Global Information Network (GIN), a Nevis-based company that promised its members access to a network of wealthy and powerful financial experts, was created by the infamous Kevin Trudeau. Trudeau has a long history of trouble with the FTC, largely because of his misleading infomercials. When he was ordered to pay $37 million as a result of false health and diet claims made in one of his books, he created GIN, allegedly to make it easier to hide his assets. According to a CNBC investigation, GIN was essentially a $110 million pyramid scheme with more than 35,000 members.
Trudeau is now in prison serving a 10-year sentence and the FTC’s Jonathan Cohen told CNBC, “It’s likely a significant portion of the assets remain stashed overseas in corporations or trusts that Kevin Trudeau controls.”
The Verge reported that the GIN case could be a sign of more clarity in how the FTC handles pyramid schemes. A 2013 filing cited “perpetual recruitment” that “dooms the vast majority of the participants (well above 90%) to financial losses by the very design of the compensation plan.”
According to Trudeau’s online radio show KTRN, GIN was a “secret society” that would generate a “money-making machine virtually overnight” for any individual involved. GIN guaranteed members they would be millionaires in no time, and Trudeau added he and a council of 29 other unnamed “millionaires, billionaires, multibillionaires” would advise potential investors on how to get rich quick.
A notorious and prolific fraud, Trudeau has been tracked by the FTC since at least 1998, when the consumer protection agency filed a sprawling lawsuit against the author and late-night infomercial pitchman who claimed, among other things, that his “Sable Hair Farming System” would “finally end baldness in the human race.” Though Trudeau has somehow managed to continue hawking his weird and obviously fake “solutions” in between stints behind bars, the FTC keeps an exhaustive record of his products, filing court action against him when regulators feel he’s attempted to market something newly counterfeit.
What makes GIN and Herbalife similar is “a form of ‘bait and switch’ where the ‘bait’ is the potential for life-changing wealth, and the ‘switch’ is the reality of an improbable opportunity,” says dean of the College of New Jersey’s business school, William Keep.
“The success stories on their websites are heavily skewed toward telling the stories of the very few who do achieve life-changing income,” he says. “Ironically, in the case of MLMs operating pyramid schemes, the very strength of trust developed through face-to-face selling gets perverted for the purpose of endless recruiting.”
Since Herbalife provides discounted products along with a business opportunity, the company certainly seems to fit the FTC’s definition of a pyramid scheme. But Trudeau is an easy target – an obvious fraud with decades of overt violations to his discredit.
Kevin Trudeau’s ventures
In the early 1990s, Kevin Trudeau was convicted of larceny and credit card fraud. In 1998, the Federal Trade Commission (FTC) accused him of grossly misrepresenting the contents of his book, The Weight-Loss Cure “They” Don’t Want You to Know About. In a 2004 settlement, he agreed to pay a $500,000 fine and cease marketing all products except his books, which are protected under the First Amendment. In 2011, he was fined $37.6 million for violating the 2004 settlement, and ordered to post a $2 million bond before engaging in any future infomercial advertising.
In 2013, facing further prosecution for violations of the 2011 agreement and non-payment of the $37-million judgment, Trudeau filed for bankruptcy protection. His claims of insolvency were challenged by FTC lawyers, who maintained that he was hiding money in shell companies, and cited examples of continued lavish spending, such as $359 for a haircut.
In September 2013, Judge Robert Gettleman held Trudeau in civil contempt for violation of multiple court orders and failure to pay the $37 million fine assessed in 2010. A month later Trudeau was arrested after refusing to cooperate with the receiver’s investigation. In November a jury found him in criminal contempt for repeated violations of his 2004 agreement as well as subsequent orders and plea deals. Pending sentencing he was held without bail as a flight risk, and for continued failure to disclose hidden assets.
In November 2013, Trudeau was convicted of criminal contempt and is currently serving a 10-year sentence at a Federal Prison Camp in Alabama.
In February 2014, the court-appointed receiver announced that a number of Trudeau’s known assets, including a home in Ojai, California, would be auctioned, with proceeds to be applied toward unpaid fines and restitutions. The receiver also assumed control of Trudeau’s Global Information Network (GIN), the Nevis-based “secret club” that had promised extraordinary “secrets to success”. Court officials informed GIN members that the club’s business model “likely amounted to an illegal pyramid scheme”, and that its relentlessly publicized group of 30 billionaire financial advisors known as the “GIN Council” did not exist. GIN’s remaining assets were later auctioned as well.
In March 2014, Trudeau was sentenced to 10 years in prison, an “unusually lengthy” term for a contempt conviction. Judge Ronald Guzman, “visibly irritated” by Trudeau’s plea for leniency, described him as “deceitful to the core”. “[Trudeau] has treated federal court orders as if they were mere suggestions … or at most, impediments to be sidestepped, outmaneuvered or just ignored,” Guzman said. “That type of conduct simply cannot stand.” Trudeau filed an appeal, contending that (a) Gettleman erred in ruling that Trudeau’s misrepresentations of the content of Free Money “They” Don’t Want You to Know About was in contempt of the court’s 2004 Order; (b) that the district court abused its discretion when it ordered him to pay compensatory damages of $37.6 million; and (c) further abused its discretion when it amended its 2004 Order to prohibit him from participating in infomercials promoting his books.
Trudeau, while in prison, maintains an active Facebook page where he solicits donations for his “defense fund” and compares his imprisonment to that of Nelson Mandela.
In April 2014, Guzman ordered that royalties payable to Trudeau from continuing sales of his books – now owned by a California company called Free is My Favorite LLC, which purchased the rights from Trudeau – be forwarded to a government-controlled trust and used for fine and restitution payments. Infomercials for Free Money “They” Don’t Want You to Know About, produced and marketed by Free is My Favorite LLC, continue to run on television stations throughout the United States.
In October 2015, Gettleman approved a partial refund of about $8 million to more than 820,000 people who bought The Weight Loss Cure “They” Don’t Want You to Know About.
In February 2016, a federal appeals court found no basis to accept Trudeau’s claims, and ruled that the 10-year sentence was reasonable, given “the size of Trudeau’s fraud and the flagrant and repetitive nature of his contumacious conduct.”
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