FTC and Colorado AG: Infomercial pitchman's promissory promises not premised on truth

According to the ubiquitous infomercials, to rake in the big bucks with Russell Dalbey’s “wealth-building” programs, all you had to do was “Find ‘Em,” “List ‘Em,” and “Make Money" — the “‘Em” being seller-financed promissory notes.  The pitch was convincing to the close to one million people who bought the programs.  But according to the FTC and Colorado AG, the defendants’ claims of quick and easy money were deceptive. The case just settled with a stipulated order that imposes far-reaching bans that will end Dalbey’s infomercial, telemarketing, and business opportunity days forever.

People who watched a lot (or even a little) late night TV couldn’t miss Dalbey’s overhyped claims.  On one infomercial — which ran tens of thousands of times — Dalbey said, “The truth is anyone can make a ton of money or even become a millionaire and you don’t need money or college or even talent to do it.”  Purported users of his “system” supposedly earned “$1.2 million in 30 days,” “$79,000 in a few hours,” and “$262,216 part time.”  But according to the FTC and AG, claims conveyed through testimonials were at best atypical and often were flat-out false.

The deception didn’t end there.  Even after people shelled out between $40 and $160 on the initial program, telemarketers pursued them to pay hundreds or even thousands more for additional stuff, like seminars, coaching sessions, and lead lists.  But no matter how large the investment, the FTC says very few people made any money, let alone the kind of money Dalbey promised.  The infomercials may have been called “Winning in the Cash Flow Business,” but the vast majority of Dalbey’s customers lost out.

Among other things, the settlement bans Russell Dalbey and Catherine Dalbey, who also was active in the companies, for life from telemarketing, from marketing or selling business opportunities, and from producing or distributing infomercials.

The Dalbeys also must disclose their assets in sworn financial statements, repatriate all foreign assets, and cooperate fully as the FTC and Colorado AG’s office determine how much of the $330 million judgment the Dalbeys can pay.  Under a separate stipulated order with Russell Dalbey’s three companies — DEI, LLLP; Dalbey Education Institute, LLC; and IPME, LLLP — the companies will be liable along with the Dalbeys for the $330 million.  The three companies, which ceased operations shortly after the FTC and Colorado AG's complaint, filed Chapter 7 bankruptcy petitions in 2011.

What’s the best advice for people thinking about buying a business opportunity or money-making “system”?

1.  Follow the example of the best-run businesses and convene your own personal “board of directors.”  Successful entrepreneurs don’t make a move without consulting trusted advisors.  Before investing in a business opportunity or paying for a system or seminar, run the proposal past people in your inner circle with a track record of business know-how.

2.  Consider tips from the FTC about how to spot a questionable money-making offer.  Steer clear of any pitch that sounds even vaguely like one already challenged by law enforcers as deceptive.

 

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