The California Attorney General's Office has sued Wade Cook Financial,
contending the Seattle-based company promised misleading rates of return to
students of its stock-market seminars.
The suit, filed today in Fresno County Superior Court, seeks restitution of up to $18 million for California customers and $4 million in civil penalties.
California is the second state in the past year to take legal action against Wade Cook Financial, which runs investment workshops and seminars across the country based on the teachings of chief executive Wade Cook. State prosecutors in Texas filed a similar suit in May, alleging deceptive business practices.
The company also is facing investigations by the Securities and Exchange Commission and the states of Washington and Illinois.
The California suit contends that Cook's company - which advertises that it can teach students how to "double your money" with high-risk trading methods - misled customers about its stock-market success. The suit cites a loss of $804,000 posted by the company on stocks it traded in its own portfolios in 1997.
"Seminar scam artists and other purveyors of bogus `get-rich-quick' schemes ought to think twice before doing business in California," Attorney General Bill Lockyer said in a prepared statement.
Cook has said the $804,000 figure is misleading
because it reflects the value of stocks that weren't actually sold.
The suit also alleges that Cook seminars' advertised guarantee - which
promises a refund if the company does not identify three stock trades that
earn an annualized return of 300 percent - is deceptive. Under the
guarantee, prosecutors said, a one-day rise of 25 cents for a $20 stock
could be extrapolated into a 300 percent yearly return.
In addition, prosecutors contend that from 1995 to 1997, the company did not
adhere to a state law that allows customers a three-day right of
cancellation for spots they'd reserved at seminars.
The company changed its policy in April, giving
customers a seven-day grace period to change their minds.
Kiman Lucas, general counsel for Wade Cook Financial, said this morning that
the company had not yet been served a copy of the suit and could not comment
on specific allegations.
Lucas said the company "respects the rights of consumers, and we are proud of our policy of providing full refunds to any customer who requests one within seven days of registration for a seminar."
