The MLM scheme, BioPerformance, and its owners, Lowell Mims and Gustavo Romero were charged by the Texas AG as a Dallas-based pyramid scheme that marketed a pill that it claimed would increase fuel efficiency in automobiles. By the defendants' own admission, they recruited 50,000 participants within six months of their scheme's inception. The Texas AG said BioPerformance conduced large meetings around the country where, consumers paid fees to join the scheme. Resellers were then subsequently instructed to recruit additional resellers and thus create a "downline" from which they could derive commissions. The Texas Attorney General had earlier gained a restraining order against the multi-level marketing company.
Attorney General Abbott called BioPerformance a "a cynical, brazen scheme to defraud consumers," and referred to the MLM product as the tools of an elaborate pyramid scheme." See http://www.oag.state.tx.us/oagnews/release.php?id=1906
According to the settlement, Mims and Romero will provide more than $7 million in compensation to deceived consumers. However, Mims and Romero may continue to operate under restrictions of the settlement.
The Texas AG had publicly charged that BioPerformance was illegal because it had few retail customers. The official complaint by the Attorney General stated, "much of Bio Performance's "sales" are actually consumers trying to improve their status in the company by getting product automatically shipped to them instead of making retail sales to non-participant customers."
The Attorney General claimed that the defendants' downline marketing scheme constituted a product-based pyramid scheme.
However, the Texas anti-pyramid law was written by the multi-level marketing industry and is cited in the Direct Selling Association as the standard for DSA member ethics. The hallmark of the law is that it specifically does not require retail selling. Texas is, in fact, becoming a nexus and haven for MLM schemes due to its MLM-friendly statute.
The court settlement dodged the basic question of why BioPerformance would be considered a pyramid scheme, based on lack of retail sales, when many other Texas-based MLM schemes operate similarly and are not prosecuted.
The future of the MLM BioPerformance is uncertain. In a January press release, the company stated: We are extremely pleased to be putting behind us the action by the State of Texas. We also are very pleased with the test results obtained so far. Distributors may expect to resume marketing the product soon
In its agreement with the State of Texas, BioPerformance specifically denied any wrong-doing.