Investment-Seminar Firm Lost 89% Trading Its Own Money
Wade Cook Financial Corp., which charges investors up to $7,995 for two-day stock trading seminars, has disclosed that it lost 89% trading its own money last year.
The company, which claims in its advertising that it can teach investors to earn 15% a month trading securities, disclosed in a securities filing that it lost $2 million in 2000, has a negative net worth, and its auditors are questioning the company’s ability to continue in business.
The Seattle-based financial education company is required to reveal its track record to prospective customers as part of settlements with state and federal regulators that sued the company for lying about its performance.
“Either Wade is unable to follow his own system, which he claims is simple to follow, or the system doesn’t work,” said Deb Bortner, director of the Washington State Securities Division and president of the North American Securities Administrators Assn.
Wade Cook, 51, chief executive and author of bestsellers, including “Safety First Investing” and “The Wall Street Money Machine,” declined to comment.
The company’s Web site promises it will donate $10,000 to the charity of your choice “if you find one person who has attended our Wall Street Workshop, used our strategies exactly as they are taught, and then lost money.”
Wade Cook Financial settled the series of suits filed by 14 states, including Washington, California and Texas, as well as the Federal Trade Commission. The agreements require the company to offer refunds to customers who were misled by its allegedly false get-rich-quick claims, and to accurately disclose its trading record in future advertising.
The company now posts its investment results on its Web site. An audio message from Wade Cook on that site tells investors that “10% to 15% monthly returns are not uncommon” among those who use his methods.
FTC attorney Eleanor Durham said she’s concerned that such claims may violate the federal consent decree that the company signed to avoid a trial.
“We’ve told them they have to substantiate that claim before they make it, and we haven’t seen proof,” said Durham.
Wade Cook Financial’s revenue slid 30% last year, to $59.1 million from $84.1 million in 1999. The company blamed negative publicity about its legal problems and poor attendance at its seminars, which are now held under the name “Stock Market Institute of Learning.”
Current liabilities of $9.4 million exceeded assets by $1.4 million at year-end 2000. Outside auditor Vasquez & Co. warned that the negative working capital and the company’s continuing losses raise “substantial doubt in its ability to continue as a going concern.”
Cook owns 65% of Wade Cook Financial. His 41.6 million shares, now valued at $4.1 million, were worth more than $200 million in 1997. The stock, which traded at $5.50 in October 1997, now trades at around 10 cents.
Cook hasn’t had to rely on stock market trading to earn a handsome living. He was paid $2 million last year in salary and royalties by Wade Cook Financial, and more than $28 million since 1996. That’s four times the company’s market value.
