Get-Rich Gurus Are in Eclipse : Promoters of Easy Street Seen on Bankruptcy Lane

The get-rich-quick business is quickly getting poorer.

Consider Ed Beckley, a skinny, squeaky-voiced man with choir-boy looks who sells a $299 “Millionaire Maker” package of cassettes and books promising to teach people how to get rich buying real estate even if they are broke.

Once based near Sacramento, the former schoolteacher moved his operation in 1984 to Fairfield, Iowa, to be closer to a university founded by his spiritual mentor, Maharishi Mahesh Yogi, the renowned Indian transcendental meditation guru.

Within a year, Beckley, 39, built the largest company in the business of distributing advice on buying real estate with no money down. His “Million Dollar Secrets” cable television program appeared in about 200 markets, his payroll grew to 560 and the company he controls, the Beckley Group, claimed to have $40 million in sales.

But while Beckley was telling people how to get rich, his Beckley Group was going broke. Deluged with more than 40,000 refund requests from people who bought Beckley’s home-study courses, the company ran out of money a year ago. On March 22, the company, in which Beckley owns an 80% stake, filed in Des Moines for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code, listing $6 million in debts.

All but 35 of Beckley’s employees have been fired, the program now appears in only 20 television markets and the company is having trouble making good on a promise made to the Iowa attorney general’s office to refund more than $3 million still owed to 11,000 people. That pledge followed an inquiry by the agency into alleged violations of state consumer laws. Donald Neiman, the Beckley Group’s attorney, said it may take three to five years to repay those customers.

The get-rich-quick industry is clearly in eclipse. At its peak in 1985, nearly 20 real estate gurus like Beckley saturated the market by regularly buying hourlong blocks of time on late-night television to sell no-money-down courses for $295, $399, $495 and more.

Their how-to courses targeted people in dead-end jobs, tempting viewers with promises that anyone could break his or her financial shackles and retire in two years with $20,000 a month in income, or earn $1 million in three years, or earn $20,000 a year working one Sunday a month. Industry executives estimated that promoters may have taken in more than $150 million a year.

The Seminar Circuit

Another 100 or so promoters worked the seminar circuit. And how-to books were published in an assembly line-like manner. One Anaheim library of get-rich books has nearly 400 real estate-related tomes (example: “Big Bucks From Bad Buildings”) written by about 120 authors.

Now, however, celebrated real estate speakers, such as talk show host Tony Hoffman and best-selling author Albert J. Lowry, have seen companies promoting their theories close or go into bankruptcy proceedings. At least 17,000 people nationwide want refunds from various real estate gurus, according to court papers, and creditors are owed millions of dollars.

“We laugh about it,” said one supplier of cassettes to get-rich firms. “They talk about buying stuff with no money down, but when we deal with them we demand our money up front. That’s what you learn after you get burned enough times.”

Tempo Television in Tulsa, Okla., once a primary distributor of get-rich shows on cable, is owed “somewhere in the six figures” by Beckley’s company, said Tempo Vice President Raymond Klinge. Tempo now will not run get-rich-quick programs unless they are paid for in advance.

“In broadcasting, the preachers, the politicians, the car transmission shops and the get-rich-quick guys are all money up front,” Klinge said.

‘People Have Wised Up’

A plethora of get-rich-quick gurus helped push the industry into decline. “They’ve over-saturated their market. People have wised up to it,” Klinge said.

It is a far cry from the late 1970s, when double-digit inflation fueled soaring home prices, opening the way for a proliferation of real estate seminar speakers who spoke to packed hotel ballrooms in sessions that often resembled religious revivals or est-like motivational meetings. Promoters told Horatio Alger stories about how they became rich in real estate, followed by testimonials from students and pitches to buy cassette tapes and books.

The cornerstone of the theory was buying real estate without any cash. In one ploy, students were instructed to find “distressed” property owned by “motivated sellers” who were so desperate to sell, because of financial or personal problems, that they would accept an IOU as a down payment with an option to let the seller out of the deal in five weeks. That gave the student, in theory, time to find a buyer at a higher price and make a quick profit.

“It won’t work for the majority of the people because (only) 5% to 10% of the people need to get rid of their property,” said Joseph Marino, ex-president of National Educational Development, a Tucson, Ariz., get-rich company.

But that did not stop the rush into the business by promoters, most of whom boasted of making it big in real estate without formal training. Top speakers included a former meat cutter, a school teacher and construction workers.

How Money Is Made

“I’ve known most of them and I don’t know of one who made a fortune investing in real estate, at least prior to the time they amassed some wealth putting on seminars. If you know how to make a fortune in real estate, you would spend your time doing it, rather than conducting seminars,” said Donald Yule, ex-president of one of Albert Lowry’s seminar companies. Lowry, however, said that he became a multimillionaire using his real estate investment methods.

Sometimes the advice that promoters sold was not their own. Paul Simon, a former carpet layer turned real estate promoter, sold a $35 book he claimed to have written entitled, “The Ins and Outs of Foreclosures.” But the Arizona State Bar Assn. said the Phoenix-based promoter’s book was copied almost entirely from one of its books and obtained a permanent court order preventing Simon from selling it. He settled for an undisclosed sum in 1985.

Critics and government regulators contend that the get-rich advice is easily abused. “People who do these deals often promise to make payments, then they don’t. They milk it, run off and it goes into foreclosure against the original owner,” said Randy Brendia, deputy manager with the state Department of Real Estate in Los Angeles.

Critics add that, with low inflation and new tax laws that are stricter on deductions for second homes, no-money-down deals are less likely to work today.

Gary Davis, an aircraft mechanic in St. Charles, Mo., said he spent nearly $1,500 on the home-study real estate courses but could not complete a deal.

‘Ideas Sounded Good’

“The real estate agents were leery of it and the banks didn’t want anything to do with it. Even though the ideas sounded good, when I went to use them they were useless,” Davis said.

The two seminal real estate gurus in the early days were Lowry and Robert Allen. Allen’s “Nothing Down” and Lowry’s “How You Can Become Financially Independent by Investing in Real Estate” were both on the New York Times best-seller list in 1980.

But it was Lowry, a former butcher from Canada with an earnest, soft-spoken manner, who begat most of the get-rich promoters still active. At 59, he is still youthful-looking, sporting a curly haired toupee.

Money magazine’s May, 1981, cover story called him a “real estate wizard.” To promote himself, Lowry hired distinguished actor E. G. Marshall to narrate “How to Be Successful in America Today,” a 30-minute program for which he bought time on television. Another was produced in a newscast style, with news anchors “reporting” on Lowry’s advice, including interviews with economist Arthur Laffer and U.S. Sen. Alan Cranston talking about general economic issues to give the program credibility.

To attract customers, Lowry paid for baby sitters, cab fare and even hotel rooms. He offered free, introductory lectures at hotels, where follow-up weekend seminars costing as much as $495 were sold. Graduates were offered Lowry’s products including books, some of which were triple-spaced and printed on only one side of the page so they would appear thicker.

Company Closed

Nevertheless, the company Lowry founded, called the Lowry Group, then renamed Success Development Institute, closed in October, 1985, owing $2.5 million. Lowry denied that he was still associated with the Westlake Village company when it closed, although records in the secretary of state’s office listed him as chief executive.

Lowry’s own financial and legal problems have been growing. He acknowledged in an interview that he lost millions of dollars on real estate in the Lake Tahoe area, blaming his problems on strict development laws there.

In January, California First Bank obtained a court order requiring Lowry and his partners in a Westlake Village health club to pay more than $400,000 for defaulting on a 1985 loan, and the court ordered Lowry to pay an additional $173,000 himself. Lowry, who plans to appeal, said he inadvertently failed to defend himself in the suit because he was traveling and his attorney was on vacation.

Public records on file with the Ventura County clerk show problems with another Lowry-related loan. This one, for $163,800, was taken out in 1984 by Lowry and his wife, Darlene (from whom he has since been divorced), for a Thousand Oaks condominium and was foreclosed on last June by Valley Federal Savings & Loan of Van Nuys.

Lowry turned over ownership of the condominium, he said, to the Success Development company to house one of its executives. The company, he said, was responsible for paying off the loan. “It was not my foreclosure. I didn’t even own the damn thing,” Lowry said.

Deeded Condominium

Ventura County records, however, show that Lowry deeded the condominium to Success Development one day after the company closed, recording it with the county a month later.

Lowry has also frustrated tax collection agencies. In 1984, for example, he was ordered to pay $41,000 for three years’ delinquent property taxes for a building in Allegheny County, Pa. Lowry, who did pay the taxes, said tenants were not paying rent and that his property managers failed to pay the bill.

Lowry, frequently promoted as “Mr. Real Estate,” cannot find a buyer for his own five-bedroom Westlake Village home, listed at $1.15 million nearly two years ago. Lowry recently cut the asking price to $945,000. “It’s hard to sell a $1-million home,” he said.

And it is hard to keep a promoter like Lowry down. He appeared not long ago in an advertisement for “an organic high-energy weight control substitute” which, he said, helped him lose 23 pounds in seven weeks. And much to the consternation of his creditors, Lowry has lately been offering advice in seminars on how to play hardball with bill collectors.

One of those who learned from Lowry was Tony Hoffman. He worked as a speaker for Lowry’s company, where he was a vice president before leaving in 1984.

Dollar Sign on Rings

A cocky Brooklyn native, Hoffman wore diamond rings shaped like dollar signs, collected Salvador Dali paintings and rode in a chauffeured Cadillac limousine with the license plate “NEGOC8R.” Likening himself to a “financial Phil Donahue,” Hoffman hosted a live nightly investment talk show called “Everybody’s Money Matters” on cable television channels nationwide. During the program, he sold his $495, 16-cassette home-study package.

Hoffman’s bluster made him a popular television guest. His publicity materials list 53 appearances by Hoffman on national and local programs from 1984 to 1986. Last June, in a documentary on Southern Californians that was broadcast on Turner Broadcasting System’s WTBS, narrator Hal Holbrook said Hoffman “came here seeking fame and fortune and got it.”

Four months after the documentary aired, the company Hoffman controls, National Superstar, based in Westlake Village, filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. The company’s debts total $3.6 million, more than five times its $661,000 in assets, according to bankruptcy papers. About $1.4 million is in refunds owed 5,710 customers.

According to its executives and financial statements, publicly held National Superstar lost $2 million in its first full year of operation in 1985 on sales of $21 million. It lost $1.2 million in the nine months ended last Sept. 30.

Despite the company’s problems, Hoffman did well. In the year leading up to the bankruptcy filing, he collected a $363,000 annual salary, $10,000 in car expenses and a $30,000 loan.

Got Loans From Company

According to depositions by National Superstar executives and papers given to creditors, Hoffman and Robert L. Francis, a vice president of National Superstar, received another $809,076 in loans from the company. Creditors’ attorney Arnold Quittner said Hoffman received about $485,000 of the money.

Executives of National Superstar told creditors that they can find no documents authorizing the loans. In any case, Hoffman and Francis contend that they should not have to repay the money because they believe they earned that much in commissions by selling courses.

Hoffman, who is still chairman of National Superstar, complained that other promoters copied his ideas. He also said the company’s problems stem from a liberal six-month return policy and higher costs for television time.

But Hoffman said the company is making new television shows and predicted that their success will enable National Superstar to pay its debts in six months.

His investment theories, Hoffman said, are still valid: “They do work, did work and continue to work. They always have and always will.”

Promote Their Seminars

As Lowry begat Hoffman, so Hoffman begat Mike and Irene Milin, a couple from Tucson, Ariz., who got their start as seminar speakers for Hoffman. The Milins, who claim that people using their advice can retire in two years with a $20,000 monthly income, promote themselves by buying time on television stations to plug their seminars.

The program, called “Two Years to Financial Freedom,” is a half-hour tape featuring Robin Leach, the British-born host of “Lifestyles of the Rich and Famous,” a sycophantic television program that examines in detail the lives of wealthy celebrities.

The tape gives the impression that the Milins were guests on Leach’s syndicated show. They ride with Leach in a white Rolls-Royce, fly with him in a corporate jet and relax in the presidential suite of Tucson’s Sheraton El Conquistador Hotel, where Leach said the Milins stayed while their new home was being built. An ebullient Leach toasts “all the future millionaires the Milin method is going to create.”

Leach, in fact, was hired for the day by the Milins to make the promotional tape. And, according to Marino, the former president of the Milins’ company and the tape’s executive producer, the Rolls-Royce and jet were rented props and the hotel suite was borrowed.

Later, the owners of “Lifestyles of the Rich and Famous” successfully sued the Milins for copying their program’s format without authorization, forcing them to change the presentation to reduce the resemblance to the actual TV show.

Claims Position at UC

But the tape does its job of getting people to come to the seminars, where Mike Milin tells of how he invested in real estate in desperation after being laid off in 1979 as a sociology instructor at the University of California, Berkeley. Milin adds that he became an expert on banks from writing his master’s thesis at Berkeley on sociology and banking.

The university’s office of admissions and records, however, has no record of Milin ever attending there. Its financial services office, which maintains payroll records for all employees, has no record of Milin teaching there.

Milin, 35, did attend Arizona State University from 1969 to 1972 but did not graduate, according to the registrar’s office. A 1970 article in the Arizona Republic said he was a member of the “Radical Student Union” revolutionary group. “When we talk about revolution, we are talking about replacing capitalism with socialism,” he said in an interview then.

The Milins refused to be interviewed for this story and declined to answer questions submitted in writing.

Another member of the Lowry professional family tree, as well as a former speaker for Hoffman’s tour, is Dave Del Dotto, 36, a former construction worker from Modesto. Del Dotto claims that he is doing fine and that his company will have a record $20 million in sales this year. The dark-haired, mustachioed Del Dotto acts the part of a showman, often beginning seminars by giving away to a member of his audience an acre of land in Arizona or New Mexico.

‘Worthless Sagebrush’

But Keith Vogt, who owns a company that once packaged home-study courses for Del Dotto, said he bought much of the land for him at auctions. He said it is “worthless sagebrush” that cost no more than $50 an acre. Del Dotto acknowledged that Vogt bought property for him but said all of the land he gives away has value because the lots are subdivided and can be developed.

Del Dotto is being sued in Sacramento by San Francisco attorney Johnny Crowell, a one-time associate who helped him arrange loans in the early 1980s. Crowell said Del Dotto failed to make loan payments on a duplex he co-signed for, adding that Del Dotto was “writing his books about how to make a million in real estate at a period of time when he didn’t have enough money to get a loan on a $60,000 to $70,000 duplex.”

Del Dotto said he stopped making payments because Crowell did not give him title to the property, as he said Crowell had promised. He also denied Crowell’s accusations that he was financially strapped while he was writing his real estate investment books. Del Dotto said he is a millionaire and that he owns a $2-million home in Hawaii.

“The bottom line is that I’m still on television. Everyone else has been weeded out,” Del Dotto said.