For several months Wray had listened to her friend rattle on and on about Cook's business acumen. The friend painted Cook as a kind of saint, a guy who made millions in real estate and was willing to share the secrets of getting rich with the man in the street--for a small sum. He shared this knowledge at his seminars across the country, and in his books and videotapes.
Wray's first impression of Wade Cook in Phoenix that night was that, for a millionaire, he wasn't very well dressed. But he seemed "very kind, sincere and knowledgeable." So she plopped down $295 to join American Business Alliance (ABA), a club that provided business-success seminars. Cook preached courage, and said that practically anybody could be a success with his techniques. "Ships are safe in the harbor, but that's not what ships are for," Cook was fond of saying.
He counseled people to buy houses facing foreclosure, fix them up and sell them. "He said he once bought a house at a Denny's as the owners were leaving town," says Wray, who lives in Phoenix.
Wray found herself sucked in. She attended more Cook seminars. She read every letter Cook sent her. And she bought $1,000 worth of American Business Alliance stock. "The American Business Alliance is about exposure," Cook bubbled in his newsletter, The Money Connection. "Exposure to new business contacts who may become friends and customers. Exposure to new ideas and solutions through live and taped seminars. Exposure to like-minded people to help you along. Exposure to high-tech solutions from companies dedicated to helping your bottom line. In short, exposure to the components and techniques that every person needs to excel."
It was a sacrifice for Wray to part with the $1,000. It was all she'd managed to stash away in her savings. She was earning only $20,000 as a purchasing agent for a medical supply company and trying to help her daughter get through college. But she trusted Cook, and she figured she'd make a killing with her American Business Alliance stock.
Shortly after Wray bought her stock, in late 1987 or early 1988, Cook's office closed. The phone was disconnected. The newsletters stopped.
"It was like joining a health club only to have the door locked on you," Wray says during an interview. She sits on her living room floor, tossing her head back and forth in disbelief as she thumbs through her worthless stock certificates. "And I'd always been so cautious," she says. "I'd been cautious, cautious, cautious."
Although she doubts she'll ever get her money back, she can still laugh at her own gullibility and some of the things Wade Cook did. Like the way he was fond of quoting what he called an Irish proverb: "The biggest fish you'll ever catch is still in the ocean."
What Joanna Wray didn't know was that she wasn't the only one who was suckered. Two years after she lost her money, the Arizona Corporation Commission would conclude that at least 150 others, mostly middle-class working people who, like Joanna, had little money to spare, lost a total of $390,000 by purchasing worthless securities from Wade Cook or one of his corporations.
"I don't really like to talk about this," says Kelly Cook, who is not related to Wade Cook. Kelly Cook installs window sills for a living. He pooled his life savings with that of family and friends to buy $23,000 in stocks Wade Cook promoted after a real estate seminar. "Oh boy, he talked up some dandy stuff," says Kelly Cook, who has since moved from Arizona to Wisconsin. "We ended up losing all our money. It drained our account and we're not going to get a dime back." "In my opinion, he's a con man," says Renz Jennings of Wade Cook. Jennings is chairman of the state corporation commission, which in 1989 ruled that Cook had engaged in fraud and several other securities violations, including using investors' money to pay for his house and income tax. It frustrates people like Jennings that he's still handing out investment advice.
And getting money for it.
Wade Cook, real estate guru, author of a dozen books with titles like You Can Get Anything You Want and How to Build a Real Estate Money Machine, is back in the saddle again. Although he has been banned from selling stocks in the state of Arizona, he has not been banned from giving "Cash Flow" seminars.
JULY 18, 1991. Wade Cook stands at the entry to a rented conference room at the past. I mean, he's a real estate lecturer," the lawyer says. "You can imagine with the market being down his business is going to be down, but with the market picking up his business will pick up." As for the "difficulty with the corporation commission," Novak says Cook simply got in hot water because he ventured into foreign territory--the sale of stocks. Cook sold stocks because he received "poor legal advice."
"Not from me," Novak hastens to add.
WADE COOK IS a family man. He and his wife Laura live in north Scottsdale with their daughters. They regularly attend a Mormon church in the area. When Cook isn't on the lecture circuit, he might be seen wandering about a north Scottsdale barn, helping his daughters with their Arabian horses.
Cook writes in court papers that he moved to Arizona from Tacoma, Washington. He claims he'd been a Mormon missionary and is a "language specialist in Chinese." He once owned an ice cream parlor in Utah, and began investing in real estate in 1977. He said he "purchased, fixed up and sold houses." Then he became a millionaire willing to share his story with others at his Cash Flow seminars, held all over the country.
"My story is simple," Cook wrote in an ad last year in the Arizona Republic. "I learned how to make money. Big money, and not just assets but hassle-free assets which produce cash flow. . . . I stumbled across an incredible way to make money and now I'm sharing these ideas around the country." Cook claimed he cleared $5,000 per month after his first year of real estate investing and retired at the age of 29, "after only two years of doing what I'm teaching." He points out that most other Americans "still end up dead broke at the age of 65."
"All this rental stuff and hassling with banks is for the birds. . . . My way avoids banks, renters and running out of money," wrote Cook in his newspaper ad.
"Wade Cook is truly America's Foremost Educator. You need to come and listen to him explain the inside tips and secrets to making big money," the ad says. Cook claimed to teach "a mind-boggling system for creating more cash flow than you can spend" as well as "getting properties before they get to the auction block" and other business tips. "Yes, at first I just taught real estate," Cook wrote. "But people were making so much that we had to move on and teach tax-saving strategies and more. We have a whole section on asset protection, living trusts and corporate strategies."
Records in the Maricopa County Superior Court and the bankruptcy court tell a different tale.
COOK'S MONEY DIFFICULTIES can be traced, in Arizona at least, back to 1985. That was when two former employees who hadn't been paid and a Utah company with outstanding bills won judgments against Cook totaling about $6,000.
Next, an office manager sued for $19,000 in severance pay, but the case was later dismissed.
The next year, 1986, Cook was ordered by a judge to pay a $1,000 bill at the cushy Equestrian Manor residential development in north Scottsdale. He was also ordered to pay $4,000 worth of unpaid bills, many of which related to his Arabian horses. Although there is no court record of his payment of these bills, Cook did repay an $8,575 loan to a Scottsdale woman after a judge ruled in the woman's favor. That same year, 1986, several other parties brought cases against Cook, although the cases were dismissed. A lawyer who once did work for Cook claimed he'd been shorted money owed him. Judge Marilyn Riddel dismissed a $36,000 judgment against Cook from Illinois District Court, saying the Illinois judgment was not valid in Arizona. The court also dismissed cases claiming Cook owed a total of $23,537 to a travel agency, a moving company and a collection agency. A 1986 judgment was entered against Cook in Iowa for failure to pay $65,719 he owed on an Arabian horse. Cook disputed the judgment in Arizona.
In 1987 Cook was having trouble paying his office bills. Judgments totaling about $175,000 were entered against him and in favor of companies claiming they were shorted money for leased office space and equipment. The same year, Cook was writing things in brochures like, "Mr. Cook successfully developed a system that created wealth with excess cash flow, growth with large tax write-offs and added in a pinch of excitement that has motivated investors everywhere to keep going."
Cook filed in bankruptcy court for Chapter 7 protection in June 1987. Because of that the $65,719 judgment against him for the Arabian horse was dismissed.
Nonetheless, in the fall of 1987, he was holding seminars and selling stocks for his company, American Business Alliance, incorporated in Utah and Arizona. He did this in several states, appealing to people like Joanna Wray and Kelly Cook. Several judgments give an idea of the worth of those stocks. Missouri ordered Cook to "cease and desist" selling unregistered securities. Two judgments, totaling about $275,000, are recorded against Cook and his investment corporations in Illinois and Kansas courts. The state of Utah also ordered Cook to stop selling unregistered securities in 1987.
It did not take long for investors in Arizona to get in on the act.
Angry Arizona investors complained to the Arizona Corporation Commission. In 1989, after a hearing, the commission ruled that Cook had engaged in fraud. Among other things, he failed to tell investors about his troubles with the states of Utah and Missouri, his bankruptcy filings, the financial condition of his companies or the fact that he was an unregistered securities salesman selling unregistered stocks.
What's more, the commission ruled, Cook received at least $390,841 from stocks purchased by at least 150 investors. Some of this money was used to pay for his house and his income taxes. (Cook later said he had simply borrowed the money.)
When the commission asked Cook to tell his side of the story, he invoked the Fifth Amendment. Later, in an undated letter to shareholders, Cook wrote that he took the Fifth because of "legalities which I do not agree with to date." He went on: "I wanted to answer their questions. I wanted to rip into them and let them have it. Their silly questions, innuendoes, untruths and half-truths were almost too much to bear."
The commission ordered Cook to pay back the investors and slapped him with a $150,000 penalty.
"Now, what the heck is an administrative penalty? Well, whatever it is, it caused me to have to file a bankruptcy case," Cook wrote the shareholders.
"One last thought," Cook wrote in his letter. "I've been told by many to file a civil rights suit against the Securities division. Something should be done to curb their destructive power. Short of that, I just wish they would get out of the way while I work to take care of the people (you) who invested in ABA."
The commission would later rue the day it ordered Cook to pay the penalty.
A FEW MONTHS after the $150,000 fine, the Arizona Attorney General's Office filed criminal charges against Cook in Maricopa County Superior Court. Among the charges: fraud in connection with the sale of unregistered securities. Cook paid Ed Novak $50,000 to defend him in the criminal case. Novak got the case dismissed a few months ago on the grounds that the corporation commission, by slapping Cook with a $150,000 fine, had already punished him for his deeds. "Wade had been subjected to punishment previously for the very same acts he was being subjected to punishment for in the criminal case. The Constitution says you can only be punished once," says Novak.
"That's a logic only a lawyer could understand, because we think Cook is not going to pay the corporation commission fine," says assistant attorney general Warren Granville, who has taken the case to the Arizona Court of Appeals. "I would like to see this case go forward based on what Wade Cook did, not on a legal technicality," adds Granville.
The state lawyers tried unsuccessfully to get the corporation commission to drop its penalty, but the corporation commission refused. However, says chairman Renz Jennings, the Wade Cook case has prompted the corporation commission to be very careful about how it slaps fines on people who may face criminal prosecution in the future.
"We whipped their butts," is all Cook has to say about it.
WILL THE BELEAGUERED Wade Cook really repay investors like Joanna Wray?
Novak says yes, but the state lawyers and the investors have their doubts. Cook has filed two payback plans with the bankruptcy court, both of which the Attorney General's Office found overoptimistic to the point of suspicion.
"The first plan was to repay everyone 200 cents on the dollar if the AG will reduce the fine from $150,000 to $15,000," says Novak. The payback would have been spread over a number of years.
Informally, Cook also offered to pay investors back in stock certificates rather than cash, says Joanna Wray. "This is really insulting to our intelligence," says Wray. "Does he think we're stupid?"
The second plan, says Novak, would have paid all the investors back in full, if the corporation commission reduced the fine by 40 percent. The attorney general rejected both plans.
"No one has been paid," adds Novak. "And no one will be paid until the plan has been confirmed. Well, you know why no one has been paid? Because the AG has objected."
State lawyers suspect Cook is trying to wriggle free of the $150,000 penalty in bankruptcy court. "I haven't seen any indication of his willingness to pay," says Granville. "I think he's trying to defeat it or discharge it in bankruptcy."
And according to Norma Martens, the assistant attorney general representing the State of Arizona in the bankruptcy, "Wade Cook is using the shareholders as hostages." It is, she adds, "not true that we are precluding the shareholders from getting paid. Our main concern is that the investors get paid back first."
But in the next breath she says she thinks the chances of this are "slim."
JOANNA WRAY HAS mixed feelings about the fact that Wade Cook is on the Cash Flow circuit. Sometimes she has an urge to picket the hotel conference rooms where Cook expounds on building wealth. Other times she just wishes Cook could build enough wealth to pay her back.
At the least, Wray would like Cook to include in his ad the very things she doubts he would ever mention to the seminar attendees: his troubles with the Arizona Corporation Commission and the states of Utah and Missouri, as well as the simple fact that he's in bankruptcy court.
"I know the man has to make a living," says Wray, who was one of the investors who tipped off the corporation commission. "That's the only way I will ever get any of my money back. And I'd love to get my money back. But on the other hand, I don't want other people to think he is good at investing. If he were good at investing, he wouldn't have all these problems."
For a millionaire, he wasn't very well dressed. "He said he once bought a house at a Denny's as the owners were leaving town."
It was a sacrifice for her to part with the $1,000. It was all she'd managed to stash away in her savings.
Cook claimed he cleared $5,000 per month after his first year of real estate investing and retired at the age of 29.
"If he were good at investing, he wouldn't have all these problems.
