Stream Energy has been hit with a lawsuit alleging that the company is a pyramid scheme. The suit was filed by the bow tie-wearing Scott M. Clearman, out of Houston. You can read the press release after the jump. I wrote the first story about Stream, back in 2006, and I’m a friend of its founder, Rob Snyder. So you can’t trust my take on the suit. But here is Snyder’s:
The fact that the Texas Attorney General’s office has previously confirmed the legitimacy of Stream Energy’s network marketing effort speaks volumes to the veracity of Mr. Clearman’s assertions. Moreover, the further reality that Stream Energy serves as a Provider of Last Resort as requested by the Public Utilities Commission of Texas also attests as to Stream Energy’s standing and repute within the state’s deregulated retail electricity market.
Simply put, the direct selling models used by firms such as Mary Kay and Stream Energy have been repeatedly found to be unquestionably legal. And, unfortunately, it seems these days that any clown with a bow tie can file a lawsuit on behalf of a purported class of injured parties.
We look forward to seeing Mr. Clearman in court.
Here’s the full release from Clearman:
The Clearman Law Firm Announces Federal Lawsuit Against Stream Energy, Executives, Alleging Unlawful Pyramid Scheme
HOUSTON — Attorneys from Houston’s The Clearman Law Firm are announcing a federal class action lawsuit filed yesterday under the Racketeer Influenced Corrupt Organizations Act against Dallas-based Stream Gas & Electric, Ltd., Ignite Holdings, Ltd., their related companies and several affiliated individuals.
A retail electricity and gas provider in Texas and Georgia, Stream has grown in only three years to become the 29th largest private company in the Dallas/Fort Worth area based on revenues of more than $800 million in 2008. Stream’s marketing division, Ignite, has fueled Stream’s growth through what the company calls a “multilevel marketing program.”
The 89-page federal complaint alleges that Stream and Ignite’s multilevel marketing program is actually an unlawful pyramid scheme. Pyramid schemes are inherently doomed programs in which investors recruit people to pay money to those above them in a first-come-first-served hierarchy with the expectation that they will get payments from other investors who enter the program later. When the number of newly recruited investors eventually dwindles, the payment structure collapses.
Specifically, the lawsuit filed in the U.S. District Court for the Southern District of Texas in Houston alleges that Stream and Ignite induced the plaintiffs and others to invest in the “Ignite Services Program” at a cost of $329 and purchase an “Ignite Homesite” web page for a charge of $29 per month. The lawsuit claims that a large portion of the $329 is paid to those higher in the pyramid.
“Some of the individuals at the top of the Stream and Ignite pyramid earn millions of dollar a year, while most of those that are now joining the scheme will likely never recover their investment,” says Scott Clearman of The Clearman Law Firm, lead counsel for the plaintiffs. “Stream promises recruits that they can make vast sums of money, but the fact is that most will lose their money.”
In addition to Stream and Ignite, individual defendants named in the complaint include Ignite founders Chris Domhoff, Rob Snyder and Pierre Koshakj [sic], as well as several Stream employees. Additional defendants include Donny Anderson, Steve Fisher, Randy Hedge, Logan Stout and Presley Swagerty, all of whom are near the top of the alleged pyramid.
In addition to Mr. Clearman, the plaintiffs are represented by Brian D. Walsh of The Clearman Law Firm.
A copy of the lawsuit and more information about The Clearman Law Firm is available at http://www.clearmanlaw.com.