As infomercial king Kevin Trudeau heads to jail, his secret global club faces uncertain future
5:36 PM, Oct 17, 2013
10:41 PM, Oct 17, 2013
KANSAS CITY, Mo. - A global club promoting the secrets to health, happiness and success is facing an uncertain future. Its leader, infomercial king Kevin Trudeau, had his assets seized and he is heading back to jail next week.
With the government trying to collect a $37 million judgment against the controversial TV pitchman, some are wondering what will happen to GIN and its thousands of members. Despite insisting he had no ownership of GIN, the Federal Trade Commission (FTC) successfully argued Trudeau held the purse strings to the multi-million dollar organization.
So what does that mean for GIN members? Backed by financial records gathered by the receiver, the FTC is arguing the club is an illegal pyramid scheme where only a select few are getting rich, while the vast majority of members are losing money.
According to a September report, receiver Robb Evans & Associates LLC is evaluating whether GIN is a legal multi-level marketing program. Among the receiver's findings:
• GIN generated more than $100 million in revenue since its inception in 2009
• Almost all of GIN's members (an average of 98 percent), pay more in $150 monthly dues than what they earn in commissions
• Out of roughly 35,000 members, only three or four people earned more than $100,000 in commissions, including Trudeau and his wife
"The most common rule with investigations is to follow the money," Dan Stewart, a retired federal prosecutor who worked in Kansas City and Chicago and specialized in fraud cases, said. "In this case, it appears a few people are benefitting greatly, while most investors are getting less than they put in each year."
Stewart has followed court filings related to Trudeau and GIN since the original 41 Action News investigation last November. He said there are a number of red flags that point to a potentially fraudulent scheme.
These include misrepresentations about commissions; "straw ownership" (Trudeau had claimed his wife was in charge of GIN, though she appeared to have no involvement); use of offshore bank accounts; failure to account for millions of dollars in transactions; and partial payments and other benefits provided to members known as "lulling statements."
"There are multiple factors that all point to the fact that this organization is not running a straight business," Stewart said.
As 41 Action News showed last November, GIN members pay large amounts to upgrade their level in the club. In Nashville, people who had just paid $10,000 to attain Level V paraded across the stage.
41 Action News also spoke with a man who had paid $75,000 to be in the "Inner Circle." According to the receiver's report, Inner Circle fees alone accumulated $12.3 million of revenue.
The program is supposed to provide about 200 members with a percentage of the club's gross monthly revenue. However, there was no formal written documentation about the program.
"I'm kind of looking at it as an investment for my grandkids," the man had told 41 Action News.
Since taking control of GIN, the receiver has laid off employees, suspended delinquent bonus payments and postponed a January 2014 cruise indefinitely.
Former GIN member Abe Husein said the receiver's report validated his claims about the club.
"I've always been saying that not a single person has made more in GIN than they've put in and those documents prove it," Husein said, who first contacted 41 Action News last year to request an investigation.
Since then, it has been an interesting year for Husein, who offers no shortage of opinionated posts about Trudeau and GIN via social media. In what has almost become a full-time job, a day rarely passes without Husein announcing a "MAJOR GIN UPDATE!!!" on his Facebook page.
During the lengthy segment, Husein drove Trudeau's former Bentley, knocked on the door to Trudeau's Chicago area mansion and accompanied the ABC News reporter to GIN's office building.
"I can't believe how far this thing has gotten," Husein said.
And he might not be done. Husein recently signed a contract with California-based
Adventures in Film to help advise the company with "efforts to produce a feature-length motion picture about GIN and Kevin Trudeau."
Meantime, while outspoken critics like Husein call for the government to shut down GIN, legions of loyal followers continue to line up in Trudeau's corner. Judging from the endless court battle, Trudeau has proven he isn't going down without a fight.
It happens to be the same city where GIN members will be gathered this weekend. In
an online video, Trudeau tells his supporters he can't be part of the GIN event while the receiver is in control, but invites people to attend his seminar.
"I desperately need your help. I need your financial help," Trudeau said in the video. "This seminar is going to contain information that I have never released before. It's not in any of the training I've ever done for the Global Information Network. It's going to be absolutely mind-blowing."
Trudeau said the event is free to anyone who makes a contribution to his legal defense fund.