ALEXANDRIA, Va. UPDATE: Oct 26, 2009 - Judge tosses verdicts against infomercial stars - Two Utahns who proclaimed themselves experts at trading stocks and used infomercials and hotel seminars to tout their abilities have been indicted on federal fraud charges.
Linda Woolf, 48, of Sandy, and David Gengler, 34, of Draper, passed themselves off as successful investors and persuaded consumers to pay anywhere from $3,000 to $40,000 to learn the Teach Me to Trade stock-picking system, according to an indictment in U.S. District Court in Alexandria.
Prosecutors say Woolf and Gengler lied or omitted pertinent information about their profits in the stock market and their annual gains and losses during presentations given at hotel seminars across the nation. One of Teach Me to Trade's supposed stock-trading experts was actually recruited by Woolf from a nail salon, according to the indictment.
A partial list of seminar appearances, supplied by the SEC, indicates that Woolf appeared March 17-19, 2005, in Salt Lake City at the Marriott Hotel, 75 S. West Temple. Gengler was at a seminar March 11-13, 2006, at the Hilton Hotel, 255 S. West Temple.
SEC officials did not have details about the number of Utahns who were victims of the alleged fraud or how much money they might have lost.
Woolf and Gengler also were featured in Teach Me to Trade infomercials. In one, Gengler explains how he doubled a $10,000 investment in one week as the studio audience oohs and aahs.
"Luck has absolutely nothing to do with this," Gengler tells the audience. "This is simply a system. If you can follow the rules ... you can find your financial future."
According to the Securities and Exchange Commission, Woolf and Gengler are unsuccessful traders Woolf never declared a trading profit on her federal tax returns, and Gengler typically declared losses or no profits. But Woolf pulled in $4 million in commissions for selling Teach Me to Trade products, while Gengler made about $2.25 million, according to the SEC, which filed separate civil fraud charges against the two.
Woolf's civil attorney, Mark Pugsley, said Woolf never recommended specific stocks to students at her seminars, and that the information she provided is unrelated to individual investment choices and therefore not a crime under federal securities laws.
"The SEC's complaint contains a novel theory of securities fraud, and we look forward to challenging it in the courts," Pugsley said. "Linda Woolf is an educator; she does not sell securities."
Gengler's attorney did not return a call seeking comment.
Woolf and Gengler worked as independent contractors, according to the indictment, and received sales commissions of 10 percent to 15 percent from Teach Me to Trade, which is a part of the Whitney Information Network, a publicly traded company based in Cape Coral, Fla.
Whitney itself is not charged, though the indictment says Woolf and Gengler relied on the company's "fraudulent marketing efforts" to entice the public to their seminars.
The charges against Woolf and Gengler, which include wire fraud and conspiracy to commit mail and wire fraud, carry maximum penalties of 30 years in prison.
A spokeswoman for Whitney declined to comment. In its 2007 annual report, Whitney said it was notified in late 2006 of investigations by the SEC and federal prosecutors.
At the seminars, Woolf and Gengler allegedly helped consumers talk their credit-card companies into increasing their spending limits so they could purchase expensive Teach Me to Trade training materials.
The seminars also employed "success coaches" who would review an individual's financial portfolio to target wealthier individuals for more expensive sales, according to the indictment.
Whitney estimates about 28 percent of the people who attend its various free introductory workshops which also include topics on real-estate investing and managing cash flow end up purchasing some type of training course.In 2006, the company had earnings of $1.8 million on revenue of $225 million.
Video clips from U.S. Securities and Exchange Commission Web site:
Teach Me To Trade Introduction:
Windows Media Player (2.5 MB)
QuickTime (2.6 MB)
David Gengler making his pitch:
Windows Media Player (4.9 MB)
QuickTime (5.3 MB)
Linda Woolf making her pitch:
Windows Media Player (3.9 MB)
QuickTime (4.2 MB)