SAN DIEGO (CN) - A "new and revolutionary" video conferencing company pushed itself as the next "Apple, Facebook, Twitter, or Microsoft," and "the biggest invention in the history of the Internet," but it was just a pyramid scheme, an investor says in a RICO class action.
Lead plaintiff Dennis Gray sued Talk Fusion, Talk Fusion International, Mane World Productions and Talk Fusion founder Robert Reina on Nov. 26, in a 110-page complaint in Federal Court.
Reina, of Florida, "founded several multi-level marketing companies, including Cash Card and Travel City," which used "a similar business model to Talk Fusion's," according to the complaint. The model is to pay its recruits a commission for referring new recruits to the company.
Gray's attorney, Geoffrey Spreter, called Talk Fusion products and services "irrelevant."
"I believe it is clear from plaintiff's allegations in the complaint that the functions and features of Talk Fusion's products and services are irrelevant," Spreter told Courthouse News.
"Talk Fusion's business model relies on the recruitment of new associates to sustain itself, as opposed to actual sales of products and services to end consumers."
Spreter did not estimate the size of the proposed class, saying he has heard "varying amounts."
Gray says in the complaint that Talk Fusion offered so-called "revolutionary" and "patent-pending" video-conferencing technology, and told prospective recruits to "imagine being involved at the beginning of 'Apple, Facebook, Twitter, or Microsoft.'"
Talk Fusion promised to pay "people around the world" to market the cross-platform system, and said its recruits would have "exclusive rights" to the "new and revolutionary" technology, according to the complaint.
Reina pushed it as a chance "to get in at the beginning of a 'billion-dollar' company," the complaint states. But it was all "a pyramid scheme disguised as a multi-level marketing company," Gray says.
Recruits paid a $39 signup fee to participate in the "Talk Fusion Opportunity," were "required" to purchase product packages from $250 to $1,499, and paid monthly storage fees of $35 to $215, the lawsuit states.
The so-called "business opportunity" entitled associates to receive bonuses and commissions for recruiting new associates and selling Talk Fusion products and services, Gray claims, and prospective associates were promised a "lifetime residual income."
"Money coming in week after week, month after month, for years to come," the defendants pitched, according to the lawsuit. "True residual income that I like to call the sitting-on-the-beach money. Because it could be going into your cash-card account even when you're sun-bathing on the beach."
But Talk Fusion's products were available for free, or at much lower monthly rates, on the Internet through "commonplace" programs, including Skype, YouTube and Google, Gray claims. "Additionally, nationally recognized, long-standing brands such as Adobe, Webex, Centrix, and Cisco offer a product similar to Talk Fusion's - without the $250, $750, and $1,450 signup fees."
Reina, founder and chief executive of Talk Fusion, launched the company in 2007, and is an ex-police officer with "with over 20 years of experience in relationship marketing as a multiple seven-figure earner with multiple companies," the complaint says, citing a YouTube post.
Gray claims Talk Fusion retail sales were "not feasibly profitable" given the "extraordinarily high" signup fees. "With little-to-no name recognition, Talk Fusion's associates' jobs are made even more difficult in their attempt to earn meaningful sales commissions," the complaint states. "Many of the supposed competitors of Talk Fusion, in the area of business videoconferencing, have never even heard of the company."
Talk Fusion's attorney Lawrence Steinberg, with Buchalter Nemer of Los Angeles, told Courthouse News that the lawsuit is based on "inaccurate and outdated information" and was filed by a "former independent associate of the company."
"The lawsuit, which is currently being reviewed by counsel, is based on inaccurate and outdated information, and incorrectly describes the company's business model, which is a 'best practices' multilevel marketing company," Steinberg said in a statement.
He said Talk Fusion "adheres to the highest ethical business practices, has an A+ rating from the Better Business Bureau and is a member of the prestigious Direct Selling Association. The company denies the allegations of the lawsuit and intends to vigorously defend against them."
Gray seeks class certification, an injunction and damages and for RICO violations, unfair trade and false advertising.
Attorney Spreter's office is in San Diego.
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