Tim Darnell's depo continued:
22 Q. Okay. What was the next company that you did
23 something for on a part-time basis between '82 and '91?
24 A. In '86 was United Sciences -- I think it was
25 '86 -- United Sciences out of Carrollton.
1 Q. Was it a network marketing company?
2 A. Yes, and it was nutritional also.
3 Q. Is it still in business?
4 A. No.
5 Q. How long did you stay in that business?
6 A. About ten months.
7 Q. Are you moving around because despite your best
8 effort you weren't able to generate enough income to
9 warrant the time?
10 A. No, actually United Sciences, my last month was
11 about $7,000 and they went out of business.
12 Q. Are you aware of any investigative -- was
13 United Sciences -- was it put out of business by any
14 government agency?
15 A. Not that I know of. I know -- it was pretty
16 interesting drama going on in the boardroom of that
17 company. And the guy had another business; Robert Adler
18 was his name. He had another business, and he just felt
19 like it was too much a hassle, I think, to operate that
20 business and closed it down.
21 Q. Okay. Has anyone ever accused United Scientist
22 (sic) of being an illegal pyramid scheme?
23 A. I don't know.
24 Q. Have you ever heard of anyone?
25 A. Not that I know of. 25
1 Q. Okay. And did you prepare any type of
2 compensation plan for that company?
3 A. I did, yes.
4 Q. And explain what it is you prepared.
5 A. Just the numbers, the model, the business model
6 of how the pay out would be handled.
7 Q. And what do you recall about that?
8 A. It was a good plan. It was well constructed
9 and --
10 Q. Describe it for me.
11 A. It was about a five-level plan that paid on
12 organizational volume, and I felt like it was fair to
13 the representatives. And it protected the company as
14 far as revenues to the company as well.
15 Q. Is that the company that sold a fiber energy
17 A. Probably.
18 Q. Was it claimed that by eating the bar one could
19 protect oneself against AIDS, cancer, heart disease,
21 A. No. There might have been a rep that did that,
22 but that would have been against company rules.
23 Q. Okay. Did you ever eat one?
24 A. I probably -- I'm sure I did, yeah. I have no
1 Q. There you go. It's proof.
2 A. That's it.
3 Q. Okay. So that's United Scientist --
4 A. Sciences.
5 Q. Sciences, excuse me -- for ten months. And
6 what next in terms of part-time income while you were
7 making your living as an entertainer?
Houston Press says:http://www.houstonpress.com/2006-12-14/news/millionaire-mindsetters/3
After graduating Texas Tech, Darnell toured with his gospel group, Dreamer. He was drawn into the business world of multilevel marketing. He cut his teeth at companies like Amway, and, he says, "I became fairly adept at compensation plans and actually wrote the compensation plan for a company called United Sciences of America in 1986. And that was a big program here in the Dallas area."
Carrollton-based United Sciences sold a nutritional plan that included something called the Fiber Energy Bar. By eating said bar and others in the United Sciences family, the company claimed, one could protect oneself against AIDS, cancer, heart disease, diabetes, arthritis, PMS, acne and dandruff. This was one motherfucking candy bar.
The company relied on reps to sell the product, promising big rewards if they signed on with the United Sciences team. It hired William Shatner to narrate a promotional video. It paid New York Mets pitcher Gary Carter $50,000 to say in the tape, "Join me and hit a financial grand slam."
In January 1987 the Texas Attorney General's office sued United Sciences for allegedly running an illegal pyramid scheme. Attorneys general in New York and California filed similar suits. At the time United Sciences filed for bankruptcy, it claimed to have 140,000 reps. (In October 1987 a permanent injunction against United was issued in a Dallas district court. Under the terms of the agreed settlement, United did not admit any wrongdoing or liability.)
On December 12, 1986, the FDA sent a strongly worded regulatory letter ordering USA to stop suggesting that any of its products are effective in the cure, mitigation, treatment, or prevention of disease. The agency said that claims of this type in its videotapes made the products "new drugs" that are illegal to sell in interstate commerce because they lack FDA approval. In addition, all of the product labels were defective in other ways.
On January 21, 1987, USA petitioned in federal court for Chapter 11 bankruptcy, listing total assets of $7,300,000 and liabilities of $8,600,000. (The purpose of this type of bankruptcy is to stave off creditors to give the company time to restructure its indebtedness with the hope of remaining in business.) The petition named Robert Adler as sole shareholder and director of USA, Inc., and Jerris Leonard's law firm as its eighth largest unsecured creditor, with $121,379.69 owed. No official sales figures were released, but press reports suggested that USA's 1986 gross income totaled $60 million.
On January 28, the Attorneys General of Texas, New York and California filed suit in their respective states, charging that USA, Inc., had made improper claims for their products and that their sales plan constituted an illegal pyramid scheme. In addition, the Texas suit charged that USA had not properly registered as a manufacturer, and the New York suit demanded that Chris Evert-Lloyd, Joe Montana, Steve Garvey, Gary Carter and Bill Rodgers appear in court to explain their financial relationship with the company. The New York Attorney General's office indicated that many USA distributors were not paid commissions owed them by the company. The California suit, filed by Supervising Deputy Attorney General Albert N. Sheldon, who had successfully prosecuted Herbalife, demanded civil penalties of at least $1,000,000 plus the cost of prosecution.
On February 5, the District Court of Dallas County, Texas, issued a temporary injunction based on an agreement between USA and the Texas Attorney General. Its terms barred the company from:
Marketing any current products without sending a "correction letter" acceptable to the Attorney General to all distributors.
Shipping any products unless accompanied by an acceptable disclosure statement that they are not for the prevention or treatment of disease.
Representing that USA's products have any effect in: infectious and parasitic disease; tumors; endocrine, nutritional and metabolic diseases and immunity disorders (including AIDS); diseases of the blood; mental disorders; diseases of the nervous, circulatory, respiratory, digestive, genitourinary or musculoskeletal systems; complications of pregnancy or childbirth; birth defects; injury or poisoning; or ill-defined conditions.
Manufacturing any food products without being registered as a manufacturer by the Texas Commissioner of Health.
Selling products through a multilevel distributorship.
FraudIn October 1986, USAI was the subject of an expose produced by the NBC network, which revealed the company’s use of fraudulent scientific claims and deceptive advertising. In November, the company failed to mail some of its commissions, and by December, the company's checks to distributors were bouncing.
The FDA subsequently investigated USAI for pyramid-scheming, the use of false and misleading promotional materials, and for making prohibited disease treatment claims. On January 28, 1987 Attorneys General in California, New York and Texas simultaneously filed lawsuits ordering USAI to change its marketing plan and sales claims. Several of the board's advisory members immediately resigned, including Leaf and DeBakey. A few others said that they were "misquoted or improperly used in USA's sales materials." Leaf told Money magazine, "They used my name with false statements to advertise the products." In February 1987, company executives told the FDA that they were going to make labeling changes and bring everything into compliance, but in April USAI filed for Chapter 7 bankruptcy liquidation and ceased operation. USAI’s deceptive sales and marketing tactics were reviewed in several articles published in 1986-1987.