|Part 1 of 3|
Was it exciting?
Oh hell, yes. Ask anyone who was there and and they'll tell stories about those heady days.
The atmosphere in the office was electric, everyone running at full speed all the time. But nobody cared that they were overworked because it was all for a good cause. What they were doing was important -- stuff that was building nothing less than a new world economy. And it helped that the place was New Age-y, with everyone really supportive of each other. There were lots of hugs.
Now imagine that you're one of the volunteers on May 28, when the police are suddenly storming through the door and there are reporters and a TV crew outside. The police read a court order from the Federal Trade Commission. Everything comes to a complete halt but nobody can leave or use the phones. The Feds are looking frantically through the records and you're very confused and frightened, worried that you may be arrested. You hear one of the reporters call it a "pyramid scam" and that makes you furious; this business certainly wasn't a con game -- not the Fortuna Alliance.
Or was it?
From this simple number trick, he promised, great riches would pour
A lot of people
end up in Bellingham, Washington. It's not a big town; situated in the Northwest corner of the state with about 60,000 souls, it has a sizable population of street people, drifters, and others who couldn't get across the nearby Canadian border and lacked the means to move further on. If you live in Bellingham you're likely to know students from the state university, some of the workers at the paper mill, maybe a few of the many folks just passing through, to and from Alaska via the ferries sailing from the town harbor.
One of the people who ended up there was Augustine "Augie" Delgado. A salesman who blended vague New Age phrases like "visionary" and "higher level aspirations" with hard-sales business patter, the dark haired and mustachioed Delgado had a circle of friends. He also proclaimed that he had a vision. In late 1995, Delgado began telling those friends about something he was calling "The Fortuna Alliance."
But what was this Fortuna Alliance, exactly? Part of his description sounded like your friendly local Food Co-Op, or maybe Amway; a company that sells things that everybody needs to buy anyway. But that was just the beginning. Fortuna would bring "empowerment of all who choose" to join, Delgado promised in an early promotional booklet, claiming to have discovered a breakthrough that would turn the world on its head.
As Augie explained it, he had a spanking new paradigm -- sort of. Part of his secret was more than 700 years old: the Fibonacci Series, a mathematical formula discovered by a 13th century monk. It's merely a pattern that comes from adding numbers together:
1 + 1 = 2
But from this simple number trick, he promised, great riches would pour.
Once you joined the Alliance, people who were there before you (your "downline") get a percentage from you. When you bring people in later, into your "upline," you get a percentage from them. Calculating those percentages using the Fibonacci Series, the returns would be nothing short of explosive.
Wasn't this the same as an illegal pyramid scheme? Not at all; this grows upwards -- and everybody knows pyramids grow downwards. Besides, they have an article from a marketing magazine that says what the difference is between a pyramid and a multi-level marketing business. Augie also explained that he'd worked for eleven years on this idea and besides, Corporate America is a pyramid scheme itself, just upside down.
You do understand, right?
The money-stuffed envelopes became an engulfing tidal wave, threatening to swamp the office
1995, over 1,000 people thought they understood Augie's plan and had handed over at least $250 -- the basic cost to join the Alliance. Delgado had named this entry-level membership "Elite."
What did you get in exchange for membership? That was less clear; as Augie explained it, Fortuna was in "pre-launch," a stage he claimed that all young, fast-growing companies go through. "Due to the formative stage of the company," Delgado wrote, "many of the aspects of the company's plan may not be fully in place, accessible or operational." But not to worry; the Alliance would "launch" in early February, just a few weeks away.
Also in December, the Fortuna Alliance opened offices on North Shore Drive in Bellingham. A squat gray building which previously had been a real-estate office, the small rooms were quickly overcrowded with computers and busy data-entry workers. Soon there were even phone booth-sized cubicles in the hallways, where, faxed-in application forms were typed into computers.
The buzz in there was described by one Fortuna data-entry worker as "a religious fervor." Things went well and people felt good about Fortuna. Among other benefits, Fortuna promised to donate 15 percent of their gross to charitable organizations selected by members.
Others described the upbeat air which wafted Fortuna upwards on a giddy climb towards "creating a new global buying cooperative." And should spirits ever flag, there were always charts showing "The Explosive Fibonacci Sequence," demonstrating a "family tree" which "generates more than 30 times the income of any other program." No wonder that Fortuna members could talk themselves into feeling pretty good.
Unlike most volunteers, these workers were collecting checks from Fortuna. Paid "volunteers" is a strange concept, but the explanation for this "volunteer pay" was even stranger. According to several of these "volunteers" the money that they received weren't wages, but was a "draw on future earnings." In other words, by working as a "volunteer," you were allowed to borrow Fortuna funds with the expectation of paying back the loan from future profits. There were no employment contracts, no taxes, and no withholding. Several Fortuna members who recieved these "draws" for working in the office stated that they signed documents which described this arrangement. None of them received a copy of the document and the orignals were kept by the Fortuna management.
Before long, a call went out for still more volunteers -- the money was coming in so fast that they can't open the envelopes, each with a money order for at least $250 inside. Some had more. A lot more.
Like a tsunami, the money-stuffed envelopes became an engulfing tidal wave, threatening to swamp the office. Word passed that they did a half a million dollars in a single day -- the equivalent of 2,000 "Elite" memberships.
The mail room and data entry kept falling farther and farther behind, even though volunteers were soon coming from out of state. Membership statements were out of date by the time they were printed because things were growing so fast. And even if the statements showed that you didn't make much money, everybody knows somebody else who did.
Boxes and boxes of mail piled up every day. While the promised catalog of Fortuna goods and services was supposed to be in production, first priority went to the urgent need for more bodies to work the mail room and data entry. The "launch" kept getting moved because it was impossible to keep up.
Meanwhile, the founders of the Fortuna Alliance did what any sensible business owners would do when their company was growing at a phenomenal rate -- they left the country for an extended vacation.
Unlike Delgado, Welch had an easy-to-find paper trail at the local county courthouse
and Libby Welch -- his "significant other" -- left in early 1996 for the Caribbean. Touring Costa Rica, Belize, Honduras, Augie left his daughter and two sons behind under the tutelage of Fortuna's manager, PR director, and bookkeeper.
Once outside the country, Augie and Libby each took what one of Fortuna's computer programmers described as "draws" on Fortuna finances for around $10,000 per month. Bank records submitted as part of a Washington state securities regulator affidavit verify funds transfers from a Fortuna account for $10,000 on April 22 to Barclay's Bank in Belize and $20,000 two weeks later. But compared to what the auditors later found missing, this was only pocket change.
So who was this Libby Welch, Augie's partner and co-founder in the Fortuna Alliance? The spotlight of Fortuna's promotional literature shined brightly on Delgado, highlighting his claims of business and academic credentials, but the buxom blonde with a trace of a southern accent remained in the shadows. Her name rarely appears in the Fortuna literature, except in a few letters to members and prospects which are signed by both "co-founders."
Public records in Whatcom County contained no references to Delgado, but Welch left a paper trail in superior court and the county auditor's office. (Actually, Delgado should have appeared in the court records as well, but a clerical error failed to put his name in the index.) The case involved a precursor to the Fortuna Alliance called the Whole Earth Alliance.
Like Fortuna, Whole Earth was going to be a new paradigm in doing business, use computers and make everybody rich. A Bellingham couple gave Delgado $36,000 in the venture based on verbal promises. When they asked for a written contract, they were turned down. When they asked for their money back, they were told that it was gone. They went to court.
Delgado and Welch didn't contest the case, never showing up in court. A default judgement in 1993 ordered Delgado and Welch to pay back the $36,000 and costs, but the Bellingham couple never recovered a dime. When the judgement against Delgado and Welch was rendered, neither had any assets which could be located -- and there hangs an interesting tale.
A series of foreclosures against Welch cascaded like a chain of dominoes. Starting with bad loans on property in San Juan County, the liens, foreclosures and evictions cascaded into Whatcom County. By the time it was all over, Welch was evicted from her house in Custer, a small community to the north of Bellingham, in order to pay back the loans and unpaid mortgages. In the final phases of this financial collapse, Welch resorted to tactics which have now become notorious. Like the Freemen of Montana, Libby Welch declared herself a "White Sovereign Citizen."
Albion Monitor July 22, 1996 (http://www.monitor.net/monitor)
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