A Federal Trade Commission administrative law judge yesterday found a Tucson-based land company, Horizon Corp., perpetrated a "vicious consumer fraud" by selling millions of dollars worth of "virtually worthless desert land" to "unsuspecting" consumers.
Judge Ernest G. Barnes said the firm used a deceptive and high pressure "sales scheme" to sell hundreds of thousands of acres of undeveloped land in New Mexico, Arizona and Texas.
During the five-year period, from 1969 through 1974, Barnes said, the company sold about $370 million worth of land throughout the U.S. and to members of the U.S. armed forces abroad.
A Horizon spokesman called the FTC action "outrageous," and said the decision will be appealed to the full commission, and criticized the FTC for making the decision public before sending copies to Horizon.
"Horizon sold its land in an honest and forthright manner and is firmly convinced that the ultimate resolution of this case will vindicate its position," said company president Sidney Nelson.
Barnes ordered the company to stop using unfair practices and to take specific measures aimed at protecting the rights of future customers.
At the same time, however, he called on the FTC to go to federal court to secure refunds for consumers who already purchased the allegedly worthless land. Such restitution, Barnes said, "may be the sole remaining hope for any consumer relief."
Using dinner parties at hotels or motels and "fly-in" trips to the proposed land sale sights, Horizon's sales representatives, numbering as many as 1,651 at one time, often sold to previous customers or referrals.
"Horizon, in almost every conceivable way short of an absolute guarantee, represented its land to be an excellent investment, better than savings accounts, stocks and bonds and insurance, and risk free," Barnes said.
He said the firm also said the "property would appreciate at a 20 percent compounded rate and be easily resold in a short term."
In fact, Barnes said, "Horizon's lots are not only bad investments, they are worthless as investments."
He said the fact that "there is no resale market for Horizon's lots, even after some of the property has been held for up to 15 years, is a strong indictment of Horizon's sales programs."
According to Barnes, Horizon misled consumers into believing that:
The cities near the Horizon properties would certainly grow toward them, assuring rapid development.
The price of the land being sold would be increasing soon, and that the land might be sold out if the buyer didn't move quickly.
Horizon would resell the property for the consumer or even buy it back, if need be.
Horizon would develop the property, providing utilities, shopping centers and recreational facilities.
Consumers could get their money back if, after seeing the property, they were dissatisfied.
Barnes contended that Horizon made the misrepresentations in national advertising, promotional literature, oral sales presentations and films featuring celebrities Merv Griffin and Leif Erickson.
Barnes also described Horizon's contract terms as "Draconian." The contracts specifically state that they do not honor any contradictory verbal agreements that may have been made in selling the property.
He said the firm "presented the customer with a highly refined product prepared by experts -- a printed contract whose terms benefited Horizon -- and it was presented to the customer on a take-it-or-leave-it basis."
Barnes ordered Horizon to provide all prospective customers with new warnings about what to expect, as well as the true status of roads, water, sewers and other facilities. He also ordered a 10-day cooling-off period during which future purchasers can back out, and a one year period during which purchasers who bought sight-unseen can visit the land and then back out of their contracts.
Horizon was also ordered to send a letter of options to those who have already purchased land in the Horizon subdivisions involved in this case: Paradise Hills and Rio Communities in New Mexico, Horizon City and Waterwood in Texas and Arizona Sunsites and Whispering Pines in Arizona.
The letter gives owners the option to continue making payments, stop making payments and declare a possible tax loss, stop making payments and attempt to sue Horizon or trading in the lot for another that may be more costly.