Energy Co. Runs Pyramid Scheme, Class Says

HOUSTON (CN) - Stream Gas & Electric used an illegal pyramid scheme to generate more than $800 million in revenue in 2008, a racketeering class action claims in Federal Court.

Stream Energy allegedly recruited investors through DVDs distributed by its marketing division, Ignite Holdings, and tent-revival style sales meetings called Power Surges, where representative would hand out oversized, replica checks to successful members.

New recruits pay $329 for the Ignite Services Program, and $29 per month for the Ignite Homesite, according to the complaint.

To move up in Stream's pyramid scheme, investors must enroll energy customers and recruit others to join the program, the suit claims. Members allegedly receive commission based on how many people are working under them.

"As expected in any pyramid scheme, those at the top make more and more money," the class claims. From July 2007 to June 2008 the highest paid Stream executive director received $2.1 million, while the average investor received only $174, the suit states.

The class is represented by Scott Clearman of Houston.

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