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Why don’t the authorities shut down the bad real estate gurus?

Posted by John Reed on

If the bad gurus are not telling the truth, how come the authorities and/or media have not shut them down? by John T. Reed

If the above question occurs to you, you are very naive about law enforcement and the media.

Some have been shut down or restricted

For one thing, a number of them have been the subject of various enforcement actions including criminal prosecution. If you use your Web browser find function on my guru-rating page, and search for words like jail, bankruptcy, arrest, Fifth Amendment, and so forth, you will find a number of gurus have been pursued by authorities. McCorkle, for example, was successfully prosecuted.

Some media exposes have been done

A bunch of gurus have received unfavorable publicity. Jane Bryant Quinn, 60 Minutes, 20/20, Dateline, Good Morning America, Larry King Live, Money, the Wall Street Journal, and so forth have done stories. I participated in some of them.

One problem is that the media do not like to do stories that others have done or that are similar to stories they themselves previously did. Virtually all media organizations have done an expose of one or more real-estate gurus. Their attitude is, “Been there, done that.” You might think that a negative media story ends the career of the bad guy in question—or of him and all similar bad guys. Nope. They keep on ticking. Their sales sometimes decline. Sometimes they go bankrupt. But two more pop up in their place. And the bankrupt ones are almost all back in the business.

Why haven't they been sued?

If you rip off several dozen people in your county for large sums of money, you are likely to be prosecuted by the local District Attorney and/or sued by the victims. But if you rip off one person in every county in America for relatively small sums, what District Attorney will get excited enough to devote his limited budget to the case? What contingency lawyer will agree to pursue an out-of-state, con man for a $2,000 “boot camp” refund?

By ripping off widely scattered people for relatively small sums, they insulate themselves from prosecution or litigation as a practical matter.

The bad gurus are also experts at keeping you from suing them successfully. They have contracts designed and used over decades, they prohibit you from recording the fraudulent promises they make but they record your promise to pay when you order by phone, etc., etc.

Why don't the bad gurus sue their critics?

Another question you might ask about the bad gurus is why haven’t they sued their critics. Probably, the answer is that a lawsuit is a public proceeding and that each party has subpoena power to force the other to produce pertinent documents, names and addresses of possible witnesses, and to answer questions under oath in interrogatories and depositions as well as in court at the trial itself. In other words, if a bad guru sues a critic, he gives that critic both extreme incentive and extreme opportunity to investigate him. Since the bad gurus are criminals, they cannot afford to have highly motivated people armed with subpoenas poking around.

Nowadays, many of them appear to have expanded their behavior to criminal actions like the unauthorized charging of customers' credit cards, frauduent statements about the qualifications of the guru and/or his instructors, and fraudulent representations about the content or value of the services being sold.

The person the bad guru sues can refer information he discovers to district attorneys, state attorneys general, and to U.S. attorneys for possible prosecution. Although those offices often claim they do not have the budget to investigate such crimes, it is another matter for them to ignore hard evidence of fraud and other crimes when it is handed to them on a silver platter.

Facts that come to light in litigation are generally public. Media stories are sometimes the result of “enterprising” by reporters—that is, digging up their own facts. But more often, they are the result of reporters using facts brought to them by others, like litigants and prosecutors.

In the marketplace, bad gurus can control the situation. They say what they want and avoid discussing what they don’t want to talk about. In litigation, they cannot. In litigation, they have to stick to what’s relevant and answer pertinent question truthfully under penalty of perjury. For example, bad gurus say or imply that they are big successes in real estate. But they refuse to provide the addresses of any properties they or their purported students have purchased. I have provided the address of every property I ever owned at my Web site. In litigation, the critic would almost certainly demand the addresses of the properties owned and the judge would almost certainly order that the guru provide them. They are terrified of revealing those addresses—or, more lilkely, the lack of them.

Lying is often not illegal

If you publish something saying, for example, that the Holocaust never happened, you are a liar. But you have not broken any law. In the U.S., we have freedom of speech and freedom of the press. Likewise, if you say that corporations save income taxes, when they do not, you have not broken any law. You have lied, but that's not illegal in most contexts.

Some lying is illegal

Some lying is illegal. You may not lie in advertising. That’s fraud. Increasingly, bad gurus are lying in advertising. Lack of prosecution and litigation has made them more bold. They have discovered that law enforcement does not have the money to go after all of them


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