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Financial guru guilty of fraud

By Steve Kaufman

Well-known financial guru Charles J. Givens Jr. has been convicted of fraud and must pay a $14.1 million class-action award likely to wipe out his Longwood, Fla., investment advice and publication firm.

Givens, who has lectured in San Jose, is president of Charles J. Givens Organization, the author of two bestselling investment books and had been a guest on TV shows such as ``Oprah,'' ``Today'' and ``Larry King Live.''

This is the second fraud verdict against Givens in three years. A San Diego Superior Court jury agreed with Salinas, Calif.-based plaintiff Cella Gutierrez and 29,000 California complainants in the class-action suit that he misrepresented his background and qualifications to give financial advice and determined the settlement. In 1993, an Iowa jury found him guilty of similar charges.

Last Wednesday, San Diego Superior Court Judge J. Richard Haden ordered Givens to stop misrepresenting the success of his moneymaking strategies.

In his first bestseller, ``Wealth Without Risk,'' Givens claims to have made and lost $1 million in three business or investment endeavors before amassing significant wealth. He then outlines tips allegedly learned from his mistakes.

But the jury and judge determined that Givens was not involved in these endeavors. He concocted them as a premise for an investment advice book.

``That is fraud with a capital F,'' said John Jeffrey, one of the attorneys representing Gutierrez and the 29,000 other Californians. ``Givens made his money not from using the strategies he sold but rather by selling the strategies themselves.''

In 1991, Gutierrez bought Givens' basic $400 package, which includes a financial library of text and tapes. She also paid $400 for the right to call Givens' firm for advice and nearly $2,000 for a 10-day course on how to find and sell distressed real estate profitably. Jeffrey, her attorney, said she found the real estate course misleading and decided to sue Givens after learning of the legal action against him in Iowa.

``Here was a woman living paycheck to paycheck who was convinced to shell out $3,000 for virtually nothing in return,'' Jeffrey said. ``She lost the bulk of her life savings.''

Michael McCloskey, one of the attorneys representing Givens, 55, said he would appeal the decision. ``My client did not violate the law,'' McCloskey said. ``In fact, he did a lot of good for a lot of people. He is not Darth Vader.''

If the appeal is unsuccessful, McCloskey said, it will force Givens out of business.

Givens is at least the second prominent investment ``expert'' caught breaking the law this year. Sonny Bloch - once radio host of one of the nation's longest-running financial talk shows - is negotiating a plea bargain agreement with federal prosecutors in Newark, N.J. He is charged with conspiring to defraud listeners of $21 million by pitching fraudulent investment schemes.

Financial-planning experts say the legal woes of Givens and Bloch are a reminder that lots of scam artists prey on the public, some with help from the media. ``People tend to believe these people because they appear on radio and TV talk shows and write books,'' said Lyndsay Mills, program director of the Financial Literacy Action Center in Cupertino. ``But they have to do some research before they give money to a financial planner.''

People should avoid investment experts who both give advice and sell products because it's an inherent conflict of interest, Mills said. Before signing on with a financial planner, she added, check his or her record with the state attorney general's office (510) 286-4200 and the Office of Consumer Services at the Securities and Exchange Commission (202) 942-7040.

Some of Givens' advice is worthwhile. In ``Wealth Without Risk,'' for example, he urges readers with a lot of credit card debt to consolidate as much as possible on one card offering a higher credit limit and a lower interest rate. He also lists institutions offering such cards. In addition, Givens encourages readers to take maximum advantage of corporate 401(k) tax-deferred savings plans and to increase deductibles on auto insurance to help trim the premium.

But other advice is misguided at best and in some cases illegal.

For example, Givens tells people not to use financial planners unless the planner has amassed wealth by virtue of his or her advice. That's akin to saying that a doctor can't treat a disease effectively unless he or she has contracted and cured it, experts say.

Givens' infomercials tell people they can deduct part of the cost of a vacation simply by writing a letter to a company located at their destination and requesting a job interview. That's an illegitimate deduction, experts say, unless an interview actually occurs.

(This article is from the San Jose Mercury News.)

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