A notorious property spruiker has been hit with $18 million in fines for peddling false and misleading claims through free seminars and paid investment “boot camps”.
On Tuesday the Federal Court imposed a fine of $12 million against property investment company We Buy Houses and $6 million against its sole director Rick Otton for making false or misleading representations about how people could create wealth through buying and selling real estate.
The fines are the highest ever imposed for contraventions of the Australian consumer law by both a corporation and an individual, and come after a long investigation by the consumer watchdog.
The Federal Court also banned Mr Otton from managing corporations for 10 years in Australia and permanently restrained him and We Buy Houses from further involvement in the “supply or promotion of services or advice” concerning real estate and investment.
“We Buy Houses and Mr Otton peddled false hope to people simply looking to get a foothold in the housing market or invest money in real estate for their future,” ACCC Chair Rod Sims said.
The record penalties imposed against both We Buy Houses and Mr Otton reflect their egregious conduct.”
“They have also effectively been permanently banned from any further involvement in real estate in order to protect consumers.”
We Buy Houses and Mr Otton taught real estate investment strategies via free seminars, paid ‘boot camps’ and mentoring programs that claimed people could:
- buy a house for $1, without needing a deposit, bank loan or real estate experience, or using little or none of their own money
- create passive income streams through property and quit their jobs
- build a property portfolio without their own money invested, new bank loans or any real estate experience, and
- start making profits immediately and create or generate wealth.
Between 2011 and 2014, the company generated the majority of its $20 million revenue from conducting these training programs, the ACCC found.
“In her judgement on liability, Justice Gleeson said the free seminars were a waste of time, and that the boot camps and the mentoring programs were an expensive waste of time,” Mr Sims said.
Mr Otton’s profile on networking website LinkedIn lists 27 years of experience in “the business of buying and selling” houses across the US, Spain, Greece and Australia.
Mr Otton describes himself as “an authority on solving seemingly ‘unsolvable’ property problems”.
“While in Dallas, I noticed that a lot of property was for sale at rock-bottom prices, due to the Savings and Loans Crisis. I saw an opportunity and started buying property using a mix of traditional and non-traditional strategies,” the profile says.
Beware of ‘so-called advisers’
Property Investment Professionals of Australia Chairman Peter Koulizos said the verdict was “very welcome news”.
“We congratulate the ACCC and Rod Sims for coming down on them so hard because we as an association have been quite sceptical about Rick Otton and his wandering band of minstrels for some time,” Mr Koulizos said.
Consumers should be “sceptical about so-called advisers offering free education seminars just to lure you in”, he said.
“If the only thing they are selling you is off-the-plan apartments walk or house-and-land packages walk away because chances are they have a back door to the developer.”
Property should primarily be viewed as a long-term investment rather than a way to get rich quick, Mr Koulizos said.
“Undoubtedly the best way to make money in property is to buy and hold. There’s no tax to pay, no GST to pay, and over time you’ll benefit from a number of upswings,” he said.
“You can make money in the shorter term, but buying a house for a dollar is just not a real thing.”