FTC’s First Monetary Settlements With Celebrity Endorsers

According to the complaint filed by the Federal Trade Commission and the Utah DCP against Response Marketing Group, LLC and its principals, Response Marketing used false promises to sell consumers a series of expensive real estate investment training programs.  The complaint also named two real estate celebrities as defendants – Scott Yancey, who was the star of the home-flipping show Flipping Vegas on A&E, and Dean R. Graziosi, the author of Millionaire Success Habits.

Yancey and Graziosi promoted the training programs and were allegedly involved in efforts to bury online customer complaints that said Response Marketing failed to deliver on its promises or was a scam.

“Today’s order against Response Marketing and its owners permanently bans them from the wealth creation business and returns $15 million to consumers, on top of the $1.7 million already secured through this litigation,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.  “We are grateful to the Utah Division of Consumer Protection for their partnership in obtaining this strong relief, and we will continue cracking down on deceptive moneymaking opportunities and unlawful endorsement practices.”

“This is the largest consumer protection division settlement in Utah’s history and holds Nudge and its affiliates accountable for the serious financial harm to consumers across the country,” said Utah Department of Commerce Executive Director Margaret Busse.  “Utah businesses that seek to take advantage of consumers should be put on notice.”

Busse also thanks the FTC and the Utah Attorney General’s Office for the robust partnership that brought about this successful consumer protection settlement.  “This partnership gave us the reach to go after these bad actors who thought they could skirt Utah’s laws.”

Response Marketing allegedly attracted consumers to free events around the country through infomercials and social media advertisements in which real estate celebrities promised to share their investing techniques.  At these events, Response Marketing purportedly enticed consumers to purchase three-day workshops for around $1,000 by falsely representing that it would provide consumers with access to special tools that would enable them to become successful real estate investors.

At the three-day workshops, Response Marketing deceptively pitched additional training programs that cost tens of thousands of dollars, according to the complaint.

Response Marketing then allegedly upsold consumers by pitching a purported coaching program through telemarketing that could cost as much as an additional $30,000.  The program was marketed as exclusive “Inner Circle” training that supposedly had limited spots and would allow consumers to work one-on-one with a purported real estate expert, according to the complaint. The complaint alleged that the vast majority of consumers who purchased Response Marketing’s products and services did not become successful real estate investors and did not even recoup the money they spent on Response Marketing’s training programs.

In a June 2022 opinion, which partially granted the FTC’s motion for summary judgment, the district court judge hearing the case found that many of Response Marketing’s claims were false or misleading, including Response Marketing’s claims that: its customers got special access to a purported funding network to allow them to do real estate deals without any of their own money; students would get access to letters that would supposedly allow them to make cash offers for properties and thereby get them at a discount; that Response Marketing had buyers lined up who would purchase homes that students wanted to flip; and there were limited spots in Response Marketing’s “Inner Circle” program.

Response Marketing allegedly sold its training programs under a variety of names, including Affluence Edu, Cash Flow Edu, Flip for Life, OnWealth, Renovate to Rent, and Visionary Events.  The company’s predecessor purportedly began selling real estate investment training packages in the early 2010s.  In December 2019, Response Marketing agreed to stop selling these packages following the filing of the initial complaint in this case by the FTC and the Utah DCP.

Two of Response Marketing’s affiliates—Nudge, LLC and BuyPD, LLC—are also part of the settlement, along with the four individuals who the complaint alleges were the actual owners of Response Marketing.

Under the settlement, these three companies, the four owners, and Response Marketing’s President are banned from selling “wealth creation” products and services anywhere in the country.  They are also required to pay $15 million, which will be used to provide redress to consumers.  If these payments are not made, these parties will be liable for an additional $15 million in civil penalties that will be payable to the Utah DCP.

The settlements with Graziosi and Yancey are the FTC’s first monetary settlements with celebrity endorsers.

Under their settlements, Graziosi will pay $1.25 million, and Yancey will pay $450,000.

The settlements announced resolve all of the claims against all of the defendants in the complaint filed by the FTC and the Utah DCP, which alleges violations of the FTC Act, the Telemarketing Sales Rule, and several Utah statutes.

Richard B. Newman is an FTC advertising compliance and defense lawyer at Hinch Newman LLP. Follow FTC defense lawyer on JD Supra.