CFO allegedly confirmed Family First Life is a Ponzi scheme
Family First Life’s (former?) CFO, circa 2022, is alleged to have referred to the company’s compensation plan as a “Ponzi scheme”.
Integrity Marketing Group (IMG) own Family First Life, the insurance niche MLM company.
As alleged by IMG in a March 3rd, 2023 filed lawsuit, defendants Nicholas Ayala, Michael Killimett, Ryan Montalto and Matthew Smith
wrongfully induced Integrity to pay them millions of dollars in exchange for their businesses, material promises, and related services.
Defendants not only failed to live up their promises; it also appears that they never intended to do so.
Ayala, Killimett, Montalto and Smith are all cited as “former Integrity executive employee(s)”.
- Nicholas Ayala owned Priority Life Insurance Agency LLC
- Michael Killimett owned FFL Southeast
- Ryan Montalto owned FFL United and
- Matthew Smith owned FFL Northwest
IMG claims it bought the above entities from the Defendants in 2020.
Those insurance agencies – Priority Life, FFL Northwest, FFL Southeast and FLL United – then became wholly owned subsidiaries of Integrity.
As part of the acquisition, Ayala, Killimet, Montalto and Smith signed Employment Agreements with IMG.
Each Employment Agreement provided that each Defendant would “serve as President” of his respective Agency after Integrity acquired that Agency.
In a nutshell, IMG argues that, based on ongoing monthly financial reports, the Defendants failed to uphold their end of acquisition agreement.
At the time of Integrity’s acquisition of each Agency, each Agency was generating net income of between $600,000 and $1.2 million annually.
In 2023, each Agency reported negative annual net income.
Integrity provided each Defendant with monthly financial reports to asses the ongoing performance of his respective Agency.
Integrity identified severe and ongoing underperformance in connection with each Defendant’s management of his respective Agency.
On information and belief, each Defendant has failed to devote his best efforts, full business time, or attention, or all of them, to the business and affairs of his respective Agency.
In an attempt to address the collapse of the four Family First Life businesses, IML met with the Defendants in February 2023.
Integrity met with each Defendant to explain the steps the Defendant must take, consistent with his Employment Agreement, to improve his respective Agency’s business.
IMG followed up with “required immediate steps” demands and a “Partner Action Plan”.
At the time of filing its lawsuit, IMG claims
on information and belief, no Defendant progressed in taking the immediate steps required by the Partner Action Plan to improve his respective Agency’s business results.
IMG asserts that each of the Defendants instead were focused on “establish(ing) and operat(ing) his own independent marketing organization”. This would allegedly be a violation of the Defendant’s Employment Agreements.
By the end of February 2023 the Defendants appear to have had enough. On February 27th each of the Defendants “threatened to resign”.
IMG responded by terminating the Defendants later the same day.
IMG’s filed lawsuit asserts
- breach of contract
- tortious interference with existing contract
- civil conspiracy
- fraudulent inducement and
- unjust enrichment
IML is seeking damages in excess of $5 million, and a declaratory judgment confirming each of the Defendants was properly terminated.
On June 5th, the Defendants filed an Amended Answer to the Complaint. The Answer is the usual denials but what’s interesting is the attached Counterclaims.
As opposed to them going off and building their own “independent” organizations, the Defendants claim the four entities failing is a result of “IMG’s conduct”,
IMG utilizes a highly deceptive, confusing, and convoluted compensation structure.
Although the Management Members continued to produce significant growth for IMG, IMG and (Shawn) Meaike began manipulating the Bonus Scheme by changing various incentives and moving credit for agents around to avoid having to pay significant bonuses to the Management Member’s agencies.
Meaike would also use the money that was supposed to be paid to the Management Members’ agencies for his own personal pleasure and gain.
Oddly enough, none of this is mentioned in IML’s original lawsuit.
I should point out that Shawn Meaike is the original founder and President of Family First Life. He sold the company to IMG in October 2019.
As part of the acquisition, Meaike was given an ownership stake in Integrity Marketing Group and other perks.
Meaike received a five percent kickback for each FLL “partner” acquired by IMG.
Because of this kickback, Meike used the Bonus Scheme to shift money to other FFL controlled agencies to inflate their revenue to make them more attractive for IMG to purchase.
Once acquired by IMG, Meike would then shift money out of these businesses to make them less profitable.
The Defendants claim, upon learning of “the fraudulent scheme of manipulating their financials”, they confronted IMG’s CFO and Director of Sales Operations.
This executive is not named in the Defendant’s Counterclaim. Family First Life’s website fails to list a CFO.
In any event, Defendants go on to claim;
After meeting with Ayala and looking into the issue in detail, the Sales Director called the bonus structure a “Ponzi scheme,” and she said they would figure out a solution.
However, nothing was done thereafter to rectify the problem.
Instead, Ayala was told to “hang in there” and to continue “doing what he was doing”.
As of November 2022, Matthew Smith claims his FFL Agent position earnings “were cut by more than 75%, even though production substantially increased”.
The IMG Sales Director also told Smith the bonus program was a “Ponzi scheme”, and she confirmed that their bonuses were being reduced so IMG and Meike could appear more profitable.
Here’s the previously referenced February 2023 showdown, this time as recounted by the Defendants;
On February 8, 2023, despite knowing each Management Members’ financials were simply incorrect, IMG sent a letter to each Management Member falsely accusing them of having lower “financial result … for the 2022 fiscal year, as compared to the financial results of [their agencies] when Integrity acquired the business …”
The Defendants go on to allege they were given instructions that “would make it nearly impossible to reach the goals of the action plan”.
At this time, it became clear that IMG was attempting to fabricate a for “Cause” termination so it would not have to pay FMV for the Management Members Rollover Units.
The Defendants maintain they didn’t threaten to resign but did in fact resign on February 27th.
Thereafter, IMG acknowledged receipt of the Management Member’s resignation letters, but claimed IMG was now terminating all of them – after the fact – “for cause”.
In the same termination letter, IMG’s real motivation was revealed, as IMG stated that it would be exercising its right to repurchase each Management Members Rollover Units, making sure to emphasize the for “Cause” language in their Employment Agreements.
“Rollover Units” are part of a financial arrangement reached when IMG bought the Defendants’ FFL businesses.
Each Management Member provided capital contributions in exchange for “Class A Common Units” and/or “Class A Preferred Units” (Rollover Units).
The Defendants argue that FFL was adamant it terminated them for “Cause”, in order to get out of paying out whatever the Rollover Units were worth at the time.
The Defendant’s Counterclaim alleges breach of contract and common law fraud.
Declaratory judgment pertaining to the Defendants resigning, and IMG not terminating them for “Cause” is also sought.
BehindMLM reviewed Family First Life in November 2021. I didn’t see a Ponzi scheme but I also wasn’t aware Meaike was allegedly manipulating Agent positions.
First and foremost, an executive manipulating an MLM compensation plan for their own benefit is a due-diligence red flag. It’s also probably evidence of fraud should the FTC ever file suit.
Taking a step back from both IMG’s original lawsuit and the counterclaim, it appears income in the four Defendant’s positions dried up.
This was likely a combination of Meaike’s alleged manipulation and that leading to a lack of effort. Why work harder when the guy running the company is just going to screw you out of more money?
Eventually the positions ran into the red, bringing us to the February 2023 showdown.
I’m also curious as to what specifically led Family First Life’s CFO to refer to the company as a Ponzi scheme. Either the term was misused interchangeably to describe a pyramid scheme, or there’s some investment shenanigans going on Family First Life I’m not aware of.
A CFO would by definition be in-charge of and fully aware of Family First Life’s financials. They’d of course also know about illegal manipulation of Agent’s income to benefit Meaike and anyone he was working with.
That Family First Life currently doesn’t appear to have a CFO, or at least publicly acknowledge having one, is ominous.
That said, personally I’m leaning to “Ponzi scheme” being used to refer to a “pyramid scheme”. In the absence of further clarification however, I can’t confirm.
Unfortunately IMG’s lawsuit and the Defendant’s Counterclaim have been filed in a state-level Texas District Court.
This means I can’t track them on Pacer and, as a result, BehindMLM won’t be able to track the case. Original filings covered in this article were provided courtesy of NAAIP.
Pending any updates we’re able to share, we’ll keep you posted.
Update 21st July 2023 – On July 20th IMG secured an order compelling arbitration.
Pending the outcome of arbitration proceedings between IMG and the Defendants, the case has been stayed.
Update 7th October 2023 – No update on arbitration proceedings but a non-jury trial has been tentatively scheduled for April 29th, 2024.
Update 30th May 2024 – Not sure what happened with this case. As per the docket a hearing on a contempt motion was held on September 21st, 2023.
The next docket entry is notation that the scheduled April 29th, 2024 trial has been cancelled because the case is closed.
I’m assuming this means arbitration resulted in a confidential settlement but there’s nothing on the case docket to reflect this.
Oz, you can track the case at url https dot dot forward slash courtsportal.dallascounty.org/DALLASPROD – case number DC-23-03018 at 134th District Court. Since you are outside the USA, you must use an IP changer.
The CFO and Director of Sales Operation are from Integrity Marketing Group, not Family First Life.
On Linkedin, we have Kelly Pemberton as Integrity Marketing Group Director of Sales Operations, and I am certain that IMG has a CFO.
Is Family First Life a pyramid scheme or a ponzi scheme?
I would have to believe that Ayala, Smith and the other former Family First Life executives used an accurate description.
The issue is that Family First Life is accused of moving downline agents from one team to another to cause that new team to get an Integrity Deal.
I am certain that some of these uplines got the deal honestly, but later on their work was used by to get the Integrity payout for others.
These frauds were described in the Tyra Hamilton YouTube interview on the NAAIP YouTube channel:
youtu.be/LkI7Of2Mohs – Eventually the money runs out to make payments to all these Integrity Partners.
Therefore, this scenario sounds like a Ponzi Scheme. The good news is that Integrity Marketing Group is a huge company and can afford to make payouts to all the victims.
IMG, has over 6,000 employees and controls a huge percentage of the US insurance industry.
@David
Please choose an alias and stick to it, otherwise the spam filter will keep marking your comments as spam.
Thanks for the court details. I did check when researching for the case details but gave up when I got stuck in a loop on the court website (local court websites are a nightmare to navigate).
Whatever I ran into wasn’t the same as your link so I’ll save that for reference. Nice to see the court documents are provided.
I don’t have much confidence in that as a surprisingly large percentage of people can’t differentiate between the two.
A Ponzi scheme has distinctive characteristics, which I didn’t see in Family First Life when reviewing it.
Paying out more than you’re taking in is unsustainable but without an investment component isn’t a Ponzi scheme.
Article noting case has been stayed pending arbitration outcome.
Article updated with 2024 trial date.
New legal decision in which Integrity Marketing Group tried to steal the domain integrity dot com from Sunil Bheda who has owned the domain since 1996 as per who.is and the court papers.
I see the judges’ decision online, and you see the Integrity Marketing Group attorney’s just make-up #$%& and hope for the best in stealing this guy’s property.
www dot adrforum.com/domaindecisions/2044445.htm
As per isitdownrightnow dot com, the owner of the integrity dot com has taken down his site, while it was up last year before IMG’s malicious lawsuit according to archive dot org.
IMG is the parent company of insurance MLMs such as Family First Life, PHP Agency, National Agents Alliance (the alliance),Equis Financia, North American Senior Benefits and others who have gotten FTC cease and desist orders.
In the present matter, Complainant is not merely unsuccessful, but it clearly knew that the Disputed Domain Name was registered long before Complainant acquired trademark rights and as such could not establish bad faith conduct on the part of Respondent; these facts were readily apparent from the Whois record (a copy of which was included in the record by Complainant) and the date of the U.S. trademark registration of the Complainant’s INTEGRITY trademark.
Accordingly, the Panel declares that the Complaint was brought in bad faith and constitutes an abuse of the administrative proceeding.
Lol, that was a bit silly. “Integrity” is a word, not a trademark.
And even then, like what, ten people on the planet might think “Integrity Marketing Group” when they see “integrity”?
Are they saying the didn’t know what was going on?
It would be nice if Oz would make an article based on the keyword Integrity Marketing Group.
Integrity Marketing Group is moving away from the keyword Family First Life in their MLM scamming, as per latest YouTube interview “Job Interview with Family First Life MLM Scammer (Evidence for Prosecutors & Attorneys)” – see minute 13.15.
If they’re just changing the name but not the comp plan there’s not much point for a new review.
Family First Life is still a thing with an active website.
Ol Shawn is living the High Life down in Florida with a Big House and Yacht ! He conned You Suckers Good!
Article updated with unclear outcome of the Family First Life Ponzi case.
Seeing as the case is now closed I’m leaving it here.
I have a feeling it is HUGE. The OKlahoma department of Securities Investigator Phillip Cole told my office that he recommended that OK should prosecute FFL for violating Business Opportunity Sales Law. Family First Life, LLC.
securities.ok.gov/Enforcement/Orders/PDF/AffofCompNoticeofHrgRecommCertofSvc_FamilyLifeFirst_24-020.pdf
Affidavit of Compliance and Notice of Service on the Administrator; Notice of Opportunity for Hearing; Enforcement Division Recommendation; Certificate of Service Filed: 8/20/2024 – This issue was initiated by Christopher Coyle who sued FFL for violating BOSL.
scribd.com/document/670813958/Family-First-Life-Counter-Lawsuit-Claiming-Business-Opportunity-Fraud
– here you see Chris’s story gofundme.com/f/qv63hy-court-fees and link to his court case in Oklahoma state court – and there is a youtube interview with Mr. Coyle – youtu.be/lr4_G48hvtw?si=pJsev-KLvlbSEHLK
It’s not nothing but the August 20th filing gives FFL an opportunity to show cause as to why a cease and desist order shouldn’t be entered against the company.
There’s nothing about “prosecution” in the filing.