Anyone wondering why one-time, late-night TV infomercial star John Beck, known for peddling his "pennies on the dollar", "free & clear" tax foreclosure acquisition system
, has been conspicuously absent from the airwaves recently may be interested in the following, borrowed from Rebecca Tushnet's 43(B)log
- [A California federal] court granted the [Federal Trade Commission - "FTC"] summary judgment on liability for violation of §5 and the Telemarketing Sales Rule with respect to three “wealth-creation” products sold via infomercials, the John Beck system (promising real estate riches), the John Alexander system (ditto), and Jeff Paul’s Shortcuts to Internet Millions (guess what). The FTC successfully held the named originators, their companies, and related companies liable.(1)
The John Beck system claimed to help consumers make money by buying real estate at tax foreclosure sales by paying the delinquent back taxes. The relevant defendants falsely represented that consumers could quickly and easily earn lots of money by buying homes in their area “free and clear” for “pennies on the dollar,” then reselling them for full market value or renting them for a profit.
The informercials also claimed that buyers would get a free 30-day membership to “John Beck’s Property Vault,” but failed to disclose that it was a continuity plan that subsequently charged them $39.95/month, in violation of the Telemarketing Sales Rule.
- Just looking at the John Beck system, the claims that consumers could “purchase” homes for “pennies on the dollar”; buy homes in their own area, regardless of where they lived; make money “easily” and with little financial investment; and make money “free and clear of all mortgages” were disproved by the kit materials themselves.
Buying tax liens doesn’t mean you get a deed, only a right to collect delinquent taxes, which only ends up with title and right to possess or sell in exceptional circumstances. Tax sales are held only once a year and bidding typically starts at a very high percentage of fair market value.
Beck’s deposition testimony also showed the falsity of the infomercials; while he expressly claimed to have bought “thousands” of properties with his system, at deposition he admitted that he did so “very infrequently”—only 10 times.
Beck claimed that his daughter had bought over 90 properties using his system, but admitted that he knew of only 4 “students” who’d been able to get title to homes like those shown in the infomercial, and those instances required several years of waiting, including a court trip to foreclose on the right of redemption. Purchasing property at tax sales is elaborate and time-consuming.
Dozens of consumer witnesses further confirmed this falsity. They testified that it was difficult or impossible to find tax sales in their area, and difficult or impossible to earn substantial money using the Beck system.
- The court dismissed small print disclaimers that endorsers’ experiences were unique. “The prints are so tiny that, under the circumstances, consumers are unlikely to read them while watching and listening to the testimonials of the endorsers.”
For more, see FTC wins against "make money fast" claims
For the federal court ruling, see F.T.C. v. John Beck Amazing Profits, LLC
, 865 F. Supp. 2d 1052 (C.D. Cal. 2012). (Go here for the lawsuit filed by the FTC
Go here for links to certain other court documents
filed in the case made available by the FTC.
(1) According to the federal court ruling, Beck was found to be jointly and severally liable with a couple of others for $113,374,305, which was the amount of injury suffered by consumers, or unjust enrichment obtained by him and the others, in connection with the practices alleged in Count 1 of the Complaint.