Some Celebrity Endorsements Tied To Scams

LOS ANGELES - As the host of "The Newlywed Game," Bob Eubanks explored the wonders of romance. Recently, he's been a spokesman for a 900-number dating service that left investors feeling jilted.

The service Eubanks hailed as "revolutionary" in an infomercial is under investigation for suspected investment fraud, part of a state and federal crackdown on a new form of scam that feeds on the psychic, chat and date lines that have become staples of cable TV.

Eubanks hasn't been accused of wrongdoing. However his endorsement evidently influenced some of the 281 unwitting investors, who expected their partnership to earn $3.99 a minute when singles called a 900 number to find a date. The investors now are out a total of $3.4 million.

"I thought it had to be on the up-and-up," said Cleve Fitzpatrick, an unemployed aerospace worker from nearby Hawthorne who was so taken with Eubanks that he sank $50,000 into the Matchmaker Network. "I never suspected anything fishy."

Welcome to the dark side of the world of celebrity endorsements. According to investigators, a big (or not-so-big) star can make an impression on the unsophisticated investors so often targeted by boiler-room operators.

Besides Eubanks, entertainer LaToya Jackson and New York cop and Playboy model Carol Shaya have endorsed questionable 900-number services.

None of the celebrities has been accused of wrongdoing. There's no indication that the deals were more than easy paydays for the celebrities, who appeared in advertisements for the 900 numbers.

Court documents indicate one company under investigation paid $250,000 to an intermediary to pay Jackson for titillating bits for a "Jackson Family Secrets" 900 number.

Eubanks, who is mostly out of the limelight these days, received $15,000 for the dating infomercial, which was shot in one day before a studio audience.

The investigations are part of the sweeping Project Roadblock crackdown on high-tech frauds, a probe led by the Federal Trade Commission and agencies in 22 states. Separately, the Securities and Exchange Commission is probing possible securities-law violations by some companies targeted in Project Roadblock.

As part of the crackdown, the FTC in January obtained a court order freezing the assets of a company called American Fortune 900, placing it in permanent receivership while the investigation continues. The agency has alleged that the Woodland Hills, Calif., company misled investors by playing down the risks associated with the 900 venture featuring the Jackson and Shaya lines, as well as a "Hollywood Pipeline" line by a former gossip columnist for the New York edition of Newsday.

Also in January, the California Department of Corporations searched the offices of several companies involved in the Matchmaker Network, including one named B.M.C. - which stood for "Bring More Cash," according to information received by authorities. Investigators say B.M.C. managed a Matchmaker Network partnership in which investors lost 80 percent of their capital. The SEC is investigating B.M.C. in connection with the sale of unregistered securities.

While most top performers are highly protective of their images and closely review endorsement deals, other celebrities aren't always as picky.

Eubanks said a Los Angeles agency called R&R Advertising approached him about doing the infomercial, which he viewed as a routine endorsement deal.

Eubanks said he didn't inquire about the promoters of the Matchmaker Network because he had no stake in the venture, and he was unaware that the infomercial would be used to lure investors.

"I picked up my check. It didn't bounce. I walked away," he said.

Jackson's husband and manager, Jack Gordon, said in a telephone interview from Spain that he was unaware of any probe into American Fortune 900. He declined further comment. Jackson was to receive 25 cents of the $2.99 a minute charged on the Jackson line.

At least one celebrity is beginning to feel as jilted as investors. Shaya's husband, New York Police Sgt. Charles Castro, said she has yet to receive money from calls to the "True Blue" hotline. She was to receive 15 cents a minute.

He said his wife's deal was with a Manhattan company named Magical Promotions, which, according to court documents, signed talent on behalf of American Fortune 900.

Behind the famous names, authorities say, are veterans of unregulated telemarketing operations that range from precious metals to ostrich breeding. The FTC said Rory Cypers, the 25-year-old president of American Fortune 900, previously sold precious-metals investments for Western Trading Group, an outfit the FTC shut down after an investigation in 1992.

In its court filings, the FTC said American Fortune 900 promised investors unrealistic gains, such as a sixfold return in two years. The agency said Cypers told some investors their money was protected against losses by a U.S. Treasury bond worth $4 million, and sent them worthless photocopies of the security to back up his claim.

When hype didn't work, Cypers allegedly used threats.

A 78-year-old widow said in court documents that she invested $10,000 after Cypers threatened to sue her if she did not come up with the money. Months later, she invested another $5,600 when Cypers told her she was required to meet a capital call.

The FTC has alleged that Cypers and American Fortune 900 engaged in deceptive promotional practices, and is seeking a court order requiring that investors' funds be returned. American Fortune 900 has been barred from selling securities in four Midwestern states.