Russell and Catherine Dalbey – who allegedly defrauded consumers with promises of making big bucks by brokering seller-financed promissory notes – have settled with the Federal Trade Commission and the Colorado Attorney General.
Using infomercials, print advertising, telemarketing calls, and testimonials, the Dalbeys and the three companies they controlled convinced consumers to part with hundreds and sometimes up to tens of thousands of dollars to participate in the “wealth-building” program “Winning in the Cash Flow Business,” according to the complaint filed by the FTC and the Colorado Attorney General in 2011.
The agreed-upon order bans the Dalbeys from telemarketing; from marketing or selling business opportunities; and from producing or distributing infomercials. The order also prohibits them from making deceptive claims about the efficacy, benefits, price, or availability of any product, program, or service, and bars them from using deceptive endorsements or failing to disclose restrictions regarding any product, program, or service.
Under the settlement, the Dalbeys must disclose their assets in sworn financial statements, repatriate all foreign assets, and cooperate fully as the FTC and the Colorado Attorney General’s office determine how much of an agreed-upon $330 million judgment they can pay. The judgment will be suspended when the defendants surrender those assets.
Almost one million consumers nationwide bought products and services from the Dalbeys’ Westminster, Colorado-based company, Dalbey Education Institute, LLC (DEI ), after seeing an infomercial or receiving a direct mail piece touting the substantial amount of money they could earn brokering seller-financed promissory notes or privately held mortgage loans secured by homes or land. According to the complaint, the infomercials made deceptive claims that consumers would experience quick and easy success using DEI’s three-step program: “Find ‘Em,” “List ‘Em,” and “Make Money.” The defendants’ claims were underscored by allegedly atypical, and sometimes false, testimonials from consumers who claimed to have made “$1.2 million in 30 days,” “$79,000 in a few hours,” and “$262,216 part time,” for example.
The complaint alleged that consumers spent approximately $40 to $160 on the initial program and were encouraged by telemarketers to spend hundreds or thousands of dollars more on additional products or services such as multi-day seminars, coaching sessions, and promissory note holder lead lists. Very few made the money the Dalbeys promised they would.
Under a separate stipulated order against Russell Dalbey’s three companies – DEI, LLLP; Dalbey Education Institute, LLC; and IPME, LLLP – they are jointly and severally liable along with the Dalbeys for the $330 million judgment.
The Commission votes approving the stipulated orders were 4-0.
The order against the three companies was entered by the U.S. District Court for the District of Colorado on July 29, 2013, following approval by the U.S. Bankruptcy Court for the District of Colorado. Having ceased operations shortly after the FTC and Colorado Attorney General filed their complaint, the three companies filed Chapter 7 bankruptcy petitions on September 21, 2011.
The U.S. District Court for the District Colorado entered the stipulated order against the Dalbeys on July 22, 2013.
NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.
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(FTC v. Dalbey, et al.: FTC File No. X110040, Civ. No. 1:11-cv-01396-RBJ–KLM)
(Related Bankruptcy Proceedings: In re DEI, LLLP, Case No. 11-32446-MER (Bankr. D. Colo. Sept. 21, 2011); In re Dalbey Education Institute, LLC, Case No. 11-32445-SBB (Bankr. D. Colo. Sept. 21, 2011); In re IPME, LLLP, Case No. 11-32437-HRT (Bankr. D. Colo. Sept. 21, 2011))
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