portunity to feed on confusion, misinformation, and wishful thinking of prospective buyers. With the professor's words very much in mind, this subcommittee now begins this hearing.

(The amended bill, a section-by-section explanation, and reports from the Commerce Department and the Deputy Attorney General begin on p. 243. The testimony from the Securities and Exchange Commission begins on p. 84.) Senator WILLIAMS. Mrs. Neuberger is a valued member of this committee. Do you have any comment at the beginning of this hearing? Senator NEUBERGER. I will be glad to wait and hear the witnesses. Senator WILLIAMS. Mrs. Neuberger is a cosponsor and I understand that a lot of beautiful Oregon countryside is being sold to people outside of Oregon.

Senator NEUBERGER. Unfortunately, it is not the most beautiful. Senator WILLIAMS. Described that way.

Senator NEUBERGER. They may think it is.

Senator WILLIAMS. We are privileged, indeed, to have as our first witnesses a panel of journalists who know what this subject matter is all about.

Mr. Morton Paulson, business editor of the News-Journal newspapers from Daytona Beach, Fla.

Mr. Sam Frear, who was formerly with the Eugene Oregon RegisterGuard, who is now in another position. He happens to be in town, in connection with his other work, and he was kind enough to volunteer to come over today.

Mr. Fred Fogarty, real estate editor of the Miami Herald, a newspaper that has done notable work in the enlightenment of some of the pitfalls that I described earlier.

Are all of the gentlemen aboard? Will you all come forward at this time?

Mr. Paulson, we have your statement. Do you want to read it or summarize it?

Mr. PAULSON. Mr. Chairman, I would like to summarize my statement. It came out a little longer than I intended and, in the interest of saving time, I would like to summarize it as briefly as possible, but request that the full statement be placed in the record.

Senator WILLIAMS. Fine.

STATEMENTS OF MORTON C. PAULSON, BUSINESS EDITOR, NEWSJOURNAL, DAYTONA BEACH, FLA.; SAMUEL T. FREAR, FORMERLY WITH THE EUGENE (OREG.) REGISTER-GUARD, AND FRED FOGARTY, REAL ESTATE EDITOR, THE MIAMI (FLA.) HERALD

Mr. PAULSON, Mr. Chairman, distinguished Senators, I want to thank you for the invitation to appear here today and discuss a subject about which I have very strong feelings. Let me make it clear at the outset that I am in favor of this bill to bring mail-order land sale under Federal control. As a Florida newspaperman, I have

had an opportunity to observe the mail-order land industry in that State at close range and to learn a great deal about it.

Two years ago I was a witness before the Senate Subcommittee on Frauds and Misrepresentations Affecting the Elderly, which investigated abuses in mail-order land sales and made recommendations which resulted in the drafting of this bill. I described some of the methods used by certain land promoters to flimflam the public.

At that time, the State of Florida was just getting started with a new regulatory program of its own. The need for such a program had been made apparent by disclosures of widespread misrepresentation in the selling of lots and acreage. The legislature, as a result, had created a new agency, the Florida Installment Land Sales Board, and had given it the power to force sellers of mail-order land to tell prospective buyers the real facts about what they were getting.

Like many others, I have been an interested observer of this program in action during the past 2 years. This has been a period in which the mail-order land industry in Florida has enjoyed spectacular growth. According to the best available estimates, sales in 1963 totaled $500 million. Last year, the estimated total was $1 billion. Senator WILLIAMS. Is that for the long run? Is that the dollars invested for the year or is it for the whole contract?

Mr. PAULSON. I believe that is for the whole contract, Senator. One company alone reported sales of $111 million during its last fiscal year, and there are approximately 233 active installment land companies in Florida. There is a great deal more installment land for sale in Florida than in any other State.

All across the Nation, and in foreign countries from South America to West Germany, people are being approached, quizzed, cajoled, beseeched, sweet talked and often pressured by a vast army of supersalesmen hawking installment-plan real estate in Florida. With such sales aids as boilerrooms that use wide area telephone service, sumptuous dinner parties, glittering brochures, and guided tours by plane. Florida land companies are persuading uncounted thousands of people to sign $20 down, $20 a month contracts for houses, lots, and acreage. It is probably the best organized, hardest hitting, most heavily financed campaign in history, and it is paying off-at least for the sellers.

What about the buyers? How successful has the State been in its efforts to protect them?

My own opinion is that, while some definite progress has been made, the efforts still fall far short of achieving the kind of regulation that will be necessary to eliminate fraud and misrepresentation from this burgeoning industry.

This opinion appears to be shared by many others. As Fred Fogarty of Miami Herald here said just 10 days ago, and I quote:

Buyers from Hong Kong to Hoboken still have few safeguards against owning a hunk of Florida swampland.

Why is this? Personally, I am not convinced that the State of Florida really wants to impose the kind of tough controls that would be needed to give the public the kind of protection it should have.

Mail-order land selling is one of the most lucrative enterprises in the State, and the real estate lobby is one of the most powerful.

Land frauds in Florida are nothing new; there is evidence that they were going on 75 years ago, or before. The boom and bust of the 1920's is a striking example of what can happen without adequate restraints.

Reforms have come slowly, and almost invariably as a direct result of exposés by a few Florida newspapers.

New laws were enacted in the early 1950's. Amendments were added a few years later. Senator WILLIAMS. That was State law? Mr. PAULSON. State law.

They didn't do the job.
They failed, too.

Senator WILLIAMS. The State can't reach beyond its borders. If an operator out of Newark, N.J., happens to own some swampland in Florida and sells out of New Jersey through mail order, the Florida State regulatory body can't reach him. Am I right?

Mr. PAULSON. Could you say that again, Senator?

Senator WILLIAMS. If a developer, or an owner of Florida swampland who happens to live in New Jersey-I will bring it right home to my own State-sells through the mails and through the other means of interstate sales, but never touches down in Florida, he can't be reached by the regulatory body in Florida?

Mr. PAULSON. Under certain circumstances, he can't. Not all mailorder land sold in Florida is subject to the State law.

Senator WILLIAMS. We have an example of this and have invited the individual to come before the committee. He said he was otherwise occupied. I told him, if he is otherwise occupied and can't come here, I will go there and talk with him, but he is still selling swampland at $245 an acre which he bought for $45 an acre and which, maybe it is accessible, but it is still under water and is in a flood control area. The Flood Control Commission, whatever you call it, could flood that land as a protection against flooding of other land.

Mr. PAULSON. Perhaps, Senator the reason he can't be reached, is that there is a loophole in the law which has enabled certain companies to change their method of operation and, therefore, not be under State regulations.

Senator WILLIAMS. Mr. Fogarty, you are going to deal with this subject?

Mr. FOGARTY. Yes.

Senator WILLIAMS. I shouldn't interrupt.

Mr. PAULSON. The present law was put on the books after the shenanigans of some swamp peddlers caused nationwide notoriety for the State. National magazines, newspapers and television told lurid stories of undrainable swamps being sold to unsuspecting northerners as a paradise in the sun.

The new law was supposed to end all that. There was a great deal of fanfare when it was adopted.

So what happened? It soon was discovered that the law contained some rather large loopholes. And about 18 of the approximately 223

land companies promptly slipped through the loopholes and were able to escape State regulation altogether.

But this is only part of the trouble. The law also seems to have failed or has not been used effectively-to stamp out highly questionable methods being used by some of the promoters who have complied with all of its provisions.

I will explain this in more detail in just a moment, but let me digress at this point to make one thing absolutely clear: Most mail-order land developers in Florida are honest. A few are doing an outstanding job. The Mackle Bros., General Development Corp., Del Webb and others have made it possible for thousands of people from throughout the world to retire in attractive, comfortable surroundings by paying a few dollars down and a few dollars a month for a home or homesite.

Planned communities like Sun City, Port Charlotte, Deltona, Marco Island, and others stand today as impressive proof that many developers can be counted on to deliver what they promise.

I have been told by people in the business-and it is my observation, too that the chief difficulties in the industry today are not with the selling of homes or improved homesites, but with the selling of unimproved or partly improved acreage.

Because of stiffer postal regulations, and improvements in the State law, it is no longer possible to advertise flooded marshes as "homesites" without risking a trip to the penitentiary.

So the big sell has been switched in large measure to small tracts of acreage, sold without improvements or with only partial improvements, but with the glib assurance of a "profit potential" that can enable the "small investor" to cash in on "Florida's fabulous future."

Prospective buyers are led to believe that, because of soaring land values, they can soon sell at a fat profit, or that civilization will have reached their little tract by the time they're ready to retire.

The truth is that, with a few rare exceptions, Florida acreage prices are not soaring by any means, and that a great deal of acreage in the boondocks may not be marketable for development purposes within the next 100 years, if ever.

Nevertheless, this selling technique has been so successful that it now brings in a major share, perhaps even a majority, of the estimated $1 billion a year grossed from sales. "This is where the emphasis is today," I was told recently by Carl A. Bertoch, executive director of the Installment Land Sales Board.

Scores of "acreage subdivisions" have burst upon the landscape in recent years, and their numbers are increasing. Many of them consist of nothing more than a huge stretch of cheap, remote, swampy, unsurveyed wilderness that has been given an enchanting name; there are no roads, drainage facilities, or other improvements, and none are promised. The land is sold off in acre-and-a-quarter tracts, usually for 5 to 10 times what equivalent land in the same area would bring. Usually the buyers do not get mineral rights, which means they probably couldn't get a building loan.

In several other large promotions, developers are putting in roads and drainage canals, but leave it up to the buyer to do the rest.

66-628 0-66

Of course, today's buyers are told, or are supposed to be told, the physical facts about the land being offered. Thanks to the new State law, which calls for "full and fair disclosure," sellers are required to furnish a property report, or prospectus, containing this and certain other information. If the land is swampy, the report must say so. Several instances have been reported of property reports not being received, however. I once attended one of those razzle-dazzle dinner parties and never saw the first property report. There was plenty of high pressure, though.

But of perhaps greater concern is the fact that the reports say nothing about the true value of the land, or about its prospects for future appreciation.

Yet the promoters are permitted to use printed matter that unmistakably implies that the land will increase in value and yield a profit. Booklets tell "How to make money from Florida acreage." Dazzling brochures talk of "assured, long-range security," "high-profit potential" and "family benefits." Charts and graphs depict Florida's zdoming population and steady industrial growth. Heroes of the past such as Theodore Roosevelt and Andrew Carnegie are quoted on the exciting possibilities of real estate as an investment.

"No investment on earth is so safe, so sure, so certain to enrich its owner as well-selected realty," observed Grover Cleveland, and the statement is prominently displayed in a brochure for some Florida acreage. I'm inclined to think that if Mr. Cleveland could see the acreage in this particular promotion, he would demand a retraction. We wonder, of course, why intelligent people fall for this sort of thing, but the fact is that well-selected acreage can be an excellent investment. Land prices are shooting up in many parts of the country, and the fact has been well publicized, such as in this article in the U.S. News & World Report, published February 17, 1964. "Real estate prices are skyrocketing," it says, "and the end is not in sight." This is quite true of good, usable land, especially land around the Nation's metropolitan centers. It is not true of most of the raw acreage in Florida.

I do not mean to suggest that Florida land wouldn't be a good investment for anyone with the capital, know-how, and experience to invest wisely. Florida land values are increasing, and the increases are above the national average. But we are talking about the little investor-people who have to pay $10 to $20 or $30 a month in order to buy land.

A study by the Florida Business Letter, a private newsletter, revealed that prices of raw land in Florida rose on the average from $75 an acre in 1950 to $279 an acre in 1963, or about $16 a year. Farmland did only a little better, rising at a rate of about $22.50 per year per acre during the last decade. In March of 1965, Florida farmland was valued by the U.S. Department of Agriculture at an average of $333 an acre, and that included buildings and all other inprovements. Swampland brings closer to $100 an acre or less.

Compare that with the $600 to $800 or more an acre which some swamp merchants are getting.