UPDATE: This version updates a previous version that mistakenly listed the couple settling in this case. The settling defendants are Carlton and Lisa Hardman.

A Texas-based multi-level marketing company, its former chief executive officer and top promoters agreed to pay $150 million and permanently end multi-level marketing to settle charges in a Federal Trade Commission settlement.

© Contributed graphic Alleged pyramid scheme business AdvoCare settled with the FTC for $150 million.

Court papers filed Wednesday, Oct. 2, in the Eastern District of Texas federal court charges that AdvoCare International, L.P., its CEO Brian Connolly and four defendants operated an illegal pyramid scheme that deceived customers into thinking they would earn significant income as distributors of health and wellness products.

Two top promoters Carlton and Lisa Hardman have settled charges for their part in the pyramid scheme and a $4 million judgment against them will be suspended when they surrender substantial assets.

The couple is charged with unlawfully promoting they pyramid scheme, making false claims about their earnings as AdvoCare distributors and providing others the means to do the same.

The FTC complaint claims AdvoCare promoted a business opportunity where individuals could become distributors of health and wellness products – such as Spark energy drink.

The company promoted the business opportunity in conferences, webinars, social media posts, videos, print advertisements and more.

Former CEO Connolly and four distributors allegedly made false claims of a “life-changing financial solution” with AdvoCare that would allow people to make “unlimited” income and quit their regular jobs.

The FTC found most AdvoCare distributors earned little to no money, or even lost money.

The FTC said AdvoCare pushed distributors to focus on recruiting even more distributors, rather than retail sales to customers.

One AdvoCare distributor said the system, as explained during the AdvoCare’s “Success School” training, was to, “recruit business builders who recruit business builders who recruit business builders. . .”

“Legitimate businesses make money selling products and services, not by recruiting.The drive to recruit, especially when coupled with deceptive and inflated income claims, is the hallmark of an illegal pyramid.” said Andrew Smith, Director of the Bureau of Consumer Protection. “The FTC is committed to shutting down illegal pyramid schemes like this and getting money back for consumers whenever possible.”

The complaint states that AdvoCare participants were charged $59 to become distributors, which made them eligible for discounts on products and the ability to sell products to the public.

However, the participants then had to become “advisors,” which required them to spend $1,200-$2,400 purchasing AdvoCare products and accumulating thousands of dollars-worth of product volume each year.

The income of advisors was based on their success of recruiting other distributors, with the highest rewards going to those who recruited the most advisors, generating the most purchase-volume down the line.

The FTC alleges defendants asked distributors to make exaggerated claims about how much money they averaged from selling AdvoCare products – as much as hundreds of thousands to millions of dollars, some claimed.

The distributors were allegedly told to make up emotional narratives about how they struggled financially, then became successfully through AdvoCare. They were further allegedly instructed to instill fear in potential distributors, saying they would suffer from regret later if they did not invest in AdvoCare.

The FTC alleges that in 2016, about 72 percent of AdvoCare distributors did not earn any compensation from AdvoCare, 18 percent earned between $0.01-$250 and six percent earned $250-$1,000.

The settlement permanently bans AdvoCare, Connolly and the other defendants from multi-level marketing along with the $150 million judgement.

The company is required to notify all distributors about the settlement and to tell them:

That they will no longer be able to earn compensation based on purchases of down-line distributors

If they had significant losses pursuing AdvoCare business, they could get some of their money back through the FTC

If the distributors wanted to discontinue their participation in AdvoCare, the company is required to offer a full refund of unused products under existing refund policies.

John Breyault, vice president of public policy, telecommunications and fraud at the National Consumers League applauded the FTC settlement Wednesday saying the move highlights the important role the FTC plays in consumer protection.

"The FTC has a 45-year track record of winning favorable settlements and court judgments against pyramid schemes. In spite of this, many leading members of the direct-selling industry continue to push a discredited bill that would dramatically undermine the Commission’s ability to protect consumers against companies like AdvoCare," he said.

The Anti-Pyramid Promotional Scheme Act, Breyault said, is a bill that creates a series of loop hoops that can prevent the FTC from protecting the public against illegal pyramid schemes.

"Today’s actions by the FTC demonstrate the need for continued consumer protection under its existing authority. NCL opposes pyramid scheme legalization bills like the Anti-Pyramid Promotional Scheme Act, which is even now being peddled by industry lobbyists. We hope this bill will once again be stopped from gaining momentum by members of Congress," he said.

Claire Kowalick, a senior journalist for the Times Record News, covers local government, military and MSU Texas. If you have a news tip, contact Claire at ckowalick@gannett.com.

Twitter: @KowalickNews

This article originally appeared on Wichita Falls Times Record News: AdvoCare to pay $150 million in FTC settlement