Other LanguagesSEATTLE - Oct. 5, 2000 - Two Seattle-area companies that allegedly sold "get rich quick" investment advice not backed up by results will discontinue deceptive practices and pay millions of dollars back to consumers. Those terms were agreed to by Wade Cook Financial Corporation and Wade Cook Seminars Inc., in consent decrees signed with Washington state and the Federal Trade Commission.
The agreement was announced today by Attorney General Christine Gregoire, Washington state Department of Financial Institutions Director John Bley, and FTC Regional Director Charles Harwood. The consent decrees are part of a series of legal settlements being negotiated between Cook's companies and 14 states, including Washington.
The settlement with Washington was filed in King County Superior Court and incorporates a separate consent decree filed this week in U.S. District Court in Seattle by the Federal Trade Commission. Under terms of the decrees, Cook's companies will stop using deceptive practices and pay restitution to as many as 13,400 Washington consumers who paid a total of $53.8 million to participate in Wade Cook seminars. Further, Wade Cook Financial will pay Washington state $136,000 for consumer education and to reimburse the state for its investigative costs.
Wade Cook, the founder of the companies, is a former Tacoma cab driver turned stock market guru.
"Cook made his millions selling seminars, not playing the stock market as he has advertised. He either deceived consumers or he didn’t follow his own trading advice," Gregoire said.
"This case is not about good or bad advice. It is about Cook's failure to be truthful in his presentations," Bley pointed out. "He should have to tell the truth about his success, just like everyone we regulate. We hope our actions will ensure that he does so from now on."
The complaint filed simultaneously with the consent decree alleges that Cook’s companies made false claims about the wealth he acquired and told others they could duplicate his financial success if they followed the trading formulas taught in the seminars. The complaint also alleged that Cook’s companies manipulated claims of financial success by not disclosing losing transactions; and that the companies falsely reported trading transactions.
The two companies, headquartered in Tukwila, made $110 million from the sales of financial seminars and other products last year. Cook personally made $18 million in royalties during the same time period.
"Our staff reviewed the stock market trades by Cook’s companies over a period of several years, and found that his annual returns ranged from plus 3.3 percent to a 5.3 percent loss," said Bley. "All this while he was claiming triple-digit returns for his stock and options strategies."
Consumers are lured to free financial seminars, say regulators, with promises they will gain wealth and riches by following Cook’s investment formulas. The seminars are actually three-hour sales pitches for a two-day Wall Street Workshop that costs between $3,000 to $5,000 and teaches consumers the formulas to Cook’s trading "success." In 1998, the corporation held 3,733 seminars in more than 379 U.S. cities.
The defendants also tout the benefits of the Wealth Information Network (WIN), an online subscription service given free for six months to those who sign up for the Wall Street seminar. WIN allegedly provides up to the minute, detailed information on "all" trades made by the corporations, using the Wade Cook formulas. After the six-month trial, consumers are charged for the service. The subscription service costs $2,995 for the first year with a $1,995 per year renewal fee.
"People see the trades Cook wants them to see," Gregoire said. "Investing in the stock market is risky enough. The investment world can do without those who use a façade of success to lure the unsuspecting."
-30-