Success By Health defendants deleted evidence, alleges FTC
The FTC has revealed the Success By Health defendants, upon learning of the regulator’s investigation, set about plans to conceal and delete evidence.
As retold by the FTC in a November 4th opposition filing;
On May 15, 2019, months before the FTC filed its case, the Individual Defendants learned the FTC was investigating SBH.
The next day, at Jay Noland’s direction, they each downloaded and installed the “Signal” encrypted messaging application on their phones.
Signal only stores messages locally on users’ phones rather than in any central sever or cloud-based storage.
The Individual Defendants subsequently instructed other SBH officers and employees to download and use Signal for SBH business.
From May 2019 through entry of the Court’s TRO in January 2020, the Individual Defendants used Signal to communicate with each other and other SBH officers and employees about “important things”.
As per the January 2020 TRO, Noland and his co-conspirators were ordered to turn over “documents or communication” to the Receiver.
Defendants chose not to comply with these orders, failing to provide any Signal communications to the Receiver.
Instead, in August 2020, right as they were about to have their phones imaged, all four Individuals Defendants uninstalled the Signal app within 12 hours of each other, irreversibly deleting all of their SBH-related Signal communications since May 2019.
The FTC states it is “likely … thousands of messages” were exchanged between the SBH defendants. What did Jay Noland want to hide from the FTC?
Perhaps that’s a rhetorical question given the pyramid scheme allegations leveled at SBH.
Particularly damning is that the SBH defendants thought they’d pulled a fast one over the FTC.
Their use of Signal and deletion of evidence was of course not disclosed to the FTC or the court.
The FTC only learned of Signal at all, and the Defendants’ deletion of texts and emails, because of its independent investigation.
Days after the Defendants’ belated, Court-ordered September 30 production, the FTC identified several mentions of Signal, which prompted the Individual Defendants’ admissions to its use.
The FTC’s investigations also revealed deleted emails, again in violation of the court-ordered injunction.
The Individual Defendants admitted to deleting emails only after the FTC independently obtained a copy of a May 29, 2020 email in which Mr. Noland instructed former SBH Director of Sales, Robert Mehler, regarding what SBH Affiliates should say in their declarations for use in these proceedings.
The email is clearly relevant and hits on the parties’ agreed search terms, but Defendants never admitted its existence—or the existence of any post-TRO emails with Affiliates— until confronted by the FTC.
In the wake of the Individual Defendants’ shocking spoliation, they now request a stay.
After admitting their use of Signal, a few weeks later the SBH defendants claimed
they had been using Signal’s “auto-delete” function to delete all communications with 5-30 minutes of receipt, so their removal of the Signal app from their phones actually did not result in any deletions.
Because the Individual Defendants each deleted their Signal app, there is no way to know what happened.
The FTC has stated it intends to address Noland and his co-conspirators actions in a subsequent filing.
the FTC will bring a motion to address this spoliation prior to the end of discovery—and after it has had more time to investigate and understand the prejudice it has suffered.
Until then, a decision on the SBH defendant’s stay motion remains pending.
Update 5th December 2020 – The court denied the Success By Health defendant’s stay motion on December 3rd.
Update 4th February 2021 – The FTC filed its “MOTION for Sanctions Against Individual Defendants for Intentional Spoliation of Evidence” on January 28th.
A decision on the motion remains pending.
Update 12th September 2021 – On August 30th the Success by Health defendants were sanctioned for deleting evidence.