Nat builds an army of salespeople to sell his dream. And then, then Ralph Nader intervenes.
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Keystone/Getty ImagesNader and His RaidersRalph Nader testifies at a Senate hearing in Washington, D.C. following the publication of his book, “Unsafe at Any Speed.” His activism helped influence Congress to pass laws that bolstered car safety regulations. After his car safety victory, Nader directed his team of young lawyers (“Nader’s Raiders”) to focus on real estate and development in California. Bob Fellmeth, one of Nader’s most senior Raiders, led the team and published a report called “The Politics of Land” that exposed what it called “deceptive sale practices in California City.”
Securities and Exchange Commission 10-K filingsNumber of Salespeople in California City 1971-1976In 1971, Great Western Cities told the federal government that it had over 3,000 salespeople and sales offices located in six states and Mexico. After the Federal Trade Commission and other agencies began investigating the company, its fortunes fell. By 1976, GWC reported it employed 132 people.
Oakland Tribune, Jan. 26, 1969“We became successful, so can you!”Most of the land Nat Mendelsohn sold in California City was to participants of a real estate training program and the people they referred, according to Securities and Exchange Commission Filings. Students would learn to sell real estate, and buy a vacant lot themselves. Salespeople held free informational meetings for the program at hotels around the country, including the ritzy Jack Tar Hotel in San Francisco.
The Los Angeles Times pg. 91, June 8, 1970Remember the Oklahoma Land Rush?This ad for California City ran in 1970: two years before the FTC instructed Great Western Cities to stop its “false, misleading and deceptive” practices. It advertises the as yet unbuilt “New Los Angeles Intercontinental Airport” and claims, “industry, business and people have already started to move,” with little to no evidence.
The Los Angeles Times, April 5, 1973“California City Is the Place”After the FTC issued a Cease and Desist order in 1972, Great Western Cities had to tone down its advertisements for California City. This ad still makes big claims about California City — an “investment that pays dividends” — but does not make promises about water or electricity on desert land tracts.
NY Daily News, Sept. 21, 1974California City — The Next Big ThingThis ad, which Great Western Cities ran two years after the FTC’s 1972 cease and desist order, compares California City to the next New York, Los Angeles, and San Francisco. The idea that California City is the “next big thing” has been a constant in the city’s marketing since its founding.
The San Bernardino County Sun, April 7, 1974Letter To the Editor: HELP!In 1974, E.N., a frustrated California City investor, turned to The San Bernardino County Sun’s “HELP!” column for advice. “HELP!” directed the investor to the California Attorney General Office to track down a refund. More than 73,000 people purchased land from Great Western Cities, according to court documents.
1977 FTC Consent and Final Judgement Against Great Western CitiesAfter the FTC found evidence that Great Western Cities had not abided by the agency’s previous cease and desist order, it took the company to court. Kenneth Donney, an attorney in the FTC’s Los Angeles regional office, played a major role in the case. The end result was a nearly $4 million dollar consumer refund, the largest in the history of the FTC at the time. GWC also agreed to stop lying about the value of land, put warning labels on all its marketing material and invest in California City’s infrastructure.
Kenneth Donney and Tom Maney’s Signatures, Side-By-SideOn the last pages of the 1977 FTC consent and judgement against Great Western Cities, all of the parties signed the document. Kenneth Donney — the FTC attorney — and Thomas Maney — GWC’s senior vice president and general counsel — signed their names just centimeters from one another. Maney would go on to become the president of Silver Saddle Ranch and Club.
“False, misleading and deceptive”In 1972, the FTC sent a cease and desist order to Great Western Cities. Page 666 of the order highlights the FTC’s findings, including various misrepresentations that Great Western City’s sales people made to sell land in California City. The FTC, on the bottom of p. 666, found otherwise. “In truth and in fact,” there was no indication profits would be made, California City was located in a desert, and only a small portion of the land was hooked up to utilities. The order was intended to bar the company from continuing these “false, misleading and deceptive” practices.