|The following is the text of the Final Judgment and Permanent Injunction against
AuQuest, Inc. For comments from Jeffrey Babener you can return to The
DANIEL E. LUNGREN, Attorney General
of the State of California
HERSCHEL T. ELKINS
Senior Assistant Attorney General
ALBERT N. SHELDEN, #46277
Supervising Deputy Attorney General
110 West A Street, Suite 1100
San Diego, California 92101
Telephone: (619) 645-2089
DEAN D. FLIPPO
MONTEREY COUNTY DISTRICT ATTORNEY
LYDIA VILLARREAL, #097698
DEPUTY DISTRICT ATTORNEY
240 Church Street, Room 101
P.O. Box 1369
Salinas, California 93901
Telephone: (408) 755-5070
FAX No. (408) 755-5068
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF MONTEREY
|PEOPLE OF THE STATE OF CALIFORNIA,
AuQUEST INTERNATIONAL, INC.,
AuQUEST, INC., dba AuQUEST
INTERNATIONAL TRUST; AuQUEST
INTERNATIONAL TRUST, LTD.,
DOES 1-50 and 53-100, Inclusive,
|CASE NO.: 107123
- Plaintiff PEOPLE OF THE STATE OF CALIFORNIA, having filed its Complaint and First
Amended Complaint herein; and Defendants AuQUEST, INC., AuQUEST INTERNATIONAL, INC.,
AuQUEST INTERNATIONAL TRUST, AuQUEST INTERNATIONAL TRUST, LTD. (all defendants hereinafter
referred to as "AuQUEST"), having acknowledged service of the Complaint and
First Amended Complaint; and Plaintiff appearing through its attorneys, Dean D. Flippo,
District Attorney of Monterey County, by Lydia Villarreal, Deputy District Attorney; and
by Daniel E.Lundgren, Attorney General of the State of California, by Albert N. Shelden,
Supervising Deputy Attorney General; and AuQUEST appearing through their attorneys,
Cominos & Biegel, by Lawrence E. Biegel, and Haight, Brown and Bonesteel, by Bruce A.
Armstrong, and Richard Rosen and David Einstein, and pursuant to written stipulation for
entry of this Final Judgment without the taking of evidence, and without trial or
adjudication of any facts herein, and without this Final Judgment constituting any
evidence or admission by said Defendants regarding any issue of fact alleged in said
Complaint or Amended Complaint, Defendants having denied each and every allegation in said
- IT IS HEREBY ORDERED, ADJUDGED AND DECREED that:
- This Court has jurisdiction of the subject matter hereof and the parties hereto.
- The provisions of this judgment are applicable to AuQUEST and any successor
corporations, to AuQUESTs' officers, directors, managers, agents, servants,
representatives, employees, independent contractors, franchisees and to all other persons,
corporations and other entities acting under, by, through or on behalf of AuQUEST and to
their current officers and directors should they engage in any other multi-level network
marketing business in which they have any ownership interest, and to all other persons
acting in concert, or participating with AuQUEST or any of them with actual or
constructive notice of this Final Judgment. Provided, however, paragraphs 5 and 15 are not
applicable to any successor corporations or entities; paragraph 14 is applicable, except
that access shall only be authorized by the Court upon notice to the defendants or as
otherwise authorized by law. Defendants shall give the Attorney General and Monterey
County District Attorney notice of the formation of any successor corporation, subsidiary
or business entity for which they have any ownership interest doing business in
- The following definitions shall apply to this judgment:
- The term "Marketing Program" shall mean any system by which AuQUEST's products
- The term "California Independent Distributor" shall mean any Person or other
entity who is a resident of the State of California, regardless of how designated, who
pays any money to AuQUEST, and has the right to sell AuQUEST's products or who earns a
Commission on the sale of any of AuQUEST's products to an Ultimate Consumer.
- The term "Person" shall include any individual, partnership, firm, association
- The term "Commission" shall include bonuses, overrides, dividends, or any
other financial benefit payable by AuQUEST to, or receivable by, any California
Independent Distributor in AuQUEST's Marketing Program. Nothing herein prevents AuQUEST
from providing its products to distributors at different prices depending on the quantity
- The term "Recruiting" shall mean introducing, enticing, soliciting or
otherwise encouraging any Person, whether directly or indirectly, to enter into AuQUEST's
- The term "Recruitment Meeting" shall mean Opportunity meetings, direct and
general meetings, social meetings, or any other meeting to which California Independent
Distributors are invited or at which non-distributors are present.
- The term "Inventory" refers to wholesale dollar price of product purchased
- The term "Ultimate Consumer" shall mean Persons who are not a part of the
AuQUEST Marketing Plan.
- The term "Prospect" shall mean a Person to whom the AuQUEST Marketing Program
is shown, and who submits a signed application to AuQUEST with the required application
- Pursuant to Business and Professions Code Sections 17203 and 17535 AuQUEST is hereby
permanently restrained and enjoined from directly or indirectly:
- Operating or participating in a Marketing Program which offers to any distributor in
said Marketing Program an opportunity to obtain any Commission unless such Commission is
based upon sales to Ultimate Consumers who are not purchasing AuQUEST's products to become
California Independent Distributors of, or to advance in, AuQUEST's Marketing Program, or
for the privilege of Recruiting other California Independent Distributors or for engaging
in any other acts in violation of California Penal Code, Section 327.
- Operating or participating in the AuQUEST Marketing Program whereby any California
Independent Distributor or prospective California Independent Distributor in said
Marketing Program is required to purchase any quantity of Inventory in order to earn any
Commission for Recruiting any other Person into the AuQUEST Marketing Program.
- Paying commissions on sales unless defendants have received proof that such sales were
made to Ultimate Consumers. Provided, however, that based upon all of the other
requirements of this Final Judgment, purchases by a distributor, for which the distributor
pays no more than $65.00 per month, can be counted as a commissionable sale to a
distributor's upline distributor, if such purchase is made because the purchasing
distributor personally uses such purchased product in the amount of the purchase desired
to be counted as a commissionable sale during the commission period, and if such
distributor makes a minimum of four (4) other verified retail sales during the same
- Requiring any California Independent Distributor or prospective California Independent
Distributor to purchase an initial or subsequent Inventory in any amount. Provided,
however, this subparagraph does not preclude the use of a sales quota.
- Allowing a California Independent Distributor to establish or maintain an Inventory of
more than $1,600.00 at one time. Each time a California Independent Distributor reorders
commissionable products, AuQUEST must verify the amount of the California Independent
Distributor's current Inventory. This verification form shall be provided by AuQUEST and
shall be signed by the California Independent Distributor.
- Accepting or receiving any payment of money from California Independent Distributors or
any Prospect, unless AuQUEST has stated in its written materials that each sponsor is
required to deliver a copy of this judgment, or a written summary of this judgment, the
form of which has been approved by the Monterey County District Attorney and/or the
Attorney General, to their immediate Prospects and AuQUEST has provided such documents to
all AuQUEST California Independent Distributors who recruit new prospects. The Court
reserves jurisdiction over this subparagraph.
- Operating a binary marketing system without providing Prospects with a written
explanation of the Marketing Program which is in sufficient detail to inform them of the
steps which must be taken in order to become eligible to receive Commissions under the
- Beginning ninety (90) days subsequent to the entry of this Final Judgment representing,
by example or by mathematical computation, that California Independent Distributors in the
AuQUEST Marketing Program may earn or receive, a specified amount, or a range of amounts,
of money, income, commissions or other compensation, unless AuQUEST, at the time said
representation is made, discloses the total number of California Independent Distributors
who have been in the marketing program and are currently in the Marketing Program broken
down by the ranks achieved under the Marketing Program, giving the number of California
Independent Distributors at each of the Distribution ranks, and the median amount of
income earned by said California Independent Distributors during the current calendar
year, updated in January and July of each year. All representations made during or after
the ninety (90) day period must be in conformance with Business and Professions Code
Section 17500. Provided, however, that any representation made within ninety (90) days
from the entry of this Final Judgment shall be submitted to the Monterey County District
Attorney and Attorney General in advance.
- Representing that any California Independent Distributor or potential distributor can
reasonable expect to recruit or retain distributors to work as California Independent
Distributors for the purpose of selling AuQUEST's products to the Ultimate Consumers,
unless AuQUEST has a basis in fact for these representations. In such case, AuQUEST must
maintain the following information:
- The average number of such California Independent Distributor an average distributor in
defendant's marketing program had in the previous year,
- The average length of time said California Independent Distributor were in the
distributor's downline, and
- The average retail value of the products said California Independent Distributor sold to
This information must be updated every six (6) months.
- Making any statement regarding the value of any product sold or distributed by AuQUEST,
which is untrue or misleading and which is known to be untrue or misleading, or which in
the exercise of reasonable care should be known to be untrue or misleading in violation of
Business and Professions Code Section 17500.
- Representing that any Marketing Program operated by AuQUEST has been approved by any law
enforcement organization, including the Attorney General or the State of California or the
Monterey County District Attorney.
- AuQUEST is ordered to make refunds, less of Commissions paid, for unused or unsold
product returned in original condition, to any Person who became a California Independent
Distributor in the AuQUEST Marketing Program prior to entry of this judgment and who
requests said refund in the manner specified below:
- AuQUEST shall be primarily liable for making the refunds. If the assets of AuQUEST are
insufficient for effectuating full restitution as required by this paragraph, the current
AuQUEST officers shall be secondarily, jointly, and severally liable to pay any such
- AuQUEST shall notify each California Independent Distributor of said distributor's right
to obtain a refund from AuQUEST and of the AuQUEST procedure for obtaining said refund.
The form of said notice and the procedure for obtaining a refund shall be approved by
Plaintiff prior to mailing. Additionally AuQUEST shall deliver a copy of this judgment or
a written summary of this judgment, the form of which has been approved by Plaintiff, to
all active California Independent Distributors. Notice shall be provided within forty-five
(45) days of entry of judgment. All requests for refunds under this provision shall be
made within forty five (45) days thereafter. AuQUEST shall effectuate all refunds within
ninety (90) days of receipt of the request. The Court will resolve any dispute if the
parties can not agree upon whether a particular California Independent Distributor is
entitled to a refund or the amount of such refund. Evidence shall be presented to the
Court by declaration.
- Upline charge back of Commissions on such returned product may be made by AuQUEST.
- Product shall be returned by first class mail, insured. The costs of return shall be
added to the refund.
- This refund policy does not apply to California Independent Distributors who either have
received refunds in the past or who were terminated for cause.
- Two hundred and fifty (250) days after entry of judgment, AuQUEST will submit a full
report to the Court and Plaintiff listing the names of each person receiving a refund and
the amount of such refund.
- Subject to the provisions of Paragraph 4 [c] above, in order for a California
Independent Distributor to receive Commissions for sales to Ultimate Consumers, AuQUEST
shall require each such distributor seeking a commission check to report his or her name,
the name and telephone number of each purchaser of product at retail, a description of the
products sold, the quantity of each item sold, and the date of the sale on forms provided
- AuQUEST shall audio or video tape (with audio) all public meetings at which AuQUEST's
marketing program, products, recruitment techniques, motivational techniques, sales
techniques or awards or bonuses are discussed, when such meetings are given by AuQUEST
officers and held in the State of California with twenty five (25) or more Persons in
attendance, and shall keep such tapes for a period of two years. AuQUEST shall keep copies
of all literature, scripts and other material which have been produced by AuQUEST and
provided to California Independent Distributors or Prospects for one year after
dissemination. AuQUEST shall, upon demand, send the above items to the consumer Law
Section of the Attorney General and Monterey County District Attorney within five (5) days
of receipt of such a request.
- AuQUEST shall keep in such forms, books and records from which can be determined, on a
quarterly basis, the following information:
- The total number of verified retail sales made to Ultimate Consumers by California
Independent Distributors in the AuQUEST Marketing Program as reported to AuQUEST.
- The total number of products purchased by California Independent Distributors.
- The number of California Independent Distributors.
- The names and addresses of all California Independent Distributors who earned
Commissions and the amounts thereof. The amounts of each earned.
Within thirty (30) days of entry of judgment, AuQUEST shall provide the address, phone
number and name of the contact person at the location where the records will be kept.
AuQUEST shall notify the Attorney General and the Monterey County District Attorney within
ten days of any change in the address, phone number or name of the contact person.
- AuQUEST shall conduct random audits in a reasonable manner to assure compliance with
this Final Judgment. Results of these audits shall be made available to the District
Attorney and/or Attorney General upon reasonable request.
- Prospects shall be informed in writing that they are entitled to a 100% refund of
unused, unsold Inventory, returned in original condition within ten (10) days of the date
of receipt of the product, after their application is accepted by AuQUEST, and thereafter
that the company will repurchase from its distributors, within twelve (12) months of the
distributor's date of purchase, subject to proof of purchase, at not less than 90% of the
distributor's original cost, unused and unsold inventory in its original condition, which
is neither after the products' commercially reasonable usable or shelf life period has
passed, nor inventory for which the company clearly disclosed to the distributor, prior to
purchase, that the products were seasonal, discontinued, or special promotion products not
subject to repurchase. A California Independent Distributor who has falsely represented an
item(s) has been sold or consumed is not entitled to a refund for that item(s). AuQUEST
must disclose to distributors before purchase, in a prominent manner, its requirements
that proof of purchase is necessary in order to obtain a refund.
- AuQUEST shall maintain an escrow trust account for the repurchase of product from
California Independent Distributors who wish to leave the company. The fund will be
established by the monthly deposit of 2-1/2 percent of the purchase amount of all
California Independent Distributors made in the preceding month. This deposit will be made
no later than the tenth (10th) day of the month. AuQUEST will provide reports of the
account on reasonable request of the Plaintiff. When said fund reaches $100,000.00,
AuQUEST is no longer obligated to continue to make monthly contributions thereto. The
Court reserves jurisdiction over this fund.
- AuQUEST will notify and demand immediate correction of, and, upon failure to correct,
shall terminate any officer, director, manager, agent, distributor, servant,
representative, employee, independent contractor, or franchisee who may violate any
provisions of this judgment. Any person so discharged shall not be permitted to
participate in AuQUEST Marketing Program or be entitled to receive any financial benefits
- AuQUEST shall disclose in writing, at Recruitment Meetings to each Prospect all licenses
or permits, if any, and their approximate cost about which AuQUEST knows or should know
California Independent Distributors may be required to obtain.
- For purposes of determining and securing compliance with this judgment, duly authorized
representatives of the Attorney General of the State of California and the Monterey County
District Attorney shall, upon reasonable written notice to AuQUEST at the address provided
in Paragraph 8.d., be permitted access during the office hours of AuQUEST to all books,
ledgers, accounts, sales forms (pursuant to Paragraph 6), correspondence, memoranda, and
other records and documents in the possession or under the control of AuQUEST which relate
to any matters contained in this judgment.
- Pursuant to Business and Professions Code Section 17206 and 17536 Plaintiff shall have
judgment against AuQUEST in the sum of Four Hundred Twenty Eight Thousand ($428,000.00)
Dollars, as civil penalties, payable as follows:
- Three Hundred Twenty Eight Thousand ($328,000.00) Dollars immediately upon entry of this
judgment; said amount being the funds currently held under order of the Court in
Independence Bank, Harris County, Texas;
- Fifty Thousand ($50,000.00) Dollars payable one year after entry of this judgment; and
- Fifty Thousand ($50,000.00) Dollars payable tow years after entry of this judgment.
Provided, however, AuQUEST shall have a credit, up to Fifty Thousand ($50,000.00)
Dollars against the first installment set forth in subparagraph "b" above for
any amounts actually paid for refunds pursuant to paragraph 5 herein and/or for California
Sales Tax paid for product purchased prior to the date of the entry of this judgment.
- The penalties awarded herein are based upon the declarations by Terry Isaacson and Todd
Isaacson signed under penalty of perjury which are attached hereto and incorporated by
reference. If the representations in these declarations are found to materially false,
Plaintiff can re-open this case and seek additional relief and/or penalties.
- Jurisdiction is retained for the purpose of enabling any party to this judgment to apply
to the Court at any time for such further orders or directions as may be necessary or
appropriate for the carrying out of this judgment, for the resolution of any dispute or
for the modification or termination of any of the injunctive provisions herein, for the
enforcement of compliance therewith, and the punishment of violation thereof.
- This Final Judgment and Consent Decree shall take effect immediately upon entry thereof.
JUDGE OF THE SUPERIOR COURT