January 24, 2007
The state of Texas has stopped a Dallas-based pyramid scheme from illegally marketing the so-called "top secret gas pill" that it falsely claimed would increase fuel efficiency in automobiles.
The settlement with BioPerformance and its owners, Lowell Mims and Gustavo Romero, prevents the defendants from continuing to deceptively market their products and ends the State's eight-month legal action against the company.
A combination of the defendants' frozen assets and the dissolution of two trusts created by Mims and Romero will provide more than $7 million in compensation to deceived consumers. Mims and Romero may continue to operate any legitimate enterprise, but may not deceptively market BioPerformance pills or similar fuel additive products.
"Swift legal action stopped this cynical, brazen scheme to defraud consumers," said Attorney General Abbott. "With gasoline prices hitting record highs, these defendants aggressively marketed their worthless product as a wonder-cure. Sadly, these do-nothing pills were merely the tools of an elaborate pyramid scheme that enriched the sellers while buyers were left with empty hands and empty wallets."
Last May, Abbott filed a lawsuit against BioPerformance that accused the company of violating the Texas Deceptive Trade Practices Act. According to court filings, BioPerformance repeatedly and falsely claimed that its fuel pills could improve vehicular fuel efficiency by as much as 30 percent while also reducing engine emissions by 50 percent. BioPerformance also sold its fuel additive in powder form.
The suit further contended that the worthless product, combined with the defendants' downline marketing scheme, constitutes a product-based pyramid scheme, which violates the Texas Pyramid Promotional Scheme statute. By the defendants' own admission, they recruited 50,000 participants within six months of their scheme's inception.
Appearing before standing-room-only crowds at seminars they organized across the country, Mims and Romero touted their products' capacity to significantly increase fuel efficiency and reduce vehicle emissions.
The true purpose of the seminars was to recruit product resellers who were charged several hundred dollars to join the scheme. Those newly minted resellers were subsequently instructed to recruit additional resellers and thus create a "downline" from which they could derive commissions.
BioPerformance's extensive Web site made similar unsubstantiated claims about product's capabilities, often referring to it as a "top secret formula" that was only available through company resellers. The site also reiterated defendants' sales pitches, promising potential resellers that selling the pills and recruiting others to do the same would reap them substantial fortunes.
To aid its investigation, the Office of the Attorney General retained respected scientific experts whose chemical analysis not only revealed that the defendants' pills did not significantly reduce fuel consumption, but also exposed naphthalene, a substance also used in moth balls, as their main ingredient.
Although the defendants claimed that the pills were "non-toxic," "good for the environment," and "extremely safe ... in all aspects of use," naphthalene is a toxin.
The state also determined that BioPerformance resellers credited with recruiting additional downline sellers were paid substantially higher commissions than were those who actually sold the company's products. Such a marketing and recruitment scheme is often indicative of a pyramid scheme.
Further evidence of a pyramid scheme was provided by Romero, the company's Vice President and Co-Founder, who admitted to selling BioPerformance for as much as $50 a bottle, despite its comparatively low $4 manufacturing cost.
The defendants' dramatic markup on their worthless product, coupled with their downline marketing strategy, indicate they were organizing an elaborate, illegal, and unsustainable pyramid scheme.
