settlement with BioPerformance
and its owners, Lowell Mims and Gustavo Romero, prevents the defendants
from continuing to deceptively market their products and ends the
State's eight-month legal action against the company.
A
combination of the defendants' frozen assets and the dissolution of two
trusts created by Mims and Romero will provide more than $7 million in
compensation to deceived consumers. Mims and Romero may continue to
operate any legitimate enterprise, but may not deceptively market
BioPerformance pills or similar fuel additive products.
"Swift legal action stopped this cynical, brazen scheme to defraud
consumers," said Attorney General Abbott. "With gasoline prices hitting
record highs, these defendants aggressively marketed their worthless
product as a wonder-cure. Sadly, these do-nothing pills were merely the
tools of an elaborate pyramid scheme that enriched the sellers while
buyers were left with empty hands and empty wallets."
Attorney
General Abbott added: "Texans will not tolerate con artists who prey
upon unsuspecting consumers. Though we will continue aggressively
cracking down on fraudulent pyramid schemes that profiteer from
worthless products, consumers should always be dubious when offered
'miracle' products that are long on hype but short on credible proof."
Last
May, the Attorney General filed a lawsuit against BioPerformance that
accused the company of violating the Texas Deceptive Trade Practices
Act. According to court filings, BioPerformance repeatedly and falsely
claimed that its fuel pills could improve vehicular fuel efficiency by
as much as 30 percent while also reducing engine emissions by 50
percent. BioPerformance also sold its fuel additive in powder form.
The
Attorney General further alleged that the worthless product, combined
with the defendants' downline marketing scheme, constitutes a
product-based pyramid scheme, which violates the Texas Pyramid
Promotional Scheme statute. By the defendants' own admission, they
recruited 50,000 participants within six months of their scheme's
inception.
Just months after BioPerformance's creation in 2005,
the Office of the Attorney General received reports that Mims and
Romero were making false claims about their product.
Appearing
before standing-room-only crowds at seminars they organized across the
country, Mims and Romero touted their products' capacity to
significantly increase fuel efficiency and reduce vehicle emissions. At
the seminars, the defendants' true purpose was to recruit product
resellers who were charged several hundred dollars to join the scheme.
Those newly minted resellers were subsequently instructed to recuit
additional resellers and thus create a "downline" from which they could
derive commissions.
BioPerformance's extensive Web site made
similar unsubstantiated claims about product's capabilities, often
referring to it as a "top secret formula" that was only available
through company resellers. The site also reiterated defendants' sales
pitches, promising potential resellers that selling the pills and
recruiting others to do the same would reap them substantial fortunes.
To
aid its investigation, the Office of the Attorney General retained
respected scientific experts whose chemical analysis not only revealed
that the defendants' pills did not significantly reduce fuel
consumption, but also exposed naphthalene, a substance also used in
moth balls, as their main ingredient. Although the defendants claimed
that the pills were "non-toxic," "good for the environment," and
"extremely safe...in all aspects of use," naphthalene is a toxin.
The
State also determined that BioPerformance resellers credited with
recruiting additional downline sellers were paid substantially higher
commissions than were those who actually sold the company's products.
Such a marketing and recruitment scheme is often indicative of a
pyramid scheme.
Further evidence of a pyramid scheme was
provided by Romero, the company's Vice President and Co-Founder, who
admitted to selling BioPerformance for as much as $50 a bottle, despite
its comparatively low $4 manufacturing cost. The defendants' dramatic
markup on their worthless product, coupled with their downline
marketing strategy, indicate they were organizing an elaborate,
illegal, and unsustainable pyramid scheme.
In the coming weeks,
the Office of the Attorney General will review consumer complaints and
other data to determine how it will administer the resources available
for consumer restitution. Consumers with questions or who wish to file
a complaint can call 1-800-252-8011 (for callers within Texas) or (512)
463-2100 (for callers outside Texas). Complaint forms are also
available online at www.oag.state.tx.us.
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