Sept. 19, 2013 -- Former infomercial king Kevin Trudeau was released from jail today after spending one night in federal custody in Chicago.
Appearing before U.S. District Court Judge Robert Gettleman Wednesday, Trudeau was found in contempt for violation of an asset freeze by transferring nearly $20,000 from an Australian account and for using a debit card tied to that account to buy things beyond the ordinary and necessary living expense he is permitted under a court order.
The specific expenditures from the Australian account that led to the contempt finding included $894 at a liquor store, $359 for two haircuts at Vidal Sassoon, $1,057 for meats ordered online and $920 on cigars. There was also an $18,642 transfer from the Australian account that was paid to a lawyer who worked on Trudeau's taxes, which happened without the judge's approval.
Trudeau told the judge Wednesday that he spent the money because he had no cash or credit cards and hadn't yet received his monthly allowance from the receiver, Robb Evans and Associates, a Los Angeles-based consulting firm that was appointed by the court in August to marshal assets and take control over Trudeau's businesses.
Trudeau and his attorneys argued Wednesday for more time to prove his cooperation, and offered to pay back any money spent on things the judge deemed inappropriate expenditures.
But Gettleman wasn't convinced and ordered Trudeau to report to the Metropolitan Correctional Center and to remain in federal custody.
But Trudeau, who appeared in court today wearing a short-sleeve orange jumpsuit, with slip-on orange sneakers, pleaded for the judge to believe him and pledged once again to be "100 percent" cooperative.
"I am penniless. I am homeless. I surrender. I am at your mercy," Trudeau told the court. "I will do anything you ask."
After hearing his pleas, Judge Gettleman said he is giving the controversial TV pitchman another week to somehow convince him that Trudeau is truthfully disclosing his assets, and granted Trudeau his freedom. Gettleman admonished him to cooperate fully or else he would be back in court "wearing the same color you are now."
Trudeau's next court appearance is scheduled for next week.
Trudeau had previously been found in contempt in July for failing to pay a $37.6 million sanction against him for deceptive marketing. Then, in August, Judge Gettleman sided with the Federal Trade Commission in granting a court-appointed receiver broad authority.
Trudeau met with the receiver and the FTC Wednesday night in the visiting area of the correctional center for a hastily scheduled interview that spanned about three hours. In reporting the results of that interview to the judge this morning, both the receiver and the FTC expressed concerns about Trudeau's vague recollections and sketchy memory.
The receiver, Kenton Johnson, the executive vice president of Robb Evans and Associates, told the court that he had "concerns about some of the content we received" from Trudeau. He said the pitchman had a "consistent failure of memory" and was unable in most cases to provide specific detail in answers to questions.
Although Johnson stopped short of saying Trudeau is being dishonest, he told the judge he found his lack of detail and memory "questionable and troubling."
The FTC lawyer, Jonathan Cohen, was less charitable. "We strongly disagree with how candid Mr. Trudeau was" in the interview, he said in court.
Some of Trudeau's responses, Cohen said, were "implausible or demonstrably incorrect statements."
Trudeau argued it was unrealistic to expect him to recall specific details of transactions that in some cases occurred years ago. He told the judge that at the time of the interview he was tired and "loopy," and hadn't eaten all day.
"There is no 37 million dollars. There's not 10. There's not 5. There's not even 1 million," Trudeau told the judge today in court.
The government, however, remains deeply skeptical.
Despite his pronouncements in court today, Trudeau is getting a monthly allowance of nearly $5,000 from the receivership, and he is still living in a 14,000-square-foot rented mansion in a tony suburb west of Chicago. The receiver stopped paying the rent on that home this month, and it is unclear whether Trudeau intends to, or has the means to remain there.
For the better part of the past 14 months, Trudeau has been locked in an acrimonious dispute with the FTC over the agency's allegations that he was concealing assets that should have been used to pay the sanction.
Wednesday's contempt finding was the fourth of Trudeau's career, which is also dotted with $2.5 million in prior settlements with the FTC for allegedly misleading claims for a host of products he pitched in infomercials. The 50-year-old Massachusetts native's record also includes two felony fraud convictions from the early 1990s, for which he spent nearly two years in federal prison.
The $37 million penalty at the root of this dispute was formally entered in 2010 when Judge Gettleman ruled Trudeau had made misleading claims in infomercials for his best-selling book, "The Weight Loss Cure 'They' Don't Want You to Know About."
The FTC's complaint in that case alleged Trudeau had bamboozled hundreds of thousands of consumers with claims that the diet - which calls for prolonged periods of extreme calorie restriction, off-label injections and high-colonic enemas - was "easy." The judge ordered Trudeau to compensate any consumer who bought the book after viewing one of the ads.
But Trudeau didn't pay. So last summer, the FTC petitioned the court to jail Trudeau, arguing that was the only hope of getting him to pony up. Trudeau countered that he would pay if he could, but it was impossible because he had no assets.
Over the course of the next several months, the FTC subpoenaed the records of dozens of banks, corporations, individuals and law firms to bolster its allegations that Trudeau was masking his control of multiple lucrative business ventures that funded a lavish lifestyle, replete with luxury automobiles and stately homes.
The FTC presented evidence that alleged Trudeau, who moved to Switzerland last fall, had embarked on a sophisticated asset-protection scheme that revolved around the creation of several vaguely-connected companies, trusts and overseas bank accounts nominally owned or directed by Trudeau's young Ukrainian wife, Nataliya Babenko.
Trudeau and Babenko were married in 2008. She was 22 and Trudeau was about to get hit with the $37 million judgment. The FTC argued that Babenko was a key figure in Trudeau's attempts to dodge the penalty.
Trudeau's attorneys consistently claimed that Babenko, who recently completed a year of graduate film studies at New York University, was a "successful businesswoman in her own right" and that the assets of companies she owned or directed could not be used to satisfy the judgment against Trudeau. The judge didn't buy that, and placed those companies and about a dozen others under the control of the receiver.
Babenko has since returned to her home in Kiev, Ukraine. Evidence presented today in court indicated that Trudeau allegedly directed associates to make a $380,000 mortgage payment on an apartment in Kiev for his wife and her mother.
Babenko's assets, which could also include overseas trust accounts, and tens of thousands of dollars in designer clothing, jewelry and furniture, may also be subject to forfeiture, to the extent that they were acquired with proceeds from those corporate coffers.
Among the companies covered by the judge's ruling is a multi-layered marketing foundation called the Global Information Network, known by the acronym GIN. It is billed as private wealth, health and success building club --boasting of thousands of members in more than 150 countries.
The club was conceived, Trudeau claims, by a secret council of 30 people -- including anonymous billionaires, royals, high-level members of secret societies -- and Kevin Trudeau. In Internet videos, Trudeau pitched GIN as a way for members, who pay $1,000 to join and $150 a month in dues, to acquire secret information heretofore available to only the elite.
The club's U.S. subsidiary, GIN USA, reported more than $60 million in gross revenue in the past three years, virtually all of which came from payments, purchases and upgrade fees from the club's own members. It is not clear how much, if any, of that money remains.
The receiver will have to determine whether GIN and its affiliated entities should be allowed to continuing to operate or should be shut down and have their assets liquidated. The receiver has already fired a number of GIN employees, and has barred Trudeau from speaking at any of the company's events, even if he spoke for free.