State Sues To Stop Seminars Of Real-Estate Pitchman -- Information Called Worthless, Outdated, Unethical

State officials cracked down yesterday on a real-estate guru they say has been preying on low-income home seekers by charging high fees for virtually worthless information.

The state attorney general filed suit against television infomercial pitchman David Del Dotto, saying his Affordable Housing Network has been charging would-be homebuyers $500 for little more than a pep rally and outdated copies of government forms.

"They lure in people who, either because of lack of assets or credit, have not been able to buy a house, and they convince them if they pay $500, they will be given the secrets to getting all sorts of government loans," said Assistant Attorney General David Horn.

Del Dotto, a former drywall hanger who says he has made a fortune in real estate, has given four seminars in the Seattle area this week, telling audiences they can qualify to buy homes even if they have no cash, no income and bad credit.

Most of the information Del Dotto gives out is "worthless," according to Cal Scott, director of the nonprofit Washington Community Housing Network. "It's old, reprinted manuals on foreclosures, information on HUD foreclosures that doesn't even apply any more, Xeroxes of old government forms."

In the suit, filed late yesterday in King County Superior Court, Horn asked the court to restrain Del Dotto from holding more seminars in the state, and to freeze any money already paid to Affordable Housing Network.

Horn said Del Dotto misrepresents himself "as a successful, self-made millionaire" when, in fact, his record is littered with bankruptcies, foreclosures and "numerous enforcement actions" by state and federal agencies.

The suit also accuses Del Dotto of acting as a mortgage broker without a license.

The Affordable Housing Network had booked the Grand Ballroom of the Seattle Westin Hotel for a two-day "Millionaire's School" this weekend. The hotel said as many as 300 people were expected to attend.

Horn said he will seek a temporary restraining order today to prevent the seminar.

Del Dotto could not be located for comment. Alan Hoch, a Long Island, N.Y., attorney who represents the Affordable Housing Network, said Del Dotto is "a paid speaker" and does not own the company. He declined to identify the firm's principals.

"Affordable Housing Network provides information and education about the multitude of grants and loans available to first-time homebuyers," Hoch said. "It does not promise anyone they will get loans, and it does not claim to be able to get loans for people with no income or no credit."

Hoch called the attorney general's charges "inaccurate and misleading."

Earlier this week, in a motel meeting room in Fife, Pierce County, Del Dotto held an audience rapt as he scrawled rapid-fire numbers on an overhead projector screen.

"Would you like a zero-percent loan with no payments?"

"Yes!" cried the crowd.

"Would you like to buy a home with no money or bad credit?

"Yes!"

"Well, stick around, because I'm going to show you how."

The 300 men and women in the room Tuesday night bent earnestly over their yellow legal pads. And after two hours of revival-style oratory, nearly half of them lined up to pay $500 each to attend the "Millionaire's School."

Tracey Bolvin stayed in her seat. A community-lending specialist with Key Bank, she had a succinct assessment of Del Dotto's pitch: "It's a crock.

"He puts enough truth in there to fool people, but it's all laced with untruths," said Bolvin, who had come to the meeting to check out Del Dotto's claims.

Del Dotto emphasizes the vast number of federal, state and local programs that provide low-interest loans or down-payment assistance, urging his listeners to "get all you've got coming" from the government.

"What he's not telling people," said Bolvin, "is that many, if not all, of those programs are for very specific groups - low-income, elderly, Title 8 renters. And even if you're in that group, you have to have good credit to qualify."

Some of Del Dotto's pitch is just flat wrong, she said. For instance, he tells audiences they can acquire land by paying someone else's overdue tax bills. But a so-called "tax deed" is only a lien, not a deed, and it doesn't convey ownership.

For buyers of his $296 package of computer programs, Del Dotto offers to throw in the "secret code" for access to an Internet page listing HUD foreclosures. However, HUD foreclosures are no secret. They're posted daily on HUD's Web page, and in the real-estate listings in newspapers.

"It's so sad, because they are targeting low-income working people who can least afford to lose this money," said Paula Benson of the state Housing Finance Commission.

Experience with bankruptcies

David Paul Del Dotto, 47, describes himself as a self-made millionaire.

"I made my first million at the age of 35," he told the Fife audience. "I bought 50 houses my first year in real estate."

In the 1980s, Del Dotto was a fixture on late-night infomercials featuring singer John Davidson and other celebrities.

He weaves casual references into his speeches to his three Mercedes-Benzes and his $2 million mansion in Hawaii. But court records show Del Dotto has spent much of his career one step ahead of the bankruptcy judge. In 1993, he lost his headquarters in Modesto, Calif., to a bank foreclosure. The same year, the IRS placed a lien on his house in Kona, Hawaii, alleging evasion of income taxes. In 1995, according to Pacific Business News, he was sued by the state of Hawaii over nonpayment of seven loans totaling more than $5 million.

In 1996, his real-estate holding company, Investmark Asia, filed for Chapter 11 bankruptcy protection, listing assets of $2.5 million and debts of $6.2 million. The same year, Del Dotto filed for personal bankruptcy protection under Chapter 7.

Two years ago, Del Dotto agreed to pay a $200,000 fine to the Federal Trade Commission to settle charges that he made deceptive claims in marketing his "Cash Flow System," a set of books and tapes on real-estate investing.

Some suggestions `unethical'

With a few swift strokes of his felt pen, Del Dotto filled the screen with numbers at the Fife seminar. "I am going to show you how to live for nothing," he said.

The advice boiled down to this: Get a low-interest government loan and buy a fourplex. Get another low-interest government loan and fix it up. Fill three units with renters and live in the fourth.

"The tenants pay the mortgage and you, my friend," Del Dotto concluded with a flourish, "are living free."

Well, maybe, say real-estate experts. What Del Dotto forgets to include are details like maintenance costs, or who pays the mortgage if your three units go unrented.

"Yes, people have done well doing rehabs of old property," said Carol Gipsen of the nonprofit Community Home Ownership Center. "But his presentation is simplistic. He doesn't tell you that it's not easy to get these loans, that you have to qualify and have good credit, that there is a limited amount of money available." And some of his suggestions, according to Gipsen, are "borderline unethical."

As a credit-repair tactic, he suggested flooding credit-reporting agencies with so many "requests for correction" that derogatory information is kept permanently in computer limbo.

"Oh, that's wicked!" he chuckled during the session in Fife. "Oh, I really shouldn't teach such things."

To claim the family car as a business expense, he suggested, "fill the glove box with business cards and every once in a while throw a couple out the window. It's called advertising."

There is a moment in the pitchman's trade called "turning the tip." It's when the entertainment is over and it's time to extract some serious money. Del Dotto appeared to handle it masterfully.

What's it worth to you, he asked, to learn my techniques? $40,000? $5,000?

By the time he shows his cards, the audience is almost relieved to learn that the two-day "Millionaire's School" at the Seattle Westin Hotel will cost them only $500.

There is one awkward moment, when a man stands up to complain that he's already paid his $10 for the lecture, "and now you want us to pay more."

Del Dotto had an answer. He held up an impressive-looking certificate.

"Would anyone here like a $500 grant to attend the Millionaire's School?"

Hands shot up.

"Well, you just see me in back of the room during the break, and we'll take care of you."

The "grants," it turns out, are promises to pay $500 toward the closing costs of the student's first property purchase - providing the deal closes within six months.

"It's a pretty safe bet he's never going to have to pay anyone $500," said Scott. "They target people they know can't possibly qualify for a house in the first place."

Seattle Times research librarian Vince Kueter contributed to this report.

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What you should do

The state Attorney General's Office has the following advice for anyone who paid money to the Affordable Housing Network.

-- Act immediately.

-- Ask your bank to reverse charges if you paid by credit card.

-- Stop payment if you paid by check.

-- File a complaint with the Attorney General's Consumer Protection Division: 206-464-6684.