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TwitThisSecrets of Losing Money
When Andrea Thomas, a Southern California CPA, learned she was going to be laid off from her job, she decided to start her own business.For months she had been watching a TV infomercial starring Brad Richdale, a direct marketer. Richdale promised he could teach people to achieve financial independence through direct marketing, and would share the secrets that had made him his own fortune.
People purporting to be Richdale's students, speaking from fancy homes, confirmed that, thanks to Richdale's program, "Secrets to Making Money Now," they, too, were rich. You simply place tiny classified ads, which his program -- at a cost of $34.95 -- shows you how to write. Then customers call to order whatever you want to sell.
Although skeptical, Thomas decided she had little to lose. "Even if I made only one-tenth of what they suggested was possible," she says, "I could have earned a comfortable living."
She ordered the program, which consisted of numerous instructional booklets and tapes. It included promotional literature, and offered a free gift to help start up a business just by phoning a toll-free number.
When Thomas called, a telemarketer set about selling her Richdale's Publishing 4 Profit (P4P). The cost: $3000, nonrefundable. This program offered reprint rights to 45 books. According to a telemarketing script that Florida investigators say Richdale employees used, the program suggested that each book ad could bring $30 per response. In addition, someone buying in would have access to a "personal coaching staff" of Richdale's "personally trained consultants," who would be available for the first 90 days for business guidance.
Thomas ordered the program and placed the ads, but after several months, she received only one response. What went wrong?
According to Florida investigators, there was virtually no market for the books -- they were mostly government publications, many available free. And those who bought P4P would likely be competing with each other to sell the same products, with the same ads, in the same publications, say the investigators.
The Florida attorney general's office says it has investigated Richdale and that there is an ongoing federal investigation. Florida Assistant Attorney General Jacqueline Dowd believes that several of the "customers" giving testimonials in Richdale's infomercials were his employees. Richdale's lawyer refused to comment when reached by Reader's Digest.
Dubious Financial Advice.
Jodie Bernstein, director of the Bureau of Consumer Protection for the Federal Trade Commission, explains that every year thousands of complaints are received about "business opportunity" programs advertised in infomercials, newspapers, radio and on the Internet.
In virtually all instances the spokespeople promise to train you in whatever they say made them rich: direct marketing, real-estate investing or some other high-stakes business. If you take the bait on the low-priced hook, they'll often try to reel you in with their deluxe programs, like P4P, often costing thousands.
"The whole theme is, 'it's a sure thing,'" says Bernstein. "They say 'invest in this, and you might earn anywhere from $20,000 to $200,000 annually with little effort.'"
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