“Find ‘em, list ‘em, and make money”? Not so fast, say the FTC and Colorado AG

You run a successful business or maybe you work with some of the top companies in the country. A friend or relative is struggling to climb out of a financial hole. They ask for advice about a can’t-miss “wealth-building program.” Do them a favor and suggest they apply the brakes before shelling out a penny.

That’s the message from a long line of cases challenging allegedly deceptive money-making claims for the latest “system” for financial freedom, including an action just filed by the FTC and the Colorado AG against infomercial pitchman Russell Dalbey, Catherine Dalbey, the Dalbey Education Institute, and related companies.

If you haven’t spotted Dalbey’s “Winning in the Cash Flow Business” infomercial, you’re not watching much TV. It’s run tens of thousands of times on broadcast and cable stations. The system du jour claims to teach people how to find, broker, and earn commissions on seller-financed promissory notes — privately held mortgages or notes often secured by the home or land that’s the subject of the loan.

As the thousands of people who paid approximately $40 to $160 for the program will tell you, Dalbey’s pitch is persuasive: “It doesn’t get any easier than my simple three steps. You just find cash flow notes, you list them, and make money. . . . There are literally tens of millions of dollars in cash flow notes in every county across America. So, there’s virtually no limit to how much money people can make.”

Once the defendants had prospective customers on the phone, the complaint alleges they turned up the heat by pushing enrollment in additional services — like the Protégé Program — costing hundreds or thousands more. Complete with stage directions, one phone script read:

  • “(Increase your voice volume) Here is the exciting part (name), in the New Year, Russ is introducing a completely new way to market your note business — it’s easy and simple. In fact, we are offering this to our protégé students, first, because space is so limited. The best part about this marketing is that not only are you going to be working with Russ’ very own Marketing Directors here Winning in the Cash Flow Business, you are going to be empowered — let us empower you to have the ability to have note sellers find you, let us empower you so you know exactly how to create good, (pause), effective, (pause) marketing for your note business. . . . These guys know how to get you making money with the fastest and most effective ways . . . .”

But before you get too amped, let’s go back to the complaint. According to the FTC and the Colorado AG, few people who bought the defendants’ products quickly and easily brokered promissory notes or earned big bucks. In fact, most people didn’t earn a dime — with one notable exception, of course: Russ Dalbey. Mr. Dalbey may have made money, but according to the complaint, he hasn’t earned millions from brokering promissory notes, as he’s claimed. Most of his note-related income for the past two decades has come from selling products claiming to teach people how to make money from promissory notes.

Pleadings watchers will spot an agency “first” in this case. Along with the Dalbey complaint, the FTC and Colorado AG announced a settlement with Marsha Kellogg, one of the consumers who offered a glowing testimonial in a Dalbey infomercial — an endorsement the enforcers say was deceptive. The order is the FTC’s first against a consumer charged with making misrepresentations in a testimonial.

The case is pending in federal court in Colorado.

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