WASHINGTON (Bloomberg) — U.S. regulators accused Wade Cook Financial Corp. of violating a settlement by failing to refund millions to investors who attended stock-trading seminars and by continuing to falsely claim graduates will earn 20 percent monthly returns.
The U.S. Federal Trade Commission contends that chief executive Wade Cook and his Seattle-based company still are misleading investors by telling them they can retire in three years by investing less than $2,000 and using trading strategies recommended during "Wall Street Workshop" seminars.
"Those claims are flatly contradicted by WCFC's actual success in the stock market," the FTC said in court documents. After losing $2 million, or 89 percent of its account, trading stocks in 2000 the company lost another 60.6 percent last year, according to regulatory filings and the company's Internet site.
The FTC sought civil contempt citations Wednesday against Cook and his company for violating a 2000 consent order. That accord requires them to stop making false and unsubstantiated claims and to pay refunds to customers who failed to recoup their seminar tuition of up to $3,000 a day.
"There has been serious consumer injury in this case, and that injury must be addressed by the defendants," J. Howard Beales III, chief of the FTC's consumer-protection staff, said Thursday. At least $4 million in refunds is still owed, the agency said.
"We've not been served" with the contempt motion, said Ropbert Hondel, the company's chief operating officer, declining further comment.
In October 2000, Wade Cook Financial settled charges by the FTC and 13 states that the company lied about its investment record and falsely claimed students could earn a 20 percent monthly return if they followed the classes' stock-trading strategies.
The FTC is seeking a civil contempt order against CEO Cook personally, as well as the company. Cook wasn't named as a defendant by the FTC in the agency's original lawsuit, although he personally guaranteed the settlement.
Cook, who told the agency his net worth was $267,000, has received more than $24 million from the company since 1998, according to company filings with the Securities and Exchange Commission.
The FTC alleged the company has been lying to customers at its seminars by claiming that Wade Cook Financial earned 73.5 percent returns trading equities.
The agency also alleged that for six months, the company's Web site failed to properly disclose its rate of return. The site was amended Jan. 18, following a Bloomberg News article reporting the track-record disclosures violated the settlement.
As many as 50,000 customers who paid more than $3,000 to attend the two-day seminars were covered by the 2000 settlement with the FTC and 13 state attorneys general. As of Jan. 18, the company had mailed refunds to 132 customers who attended the seminars, said FTC lawyer Eleanor Durham.
The majority of customers surveyed by regulators said they never received the refund questionnaire required by the settlement.
"Many consumers on receiving this mailing simply threw the whole thing out unopened" said the FTC, because they believed it was "another of the numerous routine promotional mailings made by WCFC."