$478 Million Dollar Judgment Against Jeff Paul and Other Info Marketers

38 replies
FTC Announcement here:

At FTC's Request, U.S. Court Hands Down Record $478 Million Judgment Against Marketers of Massive Get-Rich-Quick Infomercial Scams

This is a court judgment concluding a 3-year lawsuit brought by the FTC. Unlike most FTC actions, the defendants did not 'roll over' and stipulate to an order. Instead, the FTC had to file a motion for summary judgment and submit all of its evidence. The court ruled there was liability and no fact in dispute about liability. Effectively, this was a trial.

The difference is stipulations are often made, even if there is no liability, to avoid hassles, costs, and potential liability. This is a finding of actual liability and thus is a very important ruling.

In addition to getting hammered for $487 million overall, injunctions were issued including lifetime bans on certain marketing and 20-year disclosure periods to the FTC. Next up for defendants: bankruptcy court, where they will learn fraud issues may not be dischargeable.

A few of the issues where the court found liability:

- Claiming easy money from tax lien certificates and mortgage tax sales.

- Misrepresenting income claims from turnkey Internet businesses (note: biz opps are banned from the forum)

- Not clearly and conspicuously disclosing negative option features where a buyer is billed monthly unless they take steps to cancel the recurring billing.

A negative option feature includes a free trial after which the buyer is charged if they have not first canceled. Per the court's order it also includes continuity plans and automatic renewal plans. Each of these is common by forum sellers.

The court's order lays out a checklist and roadmap for appropriate disclosures to avoid legal problems. Disclose:

1. The amount of the first payment.
2. When the first payment will be made.
3. When future payments will be made (example: monthly)
4. The amount for future payments.

For trial periods:

1. When the trial period starts.
2. Length of the trial period.
3. Specific steps and means to take to cancel.
4. The date or time period by which a cancellation request must be received to avoid a charge.
5. All material conditions, limitations and restrictions on getting something for free.

(I see where this could include free - if signup to an email list, or functionality stops working after 30 days, demo, or possibly that another product such as an upsell is required to do something, or an upsell was involved in any income claims by the seller, etc.)

For automatically renewed memberships:

1. The fact there is an automatic renewal.
2. The length of each renewal period.
3. The manner in which a cancellation request must be made.
4. The date or time period by which a cancellation request must be received to avoid a renewal charge.
5. Contact information where a buyer can submit their cancellation request.

.
#$487 #dollar #info #jeff #judgment #marketers #million #paul
  • Profile picture of the author YoungAndOpulent
    Banned
    It's good to see the authorities crack down on this type of thing, but I'm not sure if I'm perfectly fine with the government being that involved in free markets.
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  • Profile picture of the author Black Hat Cat
    Banned
    Originally Posted by kindsvater View Post

    The court's order lays out a checklist and roadmap for appropriate disclosures to avoid legal problems. Disclose:

    1. The amount of the first payment.
    2. When the first payment will be made.
    3. When future payments will be made (example: monthly)
    4. The amount for future payments.

    For trial periods:

    1. When the trial period starts.
    2. Length of the trial period.
    3. Specific steps and means to take to cancel.
    4. The date or time period by which a cancellation request must be received to avoid a charge.
    5. All material conditions, limitations and restrictions on getting something for free.

    (I see where this could include free - if signup to an email list, or functionality stops working after 30 days, demo, or possibly that another product such as an upsell is required to do something, or an upsell was involved in any income claims by the seller, etc.)

    For automatically renewed memberships:

    1. The fact there is an automatic renewal.
    2. The length of each renewal period.
    3. The manner in which a cancellation request must be made.
    4. The date or time period by which a cancellation request must be received to avoid a renewal charge.
    5. Contact information where a buyer can submit their cancellation request.

    .
    I checked out one of Jeff Paul's infomercial offers(tabletop millionaire or something) a few years back to see what he was doing, and from what I remember, all those things were present. When I decided to cancel the membership, I had no problems doing so because they explained how to do it right from the beginning. Never checked out his other stuff though, so can't say if he was doing the same thing in those cases.
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  • Profile picture of the author Kal Sallam
    If you're on tv don't you have to be careful since big brother is watching?
    It's just 2 cents worth of common sense.
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  • Profile picture of the author kindsvater
    Jeff Paul's Shortcuts to Internet Millions is a product specifically mentioned by the FTC. I don't know anything about it.

    There was also apparently a $15,000 coaching program offered to buyers. Just a guess -- but the sell a marketing product so there can be a high pressure pitch for an expensive coaching program that drains someone's life savings -- might lead to complaints.

    .
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    • Profile picture of the author dreamtoreality
      Originally Posted by kindsvater View Post

      Jeff Paul's Shortcuts to Internet Millions is a product specifically mentioned by the FTC. I don't know anything about it.


      .
      I just read all about that product. All I can say is that Jeff Paul is an absolute d**k.
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  • Profile picture of the author Robert Kren
    This is yet more infringement on personal liberty and freedom of speech. If they believe their product can make someone "easy money" from tax lien certificates and mortgage tax sales, or whatever, then that is their constitutionally protected right. IMO the FTC are traitors to the US Constitution.
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    • Profile picture of the author cjreynolds
      Originally Posted by Robert Kren View Post

      This is yet more infringement on personal liberty and freedom of speech. If they believe their product can make someone "easy money" from tax lien certificates and mortgage tax sales, or whatever, then that is their constitutionally protected right. IMO the FTC are traitors to the US Constitution.
      That's the problem - the court decided that the defendants either:
      #1 - didn't believe their product could perform as advertised (or knew that it couldn't)
      or
      #2 - didn't have any reasonable basis for the claim that it would perform as advertised
      If #1 is true, they are guilty of fraud - If #2 is true, then according to law they are still guilty of fraud.

      I can't legally sell you something by telling you that it will do "so-and-so" if it won't truly do "so-and-so". And that's not a violation of my right to free speech, it's a protection of your rights as a consumer! That's the FTC's job.
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  • Profile picture of the author morgan30
    Banned
    [DELETED]
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    • Profile picture of the author Lance K
      It never ceases to amaze me how blatantly some people misunderstand freedom of speech.
      Signature
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      • Profile picture of the author Robert Kren
        Originally Posted by Lance K View Post

        It never ceases to amaze me how blatantly some people misunderstand freedom of speech.
        It never ceases to amaze me how many will roll over and let then be taken away.
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        • Profile picture of the author Steve Wells
          Originally Posted by Robert Kren View Post

          It never ceases to amaze me how many will roll over and let then be taken away.
          That's for sure............!

          Regardless if the suject in this thread is a violation of freedom of speech or not.

          Our rights are slowly being stolen from us either because we are being tricked out of them, not vigilant enough to recognize the implications of what is going on, or because we simply are to lazy or scared to stand up.

          Maybe everyone in our country should be subjected to at least 3 months slavery to a goverment just so they can see how precious our freedoms are, and how much they should be protected.

          Maybe people need to be reminded of how thankful they should be for them, and for the people who willingly give their lives to protect them and those who died unwillingly to get us to the point that we are a free country.
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          • Profile picture of the author davezan
            Originally Posted by Steve Wells View Post

            Our rights are slowly being stolen from us either because we are being tricked out of them, not vigilant enough to recognize the implications of what is going on, or because we simply are to lazy or scared to stand up.

            Maybe everyone in our country should be subjected to at least 3 months slavery to a goverment just so they can see how precious our freedoms are, and how much they should be protected.

            Maybe people need to be reminded of how thankful they should be for them, and for the people who willingly give their lives to protect them and those who died unwillingly to get us to the point that we are a free country.
            Does your constitution give you the "right" to essentially cheat people, or not to
            do what you said you'll do for people who want out, though?
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            • Profile picture of the author Rbtmarshall
              On this issue, I wonder if there is an episode of American Greed is in the making?
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      • Profile picture of the author TheEye
        When I buy food, I look at the ingredients listed. I need to be able to rely on what has been written as ingredients is what is in the food.

        I can't set up a chemistry lab in the supermarket and test each item that I buy in case the manufacturer has lied.

        I need to be able to rely on what has been told is the truth. Without this trust commerce would grind to a standstill.

        When I buy an IM product I should be able to do the same.

        Free speech is the right to say what you believe to be true. Fraud is when you tell people things you know are not so.
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        • Profile picture of the author ronr
          I remember when I first heard about him, he was a legitimate marketer offering an info course on creating high end information products to niche markets. That was probably 20 years ago. It was very good, similar to Dan Kennedy stuff (he was a student of DK) I learned a lot from it and had very good success creating my own high end information products.

          Then over the years I would see his name associated with types of products and practices that are on the FTC's radar. It seemed like only a matter of time until it caught up with him.

          Like it or not follow the same road and eventually it will catch up with you, especially if you become high profile on TV.
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        • Profile picture of the author Mike Hill
          Originally Posted by TheEye View Post

          When I buy food, I look at the ingredients listed. I need to be able to rely on what has been written as ingredients is what is in the food.

          I can't set up a chemistry lab in the supermarket and test each item that I buy in case the manufacturer has lied.

          I need to be able to rely on what has been told is the truth. Without this trust commerce would grind to a standstill.

          When I buy an IM product I should be able to do the same.

          Free speech is the right to say what you believe to be true. Fraud is when you tell people things you know are not so.

          That's a bad example because food labels are the absolute worst misrepresentation of all...
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  • Profile picture of the author Don Schenk
    Apparently Jeff Paul, John Beck, and John Anderson may not have been banned from future advertising.

    "In addition, the order issued by U.S. District Judge Jacqueline Nguyen permanently bars from the infomercials business three of the defendants, Douglas Gravink, Gary Hewitt and Family Products LLC. Gravink, Hewitt, Family Products and Mentoring of America LLC are banned from the telemarketing industry.

    The other defendants are John Beck Amazing Profits LLC, Shortcuts to Millions LLC, John Beck, Jeff Paul and John Alexander. The companies are based in California."

    I remember reading the original indictment, and it seem Mentoring Of America was a coaching company, and the real fly in the ointment. They were the once creating coaching products ranging from a few hundred dollars to the $15 mark. Paul, Beck, and Anderson had contracted with them for some percentage.

    http://ftc.gov/os/caselist/0723138/1...nbeckorder.pdf

    FWIW I did purchase Jeff Paul's $4,000 per day in your underwear course. It was quit good, and I made some money following his directions, but I didn't make $4K per day, either because the market I picked was too small, or because I was fully clothed.

    :-Don
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    • Profile picture of the author ronr
      I did well with it to, Don, not $4,000 a day either, but I continued to sell my original product I created from it almost 20 years. Who knows how well I might have done if I did it in my underwear

      Originally Posted by Don Schenk View Post

      FWIW I did purchase Jeff Paul's $4,000 per day in your underwear course. It was quit good, and I made some money following his directions, but I didn't make $4K per day, either because the market I picked was too small, or because I was fully clothed.

      :-Don
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      • Profile picture of the author salegurus
        Originally Posted by Robert Kren View Post

        This is yet more infringement on personal liberty and freedom of speech. If they believe their product can make someone "easy money" from tax lien certificates and mortgage tax sales, or whatever, then that is their constitutionally protected right. IMO the FTC are traitors to the US Constitution.
        Dear Lord, like Paul said you are clueless my friend...
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  • Profile picture of the author JasonParker
    Anyone who's seen the Shortcuts to Internet Millions infomercial knew this day would come...
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  • Profile picture of the author jvreview
    While they'd be very good at information marketing, maybe they got greedy and went too far ... too bad. It's going to hurt other marketers, be careful!
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  • Profile picture of the author JennySweets
    3. Specific steps and means to take to cancel.

    Of the free or $1 trials or recurring monthlies / annuals, this is the ONE thing I do see a problem with now and then. Most of the time there is a clear customer service / support desk link but lately.. I've had to go digging a couple of times and that is NOT COOL.
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  • Profile picture of the author Randall Magwood
    I can't believe Jeff has transformed into this. He used to be the "little guys" guru. I guess living in his sister's basement is something he wanted to avoid going through at all costs.
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    • Profile picture of the author cjreynolds
      Originally Posted by Randall Magwood View Post

      I can't believe Jeff has transformed into this. He used to be the "little guys" guru. I guess living in his sister's basement is something he wanted to avoid going through at all costs.
      This is a story I seem to hear a lot lately - Someone who used to be one of the all-time "good guys" finally turning into a scammer.

      I kinda thought it was the other way around - newbie jumps into IM by spamming, scamming, and black hat, then learns how to run a real business and, hopefully becomes a "good guy".

      I guess it's a full circle for some...
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  • Profile picture of the author SocialMediaOwls
    I think buyers should know by now when you see an infomercial that says "quick" and "easy" your finger should be pressing the up/down button on your remote.

    Too easy
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    • Profile picture of the author cjreynolds
      Originally Posted by SocialMediaOwls View Post

      I think buyers should know by now when you see an infomercial that says "quick" and "easy" your finger should be pressing the up/down button on your remote.

      Too easy
      If you're watching infomercials, there's no hope for you anyway... go ahead and give them all your money
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      I just added this sig so I can refer to it in my posts...

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      • Profile picture of the author retirewithsandie
        Originally Posted by Black Hat Cat View Post

        I checked out one of Jeff Paul's infomercial offers(tabletop millionaire or something) a few years back to see what he was doing, and from what I remember, all those things were present. When I decided to cancel the membership, I had no problems doing so because they explained how to do it right from the beginning. Never checked out his other stuff though, so can't say if he was doing the same thing in those cases.
        A lot of people don't understand what they're getting into. I used to work for a company that allowed you to take infomercial calls from your home. The way the scripts are written are VERY confusing & worded to get them to say "yes" or "OK" without thinking. Some would think they were saying "yes" or "OK" to the original offer & didn't realize until the end, that they had "agreed" to upsells.

        When I was there, we didn't do any of these fellas that I recall, but we did do the Note Flipping guy & everyone's favorite Kevin.

        Anywho, some were set up that once you got to a certain point & had their CC information there was no escape (some asked for the CC in the beginning others towards the middle). They HAD to call CS to cancel the order, if it wasn't too late by then.

        When I worked for AMEX, we had so many disputes for continuity programs where people said they didn't know they were getting into it or being charged more than they thought (many of those were they thinking they were going to get a $100+ product for $5). That they thought it was a one time only dealio or that they would have to call to have further charges/shipments.

        Sometimes folks did this on the internet where they HAD to click boxes agreeing to things before they could move on to the next part & the creditors would send back that information. Some people would still try to dispute further.
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        • Profile picture of the author ronr
          Yep sleezy tactics like these deserve to be punished.

          Originally Posted by retirewithsandie View Post

          A lot of people don't understand what they're getting into. I used to work for a company that allowed you to take infomercial calls from your home. The way the scripts are written are VERY confusing & worded to get them to say "yes" or "OK" without thinking. Some would think they were saying "yes" or "OK" to the original offer & didn't realize until the end, that they had "agreed" to upsells.

          When I was there, we didn't do any of these fellas that I recall, but we did do the Note Flipping guy & everyone's favorite Kevin.

          Anywho, some were set up that once you got to a certain point & had their CC information there was no escape (some asked for the CC in the beginning others towards the middle). They HAD to call CS to cancel the order, if it wasn't too late by then.

          When I worked for AMEX, we had so many disputes for continuity programs where people said they didn't know they were getting into it or being charged more than they thought (many of those were they thinking they were going to get a $100+ product for $5). That they thought it was a one time only dealio or that they would have to call to have further charges/shipments.

          Sometimes folks did this on the internet where they HAD to click boxes agreeing to things before they could move on to the next part & the creditors would send back that information. Some people would still try to dispute further.
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  • Profile picture of the author YoungAndOpulent
    Banned
    Am I the only one tired of seeing people try to rationalize defrauding behavior by calling it free speech?
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    • Profile picture of the author dc_publius
      Originally Posted by YoungAndOpulent View Post

      Am I the only one tired of seeing people try to rationalize defrauding behavior by calling it free speech?
      You're not the only one.

      This should serve as a heads up to all the people using deceptive advertising. When it comes to these sorts of things, it's the big guys who get busted first, and then they move down the line to smaller and smaller players.

      And it's about freakin' time. It screws up all the legitimate marketing efforts as people click on 'free groceries' instead of '5% off of your groceries'.
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  • Profile picture of the author rosetrees
    Freedom of speech is, in my personal opinion, the freedom to express an opinion calmly and rationally and in a non-inflammatory way. Fraud, deception, deliberate trolling, deliberately upsetting someone or deliberately bullying or baiting someone are NOT freedom of speech. They are deliberate acts.
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    • Originally Posted by rosetrees View Post

      Freedom of speech is, in my personal opinion, the freedom to express an opinion calmly and rationally and in a non-inflammatory way. Fraud, deception, deliberate trolling, deliberately upsetting someone or deliberately bullying or baiting someone are NOT freedom of speech. They are deliberate acts.
      It's possible that others share your personal opinion but we're talking about constitutionally-protected freedom of speech. As in the U.S. Constitution. You've probably heard about that little disagreement we had with King George.

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  • Profile picture of the author RenegadeSC
    There's a lesson to be learned here by all. Be very clear about your offer, continuity programs AND your claims.
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  • Profile picture of the author handymoney2
    I think if the court decided that then they it was the right call and I think we need more of this.
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  • Profile picture of the author rwbovee
    A lot of these crooks go on year after year. The government should get after them.
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  • Profile picture of the author catherinachia
    The checklist and roadmap for appropriate disclosures to avoid legal problems are great guidelines.
    However, i do not advocate the practice of free trial with continuity.
    Free trial with optin continuity would be fairer to consumers.
    Ultimately, for business to survive long, it has to be legal, moral and ethical.
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    • Profile picture of the author Alexa Smith
      Banned
      Originally Posted by catherinachia View Post

      Ultimately, for business to survive long, it has to be legal, moral and ethical.
      You're entirely correct, but there really are many people who genuinely don't believe this to be so, if they think about it at all. (They also overlap a good deal with the people who whine about free speech and the erosion of their "rights", typically without understanding exactly what either of those terms means, or how they really work.)
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