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Is Russ Whitney violating the Texas Proprietary School Act? by John T. Reed 1 In its various filings with the Securities and Exchange Commission, Russ Whitney' company, Whitney Information Network, Inc. brags that its subsidiary Whitney Education Group, Inc. is a certified Texas Proprietary School. I spoke to the Texas Workforce Commission, the agency that regulates proprietary schools in Texas, and confirmed that Whitney Education Group, Inc. is, indeed, licensed by them. Their directory of licensed schools including Whitney is at https://m06hostp.twc.state.tx.us/PECOSRPT/propschool. Being a licensed Texas Proprietary School is governed by the Texas Proprietary School Act which is Chapter 132 of the Texas Education Code and by the Texas Proprietary School Rules. So, is Whitney Education Group, Inc. complying with the law? I think not. How so? Let me count the ways. Mandatory disclosure to students Section 132.055 (c) of the law says Whitney must provide the following information to each student before enrollment: "¢ course outline "¢ schedule of tuition, fees "¢ refund policy "¢ name, mailing address (101 East 15th Street, Austin, TX 78778-0001) and telephone number (512-463-222) of the Texas Workforce Commission for the purpose of directing complaints to the agency "¢ the current rate of job placement and employment of students issued a certificate of completion "¢ notification of the availability of a cost comparison with similar schools prepared by the Commission under Section 132.021(b) of the Act. Does Whitney provide all that information? I am not sure, but my impression from talking to a bunch of his customers and former employees is that they probably do not. In addition, I have been asking readers of my Web site for such information for almost a year. Many have sent me other stuff. None has sent me such a packet. Section 132.055 of the Act says Whitney must also publish its refund policy in their catalog and enrollment contract. Rule 807.125 has a lengthy, detailed description of the catalog Whitney must provide to prospective students. I have never seen or heard of such a catalog. If anyone has one, I would appreciate their sending it to me. There is a six-page catalog in the back of Whitney' new book Millionaire Real Estate Mentor. It does not comply with the Texas Proprietary School Rules. Refunds Refunds have been the bane of many a bad guru"”the one thing that finally got them into trouble. See my guru rating page for examples. When your seminar is lousy, lots of people want refunds"”so many that the gurus cannot afford to pay them. Note that the law requires Whitney to give

 students a copy of its refund policy. I have not seen the refund policy that Whitney gives to the students. But I have seen the one stated in his SEC filings. Virtually all of his SEC filings have the same statement. Here' a quote from page 12 of the Form S-1 that Whitney Information Network, Inc. filed with the SEC on 2/12/03. You can see it at the SEC' EDGAR Web site. "Generally, students pay for the course in advance and the fees are non-refundable." That' an easy-to-understand policy: No refunds. That would seem to be corroborated by the Better Business Bureau report on Russ Whitney' Whitney Information Network, Inc. They rate the company unsatisfactory due to unanswered complaints and that those complaints, ""¦concern requests for refunds not received that were cancelled during 3-day right to cancel." Is such a refund policy acceptable under the Texas Proprietary School Act? Nope. Here' some of what the Act says: 132.061(a) ""¦each proprietary school must maintain a cancellation and settlement policy that must provide a full refund of monies paid by a student if: (1) the student cancels the enrollment agreement within 72 hours (until midnight of the third day excluding Saturdays, Sundays, and legal holidays) after the enrollment contract is signed by the prospective student"¦" Reed note: A 72-hour rescission period is also a requirement of the Federal Trade Commission Act regulations (16 CFR 429). 132.061(b)(3) "if tuition and fees are collected in advance of entrance, and if, after expiration of the 72-hour cancellation privilege, the student does not enter the residence school ["residence school" is defined at 807.2 (20) of the Texas Proprietary School Rules as in-person classroom instruction as opposed to correspondence school], not more than $100 shall be retained by the school. Roughly speaking, refunds for students who cancel during the course are generally to be prorated based on the ratio of the number of hours attended to the total number of hours in the course. See the rest of Texas Education Code 132.061 (b) and (g) for details. How fast does Whitney have to pay the requested refunds? 60 days [TEC '§ 132.061(b)(7)]. Based on his own SEC filings, as well as the experience related by the Better Business Bureau and many complaints posted on the Internet and emailed or phoned to me, it would appear that Whitney has totally ignored the refund-policy requirements of the Texas Proprietary Schools Act. What if you stayed for the whole course? Suppose you stayed for the whole course and feel you were ripped off. Does the Texas Proprietary School Act say you cannot get a refund? Good news. '§132.061 (a)(2) says you can get a full refund if "(2) the enrollment of the student was procured as the result of any misrepresentation in advertising, promotional materials of the school, or representations by the owner or representatives of the school." An argument could be made that every student who ever attended a Whitney seminar is entitled to a refund on that basis. It is against the law for Whitney' people to solicit you through a representative who is not yet registered with the sate, or solicit you before the school or individual course has been approved by the state. I will try to get and publish a list of the dates Whitney' school was approved and the dates his various courses were approved. If they jumped the gun with you, you may be able to get a refund on that basis alone. Misrepresentations For example, Whitney' ads and promotional materials generally tell what I call "The Legend of Russ Whitney," namely, that he is a high-school dropout who owned "well over a million dollars worth of real estate at age 25 and was a one of America' youngest self-made millionaires at age 27 and that he made his first fortune in real estate in upstate New York." As far as I can tell, that' all false. See my comparison of Whitney' claims to my research, my article about his "first fortune," and my review of his book Building Wealth. If you need a document to prove misrepresentation, use the front and back covers of Building Wealth or his new book Millionaire Real Estate Mentor. They repeat these and other false statements there and at his Web site https://www.russwhitney.com. You may wonder if a book cover constitutes advertising. I think so. Plus, Texas defines advertising pretty broadly at 807.2(5) of their Proprietary School Rules: "Any affirmative act designed to call attention to a school or program for the purpose of encouraging enrollment." Whitney Information Network, Inc.' Better Business Bureau report says that they rate it unsatisfactory in part because of unanswered complaints of "misrepresentations during sales presentations at seminars." How does Texas define misrepresentation? At 132.055 (l), the law says you may be a Texas Proprietary School only if, "(l) The school does not utilize erroneous or misleading advertising, either by actual statement, omission, or intimation as determined by the commission." Go through my all the pages of my Web site regarding Russ Whitney and you will come up with a whole bunch of evidence that fits one or more of those criteria. For example, see my article on his TV infomercial and my article on how his latest book got to be an Amazon best seller. Advertising "designed to mislead or deceive prospective students" is also prohibited by '§132.151(4) of the Texas Proprietary Schools Act. Rule 807.121 says, "A school shall not make deceptive statements in attempting to enroll students." Subsection (b) of that section says the school must provide proof of its advertising claims when requested. I hope they will demand proof of the various claims made in the infomercial as well as proof of the "Legend of Russ Whitney" claims that seemed to be false in my investigation. Rule 807.53 (c)(5) says, "A representative shall not (5) give false, misleading, or deceptive information about any aspect of the school' operation, programs, completion or employment rates, examination success rates, job placement, or salary potential;" "˜Accredited"™ In their 7/16/02 10K filing with the SEC, Whitney Information Network, Inc. says, "Whitney Education Group, Inc. is accredited by the State of Texas as a Certified Proprietary School, effective January 8, 1999." [Emphasis added] That statement is false and illegal. Whitney Education Group, Inc. is accredited by no one. The State of Texas does not accredit proprietary schools. They just license them. Furthermore, the State of Texas anticipated schools overstating the meaning of being a Texas Proprietary School in Rule 807.122(d). It says, "A school shall not use terms to describe the significance of the approval that specify or connote greater approval. Terms that schools may not use to connote greater approval by the Commission include, but are not limited to, "accredited," "supervised," "endorsed," and "recommended." [Emphasis added] Intimidation, coercion Rule 807.53 (c)(7) prohibits representatives from engaging "in acts or practices that have a tendency to intimidate, coerce, or mislead a prospective student into accepting enrollment." Zat so? Well let' look at the list of words used by people who have been the subject of Whitney representatives"™ attempts to sell them on enrolling in a seminar. This is from my article on what happens to you at Whitney' "free training." "¢ rude (used by many, many people) "¢ abusive "¢ bully "¢ crude "¢ manipulative "¢ drill sergeant "¢' slick (used by many, many people) "¢ very high pressure "¢ scam (used by many people) "¢ snapped my head off when I asked a question "¢ glared at him when he left "¢ did not want anyone asking questions "¢ humiliating "¢ acted superior "¢ demeaning "¢ put downs

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