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Zer01's mobile offer may be too good to be true

As the company enlists sales agents in a multilevel marketing effort, its service remains elusive

By Nancy Gohring, IDG News Service
July 20, 2009 03:11 PM ET

IDG News Service - UPDATE: After report questions service, Zer01 parent strips Web site

Imagine downloading a two-hour HD movie in three minutes to your new cell phone, then plugging the phone into your TV to watch the film. Make unlimited phone calls, surf online as much as you like and send unlimited text messaging for US$70 a month, without a contract. Sign up to sell the same service to other people and get $10 a month for each person you sell to.

That's what a group of related companies including Zer01 Mobile, Buzzirk, Global Verge and Unified Technologies Group are promoting heavily online and at industry trade shows. The offer is attractive enough to garner coverage in top business and technology publications, at least one positive review from an analyst and even a "best in show" award from a magazine at the CTIA wireless industry trade show earlier this year.

Top IT turkeys

Does it all sound too good to be true? If so, that's because it probably is. What little information is available about the services is vague, technically inconsistent, and doesn't match up with public records.

One key player in the network of companies is Mark Petschel. He's the CEO of Global Verge, the multilevel marketing firm that is recruiting people to sell Zer01's service, under the Buzzirk brand. Sales associates are paying $70 initially to become part of the program and $40 a month thereafter for back-office support.

Petschel is currently on probation after pleading guilty to securities fraud. According to a bankruptcy filing in the U.S. Bankruptcy Court for the Eastern District of Missouri, Petschel allegedly promised to invest $168,000 that he collected from several people, but instead spent some of the money on items like jewelry.

Petschel has been on the losing end of three contract disputes, including one in 2002 in which he was ordered to pay $50,000. The Circuit Court of St. Louis County has no record that he's complied yet with any of the rulings.

He also previously started a company called Everge whose setup was very similar to Global Verge's. It encouraged people to pay to become sales associates and then sell mobile services under the brand BizzBuzz. An Everge YouTube video from 2007 entices people to start selling the mobile service, which was to launch in 18 months.

No such launch appears to have occurred. The state of Missouri recently dissolved Everge for failing to file an annual report. The Circuit Court of St. Louis County recently ordered Petschel and Everge to pay more than $35,000 in back rent for the office building where Everge was located.

Petschel also appears to have had yet another similar company that tried to attract sales people who would sell online games. That company was called NuSkyWay, and it sold games through MVP Network.

The Web site scam.com has long threads of people discussing their concerns over these companies that Petschel has been involved in.

Through Global Verge, Petschel has more recently been working with Unified Technologies Group, which owns Zer01 Mobile.

Zer01 CEO Ben Piilani said that Global Verge has signed up 50,000 associates to sell its unlimited mobile service. Petschel discovered Zer01 at the CTIA trade show in March and then approached the company with the idea of selling the service through a multilevel marketing setup, Piilani said. The two first met in May, he said.

But Piilani became aware of Petschel's securities fraud ruling only recently, and he claims that Petschel is stepping down from his position as Global Verge CEO as a result. "The company has a great business model," Piilani said about Global Verge. Petschel could not be reached for comment; there is no contact information of any kind on Global Verge's Web site and no phone directory listing at the address for him was found in court documents.

Petschel's former venture with BizzBuzz fell apart when Amp'd, a mobile virtual network operator, went under, Piilani said. That's because BizzBuzz's business model was to be an MVNO of an MVNO, an unusual concept and one that would likely struggle to be profitable. Jack Gold, an analyst with J. Gold Associates, said he's never heard of an MVNO of an MVNO. He suspects that network operators likely wouldn't allow such an arrangement in an effort to retain some control over the way their network is being used, in part to try to combat potential fraud or illegal usage of their network.

Zer01's parent company, UTG, a company founded by Piilani, also raises some questions.

For instance, UTG lists its head office under "Illinois offices," but provides an address for that headquarters in Creve Coeur, without noting the state. Creve Coeur is a suburb of St. Louis, Missouri. The leasing agent for that office building has no record of UTG at the location. A group that rents space in the building to small businesses said that UTG may have used space there in the past, but doesn’t currently.

Piilani said the building rents an executive office that he uses for a place to hang his hat when he's in St. Louis.

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