The National Better Business Bureau has espoused full disclosure as the criterion to be observed by land advertisers, and many have followed our advertising and selling standards promulgated several years ago, and thus have caused improvement in the general character and tenor of national advertising of land. Better business bureaus also espouse industry wide self-regulation. Responsible firms have observed self-regulation, but irresponsible firms have not.

At the present time, the onus seems to be largely the consumer to investigate to develop pertinent facts before he invests. We shall continue to offer the services of the National Better Business Bureau to both the land sales industry, and the public.

Senator WILLIAMS. Thank you very much, Mr. Hoffman.

You are suggesting that a firm that operates in a national sense finds it burdensome to meet the requirements of the individual States that might by law and regulation require some disclosure here.

Mr. HOFFMAN. Yes, sir. It is cumbersome and expensive; executives have told us they had to to qualify with as many as 2 dozen States, some of which will require duplicate personal inspection, the cost of which must be borne by the developer.

Senator WILLIAMS. Now, the bill before us does not, I think the technical phrase is, "preempt the field" if it becomes national law. As a matter of fact, it works somewhat in reverse. It permits the administering agency, the SEC, to accept what is required under State law. We know what preempting the field is, it takes from the States an opportunity to legislate and regulate in certain areas, but that is not what this bill does. This bill looks more toward encouraging the States to act, you say, and we move in conjunction with them. What is the word that one of the witnesses used to describe this?

Senator MONDALE. Concurrent jurisdiction.

Mr. HOFFMAN. These major developers who have expressed this opinion seemed to hope for reciprocity among the various States.

Senator WILLIAMS. It occurred to me during part of the testimony this morning, whether there could be a way to have reciprocity between States where California on the one hand is doing a good job, and another State is not. I don't know whether we can or not, but I just don't want you to be misled that this bill suggests that the national program preempts the field of disclosure in the subdivided land sales. see you have some colorful brochures before you.

Mr. HOFFMAN. Several of them depict huge half-acre estates. Senator MONDALE. Huge half acre, how large is that? Are these as large as the half acres we have in Minnesota?

Senator WILLIAMS. I know how large a huge 2 acres is because I have to cut the lawn. Do you want to leave that descriptive material? Mr. HOFFMAN. If it would be of any interest to the committee. I just selected a few because this morning there was discussion of large colorful brochures and I think this is perhaps what they might have had in mind.

The only trouble with some of these is that they depict scenes not contiguous to the property being sold. This one, for example, is a very fine aerial view of Albuquerque.

Senator WILLIAMS. But it is selling land that is a long way from Albuquerque?

Mr. HOFFMAN. The land was about 80 miles away.
Senator MONDALE. Not even seen in that photograph?

Mr. HOFFMAN. Not at all nor even in its vicinity, so it would not help anybody in getting an idea of the true nature of the land from some of this literature, and we have criticized it. We developed standards which were promulgated several years ago urging full disclosure. As you said before, the responsible firms have gone right along with that and have worked with us in their advertising and literature, and in observing these recommended standards.

Unfortunately, there have been some who have not seen fit to do so. Senator WILLIAMS. You have been in the front line of advising people on wise investments in their purchases of not only land but commodities generally.

Mr. HOFFMAN. We get thousands of inquiries from all over the country and from outside the country. I get inquiries from Hong Kong, from Germany, from England, from France, from Burma, and quite a few from Kuwait where there is a lot of money.

Senator WILLIAMS. What are these inquiries, in what areas of purchase and sale?

Mr. HOFFMAN. Where advertising has appeared in those areas offering lots in-particularly in California and Florida.

Senator WILLIAMS. Are you equipped administratively with staff that can evaluate the subject matter that is advertised and up for sale? Mr. HOFFMAN. We have several hundred reports giving factual background on a particular development, which we can send out to Burma, Kuwait, and other parts of the globe where there is sales activity.

Senator WILLIAMS. Do you support what we are trying to do here in this bill?

Mr. HOFFMAN. Well, the Better Business Bureau, as I say, generally espouses self-regulation and we have offered, from time to time, to work directly with the industry and responsible elements in the industry have worked with us. Others have not seen fit to do so.

Senator WILLIAMS. So there is a big gap between what is desired and what is the fact today?

Mr. HOFFMAN. There are certain regrettable features to the present situation in my opinion.

Senator WILLIAMS. Do you think this bill would move in to close that gap between what is desired in terms of an honest description of what is to be sold which would be available to the person who might want to buy?

Mr. HOFFMAN. Well, in general, and I seem to be repeating myself here, in connection with the large national firms we have not had occasion to criticize their advertising within the last couple of years for the various reasons which I outlined in my talk here. These people want to present full disclosure and have done so.

Senator WILLIAMS. Do you see any great burden on reputable dealers in divided, undeveloped land by the requirements of disclosing what he has and any legal burdens on the property in the way of easements, or what the legal impediments might be?

Mr. HOFFMAN. Unfortunately I have not been able to feel that many of the merchants of undeveloped acreage have made adequate disclosure. I would normally criticize many of these persons selling

so-called investment acreage for not disclosing the pertinent facts about it.

Senator WILLIAMS. But it doesn't represent a great burden, does it? Mr. HOFFMAN. It represents adding two or three sentences to the literature, which I wouldn't consider any great burden.

Senator WILLIAMS. That is the way it seems to me. I can see some complexity where you have a business that has developed a very broad and complex industrial combine and now they are going to issue stock in the big company. They have a lot to say, what they are doing and why they are doing it. But here when you have divided undeveloped land, the story, the descriptive story, I sshould think could be quite simple.

Mr. HOFFMAN. If the land is under water part of the year, it should be disclosed.

Senator MONDALE. And then I think, pursuing your suggestions made earlier which I think have an awful lot of merit, in those cases where they are demonstrated to be sound and responsible, maybe having a different kind of form that is short in lawman's fashion might make some sense.

Senator WILLIAMS. Of course, it must be remembered that this only deals with undeveloped land in the sense of buildings on the property. Anybody who is going to buy a house probably will get down to see the house. We don't deal with that at all. People aren't going to buy a house without seeing it. We are just talking about the land in the raw state or perhaps improved to the extent that there might be, as Mr. Jeffreys said, a stream dammed up or just rudimentary land development but not structural development.

Mr. HOFFMAN. In keeping with my comments about the Caribbean area, there has been considerable activity in the entire area, particularly in the Bahamas. And I am not entirely clear in my own mind: What if a firm is domiciled in say, Nassau, and is selling land in Grand Bahama Island and is soliciting U.S. residents either by newspaper or by direct mail, would there not be kind of a jurisdictional problem here? I realize that the bill says "foreign" included in your definition of interstate commerce, but why would a firm in Nassau care what the Securities and Exchange Commission thought?

Senator WILLIAMS. Well, right now, I imagine the approach would be to have an agent here disseminating the advertising information, but I could imagine that if this became law, they might not establish a resident agent and could circumvent us to some extent. This is a very, very profound legal question that you present. Frankly, I don't know what the answer is.

Mr. HOFFMAN. And then, there are lots on the St. Lawrence Seaway; there are many inquiries on highly speculative properties and the firms are domiciled in Canada selling this. I simply raise this as a possible question.

Senator WILLIAMS. These are good questions, I would say more profound than I can answer off the top of my head, although I have known Canadian firms selling equity shares in this country that were prohibited from doing so unless they came into the country and were within the SEC laws and regulations.

Mr. HOFFMAN. I have seen SEC prohibitions against certain savings and loan institutions from Nassau, haven't I, forbidding them to do business in this country. I do recall that.

Senator MONDALE. Mr. Hoffman, I want to congratulate you and the Better Business Bureau for appearing here. Our Minneapolis and St. Paul better business bureaus have been so helpful to us in consumer protection matters. Not only has the better business bureau nationally and locally developed a most indispensible sophistication in this field over the many years, but they add something else that I think is so critical in this field. That is that they have shown courage to break a common front and show that the established responsible businessman does not need to identify with the most shabby in the field. As you well know, a shabby operator when he is in trouble instinctively calls upon everybody else in his business to join a common cause to protect him against his own vices and unfortunately, too often, unwittingly, because they are afraid of government regulations, the ethical sometimes joint with the unethical to protect the unethical. This is very unwise for business and for the consumer, because this unethical promoter resorts to these practices probably at a greater expense to the ethical competition than to anybody else. The response I would hope would be just the opposite and the better business bureau over the years has shown the courage to stand up and say, look, we in business should be the first to plan the highest ethical standards. And I think the requirements of the better business bureau in this is seeking to establish codes of self-regulation which we would all far prefer.

None of us want to see Federal regulations if the business itself will regulate itself. You have tried, you have pleaded with them, some have come along, some have not, so now we are finally presented with a situation where the thousands of Americans continue to be I won't use the word swindled-but nearly swindled on these sales. Their ethical competitors continue to be injured by this unfair competition and your testimony and the responsibility with which the Better Business Bureau has characteristically discharged its responsibilities.

I am most grateful to you and your organization. It is so important to all of us.

Mr. HOFFMAN. We thank you for your kind words, Senator. As a matter of fact the better business bureaus are working on a program of expanded informational services for consumers and this is in the works now.

Senator MONDALE. I am very pleased to see this. I spoke at our Minneapolis better business bureau's annual meeting a week ago and they pointed out to me your expanded educational role, to better educate the consumers so that they might protect themselves and this is also very very good news.

Many times that sort of an effort will dry up the unethical practitioner.

I think this example, Mr. Chairman, if classic as a symbol of the need for Federal regulations. The national better business bureau and some of the responsible realtors have tried to do something about this problem, have tried for years, there are some in the industry that won't respond to decent voluntary appeals. Now, I think it is up

to the Congress to do something about that. They shouldn't blame the Congress. They should blame themselves.

Senator WILLIAMS. I appreciate the comments of Senator Mondale who has contributed so much to our deliberations on the subject before us.

We have a problem of a vote coming up. The staff members have some questions that have been prepared. Could we present these to you and could you reply from your office?

Mr. HOFFMAN. You mean send them to me in New York? Senator WILLIAMS. Give them to you now and you send the answers back from New York.

Mr. HOFFMAN. Of course.

Senator WILLIAMS. I expect that bell to ring any minute. Thank you very very much.

Mr. HOFFMAN. Thank you, gentlemen.

(The article previously referred to follows:)

[From Dun's Review and Modern Industry, March 1965]

"EXECUTIVE" LAND BOOM IN THE CARIBBEAN; BUT TOO MUCH OF IT COMES FROM "SITE UNSEEN" BUYING

(By Thomas J. Murray)

"Invest in your own Caribbean hideaway, where lush green hills and pink sand beaches slope down to a sun-warmed sea! Own your own Caribbean island homesite in a beautiful oceanfront development! Wonderful vacations, tax-free retirement-and sound investment, too!"

As appealing as a Caribbean breeze, as narcotic as a waving palm, advertisements such as this have been appearing in a number of newspapers and magazines across the United States. But if the number of ads appears to be increasing, the media that they use have remained fairly constant. Generally, they are the quality magazines and more prestigious newspapers. For this is where they can reach the man who is on the way to becoming the Caribbean developers' best customer: the American business executive.

From all the evidence, the American executive not only has been reading the advertisements, he has been responding to them as well. From the sky-high spire of Manhattan's Rockefeller Center to Cleveland's Terminal Tower and San Francisco's spanking-new Hartford Building, corporate executives have been moving their personal investments beyond the realm of options and common stocks. Whether for possible capital gains, for retirement or just for some sort of vicarious investment thrill, they are buying land all through the chain that runs from the tip of the Bahamas, fifty miles east of Miami, down through the old Spanish Main to the British West Indies and west across the Caribbean to British Honduras.

So many businessmen, in fact, are buying land in the Caribbean's hundreds of islands, keys and islets that they are in the midst of what has been aptly called "the 'executive' land boom." As John R. Hoffman, vice president of the National Better Business Bureau puts it: "You can see from the high price tags on many of the Caribbean home sites. as well as from the media in which they are advertised, that the Caribbean developers are after the business executive." Adds he, with irrefutable logic: "After all, how many factory workers are able to pay $5,000 for a lot?"

Generally a fairly sophisticated group, the executives are lured by stronger attractions than the usual waving palms and lapping waves. As appealing as real-estate investing has become to many businessmen, the Caribbean land developers have an extra attraction to offer the harassed, tax-ridden American executive. This is the fact that the islands tend to be innocent of taxes. In the Bahamas, for example, the list of taxes that Bahamians do not pay is as long as the list that Americans do pay. Unknown on the island are income, sales, luxury, dividend, death, inheritance and franchise taxes.