Givens In Trouble

LIKE SO MANY OF US, CELLA GUTIERREZ IS A DREAMER. In 1991, yearning to improve her modest lot, the Salinas, Calif., woman attended a get-rich seminar sponsored by best-selling author and financial huckster Charles J. Givens Jr. The seminar speaker made her think that she could easily buy and sell real estate with little or no money down. So she squeezed her credit card for nearly $1,000 to join the Charles J. Givens Organization (CJGO) and paid another $2,000 for a real-estate course.

When the scales fell from her eyes, she got mad and got even. She filed a class-action lawsuit on behalf of 29,000 CJGO members in California -- charging Givens with misrepresentation and fraud. On May 8 a jury found in her favor, hitting him with $14.1 million in damages. That included punitive damages, awarded for what California calls "reprehensible conduct." Givens says, "Nothing, in my opinion, was misleading." He plans to appeal.

This is the second jury to find against the flamboyant pitchman who made his fortune by doling out financial advice. The publicity may bring his waning influence to an end. (Givens settled the previous case in 1993, before it was tried to conclusion but after preliminary findings of fraud. He sued me for libel when I reported the story, but eventually walked away from the suit.)

For those who haven't followed his career, Givens became perhaps the most successful get-rich guru ever. While his colleagues languished in the ghetto of late-night cable TV, Givens won uncritical acceptance in legitimate forums -- wowing the audience and the hosts on such widely watched programs as "Larry King" and the "Today" show. His book, "Wealth Without Risk," has sold more than 1.3 million copies. The organization he founded still boasts some 120,000 current members, who receive a grab bag of services, workshops and personal-finance advice.

Motivational groups like this are as American as hope. In the hands of a charismatic leader, they can feel like a camp meeting, brimming with faith. But in recent years, Givens's organization has been under siege. Florida, Iowa, Maryland, North Dakota and Wisconsin all have attacked its business practices. Complaints accumulated, from people who failed to get refunds they thought they were owed. In Florida alone, the attorney general's office has secured agreements for refunds worth $320,000.

Those cases pricked holes in the Givens myth. The successful lawsuit in California has opened a wider avenue of attack -- not just for recovering Givens addicts but for anyone rooked by a high-pressure TV or seminar speaker. Givens attracted his members with a TV infomercial that, in the jury's opinion, contained a number of misleading claims. "This shows that class actions can be successful when someone goes on TV and lies to sell the product," says Gutierrez's lawyer Edward Gergosian of the San Diego law firm Barrack, Rodos & Bacine. "I'm not aware of any precedent for that."

The jury split 9-3 on the case, with the nays opining that Gutierrez had been too gullible. Everyone thought the financial advice offered by CJGO was "incomplete, incorrect and misleading," juror Arnold Garza says, "but not against the law." Givens lost the case on his personal credibility -- by lying about his past and, says Garza, by "claiming that five to 10 minutes a night will put $300 to $1,000 in your pocket and anyone can do it, it's easy and safe."

"Easy and safe" is exactly what sells, to people dreaming of turning small savings into a more luxurious life. Three jury members may have faulted Gutierrez for being gullible, but in the hands of a plausible salesman they, too, might come to believe some unreasonable things.

Givens's trademark title, "Wealth Without Risk," tells the story the experts attacked on the stand: for example, his assertion that mutual funds "safely" make 15 percent to 20 percent a year or that it's "safe" to borrow against your mutual funds to get extra money to invest. Those strategies have a place, but they're hardly no-risk -- and that's the potential danger in Givens's sort of advice. It's partly right and can even be a nifty idea, but there may be a downside that failed to make it into print. Givens says that, over the years, he has made his strategies more complete. "This isn't meant for college professors," he says. "It's written for the purpose of getting people to act."

Still, actions may come back to haunt you if you didn't understand the risks. Take Givens's suggestion -- in infomercials and his book -- that people establish tax-loss deductions by starting small businesses at home. They have to be real businesses, with effort and paperwork to prove it. If you don't make a profit after two years, the IRS may disallow the loss. Dan Gleason of My Tax Man in Ocala, Fla., who prepared tax returns for Givens members for three years, says that about 3 percent have been audited -- a small number overall, but three times the national average. (Gleason is suing Givens for more than $200,000 he says is owed.)

Givens folded CJGO in early 1995 and says he's not involved in the business anymore. The successor company, International Administrative Services (IAS), sold members five-year renewals, payable upfront, until early this month, IAS president David Phillips says. But it's likely to file for reorganization in bankruptcy within 30 days, Phillips says -- partly to deal with claims of unpaid state taxes. Cash-flow problems afflict other parts of the former Givens empire. The IRS has been probing for unreported income.

Could the redoubtable Givens bounce back despite the jury finding of fraud? The companies that were spun out of the old Givens operation don't use his name, he says. But his book -- with his classic mix of good, bad and strange advice -- remains in the stores to attract a new generation of followers. Simon & Schuster, Givens's publisher (and mine), says it might re-examine the book if it were mentioned in the court judgment (it wasn't). Givens has said that I write about him because I'm jealous that he outsells me. I sure would love his royalties, but I'd rather have him fade away, so I'll never have to write this again.