The publication of the original “Scamworld” article rattled some cages, and it also opened a lot of doors. We were contacted by a number of insiders — victims, former employees, and other people in that world. We learned what it was like to sell, and what it was like to be on the receiving end of the hard sell. We heard about the political climate in the state of Utah, and about the donations to state officials and to presidential candidates — including Mitt Romney. People wanted to talk.
Some of them wanted to talk about Prosper, Inc.
The Provo, Utah-based company bills itself as “one of the most trusted names in one-to-one personalized education.” It is often referred to as a coaching floor or a call center, but the one term that we see used interchangeably is “boiler room.”
In “Scamworld” we discussed how Prosper partners with Internet Marketers like Mike Filsaime to sell coaching programs, which are kind of like the “correspondence courses” that Radar used to sign up for on M*A*S*H. When a sales call offers Mike Filsaime-branded business coaching, you might think you’ll be working with Filsaime himself, but in reality everything is handled by Prosper. Filsaime sold them the lead, and he gets a cut of whatever you buy, but that’s basically the extent of his involvement.
Mike Filsaime is just one of Prosper's many coaching partners.
Trolling Joe Vitale
There is something deeply weird about new age Internet Marketer (and Prosper coaching partner) Joe Vitale. His schtick gained its first real toehold in American life in The Secret, the 2006 film that popularized something called "The Law of Attraction." In case you missed it:
This is like having the universe as your catalog, and you flip through it, and you go: "Well, I’d like to have this experience, and I’d like to have that product, and I’d like to have a person like that." It is you just placing your order with the universe. It’s really that easy...
Part of Vitale’s appeal is that he combines spirituality and metaphysics with making money; hence the title of his book, Spiritual Marketing. Among the services he offers his students is a $7,500 joy ride around Austin, Texas, in his 2012 Fisker Karma all-electric luxury car (he used to hold classes in his Rolls Royce Phantom, but he’s since gone "green"). I’m still not sure if it’s the chance to spitball with the author of Your Internet Cash Machine, the fancy dinner, the Karma’s reclaimed wood interior, or a combination of the three that makes this trip worth six months’ rent.
In other words, Jonathan decided to troll Joe Vitale
If you can’t make it to Austin, Joe Vitale also partners with Prosper to offer something called "Miracles Coaching." In this program, you are assigned a mentor that will supposedly teach you to "attract" money, or a job, or anything else your heart desires (see "the universe as your catalog," above).
I recently spoke to "Tina," a former student of Vitale’s. (She asked me not to use her real name in the story.)
Tina describes herself as both "spiritual" and as an "entrepreneur." It was after reading Spiritual Marketing that she decided to attend a seminar in Maui hosted by Vitale and someone called Dr. Len (apparently, he’s big in Ho’Oponopono circles). It was after she returned from Hawaii that Tina embarked on her Miracles Coaching adventure.
Throughout our conversation, Tina stresses that Vitale is a brilliant guy: at one point she calls him "The Shakespeare of Marketing." But at the same time, she realizes that everything he does is geared towards selling people on his coaching program.
As she explains, "My parents are Cuban. And my father said that Fidel Castro, the way he got into power was 'he fooled people with the truth.' That's pretty much ... what Joe does. And like I said, he does have many things of value, many things that he teaches and whatnot."
In summary: "Honestly, at the end of the day I think [that his books and seminars exist] just to sell you the bigger package. You know, the bigger deal. The coaching program."
I also spoke to Jonathan Timar, a self-employed web designer in British Columbia. He got the full brunt of Prosper’s sales team when he signed up for a coaching session on the internet.
"He offered a free session," said Timar, referring to an ad on Vitale’s website. "So I thought, 'What the heck?’ And I put my name in the box, to see what it was all about."
The "coaching" session, it turned out, was a sales call. "It was all set up to give the impression that I was being invited into an exclusive club," Timar says, "and they would be choosing me." After this first call, Timar realized he had stumbled onto a sales floor, but he decided to continue, curious to see what would happen.
In other words, Jonathan decided to troll Joe Vitale.
As Timar writes in his blog, the "interview" or "coaching session" proceeded just like the sales calls we highlighted in the original "Scamworld" article. Timar was asked how much money he had available, if he had any outstanding debts, his credit card limit: all odd questions for a course in miracles (or, for that matter, A Course in Miracles).
Timar was told that he qualified for the Miracles Coaching program, and that he would be contacted for a second session. It was during this next call, Timar says, that he was "given a brief description of the various levels of coaching available, and the dollar values attached to them.
"I was told that based on my interviews, it did seem like I would be a good candidate for coaching, and that my application would now be forwarded to the enrollment director. I was put on hold for a minute or two, and when the interviewer returned he told me that my application had been accepted for final approval by said enrollment director, and that he was tied up with someone else right now, but that he would be able to call me within a few minutes. I was asked to make a list of three weaknesses and three strengths during that time, as well as to explain my sense of urgency for making changes in my life."
The reason for these questions? A salesmen will use this information whenever he detects resistance from the customer.
Eventually, the salesman returned and quoted prices for the various levels of Miracles Coaching — higher prices than he had quoted in a previous conversation.
Timar was asked which credit card he would be using.
"I plainly stated my objections to using my credit cards to finance something as uncertain as life coaching, and was reassured that this was my ‘negative programming’ talking, and that I needn’t worry because as I changed my inner world, my outer world would take care of itself."
Eventually, the salesman returned with prices for the various levels of coaching — higher prices than he had quoted previously
When Timar turned down the offer, he found himself on hold. When the salesman came back on the line, he seemed to be rather desperate. He offered Timar a different coaching program, heavily based on webinars, online material, and "resources on topics like FOREX trading." While Timar says that he "would have been willing to pay maybe a couple of hundred dollars for [it]," instead of the several thousand dollar asking price, he notes that this had nothing to do with Joe Vitale or Miracles Coaching.
"When I was again informed that I had passed the ‘test’ and that I 'seemed to be a very good candidate for Miracles Coaching,' and he asked me for my credit card number so we could get started, I told him I wanted some time to think about it."
In the end, "out of pure curiosity," Timar told the salesman that he might sell some stock to pay for the class, but "it could take a couple of weeks" to get the money.
The salesman asked: why don't you pay for the class with your credit cards, and then use the stocks to pay the credit card bill?
"I once again explained that I didn’t feel comfortable with that, and that I would rather wait."
Unable to get those credit card numbers, the salesman ended the call.
I told Tina about Prosper’s sales tactics, and about boiler room operations. I asked her how she feels about Joe Vitale working with a company like this.
"As somebody who followed Joe — I read all his books, and I read his blog and I kind of followed him, and I started to see this shift."
What do you mean, a shift?
"He just started really shifting. There’s nothing wrong with money, there’s nothing wrong with prosperity, absolutely nothing wrong with being prosperous. It’s wonderful. But when you start selling people crap [that’s a problem]. He kept regurgitating. It was the same. Every single book that he put out ... was the same, regurgitated material. It was recycled, and I said, ‘I’m sick and tired of paying good money for the same information.’
"His programs just started becoming crap. The quality was not there, and I just got really frustrated. And I think that the people that you would talk to, that used to follow Joe, would tell you the same thing."
What about the prices Prosper puts on these programs? People can spend thousands of dollars on Joe Vitale’s Miracles Coaching.
"What about somebody who has five thousand dollars in their savings account, and that’s the last $5,000 they have?" Tina says. "This is presented to them like, ‘This is really going to change your life. This is really going to make a difference for you.’ That person goes in and spends his last $5,000 ... and you’re left with nothing, really."
Boiler room salesman tells all
"I had people give me their credit card number when I didn't ask for it."
Distance learning is supposed to be an alternative to traditional trade schools or higher education, an opportunity for the underemployed or entrepreneurial-minded to acquire skills necessary to excel in the modern, fast-paced business world. Your mileage may vary, but the consensus among former Prosper students and at least one former employee is that its products are not worth the thousands of dollars people have been pressured into paying for them.
I first spoke to "Tom" a few weeks ago. Although it's impossible to definitively confirm, he tells me that he is a former Prosper "boiler," or salesman. And I believe him — after hearing hours of boiler room sales tapes, his story certainly conforms to my knowledge of the industry. His depiction of the psychology behind boiler room sales is too good not to share.
According to Tom, Prosper’s sales force was divided into sections for different "gurus." There was a Mike Filsaime group, for instance, a Joe Vitale group, and a Robert G. Allen group. Allen is mostly known for his "get rich with real estate" materials, but he's also ventured into Internet Marketing with programs and books like Multiple Streams of Internet Income: How Ordinary People Make Extraordinary Money Online.
Once Tom got someone on the phone, he says, "I would start out by reminding you, or insinuating, that you got online and looked at Robert Allen's wealth building material." He said he needed "intelligent, dedicated people that are looking to work with the mentors on a one-on-one basis, in order to develop their own personal wealth." Describing the call as an "interview" for an educational program — rather than the sales call it was — motivated marks would clamor to prove themselves worthy of handing over money to "Robert G. Allen." He’d then ask questions designed to provoke excitement about joining the program. Often this worked so well it shocked Tom. Customers wanted eagerly "to prove to me that they're dedicated and available. I had people give me their credit card number when I didn't ask for it. I had to explain, 'I'm not the guy who handles the money, I'm just handling the interview process.'"
Over the course of the "interview," Tom’s questions gain the mark’s trust, assert authority, and collect information that will later help close the sale. "I'm asking about their life situation," he says, "who they live with, and eventually [I would] get into more personal details, like what kind of debt they're dealing with: if they own on a car, if they still owe on a house, and where their loans are located, and what kind of credit they have available to them."
Tom would find out the customer’s available credit, and then price the product accordingly.
"I would start out by explaining that we had several tiers of training, different intensity, different dedication level," he says. "Then I would model the different tiers of 'dedication.' I would give them low, medium, and high [tiers], but all of them would stretch to fit their credit level.
"Let's say someone's got two credit cards with $5,000 available on them. I would say, 'All right, our lowest level is $5,000, the next level up — the medium level, where most of our clients end up falling, is about $8,000. The higher tier, which looks like it's probably out of your credit range, is $15,000.' And then I would leave that alone for a while, let that just stew in their heads."
As the customer comes to trust the salesman with his "hopes and dreams," as specified in the sales script, it will become apparent that by purchasing the most expensive tier one can achieve those hopes and dreams that much faster.
Do you remember any specific sales you made? I ask.
"There was one guy, I sold him really hard. We actually had an on-and-off conversation, [a] relationship for over a month, of him trying to get enough credit. I remember how much money he had: he had a thousand dollars available. I told him the tiers, and he was convinced that he wanted to be in the top tier, that was $5,000. He was going to get a loan from the bank to be eligible for the top tier, aggressive program. He did, and I sold him on a bank loan, eventually. He was foreign, English was not his first language, and he spoke with a pretty heavy accent. [He was] very interested in an internet business. He believed it was just a golden opportunity, and he didn't want to let it pass by."
"It was shocking, actually. I wasn't aware that the place I was working for was owned by scam artists."
Tom's fellow boilers tended to be young and, like their victims, under-educated. Tom is in his 20s, and he doesn't have a college degree. Perhaps most unbelievably, he claims he didn’t even know he was a boiler.
"It was shocking, actually," he said, after learning the truth about Prosper. "I wasn't aware that the place I was working for was owned by scam artists."
I asked him how this was possible.
"I was pretty strongly indoctrinated by the training," he said, "that it was very high quality mentors looking to give back to the community by doing training courses for 'normal people' in real estate, stock market investing, and internet business. Now that I look back at it, it's very obvious that those were just buzzwords. But at the time, I absolutely thought that I was selling real coaching lessons."
It turns out that this isn't at all unusual. In his book The Boiler Room and Other Telephone Sales Scams, the sociologist Robert J. Stevenson discusses the first scam that any boiler room will initiate: the scam on its entry-level sales force. "Becoming a boiler is neither obvious or recognized as such," Stevenson writes. "When a new worker visits a telephone room for the first time, a variation of the short con is enacted." He describes how someone without the education or background required for white collar work, or who is "down on his luck" and unable to find a legit job, is led to believe that he could earn "a living by merely engaging in telephone conversations and writing sizable orders."
In Utah, the culture of the boiler rooms has become legendary. In 2008, a former Prosper salesman named Chad Hudgens filed a lawsuit alleging that, in some sort of psychotic "team building" exercise held the previous year, his supervisor waterboarded him as other employees held him down. Afterwards, according to The Washington Post, his boss told the sales team: "You saw how hard Chad fought for air right there. I want you to go back inside and fight that hard to make sales."
The next year, in a cover story for the Salt Lake City Weekly, Eric S. Peterson detailed another call center operation, Mentoring of America, which has since gone out of business. It was here, said Peterson, that "[d]ealmakers might close a sale on a costly real estate program with an elderly couple in Florida, and on their breaks sling cocaine, OxyContin as well as marijuana brownies to their co-workers" and "on payday, the sales floor would make a liquor store run before lunchtime and by the end of the day, might be taking down customer’s credit-card information drunk, high or both."
For his part, Tom says that he never saw anything of the sort at Prosper, using the words "well-lit," "polished," and "new age" to describe the operation.
I didn’t bring up the waterboarding.
Best friends forever?
Utah Attorney General Mark Shurtleff with Jeremy Johnson
Traditionally, a boiler room ceases operation once the leads have been fully exploited. If the salesmen are lucky, their final paychecks may even clear. Or they might go to work one Monday to find that the business has simply... evaporated.
For the call centers of Utah, it’s quite a different story. Indeed, companies like Prosper seem to be a permanent part of the state’s corporate landscape — and like any good corporate citizens, they make campaign contributions.
Mark Shurtleff is the author of a book called Am I Not A Man? In this work of historical fiction, the opponent of ‘Obamacare’ and current Attorney General of Utah tells the story of Dred Scott by employing a sort of ham-fisted slave’s dialect that would make Mark Twain blush — or break out in laughter.
When not addressing the serious issue of race in this country, Shurtleff is known as something of a fundraising powerhouse. He collected a total of $15,000 from Prosper in 2008, while another call center called PMI donated $10,000. And that just scratches the surface: In the Salt Lake City Weekly article (April 2009), Eric Peterson tallies a total of $187,500 in contributions that Shurtleff has received from Utah call centers the previous year, including $32,500 (the AG’s office disputes $10,000 of that amount) from Mentoring of America — the same company (now defunct) known for its OxyContin and marijuana brownies, as well as an ongoing battle with the Federal Trade Commission.
According to a 2009 FTC complaint, a company called Family Products used infomercials and websites to sell $39.95 wealth building "systems" that consisted of the usual books, CDs, and DVDs. When customers were unable to make any headway with the material, Mentoring Of America (MOA) would enter the picture, offering coaching services that could cost as much as $14,995. The complaint goes on to state that "[t]housands of consumers across the United States have purchased personal coaching services" for these systems. This hardly seems like the kind of company that the chief law enforcement officer of the state of Utah should be keeping.
One can easily make a connection between the prevalence of boiler rooms in Utah and the fact that they account for 25%-35% of the Attorney General's campaign contributions
MOA isn’t the only benefactor of Shurtleff’s that has run afoul of the FTC: Jeremy Johnson’s I Works also made substantial contributions to the Attorney General. According to the Salt Lake Tribune, "Johnson’s companies took in more than $350 million from sales since 2006, while returning $75 million to customers who complained to their credit or debit card companies." The article goes on to state that "[a]t its height, the scheme was ensnaring 15,000 consumers per day."
One can easily make a connection between the prevalence of call centers in the state of Utah and the fact that they account for 25 - 35 percent of the state Attorney General's campaign contributions.
Shurtleff has announced that he will not seek a fourth term as Attorney General. Among the candidates looking to replace him, a potential scandal is already in the works.
In a May, 2012 Salt Lake City Weekly article, Eric Peterson relates a phone call in which the state’s Chief Deputy Attorney General, John Swallow, tells a telemarketing business owner — and, more importantly, a potential donor — named Aaron Christner that if he wins the election, Swallow will attempt to take over control of Utah Consumer Protection, which is currently under the purview of the Governor’s Office. Swallow, writes Peterson, "has banked heavily on campaign donations" from boiler rooms. State campaign filings show that "Swallow has received $82,284 from companies involved in online-business opportunities and Internet marketing, though none of those companies appear to have faced any state consumer protection complaints."
The intersection of politics and Scamworld doesn’t end at the state level.
This evening (June 8), Prosper CEO Randy Garn will join Nu Skin founder and chairman Blake Roney and "some of the best entrepreneurs in the country" at a $2,500 per person reception for Mitt Romney — $10,000 per person if you want to get your picture taken with the presumptive Republican nominee. In a 2011 article, Mother Jones magazine singled out Blake Roney as one of the multi-level marketing (read: pyramid scheme) heavyweights that constitute "Romney’s biggest backers."
In the June 7, 2012 issue of Rolling Stone, Tim Dickinson looks at the men behind Romney, "the undisputed master of Super PAC money." Among the rogues gallery of super-rich supervillains that hope to put the Republican in the White House in 2012, Dickinson calls out Steven Lund, a proud owner of a first edition Book of Mormon and Roney’s Vice chairman at Nu Skin.
...Nu Skin has been charged by the Federal Trade Commission and state authorities with operating a pyramid scheme and making unsubstantiated claims about its cosmetics. In 1997, it was fined $1.5 million for violating a consent decree with the FTC. Romney has directly aided Lund’s fortunes: As head of the Salt Lake Winter Games, he secured a $20 million sponsorship for Nu Skin, putting the Olympic name and credibility at the service of Nu Skin’s sketchy products.
In short, Dickinson says, Lund is investing in Romney because he wants "[a] world safe for false advertising and marketing scams."
According to a 2012 Gallup poll, Utah ranks third among the nation’s most conservative states. One has to wonder if the prevalence of boiler rooms there isn’t the end result of the far right wing desire to deregulate every last piece of American life.
To the casual observer, Prosper has all the hallmarks of a legit for-profit education company: a decent web page, space in an office park somewhere in Provo, and an "A" rating from the Better Business Bureau. Apparently, that’s enough to stay in business — at least until the FTC steps in.
Coaching floors like Prosper say that they teach cutting-edge knowledge and skills, that they provide a much-needed service that you won’t find through traditional channels. Whatever the value of their "coaching," it’s clear that the sales staff are predators, making money in an especially primitive way: by telling stories over the telephone. But they are making money, and as long as they have the right friends in government, they will continue to use the mystery and allure surrounding the internet to ensnare those who couldn’t possibly know better.