Nevada judge slaps Zer01 with $43 million judgment

Global Verge, a multilevel marketing firm, has won a $43 million judgment against Zer01, a company that once promised to deliver an unlimited voice and data cell phone service.

Last Thursday, a judge in the District Court in Clark County, Nevada, ordered that Zer01 and Ben Piilani, the company's CEO, pay more than $43 million for breach of contract, tortious interference with contractual relations and long-term profit losses, said Brian Hardy, a lawyer with Marquis & Aurbach representing Global Verge.

He's not confident that Global Verge will be able to receive much of the award. "We may never collect against it," Hardy said. "My guess is Zer01 goes completely under, if they're not already, and we end up collecting probably nothing."

The court must still sign the order and then Piilani and Zer01 have 20 days to file an appeal. Prior to Thursday's ruling, Piilani's lawyer had withdrawn after he stopped replying to contact from his counsel, Hardy said.

Hardy has sent documents via certified mail to Piilani's address and the documents have not been returned, meaning someone is there receiving them, Hardy said. But Piilani has stopped participating in the case, he said.

If there is no appeal, Hardy will begin looking into what assets Zer01 and Piilani have that might allow his client to collect on at least some of the judgment. For instance, Hardy said that Piilani has shown him copies of a patent that he claims Zer01 has applied for. "He showed us the patent applications but anyone can pull together that without filing it so we don't know how much of that is legitimate," Hardy said.

Global Verge filed the suit late last year charging breach of contract and claiming that it had loaned Zer01 more than $170,000 to assist in getting the business running.

People began signing up to a Global Verge sales program last year to sell Zer01's mobile service. Zer01 said it would launch the service last July but hasn't. Its Web site mostly disappeared earlier this year. It is not clear who to contact at Zer01 for comment about the lawsuit.

Even though Global Verge won this lawsuit, it continues to be the subject of complaints online from people who say they have signed up to sell mobile products as part of the multilevel marketing plan. People sign up to the sales program by paying a monthly fee in exchange for back-office support. Some say that they have paid their monthly fees and signed up other sales people or customers but have not been paid for their work. Others say that they have canceled their involvement in the program but continue to be charged the monthly fee.

"Other than phones and gift certificates has anyone received regular commission payments from Global Verge? I joined over a year ago, brought people in and all I've received is promises and hype," one person going by the name Craig commented on a blog post about the Global Verge ruling against Zer01.

Global Verge says it thinks such comments are not legitimate. "We believe they are people who are competitors posting things trying to stop us from gaining momentum in the market," said Ted Robbins, Global Verge's CEO. "We don't believe they are valid claims."

He said that anyone who felt they signed up to Global Verge's program to primarily sell Zer01 service has been offered and given refunds for their monthly fees. That offer still stands, he said, for anyone who still wants a refund. "I'm more than happy to clear up any issue out there," Robbins said.

Robbins seemed to be arguing that Global Verge did not recruit people expressly to sell the Zer01 service. "One of the misnomers out there is that with Zer01 that we were charging people to come into the company to sell the Zer01 service. We never charged any of our distributors one dime for any service or any phones or any of the ability to sell the phones or the service," he said.

Yet, Robbins himself spoke repeatedly on conference calls for associates last year that were almost exclusively about the Zer01 service and the potential benefits of becoming an associate in order to sell the service.

Robbins maintains that associates who signed up to become part of the marketing program last year did so in order to get other benefits of being part of Global Verge, such as national ID recovery, back-end management systems to manage their businesses, a video conferencing program and travel sites to save money on travel.

"Zer01 didn't charge anyone for phones and service, which I think saved our bacon," Robbins said. If Global Verge had presold the mobile services and failed to deliver them, the court may not have looked so kindly on the company, he said.

Still, 24 complaints from consumers have been filed about the company with the state attorney general in Missouri, where Global Verge is based, with most complaints in the pyramid scheme category. While Robbins said that the company's attorneys have responded to each of those complaints, the attorney general's Web site says that none has been resolved.

Global Verge now has an agreement with Sprint to sell mobile services under the GlobalMobile1 brand, Robbins said. The agreement with Sprint allows the service to be sold exclusively by Global Verge members, said Robbins.

Global Verge is involved in other legal actions. Its lawyers have sent a cease and desist order to an MLM blogger, Troy Dooly, asking him to remove what they say are defamatory statements about Global Verge from his Web site.

It has also recently filed a lawsuit against an individual and a handful of mobile services resellers for alleged fraudulent contracts and other fraud.

Copyright © 2010 IDG Communications, Inc.

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