A U.S. District Court judge has imposed a record $478 million fine against the makers of John Beck’s Free & Clear Real Estate System in a suit brought by the Federal Trade Commission (FTC), as well as a lifetime ban on individual defendants from the infomercial and telemarketing businesses.
In its complaint, the agency alleged that the defendants marketed deceptive “get-rich-quick” and personal coaching systems. According to the FTC, the defendants claimed that consumers could make easy money by following tips like buying real estate at foreclosure sales and could quickly and easily earn “substantial” amounts of money with “little” financial investment.
Each system included a free 30-day club membership, which the defendants did not disclose became a recurring monthly fee if consumers failed to cancel. Instead, consumers paid $39.95 per month for the systems and up to $14,995 for personal coaching, with “nearly all” consumers losing their money, the FTC said.
The lifetime ban on telemarketing and infomercials for various defendants was appropriate based on a “long history of blatantly disregarding the law,” a “technique of deception” that could be easily transferred to an advertising campaign for another product, the severity and pervasiveness of the violations at issue, and the “massive” size of the consumer injury, U.S. District Court Judge Jacqueline H. Nguyen concluded. Considering all of the circumstances, “the court believes that a less restrictive injunctive relief will be ineffective.”
As for the record fine, Judge Nguyen said the $478,919,765 represented the total net revenue the defendants received from approximately 1 million consumers. She rejected the defendants’ request to reduce the award for the benefit of actual services rendered and monies attributable to consumers who benefitted from the programs.
“Because defendants’ gains flow from their deceptive activities, the court agrees with the FTC that defendants’ liability should not be reduced to account for consumers who received some form of benefit. Whether the consumer is lucky enough to make a profit or some small amount of money from applying what he learned from defendants’ products is irrelevant to the issue of whether defendants’ representations were deceptive and misleading,” Judge Nguyen wrote.
To read the final judgment in FTC v. John Beck Amazing Profits, LLC, click here.
Why it matters: The FTC said the settlement should provide a warning to companies scamming consumers. “This huge judgment serves notice to anyone thinking of using phony get-rich-quick schemes to defraud consumers,” Jeffrey Klurfeld, director of the Western Region of the FTC, said in a statement. “The FTC will come after you if you violate the law. It’s also a reminder to consumers that they should be skeptical about these types of easy-money claims.”