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The NYT exposé on a financial scammer

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The New York Times takes Russ Whitney, huckster extraordinare, to task in a blistering article about his seminars on “getting rich,” which seem to disproportionately target people who just don’t know any better.

The courses cost $4,995 each, but less if you bought more. Yarbrough chose four, including the Millionaire U Real Estate Training. She had $130,000 in debt, some of it on her seven credit cards, and the clerk helped her to add $18,000 to it.

The article doesn’t spare any details about Whitney:

He was tanned and moussed; at 51, he looked like a million bucks. “Good morning,” he greeted a secretary. “How are you?” When she began complaining of cold symptoms, Whitney cut her off: “You don’t have cancer, do you? You’re doing great!” After lunch, he played basketball in the lobby, pushing down one of his executives and driving to the hoop.

And, of course, the courses amount to little more than an elementary education in real estate:

The economy is divided, Taylor said, between the rich and the poor, “and you can choose which side you want to be on.”

Taylor knew early that her class of advanced students was strictly remedial. Assessing them, she found that only 8 of 40 had invested in real estate before. The infomercial had talked of buying and quickly selling houses, and those who enrolled seemed largely unaware of the real estate slump.

Taylor introduced a hard-charging mortgage broker who began moving rapid-fire through nonconforming NINAs and no docs, PITI reserves and the 28/36 rule. At last, she looked up: “Everyone’s shaking their heads like they know this,” she said. And she rolled right on.

Amusingly, Whitney is caught in a lie with the NYT reporter:

When I asked if he would have enrolled in his school when he was starting out, Whitney said no. Then he added, “I shouldn’t say that,” and began trying to take it back.

But of course, he has your best interests in mind:

He was soon strutting before them…warning them to be careful out there, because “people don’t always have your best interests in mind.” In fact, he said “in 9 out of 10 cases they don’t.” And that’s why they needed more education — to learn what they could expect.

“We’ve got a lot of classes,” he went on. “You probably think they’re expensive.”

“They are expensive!” Yarbrough called out from the front of the class.

Whitney turned to regard her. Yarbrough stared back at him. He began to insist that his profit margins were reasonable, that he wasn’t gouging anyone, but Yarbrough quickly stopped him. “Let me say,” she replied, “that if we didn’t want to be here, we wouldn’t be here. Nobody twisted our arms.”

If there’s one thing I really hate (actually, there are thousands), it’s people taking advantage of others’ inexperience with personal finances.

My unhappy conclusion from this article is that people don’t always know what’s best for them. That, and with young people’s outrageous expectations of getting wealthy–”more than 1 in 5 Americans believe the best way to get rich is to win the lottery“–people are likely to fall for these scams more than ever before.

Depressing, but if you take the time (like, 5 hours) to learn about the fundamentals of personal finance, at least you’re ahead of nearly everybody else.

Do me a favor and tell your friends about risk/reward, investing for the long term, and living below your means. I don’t care if you tell them about this site or Suze Orman’s books or The Bogleheads Guide to Investing. Just point them to some credible information.

Read the entire New York Times article (it’s incredible): Russ Whitney Wants You to Be Rich

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20 Comments

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  1. Boy, do I ever hear your frustration.

    Unfortunately all we can do is throw free information out there again and again, and hope something sticks. I have faith that something will with someone, maybe not everyone, but someone.

  2. I especially liked this part:

    “Situations,” she whispered with a grin; they tend to create motivated sellers. One must approach them gently. It’s important to be positive, to look as though you care about someone’s situation — and it’s absolutely essential that you not care. When you make your lowball offer, you’ll have to stand firm; when tenants don’t pay the rent, you’ll have to evict.

    I mean, gimme a break. What a horrible thing to teach people…

  3. Hi Ramit,

    “Depressing, but if you take the time (like, 5 hours) to learn about the fundamentals of personal finance, at least you’re ahead of nearly everybody else.

    Do me a favor and tell your friends about risk/reward, investing for the long term, and living below your means. I don’t care if you tell them about this site or Suze Orman’s books or The Bogleheads Guide to Investing. Just point them to some credible information. ”

    Have you told Casey Serin this? If you were to publish your 2007 GtKA again today would you still ask him to contribute?

  4. “If you were to publish your 2007 GtKA again today would you still ask him to contribute?”

    Well, I hope that you would still ask me! Though maybe it would be good to change up the contributers.

  5. Heheh, I missed Casey’s article. Anybody got a link?

    And yeah, so many scams these days. Crazy.

  6. I liked the bits where the retired doctor was surprised that no-one else did the homework and the presenter said: “why are you surprised”. And when she asked them where they learnt their math… Casey would fit right in in that crowd.

  7. There’s more on Russ Whitney here:

    http://johntreed.com/Whitneyfreetraining.html

    unbelievable!

  8. A blog post on real estate scams that doesn’t reference John T. Reed is incomplete. He’s got the most comprehensive listing of real estate scammers on the Web. His books are excellent, down-to-earth, good advice. Here is a link to John T. Reed’s page on Russ Whitney — http://www.johntreed.com/ReedonWhitney.html

  9. I went to one a free seminar by him. I was curious but knew it was just a sales show. I watched how it was run. It was a good lesson in applied psychology, the tactics that were used were impressive. Anyway I am sure some of the first people to get the “limited” supply of spots in the course were shills to make others believe they needed to act and act now or lose out on the biggest opportunity of their lives etc… blech. Remeber just about any free”seminar” you go to about making money..is about making money, for the people holding the seminar.

  10. I feel like the people who think this guy’s seminar is going to make them wealthy are the same people who buy those $69.99 penis enlargement pills advertised in Maxim.

  11. “the courses amount to little more than an elementary education in real estate:”

    I respectfully disagree with your assessment. Wealth Intelligence Academy’s advanced training courses are indeed advanced training in investing strategies. The company is licensed and approved as a post-secondary education provider in states that require it.

    I’m looking forward to your book, “I Will Teach You to Be Rich.”

  12. Before you recommend Suze Orman’s books, be sure to check out her newest series of offerings called ‘Women and Money’. My girlfriend and I watched some of the PBS special together and determined that Suze is turning into quite the charlatan. Her new material is filled with gender stereotypes that supposedly reveal why women have a bad relationship with money. It’s what I would expect from Dr. Phil or that idiot who wrote ‘Men are from Mars, Women are from Venus’, but not someone formerly credible like Suze.

  13. There was an article about Whitney suing Reed in the (San Fracnisco Area) East Bay Express. It was mainly about Reed and I think it was worth reading.

  14. Wow, Ramit. Amazing find. I went to read the article so that I could write about it for my site, but found myself more struck by the mentality of the students than by Whitney’s sliminess. Yes, he’s slimey, but the people at his seminars need help. I’m in the middle of a protracted rant that I hope to post tomorrow…

  15. [...] you to subscribe to my RSS feed. Thanks for visiting!At I Will Teach You to Be Rich, Ramit recently shared his thoughts on a New York Times profile of Russ Whitney, a real estate mogul who charges thousands of dollars [...]

  16. One does not “expose on” a scammer. One “exposes” a scammer.

  17. I meant to write exposé. Fixed now.

  18. The Rich Dad Poor Dad books are turning into quite the scam, too. The majority of them are based off his first two. Real estate is made out to be some sort of easy investment. Sure…to get in! The hard part is getting out. Its so much easy to sell shares of a mutual fund or stock than it is to sell a house. Read John T Reed’s info on his take of Robert Kiyosaki. I’d imagine Suze Orman will be on it soon. After seeing the current information she has put out, I’ll never get married. Don’t listen to these “guru” people. Put your money into an index based mutual fund and you’ll be just fine. If you have a lot of money, and I mean a lot, go into real estate since its more beneficial for the tax advantages it throws off. And never day trade stocks!