Investors Sour on Investments in Milk Culture

A nationwide soured-milk-culture investment fad appears to be collapsing in the wake of lawsuits initiated by several states, a freezing of company funds by California officials and complaints from angry customers who have not been paid for the cultures they’ve grown.

An Irvine firm allegedly has been manufacturing a line of women’s cosmetics using the sour milk cultures as a key ingredient.

But in recent weeks, the two major firms involved in buying and selling the cultures have been unable to pay an estimated 27,000 customers across the country, according to Stephen Scholl, a Kansas City, Mo., attorney representing Culture Farms Inc. of Lawrence, Kan.

Payments had been running about six weeks late, but they stopped completely after the California attorney general’s office obtained a court order Friday freezing the California bank accounts of a second milk culture firm, Activator Supply Co.

Since last December, Activator Supply, of Pahrump, Nev., has been selling kits which allow customers to grow a fermented mixture allegedly used in a line of women’s cosmetics developed by House of Cleopatra’s Secret Inc. of Irvine. The kits range in price from $350 to $2,450. Culture Farms Inc. of Lawrence, Kan., had been purchasing the culture back from investors for $6 to $10 a batch.

Promoters told customers they would make a profit of $550 by selling the cultures grown from a $350 kit.

However, lawsuits filed by state authorities in Oregon, Kansas and California allege the operation is a giant, illegal pyramid sales scheme because most of the culture purchased by Culture Farms is recycled into new kits that are sold back to customers by Activator Supply.

Meanwhile, angry customers demanding their money have been unable to reach company officials. Terry Prather, a Wilmington, Calif., investor, sent a registered letter, dated June 6, to Activator Supply asking for his money back. On Wednesday, Prather received a letter dated June 14 from Activator, refusing to refund his money. Prather invested $6,400 in culture growing kits, but received only $800 in payments from Culture Farms Inc.

Although tons of the culture have been grown by investors in 16 states, only about 240 pounds have been committed for use in cosmetics, according to Craig Stancliffe, an attorney for the Kansas securities commissioner.

Culture Farms’ attorney Scholl said Activator Supply Co. has suspended the sale of kits designed to start new cultures. “Things do not look optimistic for them right now,” said Scholl in an interview with Associated Press.

Activator Supply Co. spokeswoman Laurel Sullivan confirmed that payments to customers have stopped. But she said company attorneys were trying to negotiate with California state officials to release the company’s bank accounts.