Another cautionary tale from the Federal Trade Commission. Blinded by greed and dreams of getting rich quick, nearly one million consumers ended up out at least $39.95 when they bought into a real estate “system” promising thousands of dollars a week in earnings.
The backers of the three alleged schemes have been ordered to submit remedies to the Federal District Court in Central California after the FTC won a court judgement. The FTC said it would seek more than $450 million in monetary relie.
Federal District Judge Jacqueline Nguyen granted the FTC’s request for summary judgment and ordered the commission and defendants to submit arguments on appropriate remedies.
The case stemmed from the infomercials “John Beck’s Free & Clear Real Estate System,” “John Alexander’s Real Estate Riches in 14 Days,” and “Jeff Paul’s Shortcuts to Internet Millions.” In granting the judgment the court found that the infomercials misled consumers in violation of federal law. Despite the easy-money claims, the court found that nearly all consumers who paid the $39.95 cost of the system lost money.
The court ruled that defendants falsely represented that the John Beck system would give consumers the ability to purchase homes at tax sales with little financial investment. The court also found that the earnings claims in the John Alexander informercial were false. The Jeff Paul infomercial created an overall impression that a typical consumer could easily earn thousands of dollars a week simply by purchasing and using the system. The court found less than one percent of consumers who purchased the systems made any profit.
To make matters worse, consumers were enrolled in programs that charged recurring fees of $39.95 a month without their knowledge, a violation of the FTC Act and the Telemarketing Sales Rule, the court said.
The defendants also offered personal coaching services, which cost up to $14,995, to consumers who purchased any of the three systems. The court found that, contrary to the defendants’ claims that consumers would quickly and easily earn back the cost of the coaching program and that the coaching would substantially enhance consumers’ chances of making money, almost all consumers who purchased coaching programs lost money. The telemarketers also violated the TSR by repeatedly calling consumers who previously asked the defendants not to contact them.
The court found John Beck Amazing Profits LLC, John Alexander LLC, Jeff Paul LLC, Family Products LLC, and Mentoring of America LLC liable for the misrepresentations in the infomercials and those made by the defendants’ telemarketers. Gary Hewitt and Douglas Gravink were found to have controlled each of the corporate defendants and to be liable for injunctive and monetary relief. In addition, Beck, Alexander, and Paul were found liable for the misrepresentations concerning their own systems because they participated directly in the deceptive advertising, knew that the infomercials made material misrepresentations, “or at least were recklessly indifferent to the truth or falsity of the infomercials,” the court ruled.
–Sean Gallagher, CMN Staff Writer
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