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The Red & Black | Wednesday, December 6, 2006 | 3
Univ. senior runs site similar to one facing lawsuit
By SARA PAUFF
spauff@randb.com
An online business started
earlier this year by a
University student faces a $1
million lawsuit and a federal
investigation by the Secur
ities and Exchange Co
mmission, according to a law
suit filed in Brevard County,
Fla.
Allegations in the lawsuit
state that Jonathan Mikula, a
senior business administra
tion major, led an online pyra
mid scheme that bilked thou
sands of customers out of
their money. That hasn’t
stopped him from starting
another online business.
Except this time, his fellow
students, including some
University student-athletes,
are his customers.
Mikula is the owner and
operator of the advertising
site mycollegesurf.com. It
requires members to pay a fee
ranging from $10 to $200 to
watch an “advertising pack
age” of 16 Web sites each day.
Members are paid 5 per
cent per day to watch the ads.
After 30 days of viewing,
members earn a 50 percent
profit, according to the Web
site.
Started in August, the site
boasts more than 100 mem
bers, almost 70 of them
University students, including
Georgia swimmer Hans Gillan
and former football player
Des Williams.
Mikula’s previous business,
Phoenixsurf.com, ran much
the same way. The site
required members to pay a
fee ranging from $8 to $6,000
to watch an “advertising
package” of 15 Web sites each
day.
Members were supposed
to be paid back 15 percent of
their fee each day, earning a
20 percent profit at the end of
eight days.
The site was shut down in
May after failing to produce
enough profit to pay its mem
bers, which numbered in the
tens of thousands, the lawsuit
alleges.
“I made most of my money
on the Internet,” Mikula said.
And in the process, he’s
lost a lot of other people’s
money — more than $3.5 mil
lion in less than six months,
according to another lawsuit
filed in Georgia.
Advertisers unaware
Like all of his past business
endeavors, mycollegesurf.com
is a legitimate business, not a
pyramid scheme, Mikula said.
He said mycollegesurf.com
does not guarantee its mem
bers’ profits and relies on
investments and advertising
from companies such as Best
Buy, Sony and YouTube for
revenue, so it is not a pyramid
scheme.
Advertisers purchase
space on the site ad rotation,
Mikula said, as well as text
ads or sponsor ads that run
along the top of the page.
Advertisers who purchase
space on the site rotation
have their Web page viewed
for 15 seconds before a mem
ber has the option of clicking
to the next Web page.
Web pages in ad rotation
include Abercrombie & Fitch,
Pioneer Electronics, Costco,
Sam’s Club, Sony and Apple.
At least one of the adver
tisers listed had no record of
an ad contract with Mikula or
mycollegesurf.com
Mark Stearn, director of e-
commerce for Tweeter.com,
which sells mid- to high-end
consumer electronics, said his
company never purchased an
ad with Mikula, even though
the chain retailer’s ads
appear on the
mycollegesurf.com.
An employee in the adver
tising department at Pioneer
Electronics said she, too, had
never heard of mycol-
legesurf.com, but would look
into it.
Several other companies —
including Apple Computers,
Bloomingdale’s, Abercrombie
& Fitch, Best Buy, Circuit
City and YouTube — with ads
on mycollegesurf.com could
not confirm whether they had
purchased advertising with
the site.
And at least one
company questions mycol-
legesurf.com's legitimacy.
Online payment processor
PayPal froze the accounts of
mycollegesurf.com members
using the service to process
their commissions.
PayPal spokeswoman Sara
Bettencourt said PayPal’s
acceptable use policy pro
hibits autosurfs, programs
similar to mycollegesurf.com.
“A lot of the characteristics
of an autosurf are similar to
pyramid or Ponzi schemes,”
she said.
She said the nature of the
services makes them too
much of a risk for PayPal.
She added that mycol-
legesurf.com members’
PayPal accounts will be
closed unless the acceptable
use policy team determines
QUICK DEFINITIONS
What is a pyramid scheme?
A pyramid scheme is a fraud
ulent investment operation that
involves paying abnormally high
returns to investors out of the
money paid in by subsequent
investors, rather than from net
revenues generated by any real
business.
Pyramid schemes collapse
after the business stops attracting
new investors to generate profit.
What is an autosurf?
An autosurf is an online
advertising program.
Advertised Web sites are
automatically rotated through
one’s Internet browser. No feed
back on the ads is required.
How do you make money off
of autosurfs?
Many autosurfs are invest
ment autosurfs. After supplying a
Web site to add to the advertising
rotation, members can earn
money surfing by paying a mem
bership fee. They are then prom
ised a percentage return on their
membership fee, providing they
view the required number of sites
per day.
Phoenixsurf members could
purchase “advertising upgrade
packages” for $8 each until they
reached the maximum member
ship level of $6,000.
Members viewed 15 sites for
15 seconds every day for eight
days and received 15 percent of
their fee back per day.
At the end of the eight days,
members would receive 20 per
cent profit. At the maximum mem
bership level, this would be $1200
after eight days. Members also
received an 8 percent bonus
commission for every person they
referred to Phoenixsurf.
that mycollegesurf.com does
not violate their policy.
“PayPal didn’t suit our
needs businesswise,” Mikula
said.
One student-athlete has
already gotten in trouble for
being involved with Mikula’s
endeavors.
In an e-mail to a Red &
Black reporter, Gillan said he
had received an e-mail from
the NCAA demanding he
remove himself from mycol-
legesurf.com as a business
associate. He wrote that the
e-mail states he cannot use
his name, picture or athletic
reputation to promote any
business.
Athletic director Damon
Evans was out of town and
unavailable for comment.
Associate Athletic Director
Carla Williams took down the
students’ names, but said she
could not comment on the
issue until she looked into the
matter further.
Some not worried
So far, members of mycol-
legesurf.com don’t seemed
concerned about the Web
site’s future or Mikula’s past.
Williams, a former Georgia
football player and member of
the site, has invested in sites
similar to mycollegesurf.com
before.
“I worked
with (Mikula)
on some of his
previous
endeavors,”
said Williams,
a senior from
Dacula.
Williams
said he has
been invest
ing $200 a
month in
mycollegesurf.com and has
made a couple hundred dol
lars profit.
Gillan is also a member of
the site, but did not return
numerous phone calls over
several days.
Mikula’s site adds ways for
customers, such as Williams
ft
WILLIAMS
and Gillan, to make extra
money.
“To help us grow, we put in
referral incentives,” Mikula
said.
If another member refers a
friend to mycollegesurf.com,
they can earn a 10 percent
commission on the new mem
ber’s membership fee.
“(Some members) are
making $1,000 a day because
they told all of their friends,”
Mikula said.
Text ads include links to
Williams’ Web page. Mikula
said his “small, talented staff”
contacted companies
through mass e-mails.
“You hit as many as hard as
possible; some stick,” Mikula
said.
Williams said he bought a
text ad on the site for $25 for a
week.
Williams said he was a con
sultant for the site and did
not sell ads. He could not pro
vide the contact info for the
head of advertising, Ted
Skinner, as of press time.
If the Web site does not
generate enough revenue to
pay its members, Mikula said
mycollegesurf.com's flexible
business model allows them
not to pay out commissions.
He said he is planning to
register the business with the
SEC and the Georgia
Secretary of State, but right
now “it is too small to even
appear on the radar.”
A pyramid scheme?
Lawsuits allege Phoenix-
surf.com and its parent com
pany, New Millennium
Entrepreneurs, are pyramid
schemes, in which money
paid to investors comes
almost exclusively from fees
paid by new members.
Mikula said the consulting
groups, Organa Consulting
and Avante Holding Group,
who helped him run
Phoenixsurf.com, are to
blame for the company’s
downfall.
“The money was misappro
priated,” he said. “It sucks — I
learned a lot from it.”
He said Phoenix was sup
posed to be one of many ven
tures under the NME umbrel
la. Commissions made off of
other ventures, advertising
revenue and investments
were supposed to supply
member income.
“A pyramid scheme is sole
ly reliant on new members
coming in for revenues,”
Mikula said. “We didn’t match
that description.”
The federal government
disagrees.
In March, the SEC issued
an investor alert about “paid
autosurf” programs, such as
Phoenixsurf.com, warning
about Web sites that promise
payment for looking at online
ads, the Associated Press
reported.
Mikula confirmed that
Phoenixsurf.com is being
investigated by the SEC.
Mikula said
Phoenixsurf.com was a “loss
leader” and designed to draw
more members to other NME-
owned ventures rather than
produce profit. He said the
company was structured on a
two-year time frame, with
planned additions for other
Web sites.
“Everybody made a lot of
money,” he said. “Within a
year that would have been
ridiculous.”
Williams was one of those
making
money, and he
wasn’t alone.
A
Facebook site
promoting an
NME party
listed fellow
football play
ers Danny
Ware and
B e n j a m i n
Boyd as NME
Williams,
who said he
couldn’t
remember
how much he
made, was the
chief event
planner. Ware
was the chief
director of
recreational
activities, and
Boyd was the
associate director of recre
ational activities.
Lawsuit Battle
The question of who is
responsible for the downfall of
Phoenixsurf.com remains tied
up in courts.
According to lawsuits filed
in Florida and Georgia,
Mikula enlisted the help of
Florida business consultants
Christian Rishel, Michael
Hawkins and Jason Benoit.
Mikula said he hired the
consultants to help with
Phoenixsurf.com because he
was “inadequate in certain
areas” of running the site.
Rishel, Benoit and
Hawkins told Mikula that
they wanted to work with him
because the members of NME
BOYD
members.
WARE
HEATHER FINLEY | The Red a Black
A Web site creators Jonathan Mikula (front), Caitlin
McLaughlin and Hans Gillan (back) pose for a portrait.
were trustworthy, devout
Christians and creating
Phoenixsurf.com was the best
way for Mikula to recoup his
financial losses from 12dai-
lypro.com.
12dailypro.com was an
autosurf company given a
cease and desist order from
the SEC after it was deter
mined to be a pyramid
scheme.
The consultants told
Mikula they could structure
Phoenixsurf.com in a legal
manner to avoid the charac
teristics of a pyramid scheme.
The Florida lawsuit states
Mikula and NME members
assured the consultants they
were a legitimate business,
with more than 50 percent of
the company’s income com
ing from sources outside of
the revenue from investors in
Phoenixsurf.com.
Phoenixsurf.com was cre
ated on Feb. 21, 2006, the
lawsuits state.
Less than six months later,
Phoenixsurf.com shut down,
losing many members’
money.
In the Florida lawsuit,
Rishel, Hawkins and Benoit
accuse Phoenixsurf.com,
Mikula and other NME mem
bers of conspiracy to injure
business, injunction, and
libel.
Mikula and other NME
members filed a countersuit
in Georgia in October 2006
accusing Rishel and
Hawkins’ company of violat
ing several laws including
federal and state securities
laws, conversion and breach
of contract.
Mikula’s countersuit in
Georgia district court claims
Phoenixsurf.com was sabo
taged by Hawkins, Rishel and
Benoit.
Mikula said
Phoenixsurf.com was doing
well, attracting 1,000 mem
bers a day for a month and a
half before administrators of
the site started to notice that
money was missing.
The Georgia court docu
ments claim:
> $1.5 million worth of
investments were made for
NME members without their
knowledge.
>- NME members were
never given access to their
own Web site.
> Illegal features on the
Web site were never changed.
>- Rishel, Hawkins and
Benoit hacked into
Phoenixsurf.com and took
more than $2 million.
The suit alleges that the
consultants wanted
Phoenixsurf.com to fail so
members would join Ad
Titans, another company run
by Rishel, Hawkins and
Benoit.
Mikula said his control
over Phoenixsurf.com was
minimal.
“Unfortunately I found out
about most of this stuff after
the fact... We paid out refunds
until our bank account was at
zero,” he added, losing “hun
dreds of thousands of dol
lars.”
“If (collegesurf.com) looks
and feels like Phoenixsurf,
good,” he said. “We’re very
very open to constructive crit
icism.”
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