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Acting Atty. Gen. Matthew Whitaker was paid by a firm the FTC called a ‘scam’

Acting Atty. Gen. Matthew Whitaker was paid by a firm the FTC called a ‘scam’
Department of Justice Chief of Staff Matthew Whitaker was named acting attorney general by President Trump Wednesday, replacing Jeff Sessions. (Charlie Neibergall / Associated Press)

When federal investigators were digging into an invention-promotion company accused of fraud by customers, they sought information in 2017 from a prominent member of the company's advisory board: Matthew Whitaker, a former U.S. attorney in Iowa.

It is unclear how Whitaker — who was appointed acting attorney general by President Trump on Wednesday — responded to a Federal Trade Commission subpoena to his law firm, according to two people familiar with the investigation.

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In the end, the FTC filed a complaint against Miami-based World Patent Marketing, accusing it of misleading investors and falsely promising that it would help them patent and profit from their inventions, according to court filings.

In May, a federal court in Florida ordered the company to pay a settlement of more than $25 million and close up shop, records show. The company did not admit nor deny wrongdoing.

Whitaker's sudden elevation this week to replace fired Atty Gen. Jeff Sessions has put new scrutiny on his involvement with the shuttered company, whose advisory board he joined in 2014, shortly after making a failed run for U.S. Senate in Iowa.

At the time, he was also running a conservative watchdog group with ties to other powerful nonprofits on the right and was beginning to develop a career as a Trump-friendly cable television commentator.

World Patent Marketing — founded by Miami businessman Scott Cooper, who had donated $2,600 to Whitaker's Senate campaign — prominently highlighted Whitaker's résumé as a former U.S. attorney, which helped lend the company credibility.

But Whitaker seems to have been more than a figurehead. He spoke about inventions of the company's clients in online videos — including a special hot-tub seat for people with mobility issues. He also penned a response to at least one complaint — writing a threatening email in which he cited his role as a former U.S. attorney, according to court filings.

"It's really upsetting to know that guy will be attorney general," said Ryan Masti, 26, who lost $77,000 after paying World Patent Marketing to help him bring to market his idea for a social media app to help the disabled. "It's so offensive. It's like a stab in the back."

Whitaker did not respond to requests for comment about World Patent Marketing or the investigation. "We'll decline," Justice Department spokeswoman Sarah Isgur Flores said in an email to the Washington Post.

A spokesman for the FTC also declined to comment.

There was no evidence that Whitaker knew company salespeople were making false promises to inventors, court receiver Jonathan Perlman said in an interview.

"I have no reason to believe that he knew of any of the wrongdoing," Perlman said.

Whitaker was paid at least $10,000 by the company, according to court filings.

At the conclusion of the FTC investigation, Perlman sent a demand letter to Whitaker — along with other advisory board members — seeking repayment of the fees they received. Whitaker did not respond, Perlman said.

When Whitaker was appointed to the board of World Patent Marketing in October 2014, a company spokesman said in a press release that he would provide "vision and direction." Later, the company touted Whitaker's legal background and said he was working with the company to help investors avoid patent marketing fraud.

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"As a former U.S. Attorney, I would only align myself with a first class organization," Whitaker said in a 2014 company news release. "World Patent Marketing goes beyond making statements about doing business 'ethically' and translate those words into action."

According to the FTC, however, the company falsely promised clients it would patent and market their ideas in exchange for hefty fees — and then pocketed the money.

"For the last three years, Defendants have operated an invention-promotion scam that has bilked thousands of consumers out of millions of dollars," the agency alleged in a recently unsealed court filing. "In truth and in fact, Defendants fail to fulfill almost every promise they make to consumers."

Neither Cooper nor his current attorney responded to requests for comment.

In court documents, Cooper told the court that the company did provide some services to customers and said the company's website warned customers that most inventions are not commercially successful, according to the Fort Lauderdale, Fla., Sun-Sentinel.

World Patent Marketing salespeople would persuade prospective clients to sign a confidentiality agreement and then ask them to explain their idea, according to court documents.

Whatever the concept, no matter how banal or improbable, investigators found, the salesperson would pronounce the idea fantastic and encourage the customer to pay for a package to market and patent the idea, documents show.

Many people ended up in debt or lost their life savings, according to the FTC.

Promotional material highlighted the meaty résumés of board members like Whitaker, which seemed to be a key component of the business operation. The company said the board would help review inventors' ideas to maximize their ability to get rich.

"Innovators are today's revolutionaries — forward-thinking visionaries that have come together to form the powerful and influential World Patent Marketing advisory board," the narrator of one promotional video intoned, as photos of Whitaker and other board members filled the screen.

Masti, who said he struggled with ADHD as a child and hoped his invention would help others like him, said in an interview that he trusted the company in part because he was told that advisory board members, including Whitaker, had reviewed his idea and thought it would be successful.

"They said he's very high up. He's a professional. He's got a lot of power," said Masti, a resident of Cameron, N.Y., who said he voted for Trump in 2016. "That's how they sold you."

Now Masti said he is living with his parents and facing crushing debt from loans he took out to pay the company.

Another former customer, Penn Mason, an airline employee from Nashville, said he paid World Patent Marketing $21,000 to help him patent and market a real estate app he had invented.

The company failed to patent his product and quickly stopped returning his phone calls, he said.

Mason said he believes that paid advisory board members like Whitaker essentially pocketed money from unsuspecting victims.

"That was our money," said Mason, 52. Of Whitaker's selection as acting attorney general, he said, "It makes me sick to my stomach. … It's like a punch in the gut."

When investors began to complain that they had paid the company large sums with little to show for it, they were threatened, according to interviews and court documents.

Mason said that after he began to complain, he got a call from Cooper, the CEO, who threatened to sue him for slander. "He really scared me," Mason said. "You feel like you're dealing with all these bigwigs."

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The Miami New Times, which published an in-depth investigation of the company last year, reported that Cooper would sometimes tell people who had posted negative reviews of the company that he had security with specialized training in the Israeli martial art Krav Maga.

In an August 2015 email included in court documents, Whitaker wrote to a complainant who threatened to go to the Better Business Bureau, "I am assuming you understand that there could be serious civil and criminal consequences for you." He noted he was a former U.S. attorney.

Another board member, Aileen Marty, a professor of infectious disease at Florida International University in Miami, said she was told when she joined the board that she would be sent interesting patent ideas to review — but never received any.

Marty said she received one check for her board service, which she returned when she heard the company could be committing fraud.

"I wish I had never heard of the company and I wish that my name were not in any way associated with it. I can't turn back time and not accept the offer to be on their board — believe me if I could, I would," she said in an email to the Post.

As he was advising World Patent Marketing, Whitaker ran a conservative watchdog group called the Foundation for Accountability and Civic Trust. The group lodged numerous ethics complaints and calls for investigations, targeting Hillary Clinton and Supreme Court nominee Merrick Garland, as well as some Republicans.

On its website, FACT lists a downtown Washington address. But it is one of some 200 "virtual members" who use a K Street location to claim a presence in the nation's capital, according to Brian Bullock, assistant general manager of Carr Workplaces, the firm that operates the site.

"They only come in every six months or so," Bullock said. "We pretty much just accept their mail."

FACT was formed in 2014 with a large donation from another tax-exempt charity that has served as a fountainhead of cash for organizations affiliated with the conservative movement — an arrangement that helps further mask the identity of donors.

The group received more than $1 million in recent years from a donor-advised fund called Donors Trust Inc., which is a source of funding for scores of other conservative groups, including Judicial Watch, Project Veritas, the Claremont Institute, the Federalist Society and the David Horowitz Freedom Center, tax filings show.

Whitaker received $402,000 in 2016 as FACT's president and director, nearly a third of the donations the group received that year, according to its tax filings. He received $252,000 in 2015, more than half the charity's receipts that year, tax filings show.

FACT officials declined to comment, but they described the group as a nonpartisan ethics watchdog that holds accountable government officials from both parties.

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