WakeUpNow file $70 million lawsuit against Kirby Cochran
When reports surfaced last week of Wake Up Now having gone bankrupt, one of the first things I did was check to see if anything official had been filed in court.
A search of Pacer turned up nothing, so I left it at that.
That WakeUpNow are effectively bankrupt remains in question, with the company thus far having failed to publicly issue a statement regarding most of their affiliates leaving and the lack of commission payments for months.
What has surfaced though is a lawsuit filed by WakeUpNow on January 27th, in Utah’s Fourth Judicial District Court.
Before we get into the lawsuit itself, I did some snooping around the Utah Courts websites and discovered they run their own records system. It’s called XChange and Utah charges $25 to set up an account and then $30 a month on a rolling subscription.
That’s just for access to search Utah’s records mind, with court document downloads incurring additional fees.
Needless to say I won’t be signing up anytime soon.
Thankfully a reader sent in Wake Up Now’s complaint, which is filed against former CEO Kirby Cochran, staff of Global Connection Network, Elaine Cochran (Wake Up Now’s lawyer until October 2014) and Juan Carlos Lozano.
Wake Up Now identify Lozano as
an individual residing in Mexico (who) has travelled to the U.S. multiple times (including Utah), committed acts in the U.S. and Mexico that adversely affect commerce (pertaining to Wake Up Now) within the United States.
In their lawsuit, Wake Up Now incorrectly allege that their affiliates are retail customers:
Wake Up Now makes its products available to retail customers, whom Wake Up Now categorizes as “insiders,” “preferred customers,” and “IBOs.”
The company states it ‘sells a majority of its products via direct sales‘.
Its beef with Kirby Cochran?
Kirby Cochran Gets His Nose Into The WUN Tent (Ozedit: Yes, that’s the actual title used in the complaint)
In December 2010, Kirby Cochran, who previously had no involvement with Wake Up Now, learned through his brother Gary C. that the management of Wake Up Now was interested in going public.
Kirby Cochran, acting as a middle-man, orchestrated a going public shell merger wherein Wake Up Now, an operating Utah corporation, was acquired as a subsidiary by a Delaware publicly traded corporation, trading/ticker symbol “WORC”.
In connection with the merger, the Delaware publicly traded shell corporation parent changed its name to Wake Up Now, but kept its trading/ticker symbol WORC.
Wake Up Now later discovered that, near the time of the transaction, Kirby Cochran’s brother and co-defendant Gary C. secretly purchased a large percentage of WORC’s public float.
Wake Up Now has also recently discovered that, at the time of the transaction, Kirby Cochran, who was not a licensed broker, was negotiating both sides of the deal.
He induced the public shell company to issue significant shares of stock to Wake Up Now founder Troy Muhlestein to close the acquisition, but then surreptitiously induced Muhlestein to deliver to Kirby Cochran’s possession, medallion guaranteed stock certificates evidencing at least 6,412,500 of those shares, which Kirby Cochran promised to hold for Richard Smith and others.
Troy Muhlestein is credited with founding WakeUpNow in 2009.
The naïve and trusting Mr. Muhlestein complied as directed by Kirby Cochran, leaving him with only 2,137,500 shares for the company that he founded and continued to run.
Kirby Cochran, who was an adjunct business professor at the University of Utah, requested that one of his business students set up a company to hold the 6,412,500 Nominee Shares in a name not traceable to Kirby Cochran.
On January 24, 2011, Kirby Cochran’s student complied and incorporated Vestry Consulting Services, L.L.C. (“Vestry”) in Utah. Cochran then caused the Nominee Shares to be transferred to Vestry.
With Cochran in control of a large portion of WakeUpNow’s shares, allegedly this is when things got dodgy.
Kirby Cochran Infiltrates WUN
Notwithstanding his secret, undisclosed and significant ownership of Wake Up Now through the Nominee Shares, Kirby Cochran had minimal involvement with Wake Up Now as he was then attempting to wind down Castle Arch Real Estate Investment Company, L.L.C. (“CAREIC”), where he had served as CEO between 2004 and November 2010 and director from 2004 through late 2011.
Kirby Cochran was also busy working as CEO and Director of Clear Peak Energy, Inc., (“Clear Peak”).
Later in 2011, with CAREIC and Clear Peak both driven to insolvency and ultimate bankruptcy due in large part to Kirby Cochran’s gross mismanagement and insatiable appetite for uncapped expense accounts, first class travel, fine hotels, fine restaurants, company cars, home office allowances, and salaries to his children, spouse and siblings (including defendant Nathan C., Elaine C. and Gary C.), Kirby Cochran targeted Wake Up Now as his next “piggy bank”.
Wow WakeUpNow, tell us what you really think…
Kirby Cochran’s first step in infiltrating Wake Up Now was to locate an investor.
He located Phil Polich, a real estate investor, and induced him to commit to make an equity investment in Wake Up Now.
Kirby Cochran induced Mr. Polich to invest in Wake Up Now in large part due to Kirby Cochran’s claims that he had already invested $1.5 million of his own money into Wake Up Now. Mr. Polich later discovered that Kirby Cochran had lied to him and at no time did Kirby Cochran personally ever have any material amount of his own money at risk at Wake Up Now and at no time did Kirby Cochran pay anything but nominal consideration for his WUN stock.
Kirby Cochran also concealed from and did not disclose to Mr. Polich his secret control of the 6,412,500 Nominee Shares.
After getting a commitment from Mr. Polich to invest approximately $1 million into Wake Up Now, Kirby Cochran then contacted the Wake Up Now management and indicated that he could raise millions of dollars for Wake Up Now, but that nobody in his network of investors would invest unless Kirby Cochran was appointed CEO of Wake Up Now.
And so it was.
After some thrashing among the Wake Up Now management team, the Wake Up Now Board of Directors agreed to appoint Kirby Cochran as CEO on August 1, 2011 with several dissenting members of management leaving WUN.
Biased as hell sure, but the picture WakeUpNow paint of Cochran is nothing short of a corporate tyrant:
As he had done at CAREIC, as CEO at Wake Up Now, Kirby Cochran attempted to take total control of Wake Up Now by causing the resignation of all dissenting board members, such as founder Troy Muhlestein and early director Jon Holbrook, causing the Board to grant him two board votes, ceasing all stockholder meetings, and ceasing all formal board meetings.
Indeed, during his tenure, Wake Up Now held no stockholder meetings and only one board meeting. Kirby Cochran also caused the termination or resignation of all dissenting employees and members of management.
As another tactic to ensure his desire to control matters, Kirby Cochran created a substantial number of secret side-deals and promises with employees, managers, and investors with the implicit requirement that in order for the counter parties to profit from the side-deals, loyalty to, and protection of, Kirby Cochran was required.
Kirby Cochran also installed cameras around the Wake Up Now offices at 5252 Edgewood Drive, and even admitted to at one time secretly wiretapping executive offices there.
Sounds like WakeUpNow’s own version of Kim Jung Il.
In Wake Up Now’s eyes, Kirby Cochran’s conduct was responsible for the financial state of the company.
However, due to the fact that Kirby Cochran had over $1 million in judgments against him, and was being threatened by a bankruptcy trustee who later sued him for breach of fiduciary duties and fraud in late 2014 for his actions as CEO of CAREIC, Kirby Cochran was unable to acquire voting control of Wake Up Now’s stock, a problem that later allowed him to be jettisoned from Wake Up Now after his leadership had, pursuant to his modus operandi, placed Wake Up Now in a precarious financial situation.
Oft times we hear of secret deals between MLM companies and their top affiliates, but what of executives themsleves wheeling and dealing?
Due to the fact that he had over $1 million in judgments against him, and was being threatened by a bankruptcy trustee (a forensic accountant) who later sued Kirby Cochran for tens of millions of dollars for fraud and breach of fiduciary duties in late 2014 for his actionsas CEO, Kirby Cochran insisted that WUN pay him only minimum wage (so that he qualified for health care and other corporate benefits).
However, Kirby Cochran secretly arranged that he be compensated in ways outside of his creditors reach or knowledge by causing WUN to pay his credit card bills which featured tens of thousands of dollars of charges each month, including significant personal expenditures.
In addition, Kirby Cochran caused WUN to pay for dozens of unnecessary personal trips across the world which included first-class and business class international air accommodations, nights in some of the world’s finest hotels, and meals at fine restaurants.
And Cochran its alleged was rather generous with WakeUpNow’s money, extending his secret benefits to family members.
Kirby Gets “Loving Brother” Gary C. In On The Action
Kirby Cochran and his brother Gary C. have been padding each others pockets for years.
In the 1990s, Gary C. cut Kirby Cochran into ABS, Inc., Gary C.’s speaking and sales company.
The Cochran brothers lived a lavish lifestyle at the expense of ABS, which included fine meals, travel, homes, personal use of the ABS “company” jet, and apparently gross mismanagement.
With all of its resources depleted, in large part due to the lavish spending by the Cochran brothers, ABS was unable to pay dividends to its investors, much less a return of principal, or to pay its creditors.
Moreover, ABS became subject to a myriad of regulatory and tax issues across a number of states and went into bankruptcy.
Trustee Roger Segal, Esq. and John Morgan, Esq., now a U.S. Trustee, pursued the Cochran brothers in the courts for years.
Once the dust settled from ABS, the Cochran brothers once again commenced padding each other’s pockets and cutting the other into business deals, more recently through WUN and now Global.
Pertaining specifically to WakeUpNow,
In the days leading up to Kirby Cochran’s official appointment as CEO of WUN, Kirby Cochran duped WUN’s management into signing a sham “consulting agreement” with Kirby Cochran’s nominee company Vestry.
In exchange for illusory services that were never intended to be, and never were, performed by Vestry, the consulting agreement required WUN to pay Vestry $4.00 per month per active salesperson.
At no time has WUN’s profit exceeded $4.00 per active salesperson per month, meaning that Kirby Cochran masterminded a contract to suck 100% of the profits from WUN into his secret nominee Vestry.
Now this I didn’t entirely understand. Did Kirby promise WakeUpNow a barrage of new affiliates, for which he was to be paid $4 a month for?
Huh? Surely WakeUpNow’s then management couldn’t have been that stupid?
After becoming CEO and Chairman, Kirby Cochran fired the WUN officer who signed the consulting agreement on WUN’s behalf.
On January 20, 2012, Kirby Cochran caused the entire sham Vestry contract to be assigned to Gary C.
On that same day, Kirby Cochran caused to be transferred the 6,412,500 Nominee Shares to Gary C.
Based in the average trading price of WUN’s stock at the time, the 6,412,500 Nominee Shares were valued at approximately $2,565,000. Based on WUN’s current stock price, the current paper value is $6,540,750.
As if the obligation for WUN to pay 100% of profit margins through the Vestry sham “consulting contract” were not enough, Kirby Cochran also caused WUN to hire Gary C. as a “consultant” with no responsibility or oversight.
Kirby Cochran caused Gary C. to be paid $167,953 “salary” and “dividends” between February 23, 2012 and the time that the Cochran brothers were removed in September 2014.
On information and belief, Gary C. directed some of this money back to Kirby Cochran.
I still don’t get the $4 a month per affiliate thing, but the rest is pretty messy. Getting your brother on board, transferring the shares you effectively hold onto him and paying him a salary for consulting… which is really money you want to pay yourself, but can’t because of the bankruptcy mess you’ve created in other companies.
This next part is particularly interesting, as it pertains to possible stock market shenanigans:
In addition, based on information and belief, between March and August 2013, Gary C. sold a significant portion of WORC’s public float in the market during a stock run-up.
The sales resulted in great personal profit to him.
All in all, Gary Cochran is credited with profiting greatly from WakeUpNow – whilst offering little to nothing in return.
Gary C. did virtually nothing for WUN and only spent his time ghost-writing a disorganized vanity book for Kirby Cochran entitled “The Wolf Mentality”.
Despite the fact that WUN has been unable to sell enough copies to cover the book’s printing costs, Gary C. is astonishingly demanding that WUN pay him additional cash royalties for the book.
It is little wonder that Gary C. made a Facebook post on January 20, 2015 refuting claims circulating that Kirby Cochran is a con-man, while admitting to aiding and abetting Kirby Cochran, Wach and Rosales involvement with Global, and admitting that Kirby Cochran “helped to enhance my life both personally and financially”.
As we get closer to Cochran’s termination from WakeUpNow, various greivences are aired pretaining to Cochran’s keeping of WakeUpNow property (a 2014 Jeep Grand Cherokee, an iPhone 6 and Macbook).
A sense of cult personality sculpting is also brought to the surface:
WUN also tasked Kirby Cochran with maintaining relationships with certain important IBOs. While CEO, Kirby Cochran had access to lists containing contact information and other information for WUN’s best IBOs and leaders.
Kirby Cochran regularly met these IBOs, spoke before them, interacted with them, and developed close personal relationships with them. Kirby Cochran also directed WUN to build him up as a “visionary” leader.
In this way, WUN reposited in Kirby Cochran a significant amount of its IBO and customer goodwill.
Based on the goodwill vested in Kirby Cochran over the years, many of WUN’s IBOs identified WUN through Kirby Cochran.
Part of that publicity machine was Troy Dooly, who referred to Cochran as “someone I’ve come to admire and look at as a mentor” in mid 2014:
In addition to providing to Kirby Cochran access to WUN’s IBOs and customers, WUN entrusted Kirby Cochran with developing much of WUN’s Latin American markets.
Kirby Cochran even hired his son and co-defendant Nathan C. to act as WUN’s VP of International with a focus on Latin America due to Nathan C.’s Spanish speaking abilities.
Like Kirby Cochran, Nathan C. was also subject to the Confidentiality, Non-Compete, NonSolicitation, and Non-Disclosure Agreements.
Before we get into why those agreements are of significance, here, in WakeUpNow’s own words, is how the firing of Kirby Cochran as CEO went down.
In the months leading up to it…
As CEO, Kirby Cochran caused excessive personal and corporate expenditures despite the Corporation’s relative cash positions, engaged in side-dealings with employees and affiliates, engaged in undisclosed and/or veiled agreements with family members, including Gary C., failed to adequately plan to avoid repeated financial emergencies, nearly unilaterally caused multiple severe business disruptions and costs due to his personal insistence on internally developing software to perform critical business processes despite the existence of cost-effective off-the-shelf alternatives, distraction from personal judgments and other legal issues due to past business dealings, and negatively affecting corporate morale by installing surveillance cameras throughout employee work areas, and creepily commenting to attractive young women that he was watching over them.
Moreover, members of WUN’s board and certain large investors had discovered that Kirby Cochran manufactured personal credibility by dishonestly taking credit for the success of a company called Headwaters, Inc. (formerly known as Covol, Inc.).
In reality, Kirby Cochran was president of Covol for 9 months in 1995-96. During the time that he was President at Covol, its gross revenues were only a few hundred thousand dollars with millions of dollars of investor funded losses.
Facing millions in losses, Kirby Cochran quit in 1996 citing health issues.
Despite Kirby Cochran’s representations, when he left Covol, its stock price (if adjusted for stock splits) differed little from the stock price at the time he started (despite a brief $250 million market capitalization spike during his brief tenure).
After Kirby Cochran’s departure, Covol changed its management, significantly changed its business, raised new money, and changed its name to Headwaters and most significantly, hired Kirk A. Benson, as chief executive officer & chairman of the Board who continues to serve in that capacity today.
Many years after Kirby Cochran’s departure, and under Mr. Benson and his team’s leadership, Headwaters started to gross millions of dollars in sales, showed its first profit, and became publicly listed on the NASDAQ.
Despite having little or nothing to do with its success, as Headwaters reached a billion dollar market cap in 2004 (8 years after his departure), Kirby Cochran started to falsely claim that it was he that built Headwaters into a billion dollar company.
Moreover, WUN’s largest investor, which by September 2014 had invested approximately $3 million in order to meet a series of cash shortfalls WUN faced from time to time due to Kirby Cochran’s rampant and reckless spending, lost faith in Kirby Cochran’s honesty due to his falsely claiming that he had personally invested over $1.5 million in WUN when in reality, he had no, or negligible, investment in WUN.
Kirby Cochran also wasted approximately $2 million dollars by purchasing and attempting to reboot the Southeast Asian operations of Veyea, Inc., a failed MLM started by James Watson, a former HR director of Utah based MLM Neways.
Together with Mr. Watson, Kirby Cochran and his son collectively spent months in Malaysia, Thailand and Vietnam without evidence of any work being accomplished.
Kirby Cochran even caused WUN to hire private, personal security to stop IBOs from being able to interact with him.
Most significantly, Kirby Cochran’s desire to control all aspects of WUN’s business resulted in WUN irrationally shunning third-party “commission engine” software used by substantially all direct sales companies with a multi-level compensation structure.
Kirby Cochran created a false narrative that third-party commission engine software, despite being used by substantially all of WUN’s competitors, was prohibitively expensive and problematic.
Those WUN employees and consultants with technical backgrounds who objected to WUN creating its own commission engine were marginalized and often terminated.
Kirby Cochran requested that his long-time acquaintance, Ben Anderson, who is a trained and experienced computer scientist and former Senior Vice President of Novell, Inc. from 1998-2002, advise Wake Up Now in building its own software platform and commission engine (referred to by WUN as the “HUB”) which would integrate all IBO sign-ups, facilitate marketing, customer sales, charge customer credit cards, facilitate credit card refunds, calculate and deliver sales commissions, and other functionality fundamentally essential and at the core of WUN’s business.
Unsurprisingly, Mr. Anderson spoke in terms of years of development and beta testing and millions of dollars of development costs. Kirby Cochran never again invited Mr. Anderson back to WUN.
Kirby Cochran instead turned to a couple of ambitious young developers to “complete” the development of the HUB.
Chad Jardine, WUN’s head of marketing at the time, who was closely aligned with the needs and interests of both WUN’s customers and IBOs and had enough technical knowledge to digest the “progress” of Kirby Cochran’s chosen developers, vehemently objected to the quick creation of a new HUB.
Mr. Jardine was quickly marginalized and eventually fired by Kirby Cochran.
Over the objection of a number of advisors and management team members who were powerless to stop it, Kirby Cochran and his young developers launched the new HUB in October 2013, just 3 months after Ben Anderson had assessed the need for years of development.
Mr. Anderson was right.
Kirby Cochran caused the HUB to be launched without sufficient development and with no beta testing.
The HUB was virtually non-functional at the time of launch.
Astonishingly, Kirby Cochran’s hand-picked development team had somehow destroyed the former functional HUB system in the process of launching the new HUB. There was no going back.
The result of the HUB debacle was disastrous. WUN became nearly totally blind to its business functions.
It was unable to confirm delivery of its product, unable to determine whether products were paid for. WUN’s call center had wait times for over 4 hours with disgruntled customers and IBOs who were unable to purchase product, unable to log-in to receive product, and IBOs unable to view their accrued commissions.
WUN, which already had an extremely liberal refund policy, commenced honoring substantially every refund request, even where products had been used and commissions paid.
Many customers, understandably enraged by multi-hour call center wait times, simply charged-back their purchases.
Despite what by necessity became a nearly no-questions-asked-refund policy, hundreds of people inquired with, or made actual complaints to, governmental agencies, including the U.S. Federal Trade Commission (“FTC”), and the Better Business Bureau.
Competitors pounced causing great damage to WUN’s business and reputation.
WUN was forced to spend significant money to increase its customer support staff and even hired a third party call center, which spoke for WUN, but lacked the training and skill of most of WUN’s in-house customer support agents.
Kirby Cochran’s gross mismanagement, side-deals with family members to pay out all of WUN’s profits, lavish expenditures, failed business initiatives, and the botched HUB launch placed WUN in a position where it needed millions of dollars to survive.
Now contrast that with what is presented in Troy Dooly’s video above.
But I digress, back to Kirby Cochran and his sensing that his time at WakeUpNow wasn’t going to end well…
Likely remembering the negative result to them when ABS imploded, the Cochrans returned $371,000 to WUN via two unilateral Wells Fargo Bank counter transfers to WUN in September 2014.
The Cochrans excluded WUN’s management and Board of Directors from any knowledge of the transfers back to WUN. Only the CFO became aware of the transfer when the teller at Wells Fargo called him after-the-fact to inquire as to why a large sum of money was being transferred into the WUN account.
After the fact, the Cochrans created a writing deceptively suggesting that WUN’s 32 year old CFO had somehow coordinated with the Cochrans and induced the Cochran brothers to act.
As the Cochran brothers inevitably knew would occur, the $371,000 was instantly absorbed to pay the most pressing creditors, including WUN’s IBOs and employees, with millions of dollars of other accrued liabilities still unmet.
The payment of the $371,000 to WUN creditors occurred prior to Kirby Cochran’s termination.
In order to meet the acute cash shortfall caused by the gross mismanagement and obscene spending, WUN commenced several rounds of reduction in force, even terminating a number of low-paid support workers.
In a display of Kirby Cochran’s lack of touch, he demanded that one of WUN’s remaining staff members program his new, expensive company iPhone 6 (replacing his iPhone 5) even as the staff member’s colleagues were cleaning out their desks.
About that time, he berated another employee tasked with preparing his daily smoothie for neglecting to include carrots in
Due to the foregoing, on September 27, 2014, WUN stockholders owning a majority of the voting shares of WUN removed Kirby Cochran from the WUN board of directors.
That same day, the remaining members of the Board of Directors voted to have Kirby Cochran take an unpaid leave of absence as CEO for a period of at least 6 months, leaving him with the title of “Chairman” (despite being terminated from the Board).
Kirby Cochran was instructed that day that he was no longer welcome to have an office on the WUN premises.
And that was that.
Kirby Cochran was indignant. He immediately went to the home of Richard Smith, one of WUN founder Troy Muhlestein’s original key advisors, and invited Mr. Smith to join him in creating a new company to compete with WUN during a wild drive where Kirby Cochran sped through a windy canyon road.
Moreover, a few days later Kirby Cochran attempted to cherry-pick and recruit several of WUN’s employees, including Josh Daily, who was the primary contact point for all of WUN’s primary digital product vendors.
Cochran also solicited its principal office manager.
Some of Kirby Cochran’s comments turned from defamatory to threatening.
Kirby Cochran claimed to at least one WUN employee that he had major leverage over WUN and that it was “safe” to follow him, explaining that “If I don’t get everything that I am asking for, I’m going to drop an atomic bomb on this place”, suggesting that he would devastate WUN.
Due to the behavior described above in the preceding paragraphs, on October 16, 2014, WUN’s board of directors permanently terminated Kirby Cochran from all positions at WUN, including CEO and “Chairman”.
Prior to October 16, 2014, Kirby Cochran gave no notice that he had resigned as Chairman or any other position with Wake Up Now.
And that was that.
Kirby Cochran then launched a full-scale assault on WUN. First, Kirby Cochran recruited his family who he had already inserted in positions of power and profit in WUN, including his son Nathan C, the former leader of WUN’s Latin American markets.
Kirby Cochran recruited his brother Gary, one of WUN’s highest paid, tasked with building up Kirby Cochran’s image.
Kirby Cochran recruited his wife Elaine C. despite her continuing to serve as legal counsel to WUN with the specific duty of providing personal estate planning services to WUN’s top IBOs and leaders who reach “pearl rank”; the very people who the Cochrans were targeting.
Kirby Cochran then formed and/or become involved with as CEO of “Global Connection Network” and caused it to commence competing directly against WUN.
Now, remember the confidential and non-compete agreements Cochran had signed?
Kirby Cochran is now aggressively marketing to many of WUN’s most important IBOs and customers using the IBO customer information entrusted to his while he served as WUN’s CEO.
Toilet paper as per Cochran’s actions, and something WakeUpNow are none too happy about.
Referred to as “Kirby Cochran’s atomic bomb”, the complaint then proceeds to detail just how little those agreements meant to Cochran.
Cochran induced Defendants Nathan C., Gary C., Rosales and Wach to join Global. Wach, who speaks fluent Spanish, participated in Global’s January 1, 2015 launch webinar where he introduced Kirby Cochran as president and CEO, Gary C. as marketing strategist, and Nathan C. as head of international finance.
Through his involvement at WUN, Kirby Cochran created a relationship with Adam Rosales, the top IBO and country manager in Chile. Kirby Cochran and Rosales contacted WUN’s product manufacturers in both Chile and Ecuador and requested that they produce products for Global.
The Chilean factory agreed and Rosales, Kirby Cochran and Wach designed a new label to place over cans of what is, based on information and belief, an energy drink substantially similar to or identical to WUN’s energy drink produced in Chile and manufactured in the same factory.
On top of being contractually prohibited from competing against WUN at all, the Defendants have engaged in a campaign of smearing Wake Up Now with confidential information which they are contractually and/or ethically forbidden from disclosing, as well as with false and malicious lies.
In particular, Defendants have carefully designed and broadly executed a coordinated plan to disparage and defame Wake Up Now with outrageously false and malicious claims.
Many of the disparagements include confidential information which they are contractually prohibited from divulging, and in the case of Elaine C., whose legal ethics as current WUN legal counsel, prohibited her from divulging privileged information and from competing against her client.
Among the baseless attacks, Defendants recently have contended that WUN has never been registered in Mexico and has no legal entity there, that Wake Up Now’s management was dishonest, that WUN betrayed Kirby Cochran, that WUN’s management stole Kirby Cochran’s stock, that WUN’s management was negligent, that despite being CEO, Kirby Cochran had no responsibility for anything negative occurring at WUN, that WUN’s compensation plan was unsustainable, and that WUN would not survive more than a few months.
Each of these statements is false, disparaging, and made with actual malice with the intent to harm WUN.
Whether WakeUpNow management knew they’d be effectively terminating their MLM operations just a few weeks after filing this lawsuit is unclear.
On October 8, 2014, Kirby Cochran, Nathan C. and Elaine C. invited WUN’s top leader and IBO in Mexico, Juan Carlos Lozano into their home in Orem Utah and over a three day period between October 8 and October 10, 2014 poisoned Mr. Lozano against WUN and its management with false, confidential and/or privileged information.
Poisoned and encouraged by Kirby Cochran, Nathan C. and Elaine C. divulging both confidential information and injurious falsehoods in October 2014, Lozano stopped making efforts to sell WUN products.
He also commenced private meetings where he disparaged WUN among its IBOs, leaders and customers. Lozano encouraged WUN’s Mexican customers to stop purchasing WUN products.
Lozano encouraged WUN’s Mexican customers, all of whom had received the product that they purchased from WUN, to fraudulently demand refunds of their purchases and even charge-back credit card purchased.
Indeed, as a result of Kirby Cochran, Nathan C., Elaine C. and Lozano’s efforts, product revenues in Mexico decreased by $3,623,476 in October, November and December.
Product refund demands increased over ten-times in November compared to the average requests in the prior months. By December 2014, revenues in Mexico were approximately 10% of August 2014 revenues.
On December 7, 2014, Lozano sponsored a conference call attended by dozens of carefully selected WUN IBO leaders in Mexico and falsely stated that WUN was not a legal entity in Mexico. That it was never registered in Mexico; and was therefore operating illegally.
The forgoing statements by Lozano are false.
Cochran evidently wasn’t the only one sticking boot into WakeUpNow, with the company also laying a series of allegations against Michael Wach (a WakeUpNow affiliate).
On or about January 16, 2015, Wach’s direct IBO enrollee, and close associate, Ludwig Agurto was linked to a despicable email stating, among other things, false claims that WUN is attempting to steal IBO commissions and imploring WUN’s IBO’s to contact the FBI and SEC and file complaints against WUN.
The libelous email believed by WUN to be conceptualized and/or written by Wach and Kirby Cochran and distributed by Agurto even provide links for people to file FBI and SEC complaints against WUN.
On January 13, 2015, Wach made a Facebook post announcing that he and Kirby Cochran would be holding events in South America on behalf of Global.
The post makes thinly veiled attacks on WUN claiming that “Global pays commissions on-time”.
But back to Cochran…
On December 1, 2014, Kirby Cochran contacted Rodrigo Mastrangelo, WUN’s key manager of its interest and operations in Brazil and disparaged WUN and its management, indicated that he had been betrayed, that WUN would not last, and inviting Mr. Mastrangelo to join him in his new rival MLM in South America and to lead its operations in Brazil.
Except for statements relating to WUN’s financial condition ironically caused by Cochran himself, which is protected confidential information, none of the above statements are true. They are all false.
The true facts are that Kirby Cochran was fired for cause, Kirby Cochran failed as a manager, nobody at WUN betrayed Kirby Cochran. Instead, Kirby Cochran and his codefendants are engaging in a false and disparaging smear campaign to attempt to harm Wake up Now’s business and to personally profit from it in breach of their obligations.
As far as damages go, WakeUpNow are seeking nine claims of relief:
- Breach of contract (Kirby Cochran)
- Intentional interference with economic relations
- Injurious falsehood
- Trade libel
- Deceptive practice/false advertising
- Civil conspiracy
- Injunctive relief
- Breach of contract (Elaine Cochran)
- Breach of fiduciary duty
All in all, WakeUpNow are demanding they be awarded $70.2 million dollars. A temporary restraining order, preliminary injunction, or permanent injunction has also been sought.
Putting aside the obvious “why didn’t anyone at WakeUpNow research Cochran before he got involved?”, it’s hard not to look at WakeUpNow’s lawsuit as an attempt to put a face on the failure of the company.
There’s a lot of disillusioned WakeUpNow affiliates out there and Kirby Cochran’s mismanagement shenanigans do make it easy to see him as the sole reason the opportunity collapsed.
I maintain that there’s absolutely no doubt Cochran’s conduct, if even a fraction of what WakeUpNow managment allege is factual, had some bearing on the demise of WakeUpNow. That’s indisputable.
But it wasn’t the sole contributing factor.
WakeUpNow had a flawed business model, one that saw it pay commissions on the recruitment of new affiliates and relied on constant recruitment to generate revenue.
You can try to explain that away with excuses such as “but affiliate’s didn’t have to…” or “we had some retail customers”, or even attempt to classify affiliates as retail customers as WakeUpNow did in this very lawsuit.
But at the end of the day, by and large, the vast majority of funds entering WakeUpNow were from affiliates. Affiliates who joined, purchased products and services to qualify for commissions and then recruited others to do the same.
Everyone paid their monthly fees and as long as they had recruited affiliates who did the same, everyone got paid.
Well, except those at the bottom.
That in and of itself is a train-wreck of a business model. Throw Cochran’s misadventures into the mix and that WakeUpNow would go under was inevitable.
Footnote: The lawsuit referenced in this article can be viewed in its entirety over at DropBox.
Update 9th September 2015 – The lawsuit between WakeUpNow and Kirby Cochran has been settled.
The terms of the 22nd of June settlement agreement reached between the two parties are confidential, with a Utah District Court signing off on the agreement on the 23rd of July.
The agreement was reached as part of Kirby Cochran’s Chapter 7 bankruptcy proceedings, filed on February 4th, 2015.