Salem firm must stop using Neways's info to target distributors

Grace Leong

A Salem multilevel marketing company founded by Neways founder Thomas Mower Sr. shortly before his trip to federal prison was ordered to stop using Neways's trade secrets to poach its distributors in Japan. That market accounts for 85 percent of Neways's revenues.

U.S. Senior District Judge Bruce Jenkins, in a ruling issued last week, ordered Sisel International LLC of Salem to return to Neways all confidential information, including downline reports, sales volume information, distributor lists, and bonus reports or information relating to monies received from distributors for product purchases.

Neways claims, in a lawsuit filed against Mower Sr. in U.S. District Court in May 2007, that information was taken and used by Sisel to start its business and poach its distributors after Neways was sold to Golden Gate Capital in November 2006.

Sisel markets, primarily in Japan, dietary supplements and personal care products made by its sister company SupraNaturals LLC in Springville. SupraNaturals was also founded by Mower Sr., who is now serving a 33-month prison sentence for income tax evasion. Both Sisel, which has 30-plus workers, and SupraNaturals, which has 80-plus workers, are owned by Beluga Ventures LLC of Springville.

But Sisel CEO Tom Mower Jr. disputed Neways's claims, calling the Neways lawsuit an "attempt to use the U.S. legal system to cut off Sisel's ability to compete fairly with Neways in Japan."

"We have not, and will not, use any of Neways's proprietary lists or other information. We will compete against Neways fairly as we've been doing, and have no interest in using any of its confidential information," Mower Jr. said in a statement issued last week.

In the Feb. 11 ruling, Jenkins also ordered three of Sisel's top distributors in Japan -- Koji Yamamoto, Fumiko Matsumoto and Toru Egashira -- all former Neways distributors, to stop poaching Neways distributors who aren't their immediate family members or first-level distributors. This restriction is effective for one year from the termination date of their contracts with Neways. Two other distributors -- Kaoru Kitagawa and Chiharu Hayashi -- also named as defendants in Neways's lawsuit, were, however, allowed to recruit Neways distributors because the court found they weren't contractually prohibited.

"There's no question that Tom Mower Sr. wants to compete against Neways, a company he founded and sold. At the time of the sale to Golden Gate, he had offered to sell them a non-compete provision that would have prohibited him from competing against them. But they didn't take it up. So as far as he is concerned, he is free to compete," said Phil Hadfield, legal counsel of Beluga Ventures and Sisel.

Neways general counsel Chris Crump disagreed. "They can compete but they can't cheat by using our confidential information."

Hadfield countered, "Sisel has a program that allows distributors from other companies to transfer into our company at a higher rank instead of starting at the beginner's level. Some of these distributors have submitted initial downline reports and bonus reports that showed their ranks as distributors," Hadfield said. "We have volunteered to return that information to Neways."

In May 2007, Jenkins ordered Tom Mower Sr., his two sons, Tom Mower Jr. and Dearick Mower, and two former Neways employees, Marlin Harman and Marion Shirley, to return the Neways distributor lists, product formula and other confidential information they allegedly took when the company was sold to Golden Gate.

"Sisel is located in what used to be a Neways building. We did find some forms and formulas which we volunteered to turn over to Neways," Hadfield said.

Crump maintains that this isn't the first time Sisel distributors were ordered to stop poaching Neways distributors. Neways took legal action in February 2007 against Jef and Patricia Welch, two former Neways distributors who now work for Sisel, in 4th District Court in Provo, alleging they took and used Neways's downline reports to recruit its distributors. In July 2007, they were ordered to stop poaching Neways distributors who weren't first-level distributors for a period of one year. The restriction ends this month.

"Two courts have now recognized the importance of those protections," Crump said. "And Neways will continue to take all necessary steps to ensure that our distributors' businesses are protected."

Neways now has a total of 1,200 employees companywide including 175 at its Springville headquarters and 300 in a manufacturing plant in Salem. About 70 workers, the vast majority of whom are temporary workers, were cut since the company was sold, according to James Watson, Neways's vice president of human resources and organizational development.