Citron Updates iMergent (Amex:IIG)


And the beat goes on…

As time goes on iMergent continues their reign of terror on the worldwide consumer. The company would have you believe that short sellers are using the Attorneys General throughout the country and even foreign jurisdictions to fabricate legal challenges for the company, a statement so ludicrous it does not even deserve a response.

Please do not take this report as a catalyst for the stock to move in any direction — we certainly don’t expect it to move.  We just believe it is important for both shareholders and short sellers to note the actions of iMergent which are the focus of the State of Florida’s charges.  Further, this lawsuit comes a month after North Carolina issued a temporary restraining order on the company operating any seminars, and Imergent’s home state of Utah ruled that they will have to file as a business opportunity.  (We have previously observed that this would be a devastating requirement, because it would force the company to disclose to prospective customers their darkest secret — that the percentage of buyers who go forward to operate successful online businesses is miniscule.)

Most relevant to the Florida lawsuit is that they are not charging iMergent with being a business opportunity.  Rather they accuse the company of imposing unfair business practices on consumers — and demanding full refunds for every Florida consumer. The list of some of the claims made by the Attorney General of Florida makes for some interesting reading:

“The Defendants invite consumers to seminars at which they make false, deceptive and misleading assertions in order to sell expensive website-creation products and related services… ”

“[The Defendants] tell the consumers, often senior citizens and disabled persons, that these products and services will enable them to set themselves up in new businesses …”

“[The Defendants] tell the consumers that the products and services are easy to use, even by consumers with little knowledge of computers, and will be backed by full-time assistance from the Defendants.”

“[The Defendants] tell the consumers that people today, particularly older people, face extraordinary financial pressure; a script used by the defendant states, “You have all heard those statistics that 94 percent of those who reach retirement are dead broke … You have a 94 percent chance of going over the cliff…”

“A significant portion of the defendants sales presentation consists of glowing testimonials by individuals described as successful customers. But some or all of these individuals are not in fact the Defendants customers.”

“The Defendants tell consumers that they need not even own a computer or have internet access in order to have success using the Defendants products or services.”

“Defendants represent that they money consumers can expect to make with the Defendants products and services will substantially exceed the cost of the purchase.”

“They say that Wal-Mart and other “Big 500” corporations are among companies affiliated with Defendants.”

“An inconspicuous statement in written materials provided by the Defendants states that refunds are available if buyers seek them within three days; the Defendants do not tell consumers who buy their products of this refund policy orally”

“At the conclusion of the all-day seminar. The Defendants tell the consumers who have purchased the Defendants’ packages, many of whom are elderly, that they should rest a day before giving the matter any more thought.”

(This last suggestion disadvanges buyers because their statutory 3-day right of recission period is running while they are encouraged to take no action…)

 Here is a copy of the lawsuit



It was over 6 months ago that we published an article suggesting funky accounting practices of iMergent.

Our report was shrugged off and as the company defended their polices by attacking the messenger. Recently, a thorough piece was put out by 10Q Detective that echoed the same concerns that we had regarding iMergent’s accounting and policies.

Interesting enough, David Phillips is not a short seller and does not hold a position in the company. And as of last check, the company is still in the middle of a formal SEC investigation, including their accounting procedures and we do not believe the staff at the SEC in Utah is short the stock either.


We understand the Kool-Aid is sweet and many have decided to drink it.  That is what makes our market great. Yet, we still believe that iMergent has backed themselves into a hole they will not be able to escape.  With pending lawsuits in Utah, Florida, North Carolina, and Illinois, you have to wonder who is next.  Ironically, even Ken Lay and Jeff Skilling continued to blame short sellers in the opening argument as they defended their roles in Enron.