“American Greed” Features Affordable Media Case

Many of you are probably familar with the case Federal Trade Commission v. Affordable Media, LLC.,179 F.3d 1228 (9th Cir. 1999), which is often used in casebooks to discuss self-settled asset protection trusts.  See, e.g., Jesse Dukeminier, Stanley Johanson, James Lindgren, & Robert H. Sitkoff, Wills, Trusts & Estates ch. 8 (7th ed. 2005) & Gerry W. Beyer, Teaching Materials on Estate Planning ch. 10 (3d ed. 2003).

In this case, Denyse and Michael sold products such as the Aquabell (a water-filled dumbbell), Talking Pet Tag, and KenKut (a plastic wrap dispenser) by way of late night television commercials.  They created a limited liability company to give investors the opportunity to share in their profits.  In actuality, the investment was a Ponzi scheme.  Eventually, the Federal Trade Commission enjoined their activities and ordered Denyse and Michael to repatriate any assets held for their benefit outside of the United States, including those held in an irrevocable trust under the law of the Cook Islands.  Following the provisions of the trust designed to frustrate attacks by United States courts, the Cook Island trustee refused to repatriate the assets.  The district court found that Denyse and Michael were in contempt of court and they were later taken into custody because they had not purged themselves of the contempt.  The appellate court affirmed the lower court’s injunction, contempt order, and subsequent incarceration.

Alyssa D. DiRusso (Assistant Professor, Cumberland School of Law) has just brought to my attention that this case was recently featured on American Greed on CNBC.  The site features video clips of Eric Stein (a co-defendant with Denyse and Michael) talking about how telemarketers hooked customers as well as an interview with a victim of the scheme talking about his loss.