Firstline Pyramid Collapses in Chapter 11 Bankruptcy

Posted by Karoli in News, Scams January 26th, 2008

For the past two weeks, current and former employees of Firstline Security (Orem, UT) have been leaving comments that Firstline filed for bankruptcy, but I couldn’t find any official confirmation of it.

Today, I have confirmation. From the Salt Lake Tribune via Bloomberg News:

Orem company files for Chapter 11 bankruptcy

Firstline Security Inc., the Orem-based provider of customized home security products, has sought bankruptcy protection from creditors.
The company listed debt and assets of less than $50 million in Chapter 11 documents filed Friday in U.S. Bankruptcy Court in Salt Lake City. The company didn’t give a reason for the filing in court papers.
- Bloomberg News

This brief announcement follows a flurry of comments about their service center being shut down and employees sent home after they were unable to make their payroll obligations this Friday. One commenter left a copy of the email he received from Trevor Keyes, one of the founders and owners of Firstline (grammar notwithstanding):

“Firstline Employees: As many of you may have heard, several of Firstline’s largest creditors have taken informal and formal legal actions that have resulted in Firstline’s inability to sell customer accounts and generate operating revenue to pay its ongoing expenses.

As recent as this Wednesday, Jan 23rd, Firstline was required by court-order to hold all funds generated by the sale of customer accounts pending a final hearing for appointment of a receiver for the company. Firstline has diligently endeavored to resolve the issues raised by its creditors so that accounts could be sold and expenses paid, but has been unable to do so.

After considering the wide array of circumstances—including what is in the best interests of employees—Firstline has determined that it is necessary to seek federal bankruptcy protection under chapter 11. Firstline is confident that reorganization under chapter 11 will provide the best result for payment of employees and will further provide the ability to move forward as a company and continue to operate. The short-term ramifications of filing chapter 11 are unpleasant.

Until Firstline obtains permission from the bankruptcy court, it cannot pay any debts that were owed as of the date of filing. This means that Firstline will be unable to meet its payroll obligations to you today. The good news is, however, that the money owed to you as current wages (with certain limitations including a $10,000 cap) will be treated as a priority claim in the bankruptcy to be paid ahead of general unsecured creditors.

Additionally, all wages earned after the bankruptcy filing are treated as administrative expenses in the case and are also required to be paid ahead of all general unsecured creditors. This means those of you we seek help in rebuilding will have secured pay moving forward. Firstline’s immediate order of business in the bankruptcy will be to seek permission to pay priority wage claims early so that the burden on you will be lessened. This process may, however, can take several weeks to accomplish.

To facilitate reorganization, it is unfortunately necessary for Firstline to temporarily reduce its excellent staff to a group of core rebuilders who will begin the task of stablizing and rebuilding the business. The personnel on the attached list are those that we feel are necessary to accomplish this objective.

To those not on the list, please understand that you are valued and appreciated and that we deeply regret circumstances that have led us to the point that we must reduce our staff. We credit the successes of the company to everyone, and we hope that you understand that we will do everything that we can to rebuild, rehire, and, most importantly, to pay you in full for the excellent services you have provided. Please encourage the rebuilding team as they are all of our hopes for a brighter future and immediate potential for future jobs, future pay etc.

Please await further information via email and mail. We implore your support and patience. There is a quote from Mother Teresa that says: ―What you spend years building may be destroyed overnight – BUILD ANYWAY! People are unreasonable, illogical, and self centered – LOVE THEM ANYWAY!‖ Firstline Security, Inc”

This is tragic for the employees who weren’t paid today and certainly must be jarring to the customers as well. Right now those customers have no one to service their contracts. I’m not sure how the monitoring of their systems is done, but one way or the other, it certainly is bad news for everyone involved.

And this year’s Prodigy? I’m guessing my prediction was right — there wasn’t one, or at least no one was paid the kind of money they promised.

The rise and fall of Firstline is a classic picture of a pyramid scheme and a study in the art of deceptive hiring and sales techniques. I don’t think we’ve heard the last of this story, so stay tuned. And to the students out there who thought they would see some sort of final payment next week for all their summer efforts, you have my sincere condolences.

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Viewing 49 Comments

    • ^
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    Do you think we can take any credit?
    • ^
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    You are correct, the "winner" of the Prodigy (Fraudigy) did not see his money. In fact, much of the freelance crew and producers that worked on the show are also owed a sizable deal of money.
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    Why am I not surprised! Firstline is a HUGE scam and has been from the get go. They have ripped customers off left and right as well as their own employees. I know for a fact (since I was an employee of Firstline until Friday) that they had not sent out reimbursement checks to customers since September (save for a few in November) due to no $$$ to pay them. The really sad part is they continued to allow both billing, customer care and cancellations to promise customers refunds for various reasons (over billing, compensation for lack of proper customer service, etc..) knowing full well they did not have the money to send out those checks. You can't get much more shady than that. That email that was sent out was absolutely hilarious, especially the quote from Mother Teresa at the end!!!! I do feel horrible for the employees, like myself, that were screwed out of the money we earned for working the last 3 weeks, as well as the PTO and sick time we had. All I can say is screw Wright and Trevor for the shity "business" practices they used to scam many, MANY people out of their hard earned money. Hopefully now that people are becoming more aware of the owners names and reputations they will not be able to do this in the future.
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    And I am one of those customers that is disgruntled about the lack of customer service from then when you need them. AND being promised a credit due and never receiving it.
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    I used to have a lot of respect for Trevor and Wright. But the fact that they led people along, had them put in their hard work and effort, and then leave them stranded is deplorable. Luckily I'm not owed anything by these guys, but I do know many people who are. I know that as part of that "reality" show they had whole crews working that now are out a lot of money. Very sad and dishonest.

    I hope they make it out of bankruptcy so the people owed money don't have to file for personal bankruptcies or lose their homes. I doubt Trevor or Wright think of that kind of thing, just of themselves.

    But I guess it's all made better since Trevor quoted Mother Theresa...
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    You're seriously really rude for writing what you wrote. You have no Idea what they are going through. What a rude uncalled for thing to say. Even if they WERE horrible people and they did do everything you think was so horrible...are you a better person for writing such a rude comment? I hope you feel better about yourself for writing bad things about good people who are going through a hard time. You know nothing.
    • ^
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    Obviously you've never dealth with these people...
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    One can only hope that the owners take responsibility for all of their debts or go bankrupt.


    If they pocket millions of dollars while shafting vendors, employees, etc. out of millions of dollars, that's just straight wrong.
    • ^
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    They are not pocketing millions. They are hurting. People are so hartless. The owners did not want to file bankruptcy. They had no choice because of circumstances OUTSIDE of their control. I wish people would grow up and stop acting like they know what is going on with Firstline. Seriously, I feel sorry for those guys. They are really going through a hardship and are not profiting a penny. Don't be an idiot and post comments about things you have no knowledge of.
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    Marc,

    THEY'RE going through a hardship? How about all the kids that spent their summer hawking their alarm systems door-to-door so they could have a shot at becoming the Prodigy only to discover they OWED the company money at the end? What about the ones who not only owed the company money but ended up shafted with debt as a result and who now have literally the clothes on their back and nothing much more.

    I'll bet it's hard for them, but they still go home to a big house and big cars at night.

    Don't talk to me about hardship until you hear a few stories of the hardships others suffered from their 'prodigy' sell.
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    Marc,

    FL owners are not hurting like they hurt their employees.
    Their house payments are being met, their cars are paid for, etc.

    Feel oh so sorry for people who have plenty of money & have shafted employees & vendors out of debt. That's bright.

    I tell you what, you want to get together & talk about this?
    You can be the tough guy & call me an idiot & remind me of what I don't have knowledge of. It'll be a perfect opportunity for you.
    • ^
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    That is where you are wrong. Do you know them? Do you know their bills? do you know what they are going through? Do you know anything? I don't think so. They are not making a penny off of what happened, infact they are not able to do alot of the things you are talking about...of course this ordeal put people out and it was the last thing they wanted to do...they had no choice...they too are in debt...(which does not make it better for anyone else, I realize) They did not want any of this to happen...do you really think someone wants to file bankrupcy? Would you? Obviously it was a last resort. They are good people i know them both. They ARE both having hardships and for you to assume you know that they are able to even have enough money to do the things you think they are doing is ignorant. it is unfortuante for everyone what has happened. It is the weak who can not be understanding and have even concieve the thought that the creaters of this mess..(yes its a mess) may be going through hard times as well. Honestly, it is horrible what happend, it was not done for any other reason that necessity. It was not possible because of things OUT SIDE OF THEIR CONTROL. I understand people being upset and very hurt and angry, but people really shouldn't say things about people when they do not know the whole truth. its just sad. But if it makes you all feel better to tear down other people....I guess I got caught up in that too by calling you an Idiot, and I am sorry I did that. That was rude and wrong of me. Honestly, it hurt me to hear people say such horrible things, when truly they do not know the extent of what is going on or what went on or how it is not just effecting them. Anyhow, I am sorry to upset you. We don't need to get together and talk about it and we don't need to arguee about it either. The truth is, people are upset, and for a good reason. I would be too. It is sometimes hard to take a step back and reazlie that other people are hurting as well. That is all I wanted to express, and I guess I did a bad job of it the first time as my emotions were involved. Believe it or not, others are going through hardships. Its true
    • ^
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    I'm sorry for their hardships. I am. But keep in mind that for the past six months some of the folks you see commenting here are also going through hardships, and their hardships were caused by the misleading sales pitch you all threw at them.

    Forgive me, but it's really hard to feel their hardships when I've had to see the results of the hardships they inflicted with not even one apology.
    • ^
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    Well sweetheart, I'm glad you're just another interwebs tough guy.

    I'll stand by everything I've said.
    Too bad you won't.

    You fit in really well with T-Rev-Dawg & Wrightizzle, homie.

    Firstline went bankrupt due to their unethical & dishonest business practices. These practices came from the top down in Firstline, & I won't feel bad for "men" who made dishonest decisions that impacted the lives of so many in such a brutal way.
    • ^
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    They screwed a lot of people all the way down the line. I was a manager for them in the early going and it seem a little fishy at the time. I couldnt put my finger on anything in particular but everything there was on the "hush hush". Very secretive, so I'm not suprised at this at all. I saw lot of wierd crap go on while i was there.
    • ^
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    Who "won" the Prodigy, I worked on the show but I quit in the spring. I cut my ties with Firstline quickly, me and my entire crew left.

    Its a shame hard working kids that earned thier pay are not going to be compensated.
    • ^
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    You don't even know what you are talking about. Do you even know what a pyrimid business is? Obviously not. Firstline has no releation to a pyrimid business plan. I have worked for First Line for over five years. They have been nothing but AMAZING to work for. It is unfortunate what happened. But before you go blogging about something that is not your business...why don't you find out the facts. Do you realize you are posting lies? If you want to post something, why don't you tell everyone how First Line offered people an opportunity that is very rare. If you or whoever you know that is associated with First Line did not take advantage of that opportunity that is a personal mistake. Do you not think the owners are going through their own hell right now as well? They are in much worse shape than the people who did not recieve their final pay check. I am disgusted with people who think they know everything and spread rumors and lies to get attention. Take a step back and realize that you do not know all the facts, you have heard things through the grape vine, and even if you did know everything that is going on or did go on...have some respect for people and their hardships. I have nothing but empathy for Firstline and their owners. Grow up.
    • ^
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    Adam,

    I'm incredibly familiar with Firstline. Try a search on my site for my entire series of posts on Firstline. You can paint them any way you want, but don't call me a liar. I have first-hand, eyes-on experience of exactly how they operated.
    • ^
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    From the report of their bankruptcy filing: http://deseretnews.com/article/1,5143,695248103...

    50M in assets; 12.1M to largest creditors, leaves 38M in assets. Call it 25M so that the other creditors and vendors get their due. That's a remaining 25M in assets after Chapter 11 reorganization. They'll be just fine.

    As to the so-called "opportunity", I consider it no opportunity at all to schlep alarm systems in a city that BANNED, yes BANNED door-to-door alarm sales, no opportunity at all to sign an 18% promissory note back to their "employer"...oops, I know, they were independent contractors except they weren't independent at all. They told their "advertising directors" where to live, when to work and where to work. Not much independence there.

    They gave students an opportunity to shill second-rate systems for no money at all, didn't stand up for them when they were threatened by people with guns, attacked by dogs and withstood other "advantages" such as those, and for all that, the "opportunity" left them holding a bag of lies and debt.

    Yeah, there's an 'opportunity'. If you were unfortunate enough not to be wearing the magic underwear, you got left in the armpit of america without so much as a car to escape with (the cars, of course, were far away from wherever they were dumped that day). Gotta love those "opportunities".
    • ^
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    So are the feb backends not coming for sure?
    • ^
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    Considering that no one got their paychecks on January 25 I would say don't bank on getting a backend for February. Maybe I should change that "no one" to no one but the owners got their money.