From the Los Angeles Times

Consumer fraud charges filed against five Van Nuys companies

The cases are part of a federal crackdown dubbed Operation Short Change. The FTC says the firms allegedly made $300 million by selling fraudulent programs related to real estate or online businesses.

By Jim Puzzanghera

July 2, 2009

Reporting from Washington — The recession has killed jobs by the millions, but it’s been a boon to one sector of the population: con artists.

They’ve been offering consumers help in repairing bad credit, landing new jobs, starting lucrative work-at-home businesses and obtaining government money to pay off bills. These scams — which are surging along with the jobless rate — are touted on websites and infomercials, and have bilked consumers out of hundreds of millions of dollars, said David C. Vladeck, director of the Federal Trade Commission’s Bureau of Consumer Protection.

Federal officials, working with authorities in California and other states, struck back Wednesday. They announced a series of civil and criminal charges against alleged con artists who have preyed on economic anxiety to lure consumers into making upfront payments for services that either fall far short of the promises or never materialize.

“Rising unemployment, shrinking credit, record-setting foreclosures and disappearing retirement accounts are causing consumers tremendous anxiety about making ends meet,” Vladeck said Wednesday at a news conference at the FTC. “But to con artists, today’s challenging economy presents an opportunity to exploit consumers’ fears and bilk them out of money.”

Vladeck said that more than 100 cases have been filed nationwide this year as part of Operation Short Change, a task force consisting of the FTC, the Department of Justice and officials in 13 states and the District of Columbia. The cases included eight filed Wednesday by the Federal Trade Commission.

One of the FTC’s new cases alleged that five Van Nuys companies had bilked consumers out of about $300 million by selling fraudulent programs related to real estate or online businesses.

The companies — John Beck Amazing Profits, John Alexander, Jeff Paul, Mentoring of America and Family Products — and five people who had founded or run those companies were accused of violating federal laws related to telemarketing and consumer fraud.

The FTC accuses the companies of making “false and unsubstantiated claims about potential earnings” that customers could make by following their advice in books, CDs and DVDs titled “John Beck’s Free & Clear Real Estate System,” “John Alexander’s Real Estate Riches in 14 Days” and “Jeff Paul’s Shortcuts to Internet Millions,” which were sold for $39.95 each.

People who purchased the programs, advertised through infomercials, unknowingly were signed up for additional monthly charges of $39.95 and offered “personal coaching services” that cost several thousand dollars.

Messages left at the companies’ offices were not returned Wednesday.

In another case, Beverly Steward, a single, unemployed mother of two from the Washington, D.C., area, answered a newspaper advertisement in January for a cleaning position. She was referred to another company, Job Safety USA, and paid $98 for a certification allowing her to handle hazardous materials.

The documents never came, and Steward soon realized she had been taken, she said.

“The website looked great. Anybody would have fallen for it,” said Steward, who pursued complaints with several government agencies. “I don’t want anybody else . . . to be taken for even 5 cents.”

The FTC sought a court injunction last week against Job Safety USA, its owner, Walter Ramos Borges, and five other Maryland-based companies linked to him for unfair and deceptive practices as well as restitution for customers. Borges and the companies could not be located for comment.

The California Department of Corporations, which oversees investment advisors and other financial services businesses, has filed 13 cease-and-desist orders related to Operation Short Change, mostly against people operating payday loan businesses without licenses. North Carolina has brought the most cases, 19.

“For a con artist, a bad economy is like a gold rush,” North Carolina Atty. Gen. Roy Cooper said at Wednesday’s news conference. Consumer complaints in his state have surged 27% this year, he said.

Complaints to the FTC about business opportunities, such as work-at-home offers, nearly doubled in 2008 over the previous year to 20,286 and are continuing to rise in 2009. In the first six months of this year, the credit counseling and debt management category accounted for 3,600 complaints filed with the FTC, nearly triple the 1,300 complaints filed in the first half of 2008.

California Atty. Gen. Jerry Brown’s office has seen the monthly average number of consumer complaints jump from 1,900 in 2008 to 3,000 so far this year, said spokeswoman Christine Gasparac. In June, the office set a record with 3,622 complaints.

Cooper said consumers should not pay money upfront for any such services. But he said that con artists have found fruitful territory in the recession.

“Families in desperate need of cash often let their guard down, a gold mine for scammers,” he said.

The FTC advises consumers to visit its Money Matters website, which offers tips and videos about avoiding scams fueled by the economic downturn.

jim.puzzanghera@latimes.com