[REN #720] Financial Guru, Jordan Goodman, Falls from Grace

Picture of man walking with bag and suit coat Real Estate News for Investors Podcast Episode #720

We’ve seen plenty of headlines about people getting conned out of their money by a phony real estate deal or Ponzi scheme. And sometimes the accused is a well-respected expert who you’d never suspect of any wrongdoing, like former Wall Street financier Bernie Madoff who’s serving a federal prison sentence for the largest Ponzi scheme in world history. In a more recent case, media finance guru, Jordan Goodman, surprised everyone in his role in the $1.2 billion Woodbridge Ponzi scheme.

You just don’t expect someone with credentials like Goodman to be on the wrong side of a shady real estate deal. He’s a nationally-recognized personal finance expert who calls himself “America’s Money Answers Man.” He spent almost 20 years as a Wall Street correspondent for Money Magazine. He has authored or co-authored several books on investing and personal finance. He’s appeared as an expert on mainstream news and talk shows. And, he has his own long-standing podcast and blog where he shares his financial wisdom. Much of his advice is perfectly good, but he allegedly crossed a line he shouldn’t have, and placed a big smear on his credibility.

Goodman Charged for Selling Unregistered Securities

According to the New York Times, Goodman was one of 18 people charged with selling unregistered securities for the Woodbridge Group of Companies, LLC, and its property teams. (1) The Securities and Exchange Commission says, Goodman acted as an unregistered broker and promoted the “safety , security, and earning potential of Woodbridge securities to unsuspecting investors.” (2)

Those words turned out to be an empty promise. Woodbridge collapsed in December of 2017 and filed for bankruptcy. That’s when investors stopped getting their monthly interest payments, and realized they had also lost their investment principal.

The SEC says there were 8,400 victims, many of whom were elderly and had invested their retirement savings. They were promised monthly checks from the interest on loans to third parties. In reality, they were paid with money from new investors until the scheme went belly up. (3)

Woodbridge CEO, Robert Shapiro, was at the center of the Ponzi scheme. He’s accused of living a lavish lifestyle with money from investors. The SEC ordered him to pay a $100 million fine and return about $21 million in swindled money plus interest.

Permanently Banned from Securities Business

Goodman earned about $2 million in commissions from Woodbridge. In his deal with prosecutors, he agreed to pay that back along with another $315,000 in interest and a $100,000 fine. The SEC has also permanently banned Shapiro, Goodman, and others from working as brokers or investment counselors.

Although Goodman didn’t admit guilt in the deal, he is also prohibited from declaring his innocence. The Times article says, before he signed that agreement, he denied knowledge of the Woodbridge Ponzi scheme. And, without that knowledge, you might argue that he wasn’t doing anything wrong.

How Did He Miss the Red Flags?

But… He’s also an alleged expert in all things financial. He even wrote a book on fraud called “Reading between the Lies: How to detect fraud and avoid becoming a victim of Wall Street’s next scandal.” You can buy that book and his others, on Amazon.

Co-host, Don McDonald, of Seattle radio show “Talking Real Money” told the Times, “He is one of the smartest people in the financial business that I have ever spoken with. He could not possibly be duped by an investment like this.” So, it remains unclear as to how much he knew about Woodbridge, and whether he saw any red flags for this Ponzi scheme.

One thing Goodman absolutely should have researched is whether or not he even had the right to sell securities. According to the article, he was unlicensed, and it’s my understanding that an unlicensed person can not sell securities.

And if he did somehow find a loophole that allowed him to “market” these securities, he did something you should never do when you are involved with the securities business. He didn’t disclose the fact that he was receiving commissions from Woodbridge as he was promoting those investment opportunities.

Disclosures are very important in the world of finance. Investopedia defines a disclosure as the “act of releasing all relevant information on a company that may influence an investment decision — making public both positive and negative news, data, and other details about its operations, or that impact its operations, in a timely fashion.” It’s my understanding that if you are a public figure promoting a product in which you are invested, you must disclose it. I assume the same is true if you are making commissions.

Rich and I invested in a company called Ludela, it allows you to turn on your real flame candles with a phone app, and a timer turns them off in case you fall asleep or leave the house. And if a child knocks the candle over, it automatically turns off. I announced on Facebook that Ludela candles are now on Amazon, and I also disclosed that we invested in the company.

Be careful out there. I see a lot of people now starting businesses that refer buyers to turnkey income property providers. However, it is illegal to receive a referral fee in most states if you are not licensed in that state. The referral fee must be paid from real estate broker to real estate broker.

As for Goodman, he appears to still be operating as a financial expert, but he is not allowed to be involved in the securities business.

I interviewed him back in late 2016, and was also a guest on his show. He seemed to be a very knowledgeable person. I am hoping that his mistake was merely an oversight- albeit a big one that he should have been able to see.

As investors, it’s important to understand that when someone tells you that an investment is safe and secure, you should think twice. No investment is safe or secure. Investments always have an element of risk, which should be fully disclosed. And, even if lending can be considered one of the more conservative investments, when secured to real estate at a low LTV, lending to an open-ended billion dollar fund makes it much more difficult to perform your due diligence.


(1) NYT Article

(2) SEC Press Release

(3) SEC vs Jordan Goodman

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