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Judge Tosses Verdicts Against Infomercial Stars

A judge has tossed out federal fraud convictions against two salespeople who used late-night infomercials to tout their stock-trading abilities and lure customers.

A jury convicted Linda Woolf of Sandy, Utah, and David Gengler of Draper, Utah, in May on charges of conspiracy and wire fraud. The two were among the top earners at a company called Teach Me to Trade, which uses infomercials and hotel seminars across the country to hawk courses and software on how to make money in the stock market.

Attendees spend anywhere from $3,000 to $40,000 on the company’s courses. Prosecutors said that Woolf and Gengler passed themselves off to customers as successful traders when tax records show that Woolf lost money in the market and Gengler, at best, made a nominal profit.

Defense attorneys argued that prosecutors, in their zeal to convict, conflated salesmanship with fraud and were seeking to criminalize conduct that is common in the marketplace.

It is rare for a judge to set aside jury verdicts and order an acquittal, but in a 51-page ruling issued Friday, U.S. District Judge Anthony Trenga said prosecutors simply failed to show the two had been part of any fraud scheme.

Specifically, Trenga ruled that prosecutors had the burden to show that Woolf and Gengler were part of a single conspiracy that included not only the defendants but the senior management of Teach Me to Trade, which is a subsidiary of publicly traded Whitney Information Network in Cape Coral, Fla.

The evidence found no such conspiracy, Trenga said. Furthermore, the evidence established that Woolf and Gengler barely knew each other, the judge said.

Prosecutors flew in 25 witnesses from around the country for a monthlong trial in which Trenga occasionally expressed misgivings about the government’s case. But a jury convicted both Gengler and Woolf on all seven counts they faced after only three hours of deliberations.

Mark Schamel, Woolf’s lawyer, said Trenga made the right decision, and said the thoroughness of the judge’s written opinion shows that he carefully considered the issues in the case.

“This was not a decision the judge reached lightly,” Schamel said. “He reached the absolutely right decision – this is not a criminal fraud.”

Peter Carr, a spokesman for the U.S. Attorney’s Office in Alexandria, said the government is “reviewing the decision and considering our options.”

Even if the government successfully appeals Trenga’s ruling to the 4th U.S. Circuit Court of Appeals in Richmond, Trenga has ruled that the defendants are entitled to a new trial and that the guilty verdicts could not simply be reinstated.

While he granted acquittals, Trenga said that Woolf and Gengler’s actions “were hardly models of probity. They deftly exploited the hopes and aspirations of a vulnerable audience through half-truths” and misleading statements.

A service of YellowBrix, Inc.

© 2009, YellowBrix, Inc.

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