Sunday, February 5, 2012

Get Rich Quick

If you suffer from insomnia, you’ve seen them. The late night air waves are filled with hucksters, scam artists, and worse promoting opportunities to get rich quick with no effort, prior knowledge, or skills. They are selling everything from $20.00 books to courses or software packages that cost many thousands of dollars. These scams and their predecessors offering free lunches at “informational” meetings that are in fact nothing more than opportunities to be subjected to a high pressure sales pitch have been around for a long, long time but somehow it seems worse during periods of high unemployment.

If it sounds too good to be true, it probably is too good to be true.

Let’s start with one that particularly annoys me, perhaps because my primary investment strategy involves stocks. Stock trading is a discipline that requires a great deal of study as well as a temperament found in skilled poker players. For a few thousand dollars “they” will sell you magic software that will tell you when to buy and sell shares in any company that interests you. Since major investment banking houses have devoted hundreds of million dollars over decades into highly proprietary trading software, do you really think that your little package on the PC can compete with the big boys? From The Tricks behind Infomercial Get Rich Pitches (Yahoo Finance): “In 2008, Utah residents Linda Woolf and David Gengler were charged in connection to the "Teach Me to Trade" stock-picking system. Customers paid between $3,000 to $40,000 to learn the system, even though the duo were, in the words of the Securities and Exchange Commission, "unsuccessful traders." Combined, they earned more than $6 million selling the product.”

Most of these scams pitch some variant of the no money down, property flipping, real estate scheme. Experts can buy distressed properties or foreclosures at steeply discounted prices, but they have enough equity positions to have a line of credit with one or more banks. Frequently these houses need considerable work before they are a marketable commodity. A person in this line of business needs to know the actual value of the property in its initial condition, what needs to be done to fix it, who can fix it, what that effort should cost, and the selling price of the final product. Boxes of CDs and books by late night TV conmen are not going to buy you houses with no money down even with bad credit.

A more recent variant on real estate get rich quick quackery is Russell Dalbey’s Winning in the Cash Flow Business, brokering seller-financed mortgage promissory notes. The initial program was sold for $40 to $160. Then the victims were encouraged to spend thousands more for additional products and coaching. The Federal Trade Commission and the Colorado Attorney General’s office are prosecuting the people involved in this scam for false and misleading claims by supposed customer endorsements. The Denver Better Business Bureau has been after these people since 2003.

By the way, the self help industry has discovered this ploy. I recently bought a interesting self improvement book in an airport shop, to help pass away the hours spent in terminals and airplanes between here and there. The material was OK, but as I read the book, it became obvious its primary purpose was as a sales tool promoting access to a website and personal coaches.

Let me end this post with a mention of the king of late night get rich quick scams, Kevin Trudeau. The following information comes from Wikipedia. Kevin Trudeau started his career posing as a doctor while depositing $80,000 in bad checks. Also in his early days, he stole credit card numbers and made $122,735.68 in fraudulent charges. After his release from prison, he was charged with running a nutrition multi-level marketing firm that was in fact a pyramid scheme. He settled with the state of Illinois and seven other states for $185,000.

Next he promoted dietary supplements, baldness cures, memory improvement courses, and real estate investment schemes on infomercials. This led to regulatory action by the Federal Trade Commission claiming, “That his broadcasts contained unsubstantiated claims and misrepresentations. In 1998, he was fined. In 2004, he settled a contempt-of-court action arising out of the same cases by agreeing to a settlement that included both payment of a $2 million fine and a ban on further use of infomercials to promote any product other than publications protected by U.S. Constitution's First Amendment," that would be the books he sells today including:

Natural Cures "They" Don't Want You to Know About
The Weight Loss Cure 'They' Don't Want You to Know About
Free Money "They" Don't Want You to Know About

He continues to be in and out of trouble with the law. His latest exploits include, a Federal Trade Commission warning concerning the drugs promoted in his weight loss book. Most recently, “On Nov. 29, 2011, Trudeau lost his 2010 appeal in the Seventh Circuit Court of Appeals. The court found that the $37.6 million fine for violating his 2004 settlement with the Federal Trade Commission was appropriate as Trudeau had aired 32,000 infomercials and described the figure as "conservative." The court considered sales only from the 800 number used to place orders and excluded internet and store sales. Additionally, the court found that requiring Trudeau to make a $2 million performance bond prior to participating in an infomercial was constitutional.”

Kevin Trudeau has also been recently charged with billing customers for materials they did not order including newsletters and other items.

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