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How to get refunds from bad gurus

by John T. Reed 2
Goodwill
Reputable companies accumulate what’s called goodwill over time. That is, people do business with them, have a good experience, and are therefore inclined to go back and to recommend the company to their friends and relatives. When established companies change hands, the bookkeeping often includes an amount for goodwill, which is the difference between the price paid for the company and the value of its tangible assets like real estate, personal property, and paper assets. Because of the value of goodwill, reputable companies are extremely reluctant to change their name.
Badwill
Disreputable companies, on the other hand, accumulate badwill over time—complaints, lawsuits, word-of-mouth denunciation. When the amount of bad will is starting to eat into their profits, they change the company name and address. To such companies, the only cost of a name change is new stationery, moving expense, and a new fictitious name registration fee. They lose no goodwill because they never had any.
I would say it’s generally a predatory lending scam when the financing is of a transaction that is very likely to result in default, either because the borrower was not creditworthy or because the products or services being financed are shoddy and likely to cause the buyer to stop paying, or both.
All states have numerous laws to protect consumers against such practices. These laws do not stop all such scams, but they are somewhat effective. However, when a consumer is persuaded to go into business—even a home-based business—he or she looks to the courts like a businessperson, not a consumer. Consequently, none of the consumer protection laws are applied. For example, I understand the Massachusetts leasing company lease has the words “business lease” on it. Arguably, the doctrine of substance over form may enable a court to say that these are really consumer transactions. If not, the legislatures should change the laws to broaden the definition of a consumer to include laymen who are being persuaded to buy or lease some home-based-business product or transactions which fall below the small claims court limits.
By keeping the amounts in question relatively small (The Massachusetts example I heard of is fond of $4,200 amounts), the scam company is able to use the small claims court to go after the mark. Small claims courts often have more lenient procedures. For example, MA small claims courts apparently allow the plaintiff—in this case, the leasing company—to serve notice of the lawsuit on the borrower by first class mail and takes the leasing company’s word for it that they did mail it and that it went to a current address for the person in question. The fact that many claim they never received any such notice indicates either the leasing company did not mail the notice at all or mailed it to an incorrect or out-of-date address. However, the company is reportedly quite good at finding these folks and their cars and bank accounts after they obtain a default judgment from the MA small claims court.
The small claims court dollar limits also serve the purpose of making it hard for the victim to justify the cost of hiring an attorney to fight the collection efforts. Although an attorney I spoke to who is familiar with these scams said that the scam company invariably walks away if the victim resists in court. Unfortunately, most victims just cry out in financial pain like children wanting their mommy or daddy to help them. Crying out to friends, relatives, Internet pen pals, the scam company, and the authorities is far less effective than just going to the small claims court judge and quietly pointing out that you never got notice of the suit or that the whole transaction was a scam.
U.S. Postal Inspection Service
Check your local phone book for the local number. The Chief Postal Inspector is in DC at 202-268-4267.
FBI http://www.fbi.gov/
Better Business Bureau
I have mixed feelings about the Better Business Bureau. It has long struck me as a bit of a protection racket. They ask businesses to join. If you refuse, they say they don’t know you when people make inquiries. Seems to me they should just say you are not a member and they do not provide favorable reports on non-members. Saying they never heard of you or whatever the exact wording is seems to imply that you are less than a well-established business. However, they perform a useful service and are generally worth calling. Their phone number is in your phone book. Their national number is 703-276-0100. http://www.bbb.org/
Post it on the Web
Tell about your complaint on the Web. I have a guru-rating Web page. I think everyone should have a similar page at their own personal Web site. Whenever you have a good or bad experience with a business, write it up. That includes your dry cleaner, auto mechanic, or some guru who sold you a bill of goods. Register your home page with the major search engines. You do that by going to each one’s home page. Somewhere on there you will find the words “Add URL” or something similar. Click on them and you will get a form to fill out. Once you register, the search engine will read and memorize every word on your page. Then when people search for the guru in question, they will come across your complaint about him. After it costs him a few new suckers, he may be willing to pay you so you will remove the page. Do not go into the extortion business. Just use this tactic for legitimate complaints, then up date or remove the complaint if and when the guru corrects the situation.
There are also a number of Web sites that will let you make comments about your complaint. I often post complaints I receive from readers at my Web site. Click here to send me a complaint.
Tell the media
I once helped a woman get a refund from Bob Allen. She was in the San Francisco area and I knew he was going to appear on a local TV show. I put her in touch with the producer. He put her in the audience where she confronted Allen about her inability to get a refund. He promised she would get it in front of the TV audience—and she did.
Nowadays, the typical news program has a Web site. Often those Web sites have at email address to which you can send story ideas.
Many local news organizations have ombudsmen who try to solve consumer complaints. Money Magazine had one last I checked.
I once had trouble getting money owed me from a Philadelphia bank. I wrote to the ombudsman of the Philadelphia Inquirer, the main daily paper there, and sent a copy to the bank president. Good thing I sent the copy. The ombudsman wrote back that he only did complaints about employees of the paper. Fortunately, he did not send a copy to the bank president, who apparently feared bad publicity and promptly paid.
On another occasion, I wrote a check for $600 on a Merrill Lynch Cash Management Account. They took $60,000 out of my account. When I called to complain, they said I wrote a check for that amount. I gave them a few expletives deleted and demanded my money NOW! No refund. I then sent a complaint to Money Magazine. They were very interested and called me and Merrill Lynch. Boy, did I get my money fast—with interest!
In general, whenever you send a complaint to anyone, you should send a copy to the bad guru. Bad guys often do the right thing because they assume that a media outlet or government agency will take action against them even when the outlet or agency has no intention of doing so.
Here are some media outlets that might be interested:
60 Minutes* 524 West 57th St., New York, New York 10019 (212) 975-3247
20/20
Time
Newsweek*
U.S. News & World Report
Money Magazine*
Kiplinger’s Personal Finance
48 Hours
Dateline
NBC Nightly News
ABC News
CBS News
News Hour with Jim Lehrer
CNN
Larry King Live*
CNBC
MSNBC
Today Show
Early Show
Good Morning America*
Smart Money Magazine
Wall Street Journal
* Media outlets where I have appeared in stories about bad gurus
Do not send the same letter to all of them simultaneously and tell each that you have written to all the others. 1. The media want exclusives—stories their competitors do not have. 2. If you ask more than one person to help you and they know you asked more than one, they tend to assume the other person you asked will help you so they don’t have to and it ends up nobody helps you. Better to contact one media outlet, give them a chance to do the story, then move on to another media outlet and do the same only when the first one shows no interest.
There are also local radio and TV shows in various areas that do consumer complaint or investigative reporting. When contacting the media, try to target your story to a particular person who is not a celebrity. Celebrities tend to treat such contacts as fan mail. Go instead to a producer. You can see their names in the credits at the end of a TV show. Also, use your head about the nature of the show you contact. Many news programs, like Hardball, are purely political. Better to go with an investigative show like 60 Minutes or NBC Nightly News’ “Fleecing of America” segments.
Sue them yourself
I have done that once or twice, although not against bad gurus. Bad gurus typically violate federal laws against mail fraud, wire fraud, and racketeering. Bad guys are less likely to ignore a suit than a complaint.
Regulators
Often of late, bad gurus have crossed the line between free speech, which is totally unregulated, and things that are highly regulated like securities, insurance, practice of law, real estate agency, and so forth. In many cases, they will not say their are in the securities business, but the law only cares if they are, not whether they say they are. That’s called the doctrine of substance over form. If that is pertinent to your case, you may get some mileage by complaining to those who regulated certain professions like:
state bar association
Securities and Exchange Commission
state securities commission
state real estate department
state insurance department
National Association of Realtors®
On 12/8/03, a reader from Hawaii called to tell me he had followed the above advice and gotten several refunds from the formerly defiant Robert Allen organization. He took an Allen seminar for $1,490, was dissatisfied, and tried to get a refund. He was spoken to by a junkyard dog type person who apparently gets off on telling refund seekers to drop dead.
All the bad gurus apparently have such employees. At the seminar, when they are trying to get your money, everything is sweetness and light and “Oh, yes. Of course, we will give you a refund if you are unhappy.” But then when you actually try to get a refund, they laugh in your face and dare you to try to file a credit card dispute or complain to the BBB or government.
In this case, the reader got nowhere with Allen, so he went to many of the organizations and agencies listed above including the Orlando, FL Better Business Bureau, the FL attorney general, the Federal Trade Commission, and his credit card company (make sure you complain within the time limit—usually 30 to 60 days).
Then Allen’s people called and told him to withdraw the credit card complaint. They offered to pay a refund of some amount if he signed a release in which he agreed to remain silent about the fact that he got a refund. He refused to sign the release. They finally paid the refund without his signing the release.
In addition to getting his own refund, he also helped three other people get refunds of $2,900, $5,490, and $5,900 from the Allen organization.
Here’s an article from the January, 2001 issue of my newsletter, Real Estate Investor’s Monthly.
Leaving First Amendment Land
One of the most frequent questions I get is how can I get a refund from such and such real estate guru. In the early years, laymen and reporters would often ask, “How can these guys get away with this?”

Free speech
I would explain that they were in First Amendment Land. You can say anything in the United States—for example, that The Holocaust never happened—and you break no law.
But in recent years, the bad gurus, who were never a very bright bunch, have concluded that they can make more money if they go beyond just books, cassettes, and seminars. If I were a bad guru’s lawyer, I would say, “You can’t do that. Those areas are regulated and subject to numerous laws.” Either their lawyers aren’t saying that or the gurus are ignoring them.

‘Mentoring’
“Mentoring” is one of the most popular and most expensive new services provided by bad gurus. For multi-thousand-dollar nonrefundable retainers, famous gurus say they will provide phone consultation for a year or two. Offering “mentoring” services triggers the shingle theory. In the book Ethics in Real Estate edited by Stephen Roulac, he says of that theory, “…by holding oneself out to the public as engaging in a particular profession, the public rightly relies on that person or firm as being an expert in performing that profession. The public reasonably expects the expert to have the requisite knowledge and skill for the professional tasks in which the expert engages and then to employ appropriate due care in applying that knowledge and skill.” One statutory example of the shingle theory is §3372(b)(1) of the California Corporation Code. Section 3372(a) says,
Any person engaged in the business of advising others for compensation as to the advisability of purchasing, holding, or selling property for investment and who represents himself or herself to be an expert with respect to investment decisions in such property, or any class of such property, shall be liable to any person to whom such advisory services are furnished for compensation and who is damaged by reason of such person’s compensation and for such damages…
My impression is that the bad gurus fail in each of the elements of a lawful investment advice: expertise, skill, and due diligence. So moving into “mentoring” exposes previously immune gurus to legal attack. However, although they are now violating the law, their fees generally stay below the $10,000 threshold that I and others have written is a minimum for warranting litigation. On the other hand, damage done by following their advice will likely exceed that amount.

Advertising
The content of a book, cassette, or speech is utterly unregulated, but advertising of such products are regulated and subject to laws requiring truthfulness. This is why bad gurus prohibit recording of their verbal come-on speeches and why they hope you won’t record TV infomercials.
Virtually no worthwhile real-estate investment products are sold through TV infomercials or free come-on seminars. But if you insist on buying such a product, make sure you record the infomercial or come-on speech before you buy the product. That will provide crucial evidence of the fraud.

Public companies
Taking a company public has been the source of the wealth of many of the most famous millionaires like Bill Gates and Steve Jobs and Michael Dell. Some gurus have gone that route. Offering stock in a corporation to the public is a heavily regulated activity, as is continuing to operate a public company. There are many public documents available and many regulators who may be interested in looking into your complaint.
Investment groups
Some bad gurus have put some of their followers into investment groups, taking commissions and markups for doing so. That should give gurus’ lawyers nightmares. Not only are there many laws governing such activities, state and federal regulatory organizations focus on them. Many, if not most, group investments are securities and therefore must be registered.

Insurance
The late Charles Givens even started an insurance company to sell policies to his followers. Ouch! That is a highly regulated industry.

Finder’s fees
The typical person who is dumb enough to buy expensive real-estate advice from a bad guru has only enough cash or credit to finance the guru-material purchase. So their first reaction to a guru’s pitch is to say they have no money to invest, therefore they do not want to buy the investment advice.
To the gurus, who are really just salesmen, this is merely an objection. Overcoming objections is what salesmen do. One of their ways of overcoming this particular objection is to say, “I will teach you how to find good deals. Bring them to me and I’ll pay you a finder’s fee.”
In fact, the guru just wants the up-front money from the customer. He has no intention of investing in anything, much less some *beep* deal brought to him by a cashless, creditless, novice.
In some states, like New Jersey, it is illegal to pay a finder’s fee to anyone but a licensed broker. In other situations, state and federal laws like the Real Estate Settlement Procedures Act may apply.

‘I’ll invest with you’
Another common way of overcoming the “I have no money to invest” objection is for the guru to say, “Don’t worry. I’ll put up the down payment money and give you part of the equity.” That is ostensibly a sort of put option or a contract to purchase real estate. In fact, contracts to purchase or put real estate are not enforceable unless the property and terms are stated with great specificity. On the other hand, gurus are experts, or so they claim, taking money from consumers. The law bends way over in favor of consumers in such situations. Furthermore, litigation against such a guru will almost certainly reveal that he or she has never invested in any such deal. A court is unlikely to let that pass unpunished.

Dumb enough
I originally thought these guys were too clever to leave First Amendment Land. I was wrong. They go wherever they can make a buck, including areas where they can be nailed legally.
John T. Reed, a.k.a. John Reed, John T Reed, Jack Reed, 342 Bryan Drive, Alamo, CA 94507, Voice: 925-820-7262, Fax: 925-820-1259, Email: johnreed@johntreed.com

CONSUMER WARNING NOTICE: I recently saw Russ Whitney on a late night TV infomercial and then attended one of his "free" seminars. Unfortunately I believed all of their LIES and FRAUDULENT CLAIMS and I paid thousands of dollars to go to his "training camps". Needless to say I was clearly ripped off, cheated and lied to by Russ Whitney and his employees (band of thieves). My mistake was not searching the Internet to find out more about Russ Whitney and his company's HORRIBLE reputation for fraud, deception and illegal activities. Had I searched online I would have found out about THOUSANDS of customers being cheated, HUNDREDS of investigations by the Attorney General into the fraud of Russ Whitney and his company's, and that Russ Whitney himself is a CONVICTED VIOLENT FELON and spent years in PRISON. I saved the cached pages from the major search engines of the John Reed lawsuit with Russell Whitney and the TRUTH and FACTS that Reed discovered during his investigation of Whitney. I am posting this information on real estate discussion boards so other people do NOT get cheated and ripped off like I did.