By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
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Phipps is tall and lean with a piercing glare rimmed in wire frames. The scythe-like lock of gray hair on his forehead adds to his intensity. He's a self-described evangelist, a crusader charged with saving the people from the ravishments of debt. "I hate debt with a purple passion," he says. "Debt, to me, is like drugs."
For two decades Phipps preached his gospel through a portfolio of multilevel or network marketing programs designed to loosen the stranglehold of consumer debt and compound interest. His programs went by the names Fast Cash Financial Services, Paymaster Profit Systems, Multi-Fax, Cash by Fax, Marathon Marketing and Life Without Debt. He operated from Web sites such as fortunebyfax.com. He sold program memberships, or "private contribution plans" as he called them, at prices ranging from $67.50 to $200 per month to $400, $6,250—even $100,000—per year.
In exchange for contributions, members received a kit of motivational books and tapes plus acid-tongued essays exposing the evils of the Federal Reserve Bank, the income tax and the federal government.
But the real juice in Phipps' program was the expanding networks he claimed could put thousands of dollars in each member's pocket beyond their original contribution. All a member had to do was initiate at least two others into the program and urge them to do the same, thus building a matrix that channeled cash upward.
"In reality there is no ceiling on what people can receive from our program, as it is totally driven by market demand caused by the combined efforts of our members," Phipps states in his Secrets of Selling the American Dream, his Life Without Debt training manual. A chart illustrates how a $400 annual membership can be leveraged into more than $100,000 from a matrix of 1,024 members.
At its height, Life Without Debt was a circulating slush fund passing between $700,000 and $1 million through Phipps' fingers every two weeks. It had a membership of 31,000. In one of the training manuals there's a photo of a smirking, bearded man holding up a sign. "This is what one million, three hundred thousand dollars in real cash looks like," the sign reads. The man is seated behind a table heaped with neat bundles of currency.
There was only one problem with his system: It's an illegal pyramid scheme. In June 2001 two undercover IRS agents paid Phipps a visit at his Life Without Debt Computer Center in Colleyville. They signed up for the $2,500 annual membership plan. They handed Phipps a bundle of cash. As he processed the agents' membership, Phipps boasted that some of his members had windfalls of $275,000 within six months.
Such claims are absurd, the IRS insists. Almost no Life Without Debt members earned large sums. The vast majority didn't even recoup their original contributions.
"The government is stupid, with brain-dead bureaucrats that are trying to regulate something they don't understand," Phipps says, bristling. Phipps doesn't believe for a minute he's behind bars because the government determined his program was illegal. Phipps believes he was locked up because the government wants to shut him up.
To his most devoted members, Phipps is a godsend. They marvel at his mesmerizing oratory, at the sincere emotion he summons to animate his concern for the American people. At his seminars, they say, Phipps' invectives against the banking system, the IRS and the federal government were devastatingly compelling, much to the dismay of government officials. "He's a phenomenal public speaker," Austin says. "He believes what's going on is not right, that people are led to believe that it's OK to live a life in debt."
Phipps believes he was called to lead the American people from government bondage. "I'm a modern-day Martin Luther King," he says. "I can move people. I like to speak from my heart, and people pick up on that sincerity. I'm not one of them glazed-daze-in-a-maze type public speakers that jacks you up for 30 minutes and you go out bouncin' off the wall and land on your ass after you get out the door. What I teach people stays with them."————
Phipps is the son of a farmer and custom harvester who reaped wheat every summer on a long trail stretching from the Texas Panhandle to the Canadian border, hauling his equipment and family with him. Phipps says his father—killed in 1972 after slamming into a bridge abutment while driving from Arlington to Muleshoe—was a mechanical genius, someone who could breathe life into any piece of junk.
Phipps was a frail, skinny kid who suffered from asthma and a hearing defect. He was a slow learner with an "underachiever complex." Yet Phipps seems to have inherited his father's knack. As a teenager he built racing cars out of junkyard scrap, one of which he throttled to numerous victories at the Amarillo Dragway.
"He was always fixing something or making something," says his mother, Melba Holtsclaw, who has operated her own independent Arlington insurance agency for more than 30 years. "He could do almost anything."
He eventually parlayed this fix-it know-how into an elaborate computer system that governed his vast multilevel marketing networks. He fed his computers names, contribution amounts and membership numbers. His computer regurgitated vouchers with the exact cash amounts to be disbursed to members along with the necessary mailing labels. He even developed an "automatic talking money machine," a gizmo members could call, key in their membership number, and receive voice confirmation of the members currently in the matrix below them, how much money they had received and how much more they had coming to them.