REPRISE: ‘Blue Paint,’ Part 3 Of Fantasy ASD Series

Today we are republishing Part 3 of our ASD fantasy courtroom series, the continuation of the cross examination of “Mrs. Doe.”

This scenario is fiction. The dialog is fiction. No government or ASD secrets are being divulged. (We don’t know any government or ASD secrets.) The dialog is based on what already is in the public record or on the Internet about the ASD case. It is designed to make some of the issues more understandable.

One of the reasons we’re republishing Part 3 is because ASD President Andy Bowdoin filed court documents yesterday, claiming he didn’t know ASD was illegal until the government seized tens of millions of dollars from the firm last summer.

It was a remarkable claim, considering that ASD members routinely were scolded for calling ASD an “investment” company. Indeed, some ASD members got downright angry in forums when others used the word “investment.” In the August forfeiture complaint, the prosecution cites an instance in which an ASD member instructed an undercover agent never to use the word “investment” because it could catch the attention of the wrong people — namely, law enforcement.

Indeed, ASD required its own language to operate, something addressed in Part 3 of our fantasy ASD series. At the same time, ads for ASD dating back to 2007 appeared on the Internet, telling prospects that ASD deposits were insured by the FDIC and that the company provided “shelter” from the FTC and the SEC, issues also addressed in Part 3. The SEC, of course, is the agency that regulates the securities markets — and an agency that has successfully prosecuted autosurfs for selling unregistered securities by calling them “advertisements.”

Simply put, it is the reason ASD members scolded other ASD members for using the word “investment.” They knew what the vulnerability was, but Bowdoin nevertheless is making the claim that he didn’t know what ASD was doing was illegal.

About two months after Part 3 was published last fall, prosecutors went to court, accusing Andy Bowdoin of having paid an employee to surf for Bowdoin’s son so the younger Bowdoin could earn rebates. People surfing for other people undermines claims that ASD was an “advertising” company, as opposed to an “investment” company, another topic covered in Part 3.

Fantasy Courtroom Scene 3: ‘Blue Paint’

Prosecutor: Mrs. Doe, earlier we discussed the principle of ‘Garbage in, garbage out,’ and you told us that, if the data was corrupt, the result could be corrupt. Correct?
Mrs. Doe: Yes. Correct.
Prosecutor: And you said that ‘Garbage in, garbage out’ also applies to language: If somebody told a lie — and if that lie was repeated on the Internet — it could lead to a corrupt result. Correct?
Mrs. Doe: Correct.
Prosecutor: You live in the United States, right?
Mrs. Doe: Yes.
Prosecutor: Would you agree the economy could be better?
Mrs. Doe: Yes. That’s why I was looking forward to the ASD business. It creates wealth for everybody who participates.
Prosecutor: Let me stop you there for a moment, Mrs. Doe: You just said ASD creates wealth for ‘everybody,’ right?
Mrs. Doe: Yes. Correct.
Prosecutor: You’d be among ‘everybody,’ right?
Mrs. Doe: Yes.
Prosecutor: But earlier you said you spent $12,000 on ASD ads and made only $500 through sales of your product. During the previous year, when you weren’t with ASD, you spent $1,000 on local classified ads and with Google, and made $10,000. Didn’t ASD put you in a hole?
Mrs. Doe: Yes. But I was going to make up the difference and get in profit with the ASD rebates.
Prosecutor: But ASD didn’t guarantee rebates, Mrs. Doe. So, the prospect of getting a rebate always was in doubt, meaning it was in doubt 100 percent of the time. True? And since the Terms of Service could change at any time, the prospect of getting any return at all from ASD always was in doubt, meaning it was in doubt 100 percent of the time. True?
Mrs. Doe: Do we really have to go down this road again?
Prosecutor: I understand you’re frustrated, Mrs. Doe.
Mrs. Doe: That doesn’t even begin to describe it . . .
Prosecutor: But you still agree with ‘Garbage in, garbage out?’
Mrs. Doe: Yes.
Prosecutor: Why?
Mrs. Doe: Because there is no denying that bad data can lead to a bad result. My 6-year-old knows that.
Prosecutor: Earlier you said you had three children, two of whom are in college. So, your 6-year-old is your third child?
Mrs. Doe: Yes. My husband and I are very blessed. Our daughter was born when I was 44, and she is perfect in every way. We were worried because of my age. But she is a beautiful, bright child, like her older brothers. She has provided more joy than I can even describe. Like I said, perfect in every way . . .
Prosecutor: Life is about the kids, isn’t it, Mrs. Doe?
Mrs. Doe: It certainly is.
Prosecutor: Thanks for sharing your story about your daughter. For now, let’s return to the ASD business.
Mrs. Doe: OK.
Prosecutor: ASD wasn’t a bank, was it?
Mrs. Doe: Of course not. Everybody knows that.
Prosecutor: There’s that word again: ‘everybody’: Are you sure the word ‘everybody’ applies, Mrs. Doe?
Mrs. Doe: Yes.
Prosecutor: Mrs. Doe, please turn your attention to the screen for the overhead projector. I’m going to show you part of an ad from an ASD upline in 2007, the uppermost part of the ad, and ask you to read aloud the line that begins with the number 3.

Claim that ASD deposits were FDIC-insured.

Mrs. Doe: It says, ‘FDIC insured up to $100,000, using virtual money debit card payment options.’ Oh, my God!
Prosecutor: Why’d you say, ‘Oh, my God!’ Mrs. Doe?
Mrs. Doe: Because that ad says ASD purchases were FDIC insured!
Prosecutor: Can you see, now, why I asked whether ASD was a bank?
Mrs. Doe: Yes. Plainly.
Prosecutor: Mrs. Doe, you’re 50. You have experience in business. You have a bank account. What does the FDIC do?
Mrs. Doe: It insures bank deposits so people don’t lose money if the bank fails.
Prosecutor: Would you agree that the FDIC has been in the news a lot recently?
Mrs. Doe: Yes. Because of all the bank failures.
Prosecutor: Mrs. Doe, you have three children, including the beautiful 6-year-old daughter you described. You have experience in business. You have experience in advertising. You’ve used ASD. You’ve used classified ads and Google. Did the newspaper or Google ever tell you advertising purchases were insured by the FDIC?
Mrs. Doe: No. I am really angry about this!
Prosecutor: Why?
Mrs. Doe: Because it is total garbage.
Prosecutor: Mrs. Doe, as I mentioned, this ad is from 2007. And you can see “2007” in the ad, correct?
Mrs. Doe: Yes.
Prosecutor: ASD deposits are not insured by the FDIC, are they, Mrs. Doe?
Mrs. Doe: No. Of course not.
Prosecutor: What does that line of the ad imply to you?
Mrs. Doe: That ASD deposits are FDIC-insured.
Prosecutor: So, using the principle of ‘Garbage in, garbage out,’ any proceeds that flowed into ASD as a result of that ad could create a problem, because the proceeds originated from the false premise that ASD deposits were FDIC-insured. Correct?
Mrs. Doe: Yes.
Prosecutor: And that ad was from 2007, so it’s more than a year old? We know that because the ad says ‘predicted to go mainstream by 4/1/07.’ Correct?
Mrs. Doe: Correct.
Prosecutor: Mrs. Doe, you have experience in business. And you have experience in advertising. As an owner of a small business, you have at least a basic understanding of accounting. Correct?
Mrs. Doe: Correct.
Prosecutor: How would a company account for money it received as a result of an ad that said deposits were FDIC-insured, when those deposits weren’t insured by the FDIC?
Mrs. Doe: Honestly, I don’t have a clue.
Prosecutor: Would you consider the money tainted in some way?
Mrs. Doe: Yes.
Prosecutor: If the company that received such money didn’t know it was receiving money based on a claim that deposits were FDIC-insured, would it change your opinion as a businesswoman that the money was tainted?
Mrs. Doe: No.
Prosecutor: Why not?
Mrs. Doe: The money would be tainted whether or not the company knew it had come from a tainted source. The fact the company didn’t know it was holding tainted money doesn’t change the fact the money was tainted. If blue paint gets mixed with white paint, there’s still blue paint in the mix, even if you don’t know who put it there.
Prosecutor: So, blue paint is bad?
Mrs. Doe: It’s not bad if you want blue or a shade of blue. But if you want white paint and blue gets mixed into it, it’s bad.
Prosecutor: So, one way to look at this is that an ASD promoter created ‘garbage’ and that money that flowed into ASD as a result of that ‘garbage’ was tainted with blue paint?
Mrs. Doe: Yes.
Prosecutor: Could ASD trust its numbers if it was in receipt of garbage and money tainted with blue paint?
Mrs. Doe: No.
Prosecutor: So, ‘garbage’ and blue paint could have been in the ASD system as early as 2007, based on the claim that deposits were FDIC-insured?
Mrs. Doe: Yes.
Prosecutor: What would happen if ASD was in receipt of tainted money, and that tainted money was deposited in a bank?
Mrs. Doe: The bank would be in possession of tainted money.
Prosecutor: Mrs. Doe, do you see the line in the ad that begins with the number 1?
Mrs. Doe: Yes.
Prosecutor: Please read it aloud.
Mrs. Doe: It says, ‘The company is free to join indefinitely. Provides shelter from FTC and SEC.’
Prosecutor: What is the FTC?
Mrs. Doe: It’s the Federal Trade Commission.
Prosecutor: Based on your life and business experience, what does the FTC do?
Mrs. Doe: It makes sure businesses comply with laws — things such as false advertising.
Prosecutor: Based on your life and business experience, Mrs. Doe, how do you read this section of the ad?
Mrs. Doe: That ASD provides shelter from the FTC and the SEC, that ASD somehow can hide members from the FTC and the SEC.
Prosecutor: Why would anybody need ‘shelter’ — to ‘hide,’ as you said — from the FTC and the SEC, Mrs. Doe?
Mrs. Doe: I don’t know. It’s ridiculous, and I’m really angry about it.
Prosecutor: Based on your life and business experience, what does the SEC do, Mrs. Doe?
Mrs. Doe: It’s the agency that regulates the stock exchanges and the securities business.
Prosecutor: The word ‘SEC’ appears right in the ad. Correct, Mrs. Doe?
Mrs. Doe: Yes.
Prosecutor: Does it strike you as odd that an ad for an advertising business would mention the SEC? When you purchased local classifieds and Google Adwords ads, did the newspaper or Google ever mention the SEC, that they provided ‘shelter’ from the SEC?
Mrs. Doe: No.
Prosecutor: But this ad is for ASD, a company that calls itself an ‘advertising’ company,’ and the ad says it provides ‘shelter’ from the SEC?
Mrs. Doe: Yes.
Prosecutor: Mrs. Doe, I’m going to ask you to silently read every word on the screen of the overhead projector and to remember what you read.
Mrs. Doe: OK. Thanks. Give me a minute or two.
Prosecutor: You’re welcome, Mrs. Doe. Please let us know when you’ve finished.
Mrs. Doe: OK. I’m starting now . . .
Mrs. Doe: . . . OK. I’ve finished.
Prosecutor: Mrs. Doe, you’ve read every word on the screen of the overhead projector, correct?
Mrs. Doe: Yes. Correct.
Prosecutor: Did you see the phrase ‘advertising company’ or ‘advertisement’ mentioned anywhere?
Mrs. Doe: No.
Prosecutor: And yet this is an ad for a company that calls itself an ‘advertising’ company, correct?’
Mrs. Doe: Correct.
Prosecutor: Mrs. Doe, you’re 50. You have three children. You have experience in business. You’ve purchased advertising from multiple companies. Let me ask you, based on your experience, what does this ad appear to be selling?
Mrs. Doe: It appears to be selling an investment, and protection from the Federal Trade Commission and the Securities and Exchange Commission. And it also is claiming that ASD purchases are insured by the FDIC.
Prosecutor: Mrs. Doe, we have talked about ‘Garbage in, garbage out.’ Does this ad impress you as a case of ‘Garbage in, garbage out?’
Mrs. Doe: Yes.
Prosecutor: Why?
Mrs. Doe: Because people could have put money into ASD, believing they were making a deposit that was insured by the FDIC. And they could have put money in, believing earnings somehow were sheltered from taxation or that they’d be out of regulatory reach by the FTC and the SEC. The word ‘advertising’ wasn’t even mentioned, and this clearly was the top of the page, the first thing people would see.
Prosecutor: So, just to be clear, this ad, in your view, uses the language of banking and investments, not the language of advertising, and it uses the language of investments and banking in an objectionable way?
Mrs. Doe: Yes.
Prosecutor: Mrs. Doe, thank you. We’re going to switch gears for a minute now. Earlier we talked about your 6-year-old daughter, about how much joy she has brought to you and your husband and your two sons. Children, especially young children, like to help their parents. Agree?
Mrs. Doe: Yes.
Prosecutor: Did your daughter ever help you with the ASD business?
Mrs. Doe: Yes.
Prosecutor: In what way?
Mrs. Doe: Sometimes she helped click on ads. The screen would count down, and she’d click on a colored box to load the next ad.
Prosecutor: So, she was helping Mommy, by clicking on ads?
Mrs. Doe: Yes.
Prosecutor: How long did it take your 6-year-old to figure out how to click on ASD ads?
Mrs. Doe: Oh, she figured it out instantly.
Prosecutor: Were you with her all of the time, watching the same ads she was watching, while she was practicing her clicking?
Mrs. Doe: I’d say almost always. Sometimes the phone would ring, and my attention would get diverted away from the ads while she was clicking and having fun.
Prosecutor: So, she was a little girl, helping Mommy do her job.
Mrs. Doe: Yes. It was harmless fun, and educational for her.
Prosecutor: Mrs. Doe, you have three children, and you’ve been a mother for about 20 years, correct?
Mrs. Doe: Yes.
Prosecutor: Based on your experience as a mother, would you say that most 6-year-olds could master the task of clicking on ASD ads?
Mrs. Doe: Oh, my, yes.
Prosecutor: Can your daughter read?
Mrs. Doe: She’s in the first grade, and already reads at a second-grade level.
Prosecutor: Could your daughter help Mommy shop in the Classified section of the newspaper?
Mrs. Doe: Not quite yet.
Prosecutor: If Mommy had to type a search string into Google that was above a second-grade level, could your daughter help with that?
Mrs. Doe: No, that’s still a couple of years away.
Prosecutor: But your daughter could help Mommy with ASD?
Mrs. Doe: Yes. Clicking on ads is truly easy. It was part of the beauty of ASD.
Prosecutor: But you wouldn’t want too many 6-year-olds clicking on your ads, right? A 6-year-old isn’t apt to make a purchase, when the products are marketed to business people. Correct?
Mrs. Doe: Yes.
Prosecutor: Could ASD tell if a 6-year-old was clicking on ads?
Mrs. Doe: No.
Prosecutor: Do you see that as a problem?
Mrs. Doe: I’d see it as a problem if too many 6-year-olds were clicking on ads. Those ads cost $1 apiece.
Prosecutor: Could a 5-year-old master clicking on ASD ads?
Mrs. Doe: Yes, I believe my daughter could have done it when she was 5.
Prosecutor: Could she have done it when she was 4?
Mrs. Doe: I’d say probably. Kids get started on computers very early these days. They had computers in preschool.
Prosecutor: Would you agree that newspapers and Google have a sort of built-in filter that prevents 6-year-olds from helping Mommy?
Mrs. Doe: I’m not quite sure what you mean.
Prosecutor: Well, let’s take newspapers. A 6-year-old would have to comprehend an ad, meaning she would have to be able to read the ad and understand what purpose it served, in order to help Mommy? Agreed?
Mrs. Doe: Yes. Agreed.
Prosecutor: And with Google, a 6-year-old would have to be able to type a complex search string in order to help Mommy shop, if Mommy, for example, was shopping for anything beyond the vocabulary and knowledge base of a 6-year-old. Agreed?
Mrs. Doe: Yes.
Prosecutor: But a 6-year-old could help Mommy shop on ASD, because reading comprehension and a vocabulary weren’t required. What was required was an ability to recognize a color, when it came time to click on the next ad. And that’s something a 6-year-old could do. Correct?
Mrs. Doe: Correct. But I think you’re picking on 6-year-olds. My daughter loved to help — and it was cute and sweet.
Prosecutor: You sell decorative autumn baskets. Correct, Mrs. Doe?
Mrs. Doe: Correct.
Prosecutor: From a pure business standpoint, with your knowledge of advertising, you wouldn’t want too many 6-year-olds or 5-year-olds or 4-year-olds clicking on your ads. Correct?
Mrs. Doe: Well, no. I’d want potential buyers to click on my ads.
Prosecutor: So, you agree that a 6-year-old clicking on ads is not a potential buyer, right?
Mrs. Doe: Right.
Prosecutor: And you agree that the local newspaper and Google have filters that would prevent a 6-year-old from helping Mommy?
Mrs. Doe: Yes.
Prosecutor: And you agree that ASD lacked such a filter?
Mrs. Doe: Yes.
Prosecutor: Mrs. Doe, a minute ago you suggested I was picking on 6-year-olds. Let’s talk about another group. Let’s talk about college kids, kids such as your two sons.
Mrs. Doe: OK.
Prosecutor: Would you agree that college kids can read the newspaper Classified section with full comprehension and could type complex search strings into Google with full comprehension?
Mrs. Doe: Yes.
Prosecutor: And so, beyond any doubt, they’d be able to read the ads on ASD with full comprehension.
Mrs. Doe: Yes.
Prosecutor: So, in that sense — and I’m being serious here — unlike a 6-year-old, they could contribute something to Mom beyond the recognition of colors, if Mom needed help with ASD?
Mrs. Doe: Yes.
Prosecutor: Did your college-age children ever help you with ASD?
Mrs. Doe: Yes.
Prosecutor: How?
Mrs. Doe: Well, they surfed for me if my computer was down or we were away for a few days.
Prosecutor: So, just to be clear, you didn’t always do your own surfing to earn rebates. Sometimes the boys surfed for you. Correct?
Mrs. Doe: Correct.
Prosecutor: Did you ever surf for the boys?
Mrs. Doe: Yes.
Prosecutor: So, just to be clear, ASD members could surf for other ASD members: sons for Moms, Moms for sons, upline sponsors for downline members, downline members for upline sponsors.
Mrs. Doe: Yes.
Prosecutor: So, ASD couldn’t prevent people surfing for other people?
Mrs. Doe: No.
Prosecutor: Did the boys help you with ASD in other ways?
Mrs. Doe: Well, as I said earlier, they didn’t have their own businesses. Because of that, they advertised the URL for my basket business on ASD.
Prosecutor: Did ASD ever verify that your kids had businesses of their own or try to stop them from advertising your basket business?
Mrs. Doe: No.
Prosecutor: Earlier, you said you spent $12,000 advertising your basket business on ASD. Correct?
Mrs. Doe: Yes.
Prosecutor: How much did your children spend to advertise your basket business?
Mrs. Doe: They each spent $5,000.
Prosecutor: So, a total of $10,000? Right?
Mrs. Doe: Right.
Prosecutor: So, if we add your $12,000 to their $10,000, we arrive at $22,000. Correct?
Mrs. Doe: Correct.
Prosecutor: And that would have bought 22,000 clicks for your basket business, correct?
Mrs. Doe: Yes.
Prosecutor: Mrs. Doe, earlier you said your basket business generated $500 in sales after your $12,000 ad expenditure. But the real number is $500 in sales after a $22,000 ad expenditure, because your boys spent $5,000 apiece to advertise your business. Correct?
Mrs. Doe: Earlier, you only asked about my expenditure. You didn’t ask about theirs.
Prosecutor: Respectfully, Mrs. Doe, I’m asking about it now. The real number is $500 in sales from a $22,000 ad expense, correct?
Mrs. Doe: Yes. I feel silly when you put it that way.
Prosecutor: But is that not the way it is, Mrs. Doe? Isn’t that the math?
Mrs. Doe: Yes. That’s the math.
Prosecutor: Mrs. Doe, earlier you said your business grossed $10,000 the year before ASD, based on an ad spend in classifieds and on Google of only $1,000. Correct? And you acknowledged that you spent $12,000 on ASD this year, an amount that exceeded the gross sales of your business the previous year by $2,000. In other words, you spent more on advertising this year than your business even took in last year. Correct?
Mrs. Doe: It’s not as bad as that sounds.
Prosecutor: Is it not true it’s actually worse than that sounds, Mrs. Doe? Your boys spent $10,000 advertising your business, which brings your total ad expenditure to $22,000, for a business that grossed only $10,000 the previous year. You outspent your gross sales by better than two to one. Is that not correct?
Mrs. Doe: Yes. That’s correct. But you’re forgetting about the rebates. We would have gotten all of that back and more.
Prosecutor: But the rebates weren’t guaranteed, Mrs. Doe. The Terms could change at any time, and advertising purchases were nonrefundable. Didn’t you and your boys have $22,000 at risk? Didn’t you make a bet that ASD would continue to pay rebates? And if you were compounding your earnings by taking out 20 percent in cash and — as you said — ‘reinvesting’ 80 percent, weren’t all of your paper profits at risk? Weren’t you betting that ASD would pay a very handsome dividend?
Mrs. Doe: Well, yes.
Prosecutor: And isn’t that what Wall Street investors do? Isn’t Wall Street about taking calculated risks with money? Some people bet that stock prices will go up, and others bet they will go down? Don’t some people buy stocks because they have a history of paying dividends?
Mrs. Doe: Yes.
Prosecutor: Mrs. Doe, earlier you said that you could get in trouble for calling ASD an investment company. Do you remember saying that?
Mrs. Doe: Yes.
Prosecutor: Who told you that?
Mrs. Doe: The forum people. I used the word ‘investment’ in one of my posts, and they scolded me.
Prosecutor: They scolded you for calling ASD an investment? Didn’t you and your sons have $22,000 at risk? And wasn’t that money at risk because ASD didn’t guarantee rebates and could change the Terms of Service at any time?
Mrs. Doe: Yes.
Prosecutor: So, your capital was at risk, just like on Wall Street, and forum members scolded you for calling it an investment?
Mrs. Doe: Yes.
Prosecutor: What’s one thing you had in common with the forum members?
Mrs. Doe: Well, we all belonged to ASD, for one thing.
Prosecutor: Was there anything else?
Mrs. Doe: We all spent money on advertising and looked forward to earning rebates.
Prosecutor: So, all of you were members of a common enterprise — in other words, ASD. And all of you had money at risk because rebates weren’t guaranteed, and all of you had the expectation of earning money due to the ongoing success of ASD?
Mrs. Doe: Yes.
Prosecutor: Does that sound like an ‘investment’ to you, Mrs. Doe?
Mrs. Doe: Well, yes. I never understood the forum paranoia about calling it an investment.
Prosecutor: Ever hear the phrase a ‘skunk by any other name,’ Mrs. Doe?
Mrs. Doe: Yes.
Prosecutor: Please explain to us what you believe the phrase to mean.
Mrs. Doe: Well, a skunk by any other name would still be a skunk.
Prosecutor: So, if you called a ‘skunk’ a ‘rose,’ it would still be a skunk?
Mrs. Doe: Yes.
Prosecutor: And if people decided to call an investment company an advertising company, it still would be an investment company?
Mrs. Doe: Yes.
Prosecutor: Mrs. Doe, forgive me. I can’t help but notice you are smiling, and that’s the first time I’ve seen you smile since I began to ask you questions. Why are you smiling, if you don’t mind me asking?
Mrs. Doe: Because they told me on the forum that you were stupid. And I can tell, now, that you aren’t stupid.
Prosecutor: How can you tell I’m not stupid?
Mrs. Doe: Because you got me to reveal my secret.
Prosecutor: What secret?
Mrs. Doe: That I believed it was an investment all along, and was afraid to say it.
Prosecutor: Why are you no longer afraid to say it?
Mrs. Doe: Because I’m 50, married, the mother of three, own a business, own a bank account, have purchased ads in multiple places, and understand a few things about accounting, such as ‘Garbage in, garbage out.’ And there’s one more reason.
Prosecutor: What would that be, Mrs. Doe?
Mrs. Doe: Blue paint.
Prosecutor: Earlier you said you were angry about the content of the ad. Why?
Mrs. Doe: Because of all the blue paint. The claim that ASD deposits were insured by the FDIC is blue paint, in my mind. So is the claim about ASD providing shelter from the FTC and the SEC. So is the preoccupation with scolding people who call the money they spent with ASD an investment and all the talk about ASD being a ‘no-brainer’ and ‘fool-proof’ and the importance of having a ‘diverse portfolio.’
Prosecutor: Blue paint isn’t good if you want white paint, is it, Mrs. Doe?
Mrs. Doe: No.
Prosecutor: Thank you for your time, Mrs. Doe.

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