The Federal Trade Commission won a critical battle in a California court recently against several companies fraudulently hawking “get rich quick” programs, including former Utah call center Mentoring of America. The FTC is now seeking $450 million in relief, to be determined at a future hearing.
Gary Hewitt and Doug Gravink faced a civil action from the FTC in July 2009, when they were charged with running a scam alleged to have duped hundreds of thousands of consumers out of approximately $300 million. Now in 2011, the FTC believes after further analysis that more than 1 million consumers lost roughly $450 million and that is now the amount of relief they are seeking from Hewitt and Gravink and their various companies including Mentoring of America, a call center that previously operated locations in Utah.
City Weekly reported on Mentoring of America in 2009 of the company’s close connections with, and financial support of, Attorney General Mark Shurtleff, despite the company’s fraudulent practices and drug abuse among employees who used drugs like cocaine and heroin while on the job. Mentoring of America offered coaching services for consumers who bought a product from infomercials such as “John Beck’s Free and Clear Real Estate System,” “Jeff Paul’s Shortcut to Internet Millions” and “John Alexander’s Real Estate Riches in 14 Days.”
These products offered by “gurus,” as they are called in the industry, offered services for consumers to start their own businesses making money off of tax-lien deals and other real estate-investment opportunities. The FTC had since 2009 argued in motions that the scheme was wrought with fraud. According to documents, the FTC alleged the infomercials made misleading claims about the effectiveness of the programs. When consumers bought one of the three programs for $39.95, they were often automatically enrolled in a “continuity” program that billed consumers’ credit cards without their knowledge.
According to an FTC press release, the fraud would continue with Mentoring of American call centers then offering “coaching” services to customers to help them use the programs, with such services costing as high as $14,995.
In a November 2011 hearing, FTC attorney John Jacobs argued that undercover calls with coaching telemarketers for the company found sales people making illegal claims about how much money could be earned through the program.
“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 $10,000 to $15,000 in 90 days. It reiterates that that’s the common experience,” Jacobs says according to a court transcript.
The FTC in 2009 successfully froze many of the assets of the companies to preserve funds to be used for possible monetary relief.
On April 20, Judge Jacqueline Nguyen of the U.S. District Court for the Central District of California (Gravink and Hewitt's headquarters were in California) granted the FTC’s motion for summary judgment, siding with the government’s case without the need of going to a trial. Now, the FTC and the companies will present arguments for the amount of relief the companies should pay.
If a transcript from the November 2011 hearing is any indication, Judge Nguyen suggests that the punishment would not be insignificant.
“If the defendants really believed that a case of this size and magnitude can be settled for just thousands of dollars, maybe even hundreds of thousands, it’s just—it’s not a realistic view, let’s just put it that way,” Judge Nguyen said.