A financial newsletter firm whose parent company has previously been accused of defrauding customers is marketing to the tea party movement.
Agora Financial sent an email advertisement to more than 50,000 Tea Party Nation subscribers Tuesday. It promoted an investment opportunity signed into law by President Ronald Reagan that offers “triple the retirement income most stocks or bonds pay” by profiting off oil companies. The investments, called master limited partnerships, can be used to invest in oil pipelines and are traded like stocks.
Tea partyers were invited to learn more about the secret to making double-digit returns from those products by paying an annual $49 subscription for an Agora Financial newsletter, a business model similar to one that previously ran parent company Agora Inc. into legal trouble.
The Securities and Exchange Commission sued Agora Inc. and a separate subsidiary, Pirate Investor, in 2003. The SEC accused the two of engaging in a scheme “to defraud public investors by disseminating false information” and making more than $1 million from related newsletter sales, but only Pirate Investor was held civilly liable. An Agora Financial spokesman, who spoke on the condition of anonymity, said his branch of the operation is entirely separate.
Online boards are also littered with complaints about Agora Financial. Customers have complained that they did not reap anywhere near the double-digit returns advertised and that they had trouble canceling their subscriptions.
“If a subscriber is not happy with any of our products, we gladly offer them a full refund with no restocking fees or other strings attached,” the Agora Financial representative said in response to the complaints.
Some of the dissatisfaction may come from the impression the ad gives that MLP investments are easy money and low-risk.
“They have risk just like any investment,” said Mike Kalas, president of Potomac Financial Private Client Group, who uses the investments to diversify his clients’ retirement portfolios. “They’re more like the risk of stocks versus the risk of bonds. There’s no free lunch with these.”
The Agora promotion glosses over the associated risks. It quotes a March article on the investment website Seeking Alpha as calling MLPs a “stealth commodity play.” But the advertisement leaves out the article’s warning that the products “have substantial commodity price exposure” and could falter as high oil prices come down.
“MLPs are close to full value and may undergo the sort of sudden and violent corrections they’ve had in the past,” Seeking Alpha contributor Jens Heycke wrote.
The Agora Financial representative defended the company’s claims about the investments, saying, “We absolutely stand behind the gains we have made available to our subscribers.”
The spokesman added that the tea party promotion was just one of many that the company engages in and that the conservative activist movement was not a deliberate target. Yet the advertisement clearly appeals to the tea party ethos by invoking Reagan and highly subsidized Big Oil companies and the volatile stock market.
Judson Phillips, who runs the Tea Party Nation email group that carried the ad, said that is why the company’s marketers reached out to him.
He added that he was unaware of any problems related to Agora. “We would not knowingly sell advertising to someone who is doing something fraudulent or illegal,” Phillips said, noting that the advertisement was not an endorsement of Agora’s products.
The ad marked a more aggressive turn toward advertising for Tea Party Nation, which in the past has faced criticism for profiting off the movement. Some Tea Party Nation members complained to Phillips that they mistook the ad as editorial content because of how it was designed. Phillips said that it was the first time he tried the ad format and that he was able to allay concerns raised by his supporters.
The group’s ad money offsets its expenses, including Phillips’ salary and travel expenses, a model that he defends.
“We put advertising on the site. If they don’t like it, they don’t have to be part of the site,” Phillips said. “We live in a free-market society.”