Craig Huey rode a Tea Party wave to win a spot in the July 12 runoff for the 36th Congressional District. He bills himself as a small businessman taking on "career politician" Janice Hahn.
Huey's business, Creative Direct Marketing Group, sends out junk mail advertisements for nutritional supplement companies and investment schemes, among other things. Over the years, Huey has learned that successful pitches are the ones that provoke an emotional response.
A case in point was the "Obama Crisis Kit," a marketing effort that played on fears of economic uncertainty and international instability to promote a gold-mining penny stock that critics have described as a "pump-and-dump scam."
Huey has developed seminars and given interviews that explain how to make effective direct marketing appeals. Two of the best
strategies, he explains, are fear and greed.
The recession and the election of President Obama offered a golden opportunity to direct marketers like Huey. As he explained in the interview, they could make use of "fear of government, uncertainty and confusion in Washington, and information overload" to sell investments.
One of the best products for such an approach, he argued, was cheap stocks. "Right now investors are starting to ask how they get back the money they lost," he said. "They want low-priced stocks because they thing (sic) they can get a better return."
Thus the "Obama Crisis Kit," an investors' guide that Huey marketed in 2010. The offer went by several names -- Obama Disaster Kit, Obama Survival Kit, Obama Judgment Day, and Swiss Crisis Kit, among others. But it all boiled down to a pitch to invest in Constitution Mining Co., a penny stock with gold mining rights in Nevada and Peru.
The pitch was sent out under the name of Scott Smith, in the form of an investment newsletter called Swiss Confidential. One appeal from 2010 touted "BREAKING NEWS":
Intelligence sources in Zurich are confirming the U.S. will launch a preemptive strike on Iran's nuclear facilities in the next 60 DAYS or less...
"You could be 4,640.3% Richer in Obama's Iranian Gamble"
Act now before the bombs drop and you could see my #1 Gold Stock Pick turn $10,000 into $474,030.
And even if Obama loses his resolve to target Tehran, you could still see 10 TIMES your money over the next 4 months...
PLUS: Protect yourself from the global instability to come with the 2010 Obama Disaster Kit. It's a $232.90 value, but it can be yours FREE!
Constitution Mining was trading at 67 cents a share, but it was "projected" to go as high as $6.67, on the low end, or $31.76 on the high end.
"I'm looking for special situations that could earn my subscribers at least 10 times their money," Smith said in one appeal. "And that's exactly what I think you're in for with Constitution Mining... You could make 23 times your money, even if this mine turns out to be a huge disappointment, and only produces a tiny fraction of what it's estimated to hold."
Unfortunately for investors, Constitution Mining never rose much above $1 and is now worth 18 cents.
The company has been heavily covered at Inca Kola News, a blog that focuses on Latin American stocks. The blog has repeatedly described Constitution Mining as a "pump-and-dump scam."
In a recent press release, Constitution Mining's CEO said that
making good on its gold leases "will require the Company to secure
additional financing." The company has also changed its name to
GoldSands Development Co.
Some of the recipients of the pitch were e-mail subscribers of the conservative website TownHall.com, according to a post on 2Parse.com. A commenter there using the name Lukester said that he had lost $10,000 on the stock.
was pounding the table so hard about Constitution Mining I finally gave
in to curiosity and took out a subscription to his newsletter. Then
like an idiot I bought a quite large amount of this stock. That was
back in 2010 when it was at a dollar and he was urging everyone to
catch it before it soared. Long story short barely 3 months after he
was doing all that table pounding the stock fell completely off the
cliff - down to $0.18 cents!
I got out of my position with a 50% loss and considered myself lucky to
have escaped it at 50 cents. The stocks financial prospects turn out to
Smith, investor relations consultant at GoldSands, acknowledged that he
knows Huey, but referred other questions to the Huey campaign. The Huey
campaign has yet to respond to inquiries about the company.
Huey has registered the web domain obamacrisiskit.com. He lists Constitution Mining as a client on his company's website.
One of the Constitution Mining pitches was featured on a blog that exposes "attempts to extract money from the elderly." The author of the blog wrote that he started it after his father, who had dementia, fell for a series of direct mail scams.
Incidentally, on his company website Huey has an article
that explains how to target the "mature market," which
he defines as anyone over 55. (Sample topic: "Know the keys to disarming
One of Huey's pet issues is federal government interference in the direct marketing business. On his company website, he complains about a proposed "Do Not Track" registry that would allow consumers to opt out of online tracking.
is just more regulation that will kill jobs and further slow the
economy and lessen consumer confidence," Huey writes. "Further, it
lessens freedom of commerce, motivation and freedom of speech."
His campaign website also includes a page devoted
to "nutritional freedom," in which he rails against the Food and Drug
Administration for regulating advertising for nutritional supplements.
is a simple issue of freedom," he wrote. "Just because a government
bureaucrat doesn't approve of you taking a supplement is no reason to
Huey's clients include Giro Vita International and G.B
Data, which manufacture supplements. In 2005, the Federal Trade
Commission settled a complaint with Gero Vita, G.B. Data and four other companies over misleading advertising.
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to the settlement, the companies had claimed that their products could
cure emphysema, diabetes and Alzheimer's Disease. The companies were
ordered to pay $605,000.