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Jeff Olson – CEO Nerium International Accused Of Massive Fraud

MLM News February 20, 2017

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Jeff Olson – CEO Nerium International Accused Of Massive Fraud

 

Nerium SkinCare and Nerium Biotechnology, partners of Nerium International, accuse CEO Jeff Olson from multi-million dollar fraud and ask in a lawsuit, inspection of the books.

From the law suit:

Nerium (Skincare) has recently obtained concrete evidence of numerous inappropriate transactions—totaling millions of dollars—that were directed or overseen by Jeff Olson, the Company’s sole Manager.

This evidence leaves no room for doubt that Olson is guilty of financial impropriety; now the question is the scope and extent. Nor is there any room for dispute that the Company previously underpaid Nerium by millions of dollars in equity and bonus distributions.

After Nerium filed its application to compel records inspection and served discovery regarding the Company’s equity allocations, the Company was finally forced to admit that its prior equity allocations were wrong. Yet it refuses to provide Nerium the information needed to calculate what it is owed.

To compel an inspection, the Court need not find that financial impropriety occurred. Rather, Nerium has an absolute right to inspect the Company’s records to understand its finances. The Company’s sole defense is to establish that Nerium has an improper purpose. And to be entitled to a jury trial on that issue, the Company must marshal substantial evidence and show that there is a genuine dispute that Nerium’s purpose is improper.

Texas law presumes that Nerium has a proper purpose, and the Company cannot overcome this presumption—especially in light of the evidence of fraud and self-dealing. It cannot reasonably dispute that a purpose of this inspection is for Nerium to understand where all the money is going and how much it is owed, a core purpose for statutory inspections under Texas law.

The Company has not made an equity distribution to Nerium since February 2015. It has never made a bonus distribution. It is purchasing less and less NeriumAD as it shifts from selling that to selling Optimera. In short, it is trying to win by cutting off Nerium’s income—and diverting it to Olson—until Nerium is forced to close its doors. The need for an inspection has become increasingly urgent.

In 2015, the Company reported an amazing $498 million in revenue. Still more amazing, however, was that it reported a net loss of $2.6 million.

It remains a mystery how $500 million could vanish in a single year, but financial records recently obtained from third parties and Defendants are shedding light. Nerium is now aware of several different illegal financial schemes described below, but these appear only to scratch the surface.

1. FARC, LLC.

Olson has directed the Company to disburse over time more than $3.5 million in Company funds to an entity called FARC, LLC (hereinafter “FARC”). In the spring of 2015, Nerium’s CFO, Lori Jones, discovered a collection of these mysterious payments (in $15k and $150k increments) scattered and buried in a Company ledger of over 100,000 entries.

After this discovery, she and Joe Nester asked Jeff Branch (the Company’s Chief Financial Officer) to explain who FARC was and what services or goods it was providing to the Company. Mr. Branch stated that the expenditures were not something Nerium should concern itself with. He directed further inquiry to the Company’s General Counsel, Eric Haynes. When asked the same question, Mr. Haynes responded that FARC was engaged for “business development purposes,” and refused to explain more.

Only after a third-party subpoena was served upon FARC did the Company produce underlying documentation. It turns out that Olson bound the Company to a secret agreement with his long-time friend Steve Bright, to transfer enormous wealth from the Company to Bright, through FARC. FARC was created on August 26, 2011 for the apparent purpose of receiving these payments. That same day, Bright’s wife Vicki entered into the agreement whereby Olson purportedly

(1) transferred 3% ownership in the Company to FARC;

(2) agreed to pay FARC 5% of the revenues Olson received from the sale of promotional items or sales tools under the Company Agreement; and

(3) agreed to retroactively place a phony sales distributorship at the top of the Company’s sales pyramid, whereby FARC would be paid commissions as one of the top earning sales distributors without actually performing services as a sales distributor for the Company. In exchange for these lucrative promises of Company cash, FARC tendered just “ten dollars and other good and valuable consideration.”

Nerium did not know about this wealth transfer. On its face, this “agreement” has no business purpose and violates the Company Agreement’s prohibition against transfers of equity. Company Agreement §§ 13.01 and 13.06. But even that purported transfer does not explain the payments to FARC, which were not made as equity distributions. They were made on a monthly basis in round numbers and booked as “consulting” or “legal” payments—checks for $15,000 and $150,000. Bright would personally come to the Company offices and pick up the checks.

The payments were made with the knowledge and approval of Mr. Haynes and Mr. Branch. At one point, a bookkeeper requested backup in the form of a bill, but apparently there was none, and the bookkeeper was instructed to make the payments anyway. Not coincidently, once Nerium filed this lawsuit, Mr. Branch discontinued the $150,000 monthly payment “until further notice,” and paid only the $15,000 checks.

No effort has been made to legitimize these payments of Company money, nor has anyone explained why they chose to use an entity named “FARC” instead of the names of the people actually benefitting. Only through third-party discovery has it been revealed that FARC, LLC’s sole member is the FARC Special Trust.17 The Settlor and Trustee of the Trust is Vicki Bright, Steve Bright’s wife.18 Bright is Olson’s long-time personal attorney and friend.19 The beneficiaries of the Trust are the Bright’s two children.

The only plausible explanation for the creation of “FARC” was to hide payments to Bright. When inquiry was made regarding the payments, Company executives lied and continued to conceal the nature of the transaction. It remains unknown what other role Bright may have in this conspiracy and whether he (as Olson’s attorney) is helping him set up the system of legal entities and phony vendors into which he funnels money.

2. NEFX, Inc.

Mr. Branch, the Court will recall, was the Company’s CFO and the only person Mr. Olson allowed into the “silo” surrounding the Company’s internal financial data. It now appears that to ensure Mr. Branch’s loyalty, he received additional “compensation” of $10,000 per month, to be funneled through a corporation owned by Mr. Branch—NEFX, Inc. (hereinafter “NEFX”). Although already an employee of the Company for several years, on December 8, 2104, Jeff Branch executed an agreement between NEFX and the Company, which characterized NEFX as an “independent contractor” retained to advise the Company on “investment transactions,” in exchange for $10,000 per month from the Company. NEFX is nothing more than Branch, who already was the CFO of the Company – responsible for overseeing investment transactions.

The agreement, which was only recently disclosed following a subpoena served on NEFX, calls for NEFX to received $2,500 a week beginning December 8, 2014.  Records now demonstrate that Mr. Branch surreptitiously received in excess of $300,000 through NEFX.23 Based upon documents only recently obtained, it appears that on at least one occasion, on January 16, 2015, Mr. Branch submitted an invoice in order to receive an additional $75,000 “bonus”, which was promptly approved and paid, although it does not seem to have been recorded on any of the Company’s ledgers or financial statements.

Plaintiffs requested all documents from both the Company and NEFX which would demonstrate that actual services were provided to the Company from NEFX, and were told that none existed. Mr. Branch has admitted that the payments were simply additional “compensation” which he was to receive through NEFX. In September 2016, Mr. Branch left the employment of the Company. On his way out the door, the Company agreed to pay him $125,000 annually for “consulting” services and, perhaps more importantly, his silence.

3. Amber and Renee Olson

Amber Olson is Jeff Olson’s daughter. Renee Olson is Jeff Olson’s ex-wife. Each has been a salaried employee of the Company since 2012. Recently produced documents reveal that, besides paying their salaries, Jeff Olson created phony distributorship positions for them, placing them at the top of the pyramid of brand partners where they could receive monthly “commission” checks as leading distributors—without actually distributing anything. To hide these payments, phony distributor names were entered into the accounting system.

For Amber Olson, the distributorship was called “Gator Marketing.” For Renee Olson, the distributorship was called “Chill Development.” Secret payments to Gator Marketing exceeded $1 million and payments to Chill Development exceeded $700,000.

Other disguised payments were also made to directly to the Olson family. The Company booked a “real estate bridge loan” to the law firm of “Stone & Bruce” in the amount of $347,000. Nerium only later learned that this money really went to Renee.

To hide that transaction, it had been recorded on the ledger as an “investment – CD” with “Stone & Bruce- Real Estate Bridge Loan” in the memo line. To further mask it, the funds were wired to Stone & Bruce’s IOLTA account. Interestingly, Dan Bruce, of Stone & Bruce, is the registered agent for FARC, LLC and several other Olson entities. He also prepared the Company Agreement.

4. Stuart Johnson

On the surface, Stuart Johnson appears to be the owner of “Success Partners,” a vendor that purports to provide marketing aids. He also happens to be Olson’s long-time friend. The Company paid Success Partners in excess of thirty-five million dollars ($35,000,000) through the third quarter of 2015.

In addition, Olson has directed the Company to pay over $400,000 in rent on Johnson’s Hermosa Beach, California beach house, including a $25,000 charge that was approved by Olson personally and over the phone for “leasehold improvements to California office.”The Company has no “office” in California.

Other personal payments to Johnson appear scattered throughout the Company’s books. For example, ledger entries and bank statements reflect a $200,000 payment to Stuart Johnson on April 2, 2015, which (revealing their true purpose) was later re-booked as a “distribution” to “JO Products.”

In other words, in the minds of Olson and Branch (who keeps the books), payments to Stuart Johnson and payments to JO Products are one and the same. (Incidentally, this so-called “distribution” to JO was not accounted for as one. A corresponding distribution was not credited to JO Product’s equity account and there was not a pro-rata distribution to NSC).

Other money paid to Johnson is not accounted for. The Company reported in other documentation recently obtained that it disbursed $145,000 to Johnson in 2015.

Beyond the single $200,000 payment in 2015, there is no evidence that the Company paid any monies to Stuart Johnson, which raises the possibility that an additional $145,000 was paid to Stuart Johnson under yet another “alias” entity or distributorship.

Discovery has revealed that, in transferring this wealth to Johnson, Olson was lining his own pockets. At least $2,600,000 was secretly funneled directly back from Johnson (Success Partners/Video Plus) to Olson (or Olson-owned entities) between 2011 and 2015. In addition, Olson’s personal expenses—and debts from when he was with the “Poker Training Network”—were paid by Success Partners, who in turn billed Nerium International for them.In other words, Olson was using Johnson to  siphon funds out of the Company. The full extent of this scheme is unknown, which is why the Company’s books and records must be examined.

Additionally, the Company paid Johnson, or a related entity, at least $400,000 to acquire an entity known as “Live Happy.”The business purpose for this is unclear.

Full document can be found here

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