Are Wealth Without Risk Informercials an Extension of John Beck Tax Lien Systems Challenged by FTC?

A reader sent me an excellent question. They wanted to know why it appeared that the Saen Higgins Wealth Without Risk infomercials appears to be an extension of a previous enterprise the FTC had sued that included the tax lien system by John Beck.

The reader said:

I wanted to attach for you the following FTC injunction against John Beck Systems which includes the company Family Products, LLC. It’s the same Tax Lien scheme done in 2009, and I’ll bet dollars to donuts that their marketing language is nearly the same. I’ve not seen the infomercial, but I’m sure you have, so let me know if it sounds like the same script.

I am also attaching a screenshot of a Ping Traceroute on the domain saenhiggins.tv. If you scroll down to nearly the bottom of the page, you will see that (1) The domain johnbeckclub.com is owned by saenhiggins.tv, and (2) that the Technical Contact of the domain, saenhiggins.tv, is none other than Family Products LLC.

In a nutshell, after the FTC issued an injunction, they just reopened under another name and another bunch of company names.

So that prompted me to read the attached documents and examine their claims made.

In fact the technical contact for SaenHiggins.tv is listed as Family Products, LLC, MJ OConnell (jbilen@familyproductsllc.com) at 20630 Nordhoff St., Chatsworth, CA 91311. So that proved to be accurate.

The original press release on their action that included John Beck and Mentoring of America the FTC stated, “John Beck/Mentoring of America, two principals, and three purported “inventors” marketed three get-rich-quick schemes, duping hundreds of thousands of consumers into paying approximately $300 million. The defendants marketed “John Beck’s Free & Clear Real Estate System,” “John Alexander’s Real Estate Riches in 14 Days,” and “Jeff Paul’s Shortcuts to Internet Millions.” The defendants allegedly made false and unsubstantiated claims about potential earnings for users of these systems. They used frequently aired infomercials to sell the systems for $39.95 and then contacted the purchasers via telemarketing to offer “personal coaching services,” which cost several thousand dollars and purportedly would enhance their ability to earn money quickly and easily using the systems. In addition, all purchasers were signed up for continuity programs that cost an additional $39.95 per month, but which were not adequately disclosed to consumers. Some consumers also continued receiving unwanted sales calls after they told the defendants’ telemarketers to stop calling. This case was filed in the U.S. District Court for the Central District of California.”

The Federal Trade Commission action stated:

This case arises in part out of Defendants’ advertising and marketing of two wealth creation systems, the John Beck Free & Clear Real Estate system and the Jeff Paul Shortcut to Internet Millions system. Individual Defendants Gary Hewitt and Douglas Gravink are the sole owners of Defendant Family Products, LLC. Family Products, LLC owns as its subsidiaries, John Beck Amazing Profits, LLC, Jeff Paul, LLC also d/b/a Shortcuts to Millions, LLC, and Mentoring of America, LLC. These four corporate entities shall be referred to as “corporate Defendants.” Individual Defendants John Beck and Jeff Paul developed their respective wealth creation systems, and serve as spokespersons for their respective products. The John Beck system is based upon buying government tax-foreclosed properties for “pennies on the dollar.” The Jeff Paul system is based upon creating internet websites to market and sell one’s products.

Defendants advertise their wealth creation systems through extended commercials aired on television, i.e., the John Beck infomercials, and the Jeff Paul infomercials. When a customer orders either system from Defendants, the customer is enrolled in a continuity service, either the John Beck “Property Vault” or the Jeff Paul “Big League ” or “Millionaire’s Club.” The continuity services offer a monthly newsletter and a customer service hotline, and are free for the first 30 days. After the 30-day free trial period, consumers are charged $39.95 per month unless they affirmatively take action to cancel the service. The FTC refers to this type of payment scheme as a “negative option.” In addition to the basic materials provided with each wealth creation system, Defendants offer personal coaching services to further assist customers with their wealth creation efforts. Defendants’ personal coaching services are sold through Defendants’ telemarketers, and range in price from approximately $4,000 to $12,000.

After I wrote my origin post on Wealth Without Risk I received a nastygram from Saen Higgins’ attorneys with Wealth Without Rick, LLC, WWR Marketing, LLC, and Wealth Systems, LLC.

It turns out that JohnBeckClub.com is owned by Wealth Systems, LLC and lists the address as 20630 Nordhoff St. Chatsworth, CA 91311.

The server that hosts JohnBeckClub.com also hosts:

  • afioutlet.com
  • danssupportsite.com
  • johnalexanderclub.com
  • johnbeckclub.com
  • ozsoyaltyapi.com
  • realestaterichessupport.com

The site saenhiggins.tv is also owned by Wealth Systems, LLC at the same listed address and sits on a server with:

  • saenhiggins.com
  • saenhiggins.tv
  • shawnhiggins.com

It appears that the official website promoting the Wealth Without Risk product is SaenHiggins.com.

The domain SaenHiggins.com is owned by Wealth Systems, LLC at the same Chatsworth, California address. And that address happens to be the same one, with the same registered agent, for Family Products, LLC that was named in the FTC action.

According to the complaint filed by the FTC in 2009 against Family Products, LLC it stated the sole members of that company were Gary Hewitt and Douglas Gravink.

The FTC 2009 complaint alleged that Family Products, LLC advertised and sold John Beck’s Free & Clear Real Estate System, John Alexander’s Real Estate Riches in 14 Days, and Jeff Paul’s Shortcuts to Internet Millions. – Source

The Federal Trade Commission alleged the collective enterprises “have operated together as a common enterprise while engaging in the deceptive acts and practices described herein, through an interrelated network of companies that have common ownership, officers, managers, addresses, and/or business functions.”

The previous companies each sold a “system” that consisted of “written materials, DVDs, and/or CDs. Consumers usually order one of the systems by calling a toll-free telephone number appearing in the infomercial advertising that system. Consumers may also order the systems via websites located at www.johnbeck.tv, www.johnalexander.tv, and www.jeffpaul.tv.” Seems very similar to the saenhiggins.tv domain I mentioned above.

The John Beck infomercials that ran “from at least 2005 through September 2007” had a message that appears similar to that in Wealth Without Risk. The Beck infomercial “opens with a picture of a home and a voiceover that says:

ANNOUNCER: How would you like to own this home (picture of home shown) for just $534? Now, we’re not talking about a down payment of $534 with hundreds of dollars in mortgage payments on top of that every month. That’s right. We’re talking about owning this home, free and clear of any monthly mortgage payments, for just $534.

After showing a photo of a different home, the voiceover then states:

ANNOUNCER: Or this one for only $200? (picture of home shown) All of these homes and the many more examples you’ll see throughout this program were all purchased for pennies on the dollar at local government tax sales that most people don’t even know exist.

Later, a consumer endorser states:

FEMALE: You can buy propert for $200 to $300 and turn around and sell it for several thousand dollars. (pictures of homes shown) You can do it consistently, you can do it over and over again, and you can do it in all 50 states.

The infomercial voiceover later states:

ANNOUNCER: In Real Estate for Pennies on the Dollar, you’ll learn how to immediately take advantage of these little known government tax sales to purchase homes for as little as two to three cents on the dollar and own them free and clear. You can live in these homes (pictures of homes shown) yourself with no mortgage payments, resell them for unbelievable profits, or rent them out to generate a great source of extra spendable cash. There are currently well over a million tax sale properties available in counties all across America and John Beck’s North American Tax Sale Directory will give you everyhing you need to locate the upcoming tax sales in your area.

John Beck later states:

JOHN BECK: That’s correct. You see, right now, the cities and counties need to get rid of these properties so badly that they’ve gone out of their way to make it easy to buy them. A lot of counties in the U.S. now even allow you to buy tax sale properties online.”

The FTC complaint also lists a breakdown of a second John Beck commercial that begins with an introduction by Michelle Boudreau where she reportedly says: “I’d like to introduce you to John Beck, the man who, believe it or not, can teach you how you can buy homes all across the country for as little as just a few hundred dollars.

And than as part of a seemingly coincidence Michelle Boudreau winds up retweeting a tweet by Saen Higgins about his tax lien system.

The 2009 action by the Federal Trade Commission is still ongoing.

As part of that ongoing case a monitor was appointed by the court to supervise the activity of John Beck Amazing Profits, LLC. The October 19, 2011 monitor report states that calls were received for Saen Higgins.

Of the calls monitored, three made reference to Monitored Defendants Mentoring of America and Jeff Paul. Two of those three calls were to the same consumer at different telephone numbers. The Mentoring of America call had to do with a one year old refund agreement on which the consumer had not received the refund.

Other entities referenced were Success Team, Wealth Systems LLC, Thrive, Family TV and Sean Higgins. One of the outbound calls from Wealth Systems, LLC followed up on a call that resulted in a sale. During that call the consumer was told that the representative had made an income representation that had not been documented and verified by ‘another department’. The calling representative wanted to clarify that the consumer had not made the decision to purchase the program based on that representation.

One incoming call resulted in an initial sales conversation for a product by Sean Higgins. The representation was made that federal law guarantees investments in tax liens return at between 18% and 20%. The call ended with the salesperson telling the consumer that the National Director would call the consumer in five minutes. Subsequently, the Monitor searched the Oaisys System by telephone number for the number of the consumer whose call had been monitored. The search produced no outgoing calls to the telephone number the National Director was to call. There were, however, two incoming calls from that telephone number needing log in assistance with the “Members Only Deluxe Package” that was just signed up for. – Source

The Monitor listened to an unusually long incoming call. It was a sales call initiated by a consumer who was returning a call to someone who had called him subsequent to his upgrade to a ‘deluxe package’. It appears that one of the books in the Sean Higgins package describes how to use retirement money to invest in tax lien certificates. The consumer was informed about how retirement money in a 401k plan that is not currently with an employer where contributions are being made can be moved to a Qualified Retirement Plan (QRP), which can then be borrowed against to pay for coaching and subsequently tax lien investments. The consumer was told that Mike Higgins, Sean Higgins’ brother, can set this account up for a charge that is equal to or less than what a financial institution would charge. The consumer was also told that the added benefit would be that Mike Higgins focuses on a different account than account Congress set up. The Consumer was told that “today with tax liens and deeds I don’t know of any other program that is going to pay you 18 to 24% and sometimes even more depending on the state which is guaranteed.” The consumer was further told that this is why the representative’s company is growing. The consumer is then told that it doesn’t matter what type of account is set up, it is not going to earn the type of return that a tax lien certificate can. Further, the Consumer is ambiguously told that “. . . there are some states in compounding interest each quarter throughout a year where you can pay yourself on one investment because you are rolling it back into another lien, same type of strategy each quarter 20% in penalty state, which can pay you, to make it as simple as I can without going into all of the details, but it is paying yourself almost 80% throughout a year on one investment that you are compounding in, something that Sean talks about.”

The following statements and information come from a November 28, 2011 court transcript where the John Beck tax certificate program was being discussed. Some of the issues raised may be similar.

“As a matter of fact, if you think about it, why else would a consumer be persuaded to pay thousands of dollars for coaching on top of what they’ve already paid for the kit? It’s because they think that’s how they are going to make their money back. It’s the only way to persuade a consumer to pay that kind of money.

And then you look at the sales script, the approved sales scripts, and you see that, in fact, they are designed to make consumers believe that they are going to make back the cost of coaching, that they are going to be the next success story.

They want you to believe that your goals — they ask you to set your goals, to tell the defendants what your goals are to make money in and they make you believe that if you buy this program you are going to achieve those goals.

Looking back at the undercover transcripts, what you see is in one case a telemarketer promising that consumers will make back the cost of coaching — will make 10- to $15,000, actually, within 90 days. It reiterates that that’s the common experience. People flip their properties in 90 days, and that’s what you can expect.

Another telemarketer claims that you can expect to make 80- to $90,000 in your first year. These are random calls. These weren’t just cherry-picked undercover calls that — where the FTC called in 100 times and found only two that had problems. The FTC did just a couple, and these are what they show.

You look at those calls. You look at the consumer declarations which testify about experiences that occurred throughout time, throughout the different years for the different products, and you get a pretty clear picture that, in fact, defendants’ telemarketers are making consumers believe that they are going to make back the cost of coaching in a fairly short period of time.

So the next question is: Do defendants have any substantiation for those claims? Well, we see that, in fact, they didn’t. They never tracked their customers’ success. They had no evidence even 10 people had made $50,000 using their coaching services. None of the defendants had any evidence, any documentation, could identify 10 people who had made that kind of money.

Then the next question is whether the representations the defendant makes are false.

Various pieces of evidence, consumers’ declarations, consumers testified that they were not able to make that kind of money. It was difficult. They didn’t understand how to use the product. They couldn’t use the system to make the money.

You have the FTC survey evidence, of course, and the survey evidence shows that fewer than 2 or 3 percent of the people were able to make any money whatsoever. If you look at people who were able to make $50,000 or more, miniscule, hardly anybody.

With respect — the other telling piece of evidence with respect to falsity is the kit materials themselves. Looking at the John Beck system, the John Beck kit materials themselves show how difficult it is to make money, to buy property where you are going to make money, and they show that you aren’t, in fact, going to go to a tax sale and walk out of the tax sale with a piece of property free and clear.

And I’d be happy to go more into how they completely misrepresent what happens at tax sales, but their kit materials themselves demonstrate the falsity of the representations that you can expect to make back your cost of coaching fairly quickly. John Beck himself testified that it can’t be done in a couple of months. The system is too complicated to learn.

THE COURT: I understand. I will give the defendants an opportunity to respond. And before you start, Counsel, let me just frame a couple of questions for you that I think make the defendants’ case a fairly tough one.

One is that the briefing really failed to address the net impression test, and I think that that is the prism through which the Court has to view some of these alleged Section 5 violations, is what is the net impression here? These were fairly lengthy infomercials and, yes, there were disclaimers, but what is the overall impression that a reasonable consumer walks away with when the consumer views these infomercials?

I think the second big hurdle for the defense in this case is Judge Cooper’s ruling. She reviewed the evidence that was submitted in connection with the preliminary injunction and found that under the net impression test that it was deceptive and that the FTC established a likelihood of prevailing on the merits with regard to the Section 5 claims. – Source

The defendants in this hearing were represented by Larry C. Russ, the same name as that of the registered agent for Wealth Systems, LLC.

In the transcript Russ states the defendants conducted a test of some random consumers in a shopping mall, “And he asked the consumers in open-ended questions, mostly open-ended questions, what’s the main message you are taking away from this? What is your — and the consumers gave some pretty candid answers. I mean, some of them we didn’t like.

But the entire takeaway was that consumers really weren’t deceived by this infomercial. They knew that the infomercial was mostly aspirational, that there were a lot of words of puffery. They understand that this is just something that they could learn how to do and make money with it, but they didn’t really adopt all of the interpretations that the FTC is giving to the commercial in terms of what the net impression is.”

THE COURT: Well, can you quickly address the substantiation, because one of the primary points in the Court’s view raised by the FTC is that the defendants don’t keep track of the success rates of any of your customers, so without keeping track of an individual’s ability to utilize and make money off of the products that were being sold, how can you support some of the very exaggerated claims that were being made in these infomercials?”

Russ answers, “If the FTC wants this Court to adopt a new post-substantiation standard, there will be an uproar throughout the advertising community. There’s just no such thing. Advertisers cannot track their consumers’ results.”

The end of the transcript includes a statement by the lawyer for the FTC, “The FTC, as the Court knows, is seeking a ban from Mr. Hewitt and Mr. Gravink as well as the Family Products and Mentoring of America concerning telemarketing and infomercials, which the FTC thinks is entirely appropriate given the history of these defendants and the amount of the consumer injury involved.”

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Russ, the lawyer for the defendants says, “The real issue here is the FTC’s insistence on a lifetime ban, which they can’t agree to. That’s the real issue in this case. It’s not a matter of settling. It’s not a matter of what the judgment is. It’s not a matter of how much money. It’s a matter of a lifetime ban. That’s where we are apart and that’s where the FTC has insisted there is no give or flexibility and that’s a problem.”

And so that’s where it stands. From the facts presented here it does appear there is some relationship, in pitch, presentation, or approach between the current Wealth Without Risk informercial and products to that still in the courts between the FTC and the remaining named defendants.

My impression of the issues raised by the reader and the material sent in is that the Saen Higgins Wealth Without Risk system may be a spin-off of or similar in some ways to the John Beck system and the two products share some commonality. They certainly share some common customer service as shown in the monitor report.

At the end of the day it seems to me the messages conveyed by Wealth Without Risk need to be balanced with a overall impression that results in the average consumer understanding the puffery presented is not a likely outcome or representation of the results the average purchaser experiences. But in looking at the messages on SaenHiggins.com I just don’t see that as being the net impression.

There is a single disclaimer at the bottom of the website that says “Extraordinary results.” But more prominently on the page the messages are that you can consistently earn high returns and make thousands.

So are the results presented on the site both consistent and extraordinary? Can they be both?

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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