Business Scheme Under Legal Investigation

By Shanthal Perera
September 19, 2007
WSU (Winona State University) Winonan

It's no shock that a public university is open for business.

Within the first few weeks of the semester at Winona State University, Kryzsko Commons and the surrounding area were bombarded with banks trying to set up student accounts, phone and cable companies targeting future business and wall poster sales that decorated the courtyard.

Some businesses, however, students should be wary about, as they may be structured illegally into what's called a pyramid scheme.

Typically, pyramid schemes have a large base of low-level employees, such as college students, who remain virtually at the bottom of the pyramid and rake in large profits for the higher-up employees.

The company collects a fee from its employees and stresses recruitment of others to join the business.

Two years ago, the student services committee of Winona State's student senate made brochures and placed them on dorm hall racks to warn students who would likely be targeted by scammers.

Student senate president Jared Stene, who formerly chaired the committee, is hoping to reprint and circulate the brochure again.

â€œThe golden rule is if it's too good to be true, then it probably is,â€ Stene said to inform students of the dangers of scams such as pyramid schemes.

With the growth of the Internet, scammer Web sites, forums, blogs and even Facebook groups can provide information on illegal businesses, and the lack of gatekeepers and unconfirmed information makes the Internet a

double-edged sword.

Such is the case with the multilevel marketing business Quixtar.

Formed in 1999, Quixtar sells products ranging from energy drinks to cosmetics that are sold through referrals by members called Independent Business Owners (IBOs).

IBOs earn income based on their sales as well as sales made by other IBOs that they have registered below them.
Quixtar IBOs have been reaching out to students at both Winona State and St. Mary's University.

At the time of Stene's campaign against pyramid schemes two years ago, several Quixtar IBOs held an invitation-only meeting in a St. Mary's classroom, where students from both campuses learned about the company and how they could earn money by joining.

While the company is not listed as an illegal pyramid structure, eight of Quixtar's largest distributors filed a lawsuit against the company on Aug. 7, alleging that the company knowingly operates as a pyramid scheme, according to the Business Wire.

The plaintiffs stated that Quixtar overprices its products so that they can't be sold at competitive prices, making the recruiting of more members the only viable way of earning money.

Amway, Quixtar's sister company, was accused of being a pyramid scheme but was cleared by the Federal Trade Commission in 1979.

The company does have a satisfactory record with Better Business Bureau, an independent consumer protection organization, which can be cited as proof of Quixtar's legitimacy.

While the company's presence at Winona State is unconfirmed, scribbled writing discovered on a study room whiteboard at the library earlier this month indicates they may still be actively recruiting.

Larry Hardesty, dean of library and information services at Winona State, said he was unaware that library study rooms were being used by businesses to recruit students.

Vernon Leighton, coordinator of public services at the library, wasn't sure if there was any way to stop groups or companies secretly using university study rooms to recruit students.

â€œPeople can sneak in and use them,â€ Leighton said. â€œI'm not sure we can do much.â€

Companies that want to use university facilities such as the student union or library have to pay a rental fee for the facility.

Companies have found ways around this, however.

Stene said he has known of cases where recruiters have gotten into classes to recruit students.

â€œJust because they are on campus, it doesn't mean they are a part of the university,â€ Stene said.

Currently, students can access an electronic copy of the pyramid scheme brochure at http://www.winona.edu/studentsenate/committees/studentservices.html.

While Stene would not name companies or individuals of pyramid schemes, he did highlight things for students to watch out for.

Stene warned students to be skeptical if the organization requires payment in order to work for them and an emphasis on recruiting others to join.

He also directed students to the Office of the Minnesota Attorney General to check up on the legality of business opportunities.

The Office of Minnesota Attorney General had no public information concerning Quixtar it could share at this time.
Even legal business ventures have been restricted from using university facilities.

Credit card companies are banned from selling within the student union, according to student union director Joe Reed.

â€œThey rip off our students,â€ said Reed, citing credit card debt as the No. 1 problem college students face.

According to the Business Wire, Quixtar's recent legal hearing continues today.

D.J. Poyfair

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