A screenshot of the American Advisors Group website with Sen. Fred Thompson's endorsement.
By Bob Sullivan
What do Rudy Giuliani and Fred Thompson have in common? They both ran for the Republican presidential nomination in 2008, but that's old news. Newer is this: They are both paid spokesmen for companies that have had run-ins with federal or state consumer protection agencies before they were on board.
Giuliani works for LifeLock, the identity theft prevention company, and Thompson is frequently on late-night television hawking reverse mortgages to older U.S. homeowners.
Running for president seems to open up interesting ways to make money, though product endorsement is a relatively new avenue. But in some ways, Giuliani and Thompson are merely continuing a tradition that dates back to Eleanor Roosevelt selling margarine in TV ads.
"I've spent a significant part of my career fighting crime and working to help protect consumers from threats," said Giuliani in a press release last month announcing that he had become a "strategic adviser? to LifeLock. "Identity theft isn't going away. I have seen this crime expand and change dramatically throughout all of my years working with law enforcement."
The announcement came only a few weeks after LifeLock announced plans for an initial public stock offering that aims to raise $175 million.
Two years ago, LifeLock paid $12 million to the Federal Trade Commission and 35 state attorneys general to settled charges that it used "false claims" to promote its services.?
Giuliani didn?t immediately return a request for comment.
At the time, LifeLock admitted no wrongdoing and said it had long since abandoned all tactics the agencies claimed were misleading.? There have been no subsequent allegations against the company, which has made a name for itself through aggressive marketing and by hiring celebrities.
The subscription service LifeLock sells -- identity theft prevention, also offered by a variety of financial institutions -- has frequently been criticized by analysts who say it is ineffective. They note that consumers can perform the same preventative techniques themselves for free.
Consumer Reports magazine reported earlier this year that U.S. consumers spend $3.5 million annually ?on ID theft prevention products, but that the money is largely wasted.
"Consumers who buy this protection from their banks are helping to foot the bill for services that financial institutions are obligated to provide by federal law to shield their customers from losses stemming from credit-card and bank-account fraud," the report said.
LifeLock counters that its ID theft services go beyond basic measures consumers can take on their own, saying its product offers both innovative technology and convenience.
Stephan Savoia / AP file
Former New York City Mayor Rudy Giuliani in 2012.
?Our more advanced features depend on our sophisticated technologies, algorithms and processes and can not be done by consumers on their own,? Tami Nealy, a? LifeLock spokeswoman, said in a written statement. ?The most notable example is monitoring of checking and savings accounts for take-over fraud. We do this by using a member?s SSN and other personally identifiable information as a unique identifier, then match this to proprietary databases which contain SSNs linked to +90% of U.S. bank accounts. And that?s just one of the intelligent monitoring features we offer. Plus, our remediation services give you the peace of mind that doing it yourself can?t.?
Giuliani isn?t the only former candidate hawking a financial product whose value that has been questioned.
Thompson has been pitching reverse mortgages for the American Advisors Group (AAG) for several years.? In 2008, Massachusetts banking regulators issued a cease-and-desist order against the firm for allegedly engaging in unfair-and-deceptive marketing that suggested it was offering reverse mortgages as part of a government benefit.? In February 2010, Illinois Attorney General Lisa Madigan sued American Advisors Group over similar allegations.
The firm "used extremely misleading language in their advertising, sometimes even disguising their loans as government benefits that borrowers don?t have to repay," she said in announcing the lawsuit.
The firm later paid a small?"voluntary contribution" and settled?the Illinois case, and stopped sending out mail advertisements in Massachusetts, but admitted no wrongdoing in either case.
Today, in addition to copious television ads, former GOP candidate Thompson's image appears atop the American Advisors Group website aside an American flag, the words "the best advice for a better life" nearby. The site says Thompson became spokesman for the company in May 2010 ? three months after the Illinois lawsuit was filed.
?I am proud to join AAG?s efforts. In this tough economic climate, it?s important that America?s seniors know all their options, and have the facts they need to make informed decisions about their financial and retirement futures," the website quotes him as saying.
In an interview with NBC News, Thompson said that the alleged deceptive advertising occurred before he was affiliated with AAG, and involved a third-party marketing company that no longer works with the firm.
?There has never been any question about my ads,? he said, adding that AAG is the largest private originator of reverse mortgage loans. ?There have been no incidents (of false advertising claims) since I?ve been affiliated with the company.?
Reverse mortgages, which lets older homeowners turn equity in their homes into cash, is not inherently risky or unfair to consumers and can represent a sensible part of an estate plan. But a recent report by the Consumer Financial Protection Bureau found that a majority of consumers who purchase reverse mortgages put themselves in financial peril.? Against most financial advice, 73 percent draw out the maximum amount of equity in a lump sum, the report found.
"Borrowers who withdraw all of their available home equity upfront will have fewer resources to draw upon to pay for everyday and major expenses later in life," the report said.
Many consumers mistakenly believe that they will have no monthly expenses associated with their home after a reverse mortgage, when in fact they must continue to pay property taxes and insurance, the report found. Some companies? claims that government guarantees will protect consumers are misleading, the report said, as were logos that?made it appear that firms had some connection to government agencies, such as the U.S. Department of Housing and Urban Development.
Last month, the agency issued a sweeping warning against firms advertising reverse mortgages, and sent warnings to some financial institutions that offer them.
Teague McGrath, head of marketing for AAG, said his firm did not receive a warning letter.
?There is a lot of misunderstand about reverse mortgages,? McGrath said, adding that he disagreed with the negative picture painted by the consumer agency report. ?They can be a really good option for some people.?? Most consumers who take lump sums are doing so to pay off the outstanding mortgage on their homes, which frees up their monthly budgets, McGrath said.
Thompson said he was confident that AAG wasn?t pushing consumers into financial arrangements that were harmful.
?I've spent time in their headquarters. I've listened to their people on the telephone. I know what their values are, what their practices are,? he said. ?It?s in no one?s interest when someone gets into one of these (reverse mortgages) who?s not qualified.?
Giuliani and Thompson?s endorsements probably would have sounded foreign to candidates and former presidents before the 1960s, historian Michael Beschloss said. Harry Truman famously turned down advertising opportunities, even though he was virtually penniless when he returned to Missouri after his presidency. Richard Nixon thought hawking was below him. Dwight Eisenhower didn?t endorse products, Beschloss said.?
Mrs. Roosevelt for Good Luck Margarine (1959)
?Truman said he could have made quite a bit of money, but didn't feel a former president should do it,? Beschloss said. (First Lady Eleanor Roosevelt did appear in margarine ads, however, largely to help her children stay afloat.)
Former President Gerald Ford served as a kind of dividing line, Beschloss said. Ford did not publicly endorse any products or appear in television advertisements, but he was the first former president to join corporate boards and earn substantial money giving speeches. Since then, it?s been common for former national political figures to join boards, make money on the speaking circuit and, more recently, act as pitchmen and women, and absorb the potential risks that come with that.
But Beschloss said it might not be quite fair to compare politicians from the 1940s and ?50s to politicians from today. In the past, former presidents rarely lived more than a few years after their terms expired, he said.?
?One reason things began to change is that presidents and candidates started to live a lot longer,? he said, so they need to plan a post-politics career.?
Other former elected officials also have turned their name recognition into profitable post-political careers.? A long line of presidential candidates -- both Republicans and Democrats -- have gone on to found lucrative lobbyist firms.? Dick Gephardt, former Democratic House majority leader from Missouri, now leads the Gephardt Government Affairs lobbying firm, for example.? Dan Quayle has enjoyed a lucrative career in investment banking. Famously, former Democratic presidential candidate Al Gore has made an estimated $100 million by serving on various boards, and through his popularity as de facto spokesman for the environmental movement.
But acting directly as a paid spokesman or spokeswoman seems to be relatively new territory.? Former Sen. Bob Dole, the Kansas Republican who was his party?s presidential nominee in 1996, famously pitched Viagra, although in a tastefully subtle way which emphasized public discussion of a serious health issue, rather than selling a product.
"Any second thoughts I may have entertained about the latter were put to rest by a couple of wives who approached me in airports to say, simply, ?Thank you, Senator," Dole wrote earlier this year in the Washington Post.
Perhaps bolstered by the positive reviews of that work, he later acted in Visa, Dunkin Donuts and American Express commercials.
Dole's work as a pitchman actually began almost immediately after he lost his bid to oust then President Bill Clinton, though in modest fashion. Two weeks after the election, he appeared in an ad for Air France that cleverly suggested people who suddenly have free time should consider a trip to Europe.
According to a New York Times story at the time, Dole donated the $3,000 fee he earned to charity.
"The ad ... is believed to mark the first time that the presidential candidate of a major political party has agreed to allow his image to be used for commercial purposes," it said.
It listed a number of famous retired politicians ? none of them presidential candidates -- who appeared in ads during the 1970s and ?80s: Former House Speaker Tip O'Neill pitched for Quality Inn Hotels, Vice Presidential candidate Geraldine Ferraro appeared in Pepsi ads, Former New York Democratic Gov. Mario Cuomo snacked on Doritos with Former Texas Republican Gov. Ann Richards. In 1975, Barry Goldwater?s running mate, William Miller, ran in the successful "Do You Know Me," American Express ad, which?may have paved the way for future candidates
There is a risk in product endorsements, however. Gen. Wesley Clark, before he ran for the Democratic presidential nomination in 2004, endorsed a number of high-tech start-up products that made him the butt of some Silicon Valley humor. He also served on the board of directors at Acxiom, a consumer information data broker that has endured negative press because of way its database tracks U.S. residents.
More recently, Clark has served as the front man for ethanol fuel firms.
So Thompson and Giuliani are doing what most public figures do today -- capitalizing on their fame when there is no longer any fear that doing so might compromise their primary career. Perhaps their new employers hope their instincts for reputational management will help burnish their image as well.
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