'Millionaire University' Sued For Allegedly Scamming Students

Victims claim 'professors' conned them into risky real estate investments

It's hard to come up with a more enticing name for a school than "Millionaire University," but in fact institution appears to serve as reminder that, if something seems too good to be true, it probably is. MU, a staple of late-night infomercials, is facing a lawsuit alleging that it scammed its "students" out of hard-earned money in a sleazy real estate scheme.

A group of dissatisfied students across the country have filed a class action lawsuit against the school, alleging that they were tricked into buying property in Florida at grossly inflated prices.

According to the complaint, Millionaire University (MU) "professors" first build trust with their students, then go in for the kill by offering "real estate investment 'opportunities.'" The suit points out that MU students are particularly vulnerable to such schemes, given their desire to invest in real estate but still-undeveloped ability to know a good deal when they see one. Students are also highly motivated to turn a quick buck; MU "real estate courses...generally cost in excess of $20,000."

MU attracts prospective students through infomercials that air across the country. In the advertisements, Russ Whitney, a supposed real estate mogul, tells how he personally made millions of dollars using the techniques taught at MU. (Whitney is the CEO of the Whitney Information Network, which provides the bulk of seminars at MU.) The infomercial then offers testimonials from alumni, who predictably testify to the wealth of information and gobs of money they now possess thanks to MU. Viewers are encouraged to show up for a free one-day seminar -- offered at locations throughout the country -- to see how they, too, can become wildly successful using MU's techniques.

At the seminar, professors follow a prepared script in advising students to increase their credit card limits and enroll in additional MU classes. Students are warned that the one-day seminar only "scratches the surface" of the tools they will need to succeed in real estate, and are encouraged to sign up for "advanced" real-estate seminars, which last three days and regularly run over $10,000. Professors also relate the value of "educational packages," which purportedly provide investment opportunities with a high rate of success; these packages can cost more than $25,000.

Students who opt for the three-day course are taken on a bus tour and shown a new house built by Gulfstream, a southwest Florida homebuilder, in a well-maintained neighborhood. They are then informed that MU has arranged for a "turnkey investment" for a similar home on a "prime lot" that "will pay back every dollar spent by the student for the intensified real estate training at MU and give them capital to jumpstart their real estate investing careers." The investment deal is billed a limited-time offer, encouraging students to jump on the bandwagon as soon as possible.

During the first year, an MU affiliate provides construction loans to finance the lot and construction of the house. The loan is refinanced once the house is fully built. Students are told not to worry, however, as two MU-affiliated realty companies will "use their expertise and 'excellent' reputation to sell the home at a substantial profit" before the student has to pay off the loan. MU professors further stress that the homes' prices are low enough that students "should consider buying at least two of them" in order to make the maximum profit.

In fact, the homes are not on prime lots -- they are constructed in "high crime, highly vandalized areas," in locations with no streets, sidewalks, or utilities, save for well water and septic tanks. According to the complaint, MU went on to fraudulently overstate the appraised value of subject properties by "thousands or tens of thousands of dollars," giving them an opportunity to make a handsome profit off the students they brainwashed and manipulated into buying the property. Furthermore, MU saturated neighborhoods with similar homes; some areas have "five or more of the same model home...in close proximity to one another," making resale even more difficult. Indeed, the complaint says that, at best, students were able to sell the homes at a "crippling loss."

The complaint, filed in a Florida federal court, charges sixteen counts, including for breach of fiduciary duties, fraud, violation of mortgage brokerage and lending laws, and violation of the state Unfair and Deceptive Trade Practices Act. In addition to MU, the suit names as defendants over a dozen affiliates that allegedly conspired with MU to perpetuate the fraud. Among those defendants are Gulfstream Development, the homebuilder; Whitney Information Network; and Paradise Title Services. In addition to damages, the plaintiffs seek a declaratory judgment that the properties' mortgages are illegal and therefore void.

Take a Home Warranty Quiz. Get matched with an Authorized Partner.