Frank Kern FTC
OK, so what’s it like to get sued by the FTC? Well, first off, IT BLOWS. …As if that needed saying, right? But seriously …not a good time. I’ll get to the gory details in a sec, but first some important things you should consider.
1: For the love of God, do NOT take anything I say here (or anywhere) as legal advice.
2: Everything I say here is my opinion and is for entertainment purposes only.
How to ruin your business in one easy step!
I’m guessing you probably already know that I was sued by the FTC back in 2003. After all, I talk about it publicly. But there’s probably a lot you don’t know about that whole story as well. So here’s the dirt.
Let’s talk about the dumb shit I did that got me in trouble in the first place.
Back in August of 2001, I created a product called Instant Internet Empires. I remember this well because I got the idea to create the product while I was sitting in a real estate licensing class.
Why was I sitting in a real estate licensing class you ask? Because I had temporarily been overcome with insanity and thought it might be a good idea for me to get a Realtor’s license.
Anyway, the class was boring as hell so my mind started to wander and I got to thinking about all the Internet Marketing products I’d purchased.
…And I noticed a common theme that was really popular back in the day: MASTER RE-PRINT RIGHTS.
Now, the term “Master Reprint Rights” simply means that you have the rights to re-sell a product and keep all the money …and you also have the rights to transfer that ability to others if you so desire.
It was all the rage back in 2001 and not only had I bought a ton of e-Books with Master Reprint Rights, I’d also noticed they were selling like crazy in the Internet Marketing community.
Each of the ebooks that I saw on the market were selling for around $20-$30.
So I figured, “Hey! Why not buy a bunch of these, bundle ’em up into a separate product, and sell them all at a discount?”
So that’s exactly what I did when I created Instant Internet Empires.
I took several of these ebooks and bundled them up into one package …and sold it for $47. (If purchased separately, it would have cost around $80 …so the customer was getting a discount.)
I also included a bunch of screencam video tutorials I created that showed people how to FTP, edit web pages, accept credit cards, and so forth.
And you might be wondering, “What’s so bad about that?”
Well, I haven’t yet told you about the
Super Jenius Part!
See, here’s what I haven’t told you yet.
I also offered re-print rights to the Instant Empires collection.
So if you bought Instant Internet Empires from me for $47, you could:
A: Read all the ebooks, watch the videos, and learn some stuff.
B: Set up separate websites that sold each of the ebooks individually, keeping 100% of the money (using the included website templates that came with the ebooks or by creating your own).
C: Set up a separate website that sold Instant internet Empires as a bundled package and keep all the money from each sale.
Now, if this was a multiple choice quiz and I asked you “Which one of the above activities got ol’ Frankie in hot water with the Feds?”, which would you choose?
Here, I’ll just tell you: THE ANSWER IS “C”.
Here’s Why “C” Was So Damn Stupid
When someone bought Instant Internet Empires, I foolishly gave them the rights to re-print, use, and re-sell the very sales letter I’d written for it. The same sales letter that had my name in it, as well as my bank statement photo and my earnings information.
And this led to all kinds of bad stuff happening, such as:
Bad Stuff Part One: Within a few months, there were a gazillion websites doing business as “Frank Kern” …but only one of them was mine. (There are still a bunch of Instant Internet Empires websites out there with my name on them …NONE of them are mine. Dammit!)
Bad Stuff Part Two: Some people started sending SPAM using my name …and promoting their Instant Internet Empires website that also had (you guessed it) my name on it.
But Here’s Where It Gets REALLY Awesome!
One of these companies proceeded to call their customers and tell them they either were me, worked for me, or were my partners. (None of those statements were true.)
….And then they’d kindly sell them $4,000 “coaching” packages (with “mentors” and everything!)
That really pissed me off because people would email me saying “your sales staff called me and they were rude!”. And since I didn’t have a telemarketing staff (never have, don’t plan on ever doing so either), I got a little freaked out.
So I finally figured out who these nice folks were and I got an attorney to send them the ol’ “cease and desist” letter.
They got it, I talked to their head dipshit on the phone, and they promised to stop using my name.
All of this happened within months of my creating the Instant Internet Empires product and by the time Spring of 2002 rolled around, it had all died down.
Fast Forward To May, 2003
That was when I got sued by the FTC. I’ll never forget this moment.
I worked from my house in Macon, Ga back then and I was pacing around in my driveway while talking on the phone.
I looked up and noticed a man in a white golf shirt getting out of a burgundy ford ranger pickup truck. He walked right up to me and said, “Are you Frank Kern?”.
“This is for you.” – and he handed me SEVEN POUNDS of paperwork.
…Then he left. The poor guy actually looked apologetic when he handed me this stuff. (He was simply a process server. Contrary to popular belief, the FTC never “raided” my offices or anything weird like that.)
Anyway, I hung up the phone, walked into my home office, and started reading what he handed me.
Here’s What It Said
(This is a very rough translation)
“Dear Mr. Kern. YOU ARE SCREWED. Sincerely, the FTC.”
…They were a lot more eloquent than that though. They basically told me that Instant Internet Empires as a pyramid scheme (what??) and that they’d frozen my assets …and that they were going to take all my money.
I damn near had a heart attack.
I mean …a pyramid scheme?? We’re talking about a $47 bundle of ebooks here. There was no “downline” or anything even remotely like that.
Turns out that doesn’t matter.
See, their argument was that the product didn’t have any value other than the fact that it could be re-sold. And that due to the way I had worded my sales letter, it would be physically impossible for anyone to achieve the results I’d experienced by simply re-selling the product.
Here’s What Happened Next
Over the course of six months, I borrowed over $100K against my home, got really stressed out, and eventually settled out of court.
I never attempted to fight them because it would have taken forever and I probably would have lost anyway.
Plus, I don’t want to make enemies with any government agency. That’s stupid.
I’m pretty sure I could have just called them and said “I want to settle immediately.” And they’d have been like, “OK. Give us all your money.”
But my damn lawyers in Atlanta wanted to get their cut so we did a bunch of useless paperwork stuff (to the tune of $100K in legal bills) and then I gave the FTC all my money.
Speaking of lawyers, here’s something that’ll amaze you.
Long before I got sued by the FTC, I had an attorney review my website to make sure everything was cool.
For some reason, I was worried about getting into trouble (duh!).
Anyway, he said, “Looks fine to me, Frank” and I went about my merry way.
Here’s what a dumb ass I was back then.
That guy was my family’s TAX LAWYER. He knew NOTHING about FTC regulations. I was so naive that I thought all lawyers were created equal.
Here’s What I Learned
1: You don’t have to be a star, baby, to be in my show.
During my $100K round of useless paperwork, we actually did get something of value. My lawyers asked the FTC for copies of all consumer complaints filed about Instant Internet Empires.
And remember that company I told you about? The one where they would call the customers and say they were me?
Well, almost ALL OF THE COMPLAINTS were actually about that company. …Not me!
They even listed that company’s name on the complaints and everything!
When I discovered this, I thought my troubles were over because:
A: I have absolutely no connection to those guys.
B: I had copies of the cease and desist letter I’d sent them long before the FTC ever entered the picture!
C: That other company had a lot more money than I did and would make for a much better “target” than me … a 31 year old guy in Georgia working out of his house.
When I excitedly called my lawyers about this, here’s what one of them told me: “It doesn’t matter. You created the product in the first place …and more importantly, they’ve already issued a press release about you and they’ve convinced a federal judge to freeze your assets. There’s no way they’re going to go back and say they went after the wrong guy.”
Out of all the stuff that happened, that’s what shocked me the most. My guess is they got a gazillion complaints against “Dipshit, Inc.” for selling Instant Internet Empires and simply assumed that I was the guy in charge …mainly because my name was on a ton of websites. From the outside, it probably looked like I was the “Kingpin” behind a major spam operation which then called customers and sold them bogus coaching products. Why they never shut down the guys who actually were hosing people will always be a mystery. (Those guys are still hosing people to this day.)
But here’s the point: IT DOESN’T MATTER. I believe that once the FTC even thinks you’re a bad guy, you’re screwed. You can technically even be “right” and still get into trouble.
Here’s what I mean: out of all the consumer complaints we received, only EIGHT mentioned my company. The worst complaint was “I didn’t like the product”. No kidding. And because I’m totally OCD when it comes to customer records, I was able to show that all eight of the people who actually did business with me had received full refunds …and one of them even thanked me for having good customer service.
And guess what? THAT DOESN’T MATTER.
The FTC is the FTC. Your best course of action is to try to be obnoxiously compliant with their regulations. If you get on their bad side, YOU WILL NOT WIN.
2: Disclaimers Don’t Matter
A popular misconception about my FTC lawsuit is that I didn’t have the correct disclaimers on my website.
While I probably didn’t have the right disclaimers on my website, having the “right” ones wouldn’t have mattered much.
In fact, since all that stuff happened, I’ve actually become friends with a former FTC lawyer and here’s what he told me.
“The FTC pretty much thinks that if you have to have a disclaimer in the first place, you’re probably doing something wrong.”
Here’s what this means to you.
You can’t have a website that says “You’ll get rich if you buy this product.” …and then hope your disclaimer that says “not really” will keep you out of trouble.
3: The FTC is Complaint Driven
I asked my friend (who used to work for the FTC) how someone even ends up on their radar in the first place.
He told me that most of their actions are driven by consumer complaints.
This means that YOU NEED TO TREAT YOUR CUSTOMERS LIKE GOLD.
And by the way, simply giving refunds is not NEARLY enough.
You need to make sure that what you’re selling exceeds their expectations.
After all, satisfied raving fans aren’t going to file complaints about you.
4: If you’re worried that what you’re doing might get you into trouble, it probably will.
The “problem” with the FTC is that you can’t just call them up and ask them if what you’re doing is OK.
…And their rules are pretty ambiguous.
So my advice to you is that if you’re even remotely concerned that what you’re doing might get you into trouble, then stop doing it. It’ll probably get you into trouble.
Hire an experienced FTC attorney to look over your stuff and then DO WHAT HE SAYS.
5: If “everyone else” is doing it …and “they’re a lot worse than you” …you can still get into trouble.
When I look back on it, my ad copy for Instant Internet Empires was hypey as hell.
Granted, everyone in the Internet Marketing Community was writing super hypey stuff back then. Many of them worse than me. (Hell, my customers liked me for crying out loud!)
But the fact is, if everyone else is doing it too …you’re still likely to get into trouble.
In fact, if a lot of people are doing it …you’re probably going to get into more trouble because the FTC likely to be really sick of hearing complaints against “your type” of stuff …and they’ll be looking to make an example out of someone.
Remember a few months back when everyone was doing those fake blogs selling weight loss crap and scammy biz opps?
Look what happened. FTC came in and kicked major ass.
I’ll bet the guys that got sued were thinking, “Wait! Why us? Everyone else is doing it!”
The FTC is no joke. Don’t press your luck.
6: For Christ’s Sake, Get A Good Lawyer!
Remember when I told you that I’d had my Instant Internet Empires website reviewed long before I got sued?
And remember when I told you I had it reviewed by my TAX ATTORNEY??
Well learn from my idiotic mistake. If I’d have had any clue that what I was doing could get me into trouble, I’d have stopped immediately.
I’m sure you would too.
But the only way to know is to get qualified legal advice.
I recommend you have an attorney who is familiar with FTC regulations review your stuff.
DO NOT use your family’s tax attorney.
DO NOT use your buddy who just got out of law school.
And DO NOT hire an attorney and ask “How do I get away with this?”
Instead, ask “How can I make absolutely sure I’m being 100% compliant with the law?”
While All That Sucked Really Bad, It Was Also Kind Of Cool
I realize that’s a crazy thing to say but hear me out.
I learned a lot of lessons during that experience and I’m grateful for it. (Don’t want to go through it again, however…)
The biggest lesson is that if you treat people right, they will stick by you.
The FTC made me email a copy of their lawsuit against me to something like 18,000 customers.
I thought I would be ripped to shreds once that went out …but the opposite happened.
Many customers wrote me telling me that they liked Instant Internet Empires and that they’d learned a lot from the videos I’d included and so forth.
And most of the Internet Marketing Community stood by me and gave me encouragement to keep plugging away.
That was cool and I haven’t forgotten it.
It’s part of the reason I include good free stuff for everyone on this blog. Friends stick together.
Another thing I learned is that when the shit hits the fan and everything goes to hell, you CAN get back up again and come back better than ever.
It’s hard, it takes a while, but it’s worth it.
And finally, I learned that in the end, everything will turn out fine.
Always has, always will.