Interlake Chemicals Sued By State of Washington
The Manitoba Company, Interlake Chemicals, has been served a Notice of Intent To Issue an Order to Cease and Desist by the Department of Financial Institutions, in the State of Washington, for violations of the Business Opportunity Fraud Act of Washington.
According to the allegations, "Glen Stroud, Dan Hammond, and Interlake Chemicals International Ltd. Corp., and their agents and employees, have violated the Business Opportunity Fraud Act of Washington, RCW 19.110, and that their violations justify the entry of an order of the Securities Administrator under RCW 19.110.150 to cease and desist from such violations."
The tentative findings of fact are:
"Interlake Chemicals is the seller of a business opportunity to distribute NON-SLIP products and services. The company’s NON-SLIP products include SURE STEP, a product applied to floors and bathtubs. SURE STEP increases the coefficient of friction of treated surfaces, which prevents the surfaces from being slippery when wet.Interlake Chemicals sells distributorships and master distributorships by territory. A purchaser of a distributorship has the right to market, sell and service the NON-SLIP products within a designated territory. A purchaser of a master distributorship has the right to market, sell and service the NON-SLIP products within a designated territory, and also has the right to establish local distributors in the designated territory which it will manage.
Purchasers of the opportunities receive an inventory of the SURE STEP product, an application demonstration kit, application equipment, promotional materials, distributor training manual, distributor training video, on-site training, and home office support.
Purchasers of the opportunities are expected to establish their own business in the designated territory to market, sell and service the NON-SLIP products. According to the Distributor Agreement, the purchaser may not use Interlake Chemicals as their business name.
According to the Distributor Agreement, purchasers of the opportunities must purchase a minimum of $2,400 in NON-SLIP products from Interlake Chemicals annually, in order to renew the agreement. Failure to do so results in the expiration of the agreement.
Interlake Chemicals represented to purchasers in a brochure that “revenue from your initial inventory will more than pay for your entire SURE STEP investment three times over.” Interlake Chemicals further represented to purchasers in a brochure that “the market potential is unlimited, and the profits are enormous.”
Interlake Chemicals offered and/or sold its opportunity to Washington residents via advertisements on the internet. Additionally, Interlake Chemicals offered and/or sold its opportunity through a website it maintains at www.interlake-chemicals.com."
I have taken the time to reproduce these tentative findings of fact, and bolded the requirement that the distributors not use the name "Interlake Chemicals" in their own business name.
Undoubtedly, someone erroneously thought that a) if Interlake sold distributorships, and b) required the distributors not to use the name "Interlake Chemicals", then c) the sale would neither be the sale of a franchise or business opportunity.
This is an incorrect conclusion, in my view, given the facts asserted.
For the record, Glen Stroud was involved with Paul Beaupre - who masterminded the largest single business opportunity fraud prosecuted in Canada. (Your humble scribe appears on the WFive's expose of Beaupre.)
Perhaps a background check by Interlake Chemicals would have been in order? Certainly, a good US franchise lawyer would have been useful.
