Infomercial pitchman is shut up

Jail ends the career of Md. man who talked people out of millions

Hagerstown `institute'

Polk was broke, once lived in a tent, then he started selling dreams


July 18, 1999|By Sean Somerville | Sean Somerville,SUN STAFF

In one of his TV infomercials, John Polk looks busy, the kind of busy that goes with being rich.

Busy in his office, busy on his jet and busy interviewing successful subscribers to his programs -- "Inside Secrets," "Elite Performer," "Real Estate Money Machine."

But it's not Polk's office. It's not Polk's jet. And, federal prosecutors said, the subscribers are not success stories of Polk's Peak Performance Institute in Hagerstown.

U.S. District Judge J. Frederick Motz ruled Thursday that Peak Performance defrauded thousands of people of more than $10 million.

Polk, who had pleaded guilty to one count of mail fraud in a plea bargain, was sentenced to 51 months in federal prison. Motz also fined Polk $250,000 and ordered him to pay $2 million in restitution.

Motz also sentenced David Bowen, another company official, to 18 months and ordered him to pay $250,000 in restitution. And a third company official, Matthew Foulger, 32, was sentenced to 30 months in jail. Like Polk, Bowen and Foulger pleaded guilty to one count of mail fraud.

According to prosecutors, Peak Performance made numerous misrepresentations in its infomercials and sales seminars, and falsely promised money for joint real estate ventures.

"If people are not willing to invest in themselves, then how can they expect me to, in some cases, invest tens of thousands if not hundreds of thousands of dollars?" Polk asked at a 1995 seminar in Tampa, Fla., according to court records.

Polk, who declined to answer a reporter's questions, testified at his sentencing hearing last week that he tried to run his business legitimately.

"I never imagined in a million years that anything could become criminal out of it," he said.

The sentencing might not be the end of Polk's legal problems. After Polk sold Peak Performance to Foulger in 1995, he moved to Texas and started another company, 2xtreme Performance International LLC, which marketed health, fitness, beauty and weight management products through 100,000 claimed distributors in 50 states.

Like Peak, that company used infomercials and seminars to market products. Like Peak, 2xtreme generated numerous complaints of fraud. And like Peak, it is no longer in business.

Barry Cohen, a self-employed Web designer from Phoenix, Ariz. and his wife Catherine, became involved in Polk's 2xtreme through a friend.

Cohen said he spent a year working the 2xtreme program before getting out in December. "It was a spiral of spending money, more and more money," Cohen said. "It was a scam."

Testimony in the Polk case has pulled back the curtain on a mysterious industry that often is encountered late at night by channel surfers.

The industry features salesmen-speakers who float from company to company, earning a commission for every package they sell through scripted presentations.

One of the industry's rules is "poundage," meaning the books and tapes that customers buy must weigh a lot.

One of the industry's most effective sales tools is "shortage," the idea that only a few slots are available in the most lucrative programs.

The $2 billion industry -- and its sales techniques -- have started to attract the attention of prosecutors.

Polk's case was not the first to be prosecuted, noted Jeffrey Knowles, a partner at the Baltimore and Washington law firm of Venable, Baetjer, Howard & Civiletti and general counsel to the Electronic Retailers Association, formerly the National Infomercial Marketing Association.

He cited recent cases in Orlando, Fla. and Fairfield, Iowa, as the first criminal charges he had heard of that directly resulted from infomercials. "This is a relatively new development," Knowles said.

Knowles said he thinks the Federal Trade Commission has been dissatisfied with the results of civil proceedings it had previously relied on. "As a result of the ineffectiveness of their enforcement, they have reached out to law enforcement for help in dealing with fraud cases."

In light of the criminal cases, the Electronic Retailers Association is telling members that they must have their own internal standards, monitor their own operations, and make sure their businesses are in accord with the association guidelines on truthful marketing.

Knowles said officials of Peak and the Florida and Iowa get-rich programs were not members of the association.

"These business-based programs constitute only a small segment of the direct-response television industry," he said. "Most products sold through infomercials are consumer products. These business-based programs have always been part of the infomercial industry, part of the `dark side' of the industry, but they are a small part of the industry."

Clean-cut, lean and of average size, Polk appeared relaxed and confident in court last week, winking frequently to family members and even attempting to converse with FBI Special Agent Barry O'Neill, who led the investigation into Peak.

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