Melvin J. Ford, president of International Loan Network, Inc. (ILN), promoted ILN’s financial enrichment programs to ILN members and prospective members with evangelical fervor at revival-style “President’s Night” gatherings. His basic philosophy was this:
The movement of money creates wealth. What we believe is that if you organize people and get money moving, it can actually create wealth.
One ILN program was the Maximum Consideration Program, which, somewhat like a chain letter, provided $5,000 awards to members who sold $3,000 worth of new memberships called PRAs and made a deposit on the purchases of nonresidential real estate. According to Ford, an individual purchasing $16,000 worth of PRAs could receive an award of up to $80,000 because “all of a sudden the velocity of money increases to such a point, the ability to create wealth expands to such a degree, that we could come back and give somebody an award for up to $80,000.” The SEC contended that ILN was selling unregistered investment contracts in violation of the 1933 act. ILN disagreed, contending that the program never guaranteed a return and was thus not an investment contract. Decide. Could ILN have provided full disclosure to investors concerning the program in a prospectus if required by the 1933 act? [SEC v. ILN, Inc., 968 F.2d 1304 (D.C. Cir.)]