FTC Coming Down on Burnlounge?

Posted on 11. Jun, 2007 by Ty Tribble in Uncategorized

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MyrtleBeachOnline:

The pitches came in S.C. offices, restaurants, nightclubs, living rooms - and even the USC football complex.

How about opening your own online music store with BurnLounge?

USC receivers coach Steve Spurrier Jr. paid $500 to start his a year ago.

So did Charles Wilkie, an owner of Headliners music club in Columbia's Vista.

S.C. Attorney General Henry McMaster and his wife were asked to invest. They declined.

Former USC football standouts Rob DeBoer and Todd Ellis became two of the company's biggest promoters.

Columbia has generated more visits to BurnLounge's Web site than any other city worldwide, according to Google. Now the company that caught Columbia's eye is under scrutiny.

BurnLounge is accused of being an illegal investment scheme in a lawsuit filed by the Federal Trade Commission last week. The company declined comment Saturday.

DeBoer was named in the FTC lawsuit, along with BurnLounge, its CEO, Alex Arnold, and two Texas men, who, like DeBoer, promoted business opportunities, the FTC said. Ellis was not named in the suit.

The commission accuses BurnLounge of running a pyramid scheme because the company paid more money for recruiting new store owners than for selling music.

Operators earned bonuses up to $50 for recruiting two new operators and selling two albums a month, while paying 50 cents per album sold, the complaint said.

The lawsuit said promoters, including DeBoer, misrepresented how much they had earned.

"Guys, we've made just under $300,000. Todd Ellis' next door neighbor made $280,000. We've got a dozen people that have made over $100,000," DeBoer is quoted as saying at a recruitment meeting, according to FTC documents obtained by The (Columbia) State.