Equinox founder liquidating some assets

David Strow

Tuesday, Feb. 15, 2000 | 11:15 a.m.

Equinox International Corp., the Las Vegas network marketing company currently fighting for its life in a federal courtroom, is losing millions of dollars a month as it prepares to go to trial -- losses its founder is covering by liquidating about $10 million in personal assets.

A report filed by Robb Evans, court-appointed receiver of Equinox, reported to federal Judge Johnnie Rawlinson that Equinox lost $3.4 million in October and November 1999. Though some of that loss was caused by accounting changes, Evans reported that Equinox officials expect sales to remain depressed until its legal battles are resolved.

The company sells beauty and health products, as well as a line of water filtration products, through a network of independent distributors. Prior to the initiation of legal action, the company had 40,000 distributors.

The Federal Trade Commission, together with eight states, sued Equinox in federal court, accusing it of operating an illegal pyramid scheme. The plaintiffs are seeking to recover damages on behalf of former Equinox representatives and are looking to shut down the company. A trial is scheduled to begin in April.

Equinox has denied these charges -- and says negative publicity generated by the government is reducing its sales. In a filing late last year, Equinox said sales fell 78 percent in September and blamed an "aggressive publicity policy by the FTC."

From May to June, Equinox recorded net revenues of $6 million, Evans' report said.

Evans was appointed receiver of the company in order to preserve company assets pending trial.

Company officials expressed optimism, saying sales in both Mexico and Taiwan were increasing, Evans reported. A good portion of pending revenues were expected from the sale of water filtration devices to school districts in Mexico, Evans' report said, though it did not elaborate on the extent of those sales. Nor did Evans say if he expects losses to continue.

Equinox has slashed expenses under Evans' direction. The receiver's report indicated the company had 134 employees as of Nov. 30, down from 167. In addition, the company has suspended payment of management fees to Equinox founder William Gouldd, and Gouldd has assumed payment of his business expenses, which were averaging $70,000 a month at the time of Evans' report.

But some expenses cannot be cut -- the company's legal fees, Evans said, have reached an average of $200,000 per month. In the weeks before and during the trial, Evans expects these costs to "double or triple."

Another significant expense -- and one that led to some dispute between Evans and the company -- is the Equinox corporate jet. Evans' report indicated that Gouldd is still using the Falcon 20 corporate jet to attend Equinox sales seminars across the county, despite monthly expenses of $100,000 a month.

When Evans challenged this expense, Equinox officials replied that Gouldd had to attend the sessions personally to prevent violations of Rawlinson's orders. Rawlinson ordered the company to stop making income claims to prospective recruits, though evidence filed by government officials indicates that some violations of this order have occurred.

Moreover, Gouldd's presence at the seminars was necessary to "reduce resignations or defections to other companies," the company argued to Evans. Company officials acknowledged that commercial air travel would be far cheaper, but said they could not guarantee Gouldd would be able to make flight connections without a personal jet.

Evans' report indicates that Gouldd is personally bearing much of the cost of keeping Equinox going until its trial.

So far, Gouldd has loaned Equinox $2.5 million obtained through the sale of securities and intends to raise an additional $7.5 million to loan to the company, Evans reported.

Gouldd plans to sell an additional $2.7 million in securities and has already sold one of his Las Vegas homes for $1.75 million, netting $800,000.

Gouldd has also placed his home in Lake Las Vegas on the market and hopes to net $4.35 million from its sale, Evans said.