Stream Energy, a fast-growing Texas-based natural gas retailer that entered Georgia last year, is being charged with running a pyramid scheme in a federal class action lawsuit filed this week.
Stream, in a statement, called the suit "groundless and without merit."
A Houston law firm says in the complaint filed in Texas that Stream Gas & Electric and its Ignite Holdings division operated a multilevel marketing program it contends is a pyramid scheme.
In a pyramid, new participants pay money to the people who recruit them, then hope to recoup their investment and more by recruiting others. The fraud collapses when there aren't enough new recruits providing money to sustain the hierarchical structure.
"Some of the individuals at the top of the Stream and Ignite pyramid earn millions of dollars a year, while most of those that are now joining the scheme will likely never recover their investment," said Scott Clearman of the Clearman Law Firm, which brought the suit.
The suit says Stream and Ignite induced people to invest in the "Ignite Services Program" for $329 and to buy an "Ignite Homesite" Web page for $29 per month. The lawsuit says much of the $329 goes to those higher in the pyramid.
Stream said its direct selling methods, such as those of Mary Kay, are "unquestionably legal."
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