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A Utah man who bought the rights to sell the green tea products of a Lehi company testified Tuesday he lost tens of thousands of dollars, counter to assurances of the potential for profits made by the firm's representatives.
To boost their case against Green Tea Co., state investigators also played a video recording at a hearing Tuesday of then-Utah Attorney General Mark Shurtleff as they tried to establish that the company had broken Utah and federal laws that regulate the sale of franchises or business opportunities.
Green Tea has been served by the Utah Division of Consumer Protection with an administrative citation for allegedly violating those laws. The Tuesday hearing was to give it a chance to hear the state's evidence and to convince a judge the company did not commit the violations.
The Shurtleff video, which had been posted on YouTube, showed the state's top law officer talking in 2009 about how Green Tea's products had helped him concentrate during recovery from a motorcycle accident and finish a book he was writing. Shurtleff also praised a part of Green Tea's business model known as multilevel marketing, which is controversial among some because only a few people earn most of the commissions from it, while most others lose money or make little.
"The purpose of the division in showing this video was to restate the quotes there, that it's a solid product and if you just follow the rules, you can be wildly successful, and that this is endorsed and supported by the attorney general," said investigator Elizabeth Blaylock.
She said the video and another of company officials at a meeting with prospective clients made the point that "selling Green Tea is simple, easy, low cost, low risk. A great way to derive income by starting your own business."
For Shurtleff, his inclusion in the hearing is the latest revelation about his appearances before or connections to several companies that have later been the subject of a regulatory action.
Gary Zaccaria of Salt Lake City testified Tuesday that after seeing a spreadsheet at a 2008 meeting with Green Tea representatives showing the products could generate $50,000 a month in sales after only three months, he bought a franchise. Sales would be made from at a kiosk in a San Diego-area mall.
But after an initial investment of about $30,000 including fees and the purchase of products he said the best month for sales turned out to be about $15,000, which barely amounted to a profit, while most months produced $10,000 or less.
"Over a period of 18 months, the accrued loss I had from the business, and these are hard losses, was over $100,000," Zaccaria told Administrative Law Judge Angela Hendricks, who took the case under advisement.
An owner of the Green Tea Co., Roger Hendrix Jr., countered in his testimony that a number of kiosk businesses, including some run by the company, proved quite profitable. But he acknowledged that the company at times did not follow best business practices, saying that with limited resources it had a difficult time keeping up with its business and that many contracts the state points to as evidence went unsigned.
"We had limited resources to respond, sign, receive a fax back," Hendrix said. "We were just small. We weren't capable."