NBC Dateline Exposes Galaxy Mall

January 13, 2002

A Dream Deferred

Uncovering the hard facts behind the easy promises of an online business

Watch The Video of Correspondent Chris Hansen's Report

NBC News

Jan. 13 — Carnegie, Rockefeller, Gates — they all turned good ideas into personal fortunes. Could you? It’s a seductive thought that’s fired the American dream, so you can imagine the appeal of a company that offers to teach you how to make it come true. Tens of thousands of people have paid up and signed on for these money-making lessons. And we met one of them who learned something all right, just not what she’d hoped for.

Correspondent Chris Hansen reports.

Like so many would-be entrepreneurs, Mary Bair thought she could turn a good idea into gold. For years Mary has worked weekends videotaping weddings. And she’s seen just about everything that can happen on a couple’s big day.

So Mary figured why not write a book? And when she received a letter from a company called Galaxy Mall inviting her to an Internet marketing seminar, it gave her an idea. Maybe she could sell her wedding tips online on her own Web site.

“That was the first thing I thought of, you know, maybe that’s the way I could market a book,” she says.

As a retired deputy sheriff, Mary was wary of tales of the dot-com gold rush — people making a quick buck with seemingly little more than a dream and a hard drive. But Mary says Galaxy seemed different. And she thought maybe she found her ticket to success. And as Dateline’s hidden cameras discovered, it appears that’s what Galaxy wants its customers to think.

Using hidden cameras, “Dateline” documented a Galaxy pitch:

Galaxy: “How many of you are here today to find out how to drive literally thousands and thousands of people to your Web site? Anything you possess as knowledge you can put down on to paper or in the transcript and you can sell it. You will be able to leave here today and make money.”

Galaxy, based in Utah, is sort of like a flea market for the Internet age. It leases electronic storefronts to small business owners and says you don’t need to do all the hard work of getting an online business started. It will help you.

And tens of thousands of people across the country have attended Galaxy’s seminars to learn what it calls its “insider secrets.” Mary paid $45 for the seminar she attended in an upscale hotel ballroom.

“These people were dressed in suits,” says Mary, “had a beautiful presentation where they had a large screen.”

How’d she feel when she walked out of the hotel that day after the pitch? “I felt good,” she says.

She says she was ready to go. She was going to be a part of the Galaxy Mall team?

“Absolutely,” says Mary.

Mary signed up for not one, but three Web sites. And when Galaxy called later selling a personal tutoring service to help her build and market her site, Mary signed up for that too. With other options, the total cost was more than $7,000. She says she worked long hours and followed Galaxy’s blueprint for success.

“There were days when I was in my pajamas from morning to night,” says Mary.

Just working on it? “Just working on it,” she says. “Yes. I thought, you work harder and faster, you’re going to win.”

For 15 months, Mary tried to get her site noticed in directories, chat rooms and on other Web sites. Still, her book didn’t exactly fly off the cyber shelf.

“Seven thousand dollars later, I had sold five books,” she says.

That’s five books in 15 months. Mary says she was surprised because she had done everything Galaxy had told her to do.

If you read their disclaimer, the fine print, it says that Galaxy Mall doesn’t guarantee your success.

“But they sure tell you you’re going to be successful,” says Mary.

Help for consumers

Who to contact if you think you are a victim of fraud

• Federal Trade Commission Bureau of Consumer Protection: The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or to get free information on consumer issues, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the online complaint form. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

• National Consumer's League

• Search by state: List of state's Attorney General offices and Better Business Bureau offices

But can someone blame a landlord if nobody comes to the store? Maybe it depends on what kind of promises that landlord makes. “Dateline” decided to take our hidden cameras to watch the Galaxy pitch.

Galaxy: “You’ll leave here knowing what you need to do to make money on the Net, promise #1. That I’ll guarantee you.”

This Galaxy pitchman says he cashed in himself with his own children’s book, thanks to Galaxy.

Galaxy: “They make it easy for me to make money...”

And he says if you work at it and follow Galaxy’s fundamental lessons, you can cash in too.

Galaxy: “It works. The fundamentals work and the rest of it will help you even be more successful. Your growth should be like this [points upward].”

He asks a sure-fire question.

Galaxy: “How many of you would like to recover you investment in less than a year? Can I see your hands?”

Then he urges them onward.

Galaxy: “Folks, change your lives.”

Sure, there’s useful advice at the seminars, but most of it you probably already know, like sending e-mails directly to potential customers or describing your product with words that shoppers might type into a search engine.

How easy is it to get started? At this seminar one speaker said you don’t even necessarily need a business idea or, for that matter, a computer.

Galaxy: “Don’t feel like you’ve got to have everything together before you move. Now, I don’t have the idea, I haven’t got the computer.”

We asked company president Jay Poelman if you could really start an Internet business without basics like an idea or a computer.

That’s probably not the same advice you’d get from the Harvard Business School.

“Well, that may be,” says Poelman, “but our position is that a person in order to start with us does not have to have a computer, does not have to have a business, does not have to have a product. But like any other business, if you were going to get in the telemarketing business, for example, it makes sense for you to get a telephone.”

So just to be clear, you do need a computer to operate a business on the Internet.

“Oh, yes,” says Poelman. “I think, well, technically, no.”

And Poelman insists that Galaxy doesn’t mislead anyone about how successful they’ll be.

“When people purchase from us, we have no idea what their product or service is,” says Poelman. “And in fact, they confirm that in writing.”
It may say that in writing, but listen to this Galaxy salesman in person.

Galaxy: “You got a winner here, I’m telling you. Most — some people — they don’t — you have to dig for it. This one is a no-brainer for me. Yes, I know exactly what I’d do. I’d be making good money.”

And they repeat time and again: the time to act is now.

Galaxy: “You’re approved on both packages.”

So instead of walking away, why are so many people taking it to the next level and forking over thousands to make their Internet dreams come true on the Galaxy Mall?

Galaxy: “You guys are great. You can do this thing.”

Galaxy offers more than hope and encouragement. It also talks about featuring successful merchants in its “national advertising.” That could be good for business, right?

A lot of those big Internet companies spend millions in advertising to attract customers. But when we asked company President Jay Poelman about Galaxy’s national advertising, we heard something else.

Does Galaxy do any national television advertising? “No, not at all,” says Poelman.

Radio advertising? “Not at all,” says Poelman.

In fact, Poelman told “Dateline” that the only national advertising the company does is sending direct mail to get people to come to its seminars, not to the mall.

So how do shoppers even find a storefront on the Galaxy Mall? Well, Galaxy says it will teach you to bring in business yourself. How? One way is learning to use descriptive words that will get your site noticed on big search engines.

So we put Poelman to the test and asked him to search the Web to find a vitamin store named Wholesome Essentials that Galaxy featured at the time of our interview as one of its “hot” sites.

To see how easy it would be to find the site, we asked him to type in what seemed like three logical search words: vitamins, natural supplements — three reasonable key words.

But those words never got us close to the site. Not the first 20 or the first 30.

“In this case, he didn’t come up, right,” says Poelman.

It was only when we typed in part of the store’s name — “wholesome” — that the site came up.

“If we add ‘wholesome’ to it,” says Poelman.

So if you happen to know the store is named Wholesome Essentials, you might find it.

But Poelman insists that Galaxy’s techniques work and too few customers may mean merchants aren’t following Galaxy’s plan properly.

So he’s saying that people who are not successful with his system, it’s their fault? They didn’t work it hard enough? They didn’t know what they were doing? They didn’t pay attention to the mentoring sessions?

“That sounds harsh,” says Poelman. “I don’t think I’d say it quite that way. What I would say is that people who are not successful are not following the principles that are necessary to be successful.”

Galaxy told us it has successful merchants to back up its claims. It put us in touch with six people who told us they were happy with Galaxy’s services.

Lisa Oliver is one of Galaxy’s most prominent success stories. She says Galaxy’s training helped her make it big in the online cookie business.

Little Lisa Oliver — I called her up. The cookie girl? Did you hear about her?

Galaxy: “Her name is Lisa Oliver. She’s been very successful with her online business.”

She’s featured in Galaxy’s seminars and promotions.

Galaxy: “She was able to continue to grow that business and bought a new car and saved enough money for the down payment on a beautiful new house.”

That may be true. But there’s something else Galaxy doesn’t mention.

Lisa Oliver used to work for Galaxy. And there’s one more thing.

Jay Poelman knows who that young woman is? “You better believe it. That’s my daughter.”

Shouldn’t people receiving that promotional video know that the highlighted success story is in fact the company president’s daughter? Fair is fair.
“Well, I don’t think that’s relevant,” says Poelman.

Relevant? “No, it’s not relevant,” says Poelman. “Who fathered her was not the issue.”

Deceptive business practices have been an issue for Jay Poelman in the past. In 1993, the Minnesota attorney general charged another seminar business he owned — this one dealing in 900 numbers — with consumer fraud, false advertising and deceptive trade practices.

Poelman and his associates paid an $18,000 fine and settled the case without admitting wrong-doing.

More recently Galaxy’s own filings with federal regulators show that the company has faced inquiries or investigations by the Federal Trade Commission and attorney’s general in seven states. And it hasn’t won many friends at the Better Business Bureau either.

“I would call their marketing techniques some smoke and mirrors,” says Utah Better Business Bureau president Russell Behrmann.

Behrmann says Galaxy has a history of complaints from across the country.

“It’s very enticing,” says Behrmann. “If you’ve ever had the entrepreneurial spirit at all and you go to one of these seminars, they just might get you excited enough to swallow the first pill. And it’s not until the next morning when you wake up and realize, ‘What have I done?’”

The company acknowledges some customer service problems in the past that it attributes to “growing pains.”

“We went through a very difficult time,” says Poelman. “Explosive Internet business. We broke our systems. We got behind in producing our storefronts.”

Poelman insists that the number of complaints is still small compared to the tens of thousands of people Galaxy has served. And he says Galaxy tells its customers that there are no short cuts to success.

“We do not present the Internet as a get-rich-quick scheme,” says Poelman.

But in the past, in some of the mailings, Galaxy has suggested that you can make money pretty quickly here. And I’ll quote one of the mailings to you. If you are truly serious about getting started making real money on the Internet and want to be profitable within the next few weeks.” Is that really possible?

“Tough, but I think it’s possible, yes,” says Poelman.

Is this puffery? “I don’t know, maybe there’s some puffery into it,” says Poelman. “But again, are we talking about possible? Yes.”

Retired cop Mary Bair feels cheated. She says she could have saved thousands if she had only known you can go online or to a bookstore to learn about creating and marketing a Web site.

“You can get a lot of this stuff free,” she says.

Galaxy has given Mary a partial refund. But every month that she makes another payment on the $1,600 she still owes, she’s reminded that she should have done her homework before signing those contracts.

She is a retired deputy sheriff, familiar with law enforcement. Shouldn’t she have known better? “Probably,” she says. “I wish I had. I look back and I think about it, and I think, ‘Oh, what a dummy you were.’ And I guess sometimes you have to pay for lessons.”