Copyright 2001, 2002, 2003 by John T. Reed

I frequently get email from readers who paid a bad guru for some product or service and want a refund. Lately, I have received increasing reports of gurus charging unauthorized purchase to credit cards they previously used for authorized purchases. I suspect the guru business has fallen on hard times and the bad gurus are pressuring their commissioned phone salespeople so much that they are now resorting to outright credit-card theft.

There is no sure way to get refunds, but I am going to make some suggestions here. I hope that readers will provide additional ideas from their experience.

Ask the guru

Guru John Beck is the only good guru I know who does TV infomercials. He says that people can probably get a lot more refunds from gurus if they just ask and do it in a way that is appropriate. No ranting and raving. Just get the facts and make a straightforward request. As a general rule, you must do that before you ask anyone else for help. Document everything.

Find and read the refund policy

Some guru victims have told me that their guru buried the refund policy deep in the box of stuff they received—and that it had early deadlines that had passed by the time they learned about them. When you receive the products your ordered from a guru, examine the contents of the box to find the refund policy, if any. If there is one, and you want a refund, make sure you comply with it if it’s reasonable. Some refund policies are ridiculous, like making you submit offers to buy real estate and such to qualify.

Tape record any phone pitches

You can buy a cheap, simple device for tape recording phone calls at Radio Shack. That’s where I got mine. It’s also where Linda Tripp got hers. However, do not follow Linda Tripp’s example of taping Monica Lewinsky over the phone without Monica’s permission in a state where that is illegal—like the state where Linda did it: Maryland.

I only use the device when I am in litigation because I found that many lawyers say things on the phone, then deny they said them later. I always ask the other person permission before I turn it on. Then I ask them their name, today’s date, and again for permission while it is running. When I interviewed Nothing Down author Bob Allen, I also had my wife on the other phone taking notes. I told him she was there. You may not have to do that. Check your local laws and the recording section in the front of your phone book.

Since it is now typical for bad gurus to follow up your initial purchase with multiple boiler room calls pressuring you to buy expensive products or services, you will have plenty of opportunities to record them or have a second person take down what they say. One of the ways these guys get away with it so much is they do everything verbally, hardly anything in writing. Then, when confronted, they deny the lies they used to sell you the product or service. By taping them, you eliminate that escape route.

Tape record in-person pitches

You should also tape record the sales pitch at the free come-on seminar. Fraudulent gurus typically prohibit that. Ignore them. Tape recording copyrighted material is wrong and illegal. But a sales pitch is not copyrighted material. Legitimate businesses would be delighted for anyone to reproduce their advertising. Sit near a public address speaker in the meeting room.

Pay by credit card

Your credit-card company will often give you a refund whether the guru likes it or not. There is typically a deadline for doing that. Look under the “disputes” section on the back of your monthly credit card bill. It tells you the address where you send your complaint as well as what to include. Mostly, they just want you to tell them which item on your bill you are disputing and why. Of course, if the guru in question is so crooked that he starts making unauthorized use of the card, this is not such a hot idea. This seems to be happening an amazing amount lately. I surmise it’s happening because the telephone boiler room salesmen are on straight commission—and because no one is closely supervising them integritywise. Typically, the guru in question either knows what’s going on or doesn’t want to know. Often, the claim innocence on the grounds that the boiler room is a separate company.

But there are a number of restrictions on this. Here are some of the problems from Jane Bryant Quinn’s book Making the Most of Your Money:

You probably have not read the fine print in your credit-card agreement. Guess who has? The bad gurus. They are taking advantage of your ignorance of the rules by structuring transactions to strip you of the protections you take for granted so they can take advantage of you.

Federal Trade Commission

The Federal Trade Commission ( is the agency in charge of consumer protection (202-326-3650). You should report the problem to them, but they are busy, underfunded, etc. Click here to file a complaint with the FTC.

You can also look at the map at to see what FTC region you are in. Click on your state and you will get the mailing address and phone numbers of the regional office for your region.

This is a consumer Web site run by the federal government.

National Fraud Information Center

The National Fraud Information Center is at

National White Collar Crime Center


White Collar Crime 101


Opt Out Request Line

This gets you taken off mailing lists and telephone sales lists. 888-567-8688

Direct Marketing Association

This gets you taken off mailing lists and telephone sales lists. 202-955-5030

American Association of Retired Persons

Nothing-down gurus often tell their followers to target seniors because they have lots of equity in their homes. The unspoken reason is that seniors are often easier to take advantage of. Because senior citizens are often the targets of scammers, this association has developed programs to help seniors avoid becoming victims and possibly recoup losses.

Contact the Attorney General for your state

Go to a search engine like Google and type in the name of your state and the phrase attorney general. That will most likely give you the attorney general’s Web site where you will find instructions on how to file a complaint. For example, the NC attorney general consumer complaint Web page is

Contact the Attorney General for the bad guru’s state

Got to a search engine like Google and type in the name of the bad guru’s state and the phrase attorney general. That will most likely give you his or her attorney general’s Web site where you will find instructions on how to file a complaint.

Small claims court

I mistakenly thought that you generally could not sue a guy from another state in your local small claims court. I thought if it is convenient to sue him in his home area or in an area where he has property, that can work quite well.

However, on 4/30/02, I heard from a reader who sued Carleton Sheets for $2,500 in small claims court. Sheets is in Florida. The customer in question was in California. “How can you get jurisdiction over him for a California Small Claims Court?” I asked. He said he searched for Sheets on the Internet and found that the parent company had a person designated to receive service of summonses in California. California corporations and certain others doing business in California are required to designate a local person for that purpose. So he served his summons on that company in California and subsequently received a settlement offer of $2,000 from Sheets’ representatives.

If you want to sue a guru in small claims court, do not assume you have to be in the same state. Do a diligent search for him or his company in your state. If he owns property or rents space or anything else there, you can probably sue him in small claims court and collect if you win. Check:

The late Marc Goodfriend once made a speech for a guru who then failed to pay him. He had a cute young woman approach him after another seminar saying excitedly, “Are you So-and-so?” When he beamed “Yes,” she handed him a summons. Goodfriend got his money.

Mark Haroldsen once reprinted something I had written and paid me less than I told him I wanted when he had called to ask permission. I billed him for the difference. He ignored me. So I made sure I told everyone I could about it. Eventually, I guess he got tired to hearing about it and paid me.

Under certain circumstances, you can “till tap” a bad guru. That is, you get a court order and go to one of his paid seminars. The sheriff confiscates the money he is collecting at his seminar and gives you the amount on the order. Sounds like fun. I was contemplating it regarding Haroldsen when he paid.

Use of small claims court against you

There are a bunch of complaints on the Internet about a leasing company. Many claim the company somehow managed to get a judgment against them in Massachusetts, then used that judgment to confiscate their bank account, car, child’s bank account, and so forth. Some claimed they never got notice of the trial in Massachusetts, which they lost by not showing up.

This made no sense to me. The U.S. Constitution requires due process, which, among other things, means that a person or company who is suing you must tell you about the suit. When I investigated the Massachusetts example, I was told it works something like this. Consumers, including single moms and retired people, are pitched some sort of home business idea, like your own Web site. As part of the pitch, they are told they have to lease software that costs thousands of dollars and sign up for credit-card-processing services.

I have a Web site, as you can see. To have a Web site you need only pay modest amounts for Web access (e.g., $23.90 a month to AOL) and Web hosting (maybe $25 a year). Most Internet Service Providers throw in free Web hosting as part of giving you email and Web browsing service.

A machine to process credit cards costs about $200 to $400 and your local bank will provide the processing service for a small percentage and perhaps a transaction cost. For example, Costco provides Merchant Credit Card Processing through Nova Information Systems for 2.01% + 28¢ per transaction. The only software I use is a Web page writing program that cost less than $100. Nowadays, I get the impression that various common word processing and page layout programs include Web page creation as one of their features. In other words, if you have Internet access from your home, you probably already have a Web site that you are not using. And you probably have all the software you need in your normal programs.

The leasing company does not lease software or card processing services, but they provide financing for the lease. Roughly speaking, they only loan you the money in the form of a lease.

Businesses sometimes set up shell companies to take the legal heat, but the company that is supposedly only financing is actually getting all the profits. I wrote in my newsletter about some banks that claimed to be mere lenders in slum properties, but investigation revealed that the “owners” of the buildings were maintenance men and such who were put in the position of “owner” by the lenders. These folks were owners on paper only. Their compensation bore more resemblance to a salary than profit. They had invested nothing in the property. And virtually all the profits were going to the “lenders” in the form of “interest” that went up and down according to whether the property had a good month. Real interest payments do not fluctuate according to the performance of the assets. They are set as a percentage of the amount owed.

Courts do not like efforts to mislead them and apply legal doctrines like “substance over form” and the “step transaction” doctrine (interim steps get ignored and the court just looks at where everyone started and ended) to treat the arrangement as what it really is, rather than what it claims to be. From time to time, fancy schmancy Wall Street firms and big banks are exposed as being involved in sleazy scams like predatory lending. They always do it through some shell company you never heard of. When they get caught, they protest, “We just provided the financing.”

When finance or leasing companies play this game, the shell companies frequently go out of business. Typically, they accumulate a high number of Better Business Bureau complaints and lawsuits, then simply go out of business, often reopening across the street with a new name, but with the same owners, managers, employees, and business practices. And guess who their financing or leasing company is? The same company. Reputable financing or leasing companies would not keep doing business with a product or service company that was generating an inordinate number of legitimate complaints. Nor would they do business with a company that was founded and run by guys who just ran a similar business into the ground.


Reputable companies accumulate what’s called goodwill over time. That is, people do business with them, have a good experience, and are therefore inclined to go back and to recommend the company to their friends and relatives. When established companies change hands, the bookkeeping often includes an amount for goodwill, which is the difference between the price paid for the company and the value of its tangible assets like real estate, personal property, and paper assets. Because of the value of goodwill, reputable companies are extremely reluctant to change their name.


Disreputable companies, on the other hand, accumulate badwill over time—complaints, lawsuits, word-of-mouth denunciation. When the amount of bad will is starting to eat into their profits, they change the company name and address. To such companies, the only cost of a name change is new stationery, moving expense, and a new fictitious name registration fee. They lose no goodwill because they never had any.

I would say it’s generally a predatory lending scam when the financing is of a transaction that is very likely to result in default, either because the borrower was not creditworthy or because the products or services being financed are shoddy and likely to cause the buyer to stop paying, or both.

All states have numerous laws to protect consumers against such practices. These laws do not stop all such scams, but they are somewhat effective. However, when a consumer is persuaded to go into business—even a home-based business—he or she looks to the courts like a businessperson, not a consumer. Consequently, none of the consumer protection laws are applied. For example, I understand the Massachusetts leasing company lease has the words “business lease” on it. Arguably, the doctrine of substance over form may enable a court to say that these are really consumer transactions. If not, the legislatures should change the laws to broaden the definition of a consumer to include laymen who are being persuaded to buy or lease some home-based-business product or transactions which fall below the small claims court limits.

By keeping the amounts in question relatively small (The Massachusetts example I heard of is fond of $4,200 amounts), the scam company is able to use the small claims court to go after the mark. Small claims courts often have more lenient procedures. For example, MA small claims courts apparently allow the plaintiff—in this case, the leasing company—to serve notice of the lawsuit on the borrower by first class mail and takes the leasing company’s word for it that they did mail it and that it went to a current address for the person in question. The fact that many claim they never received any such notice indicates either the leasing company did not mail the notice at all or mailed it to an incorrect or out-of-date address. However, the company is reportedly quite good at finding these folks and their cars and bank accounts after they obtain a default judgment from the MA small claims court.

The small claims court dollar limits also serve the purpose of making it hard for the victim to justify the cost of hiring an attorney to fight the collection efforts. Although an attorney I spoke to who is familiar with these scams said that the scam company invariably walks away if the victim resists in court. Unfortunately, most victims just cry out in financial pain like children wanting their mommy or daddy to help them. Crying out to friends, relatives, Internet pen pals, the scam company, and the authorities is far less effective than just going to the small claims court judge and quietly pointing out that you never got notice of the suit or that the whole transaction was a scam.

U.S. Postal Inspection Service

Check your local phone book for the local number. The Chief Postal Inspector is in DC at 202-268-4267.


Better Business Bureau

I have mixed feelings about the Better Business Bureau. It has long struck me as a bit of a protection racket. They ask businesses to join. If you refuse, they say they don’t know you when people make inquiries. Seems to me they should just say you are not a member and they do not provide favorable reports on non-members. Saying they never heard of you or whatever the exact wording is seems to imply that you are less than a well-established business. However, they perform a useful service and are generally worth calling. Their phone number is in your phone book. Their national number is 703-276-0100.

Post it on the Web

Tell about your complaint on the Web. I have a guru-rating Web page. I think everyone should have a similar page at their own personal Web site. Whenever you have a good or bad experience with a business, write it up. That includes your dry cleaner, auto mechanic, or some guru who sold you a bill of goods. Register your home page with the major search engines. You do that by going to each one’s home page. Somewhere on there you will find the words “Add URL” or something similar. Click on them and you will get a form to fill out. Once you register, the search engine will read and memorize every word on your page. Then when people search for the guru in question, they will come across your complaint about him. After it costs him a few new suckers, he may be willing to pay you so you will remove the page. Do not go into the extortion business. Just use this tactic for legitimate complaints, then up date or remove the complaint if and when the guru corrects the situation.

There are also a number of Web sites that will let you make comments about your complaint. I often post complaints I receive from readers at my Web site. Click here to send me a complaint.

Tell the media

I once helped a woman get a refund from Bob Allen. She was in the San Francisco area and I knew he was going to appear on a local TV show. I put her in touch with the producer. He put her in the audience where she confronted Allen about her inability to get a refund. He promised she would get it in front of the TV audience—and she did.

Nowadays, the typical news program has a Web site. Often those Web sites have an email address to which you can send story ideas.

Many local news organizations have ombudsmen who try to solve consumer complaints. Money Magazine had one last I checked.

I once had trouble getting money owed me from a Philadelphia bank. I wrote to the ombudsman of the Philadelphia Inquirer, the main daily paper there, and sent a copy to the bank president. Good thing I sent the copy. The ombudsman wrote back that he only did complaints about employees of the paper. Fortunately, he did not send a copy to the bank president, who apparently feared bad publicity and promptly paid.

On another occasion, I wrote a check for $600 on a Merrill Lynch Cash Management Account. They took $60,000 out of my account. When I called to complain, they said I wrote a check for that amount. I gave them a few expletives deleted and demanded my money NOW! No refund. I then sent a complaint to Money Magazine. They were very interested and called me and Merrill Lynch. Boy, did I get my money fast—with interest!

In general, whenever you send a complaint to anyone, you should send a copy to the bad guru. Bad guys often do the right thing because they assume that a media outlet or government agency will take action against them even when the outlet or agency has no intention of doing so.

Here are some media outlets that might be interested:
60 Minutes* 524 West 57th St., New York, New York 10019 (212) 975-3247
U.S. News & World Report
Money Magazine*
Kiplinger’s Personal Finance
48 Hours
NBC Nightly News
ABC News
CBS News
News Hour with Jim Lehrer
Larry King Live*
Today Show
Early Show
Good Morning America*
Smart Money Magazine
Wall Street Journal

* Media outlets where I have appeared in stories about bad gurus

Do not send the same letter to all of them simultaneously and tell each that you have written to all the others. 1. The media want exclusives—stories their competitors do not have. 2. If you ask more than one person to help you and they know you asked more than one, they tend to assume the other person you asked will help you so they don’t have to and it ends up nobody helps you. Better to contact one media outlet, give them a chance to do the story, then move on to another media outlet and do the same only when the first one shows no interest.

There are also local radio and TV shows in various areas that do consumer complaint or investigative reporting. When contacting the media, try to target your story to a particular person who is not a celebrity. Celebrities tend to treat such contacts as fan mail. Go instead to a producer. You can see their names in the credits at the end of a TV show. Also, use your head about the nature of the show you contact. Many news programs, like Hardball, are purely political. Better to go with an investigative show like 60 Minutes or NBC Nightly News’ “Fleecing of America” segments.

Sue them yourself

I have done that once or twice, although not against bad gurus. Bad gurus typically violate federal laws against mail fraud, wire fraud, and racketeering. Bad guys are less likely to ignore a suit than a complaint.


Often of late, bad gurus have crossed the line between free speech, which is totally unregulated, and things that are highly regulated like securities, insurance, practice of law, real estate agency, and so forth. In many cases, they will not say they are in the securities business, but the law only cares if they are, not whether they say they are. That’s called the doctrine of substance over form. If that is pertinent to your case, you may get some mileage by complaining to those who regulate certain professions like:

state bar association
Securities and Exchange Commission
state securities commission
state real estate department
state insurance department
National Association of Realtors®

On 12/8/03, a reader from Hawaii called to tell me he had followed the above advice and gotten several refunds from the formerly defiant Robert Allen organization. He took an Allen seminar for $1,490, was dissatisfied, and tried to get a refund. He was spoken to by a junkyard dog type person who apparently gets off on telling refund seekers to drop dead.

All the bad gurus apparently have such employees. At the seminar, when they are trying to get your money, everything is sweetness and light and “Oh, yes. Of course, we will give you a refund if you are unhappy.” But then when you actually try to get a refund, they laugh in your face and dare you to try to file a credit card dispute or complain to the BBB or government.

In this case, the reader got nowhere with Allen, so he went to many of the organizations and agencies listed above including the Orlando, FL Better Business Bureau, the FL attorney general, the Federal Trade Commission, and his credit card company (make sure you complain within the time limit—usually 30 to 60 days).

Then Allen’s people called and told him to withdraw the credit card complaint. They offered to pay a refund of some amount if he signed a release in which he agreed to remain silent about the fact that he got a refund. He refused to sign the release. They finally paid the refund without his signing the release.

In addition to getting his own refund, he also helped three other people get refunds of $2,900, $5,490, and $5,900 from the Allen organization.

Here’s an article from the January, 2001 issue of my newsletter, Real Estate Investor’s Monthly.

Leaving First Amendment Land

One of the most frequent questions I get is how can I get a refund from such and such real estate guru. In the early years, laymen and reporters would often ask, “How can these guys get away with this?”

Free speech

I would explain that they were in First Amendment Land. You can say anything in the United States—for example, that The Holocaust never happened—and you break no law.
But in recent years, the bad gurus, who were never a very bright bunch, have concluded that they can make more money if they go beyond just books, cassettes, and seminars. If I were a bad guru’s lawyer, I would say, “You can’t do that. Those areas are regulated and subject to numerous laws.” Either their lawyers aren’t saying that or the gurus are ignoring them.


“Mentoring” is one of the most popular and most expensive new services provided by bad gurus. For multi-thousand-dollar nonrefundable retainers, famous gurus say they will provide phone consultation for a year or two. Offering “mentoring” services triggers the shingle theory. In the book Ethics in Real Estate edited by Stephen Roulac, he says of that theory, “…by holding oneself out to the public as engaging in a particular profession, the public rightly relies on that person or firm as being an expert in performing that profession. The public reasonably expects the expert to have the requisite knowledge and skill for the professional tasks in which the expert engages and then to employ appropriate due care in applying that knowledge and skill.” One statutory example of the shingle theory is §3372(b)(1) of the California Corporation Code. Section 3372(a) says,
Any person engaged in the business of advising others for compensation as to the advisability of purchasing, holding, or selling property for investment and who represents himself or herself to be an expert with respect to investment decisions in such property, or any class of such property, shall be liable to any person to whom such advisory services are furnished for compensation and who is damaged by reason of such person’s compensation and for such damages…
My impression is that the bad gurus fail in each of the elements of a lawful investment advice: expertise, skill, and due diligence. So moving into “mentoring” exposes previously immune gurus to legal attack. However, although they are now violating the law, their fees generally stay below the $10,000 threshold that I and others have written is a minimum for warranting litigation. On the other hand, damage done by following their advice will likely exceed that amount.


The content of a book, cassette, or speech is utterly unregulated, but advertising of such products are regulated and subject to laws requiring truthfulness. This is why bad gurus prohibit recording of their verbal come-on speeches and why they hope you won’t record TV infomercials.

Virtually no worthwhile real-estate investment products are sold through TV infomercials or free come-on seminars. But if you insist on buying such a product, make sure you record the infomercial or come-on speech before you buy the product. That will provide crucial evidence of the fraud.

Public companies

Taking a company public has been the source of the wealth of many of the most famous millionaires like Bill Gates and Steve Jobs and Michael Dell. Some gurus have gone that route. Offering stock in a corporation to the public is a heavily regulated activity, as is continuing to operate a public company. There are many public documents available and many regulators who may be interested in looking into your complaint.

Investment groups

Some bad gurus have put some of their followers into investment groups, taking commissions and markups for doing so. That should give gurus’ lawyers nightmares. Not only are there many laws governing such activities, state and federal regulatory organizations focus on them. Many, if not most, group investments are securities and therefore must be registered.


The late Charles Givens even started an insurance company to sell policies to his followers. Ouch! That is a highly regulated industry.

Finder’s fees

The typical person who is dumb enough to buy expensive real-estate advice from a bad guru has only enough cash or credit to finance the guru-material purchase. So their first reaction to a guru’s pitch is to say they have no money to invest, therefore they do not want to buy the investment advice.
To the gurus, who are really just salesmen, this is merely an objection. Overcoming objections is what salesmen do. One of their ways of overcoming this particular objection is to say, “I will teach you how to find good deals. Bring them to me and I’ll pay you a finder’s fee.”
In fact, the guru just wants the up-front money from the customer. He has no intention of investing in anything, much less some cockamamie deal brought to him by a cashless, creditless, novice.
In some states, like New Jersey, it is illegal to pay a finder’s fee to anyone but a licensed broker. In other situations, state and federal laws like the Real Estate Settlement Procedures Act may apply.

‘I’ll invest with you’

Another common way of overcoming the “I have no money to invest” objection is for the guru to say, “Don’t worry. I’ll put up the down payment money and give you part of the equity.” That is ostensibly a sort of put option or a contract to purchase real estate. In fact, contracts to purchase or put real estate are not enforceable unless the property and terms are stated with great specificity. On the other hand, gurus are experts, or so they claim, taking money from consumers. The law bends way over in favor of consumers in such situations. Furthermore, litigation against such a guru will almost certainly reveal that he or she has never invested in any such deal. A court is unlikely to let that pass unpunished.

Dumb enough

I originally thought these guys were too clever to leave First Amendment Land. I was wrong. They go wherever they can make a buck, including areas where they can be nailed legally.