Facing the Music

Petty was selling his scheme as a new "multilevel" marketing plan unlike anything seen before. Amway, Mary Kay Cosmetics, Tupperware and other companies use multilevel marketing principles that call for business representatives to unload soap, makeup and plastic containers on their friends. The difference is that at the lowest level there are actual products sold at prices comparable to their worth.

The research association, like Petty's other schemes, failed without attracting much attention from authorities, either because it had few investors or because no one who lost money felt inclined to contact authorities. But that wasn't the last time Robinson or the others at the bureau would hear of Petty.

He soon began employing a computerized telephone dialer to make his various sales pitches. The dialer would later be instrumental in the meteoric rise of TeleCom2000.

In about 1996, the Better Business Bureau received a call from a frantic employee at Trinity Mother Frances hospital in Tyler. All of the hospital's phones, including emergency phones, doctors' office phones and those in patients' rooms, were ringing. Nothing could stop them, and they couldn't disconnect from a lengthy Petty commercial.

"They called Southwestern Bell and the police," says Ann Harris, director of standards and practices for the BBB. "They didn't know what to do."

The bureau found that Petty was using his "revolutionary" computer dialer to reach out and touch anybody who would answer. They also had an unlisted telephone number for him at his mobile home in Overton, Harris says.

"I got a hold of him and told him what he was doing, he was locking up all the hospital lines...I said, 'Al, you got that dialer on? Yeah? Turn that damn thing off; you got the whole hospital locked up.'"

Petty, who not infrequently compares himself to Alexander Graham Bell, switched off the automatic caller and apologized.

It would not be long before Petty's unorthodox business sense, combined with elements of the research association and his computerized phone dialer, would crystallize as TeleCom2000. To Robinson, Harris, the FBI and a jury of Petty's peers, TeleCom2000, which was launched in 2000, was clearly another pyramid scheme.

To Petty, it was legitimate and pure genius--but quite complex. When Petty was riding high on TeleCom2000 successes and a tidal wave of cash, he told his brother Dan Petty that he didn't have time for the Better Business Bureau or its complaints anymore.

"I am sitting out here in the middle of the woods. I'm not registered with Dun & Bradstreet, and I don't even care," Petty tells his brother in a December 2001 conversation secretly recorded and used in the FBI investigation. "The Better Business Bureau thinks I'm an idiot from outer space. I will not even take time to answer their complaints. Their complaints are so, so, so elementary."

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Petty believed that investing in TeleCom2000 was so confusing that he would not allow anyone to send him money without being fully educated, and he insisted on being the educator. He required all potential investors to listen to a 14-minute taped message that described what TeleCom2000 was about.

The message would invite investors to join in one of Petty's national conference calls. During those recruiting calls, existing TeleCom2000 investors would gush about how much money they had made. Petty would explain the business and answer questions.

Petty is proud that no one was pressured to send money and that no one invested in the dark. He was happy to provide as much information as any investor desired.

On its face, TeleCom2000 was sold as a telephone network that offered its members cheap cell phone service and company profits. Joining the network cost $1,316 for a phone contract. After six months you were promised to receive checks to repay you the $1,316. A fee to the person who referred you to TeleCom2000 was supposedly also paid out of your money, but you were still guaranteed an added $2,463.

Even greater moneymaking opportunities were offered to those who invested more. A $10,000 investment was guaranteed by Petty personally to return about $50,000 in six months.

No investors were required to sell or market TeleCom2000. Petty did it all from the comfort of his mobile home. With the power of "digital technology," Petty felt he could target potential investors specifically identified by existing TeleCom2000 clients and find thousands of others randomly through phone messages and "fax blasting."

Petty reasons that because regular telephone networks must spend so much on acquiring and retaining long-distance telephone customers, they have to pass on expensive marketing and sales costs to customers. Plus, he says, customers are fickle and switch telephone service frequently, which means the telephone companies must spend more money to get them back or find new customers. As part of his pitch, Petty calculated that telephone companies spend about $3,600 for each new or returning customer including all of the marketing, sales and operational costs.

TeleCom2000 had no sales staff, no marketing staff, no big expensive building or other brick-and-mortar infrastructure to buy or maintain. TeleCom2000 could save everybody all the money that traditional telecommunications companies were forced to spend. TeleCom2000 would be saving so much money in expenses that they could "give" long-distance and cellular telephone service to its customer/investors for free. In fact, TeleCom2000 could give the money it saved back to customer/investors.