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and accurate information before he became obligated to purchase. Further, the developer would remain subject to all of the existing laws relating to fraudulent advertising. Passage of the Act should make such laws even more potent weapons than they are today, since the registration statement filed under the Act would stand as an admitted state of facts against which any aggrieved person or law enforcement official could compare the statements made in the advertising.

It is surely clear to the Committee that the history of this country is a history of the promotion of real estate across vast distance--not merely interstate, but international.

From the time of Columbus, it was the reports of the earliest explorers of the vast and virgin lands across the ocean which brought all our ancestors here. Indeed, it has been pointed out to the Committee that the Father of our Country, George Washington, can be described as the founder of the advertising of installment land sales.

The Committee is also, I am certain, aware of the gigantic achievements of some of the major land developers whose business is based upon interstate advertising and sales.

The “Sun Cities” of Del Webb; such growing and prosperous communities as Deltona built by the Mackle Bros.; Port Charlotte, Florida ; by the General Development Company, and if I may be so immodest, my own company's Rainbow Lakes Estates, Florida, and Rio Rancho Estates in Albuquerque, New Mexico, are making available to thousands upon thousands of Americans who otherwise could not afford them, homes in the sun, in planned communities, with the most advanced residential and recreational facilities.

Companies like ours are doing this at the price of the advance investment of many million of dollars, to build roads, utilities, and other facilities and in planning and providing community services to an extent impossible in the older communities in the East and North.

We are able to undertake such construction because we can reach nationally, and even internationally, for our markets. As a result, some members of our industry have built whole new cities. Others, like ourselves, have built and are building new planned suburbs which avoid what has become known as "urban sprawl."

I understand that one justification of the proposed federal regulation of the subdivided land industry is that many purchasers do not have the opportunity to visit the land and examine it, and the industry thus has been analogized to the securities industry. Such analogy is, in our view, totally erroneous.

The securities industry deals with intangible property, and the manner in which the securities markets function is directly and vitally related to the health of the entire national economy. While I believe the land development industry is performing an important function in the development of certain sections of the nation, and will continue to perform such function for years to come, I do not flatter myself that this industry is of such size or importance that it can affect the state of the national economy at any particular time.

Moreover, if the test is to be whether or not the layman can see and evaluate what he is purchasing, then I submit that subdivided land sales cannot be distinguished from the sale of a myriad of different items of personal property. It is a rare person indeed who has any technical knowledge of the functioning of automobile engines, the circuitry of stereophonic sound systems, the construction of television color tubes or the mechanisms of automatic washing machines, to mention a few obvious examples. If it be a vice to use advertising media in the traditional manner to advertise land, then I submit it is equally wrong to use advertising to sell any consumer goods.

I think it worth noting that the securities industry is unique in its capability to operate effectively without the benefits of consumer advertising. Persons selling securities are backed up by enormous quantities of information made available to the investing public by various statistical services and news agencies. The vast majority of the information concerning securities reaching the public comes from such sources and not from the highly regulated materials which issuers of securities are permitted to disseminate.

No similar sources of information presently are available or can possibly be offered with respect to the sub-divided land industry or virtually any other industry selling to the general public, and there is no reason to believe that trading in sub-divided land ever will become sufficiently great to lead to the development of such sources of information.

In point of fact, as has been noted by members of the committee itself, the proposed legislation will not replace but supplement the laws of the various states on interstate land sales. It is a tribute to the past work of Senator Williams and the Committee on Aging, that new and vigorous state laws have been enacted which have effectively forced the unscrupulous fringe operator from inter-state to intra-state operations. I can testify that the important national developers cannot remain in business, regardless of where their developments are located, without advertising access to their major markets—New York, California, New Jersey, Ohio, etc. In each of these states, their advertising and sales literature must be cleared by state officials after careful on-the-spot inspection.

In our own case, we must have our advertising cleared in states where we do 75% of our business. I submit that all these clearances necessary and with the additional provisions of the proposed legislation protecting the consumer against possible deception, the requirements of this bill for all advertising not to omit any material fact, which in practice means no advertising, sales by prospectus only, is as unnecessary for the consumer as it is harmful to the industry.

I assume it to be unnecessary for me to defend the role of advertising under our system or to expound upon its importance to our present economy. I assume also that the proposed Interstate Land Sales Full Disclosure Act is not intended as an opening wedge to make unlawful the effective use of advertising in the merchandising of tangible property generally. I simply cannot believe that the Congress is yet ready to bar the use of advertising in the land development industry or other broad areas of the economy. Indeed, I am so bold as to suggest that advertisements of a subdivider, when coupled with a proper prospectus, will often give to the prospective purchaser a more accurate picture of the land than could any prospectus by itself.

For the foregoing reasons, I respectfully urge that the proposed Bill be amended specifically to exclude from the operation of Sections 10, 11, 17, 18 and 21 advertisements of a developer who otherwise is in compliance with the provisions of the proposed Act.

In our previous testimony before the Sub-Committee on Aging, we stated, "Instead of one Federal registration, as is proper with interstate commerce, we have separate registrations in each of the states with increasingly high legal and other costs. Instead of one inspection of the property, to this point we have had to bring various state inspectors on 15 separate trips from the various states.

“Gentlemen, I would think interstate land sales are truly interstate commerce, to be regulated only at the federal level.

“But let us remember that the present state laws are doing an excellent job of policing, and additional federal legislation on top of the present state laws would be unnecessary and wasteful. However, I do believe that one federal agency to replace the presently existing state agencies would be far more preferable and far more economical, for government, for the consumer, and for the business men. If it is possible to replace the separate state regulation with one overall, interstate Federal law, then we are all for it. To leave as is the present individual state laws and add an additional Federal bureau, would be, we feel, unnecessary."

If the Bill be so amended, I assure you that we at American Realty and Petroleum Corp. and, we believe, other large developers can continue to exist and perform our services to the community.

I am annexing hereto a brief appendix in which certain technical comments on the proposed Bill are set forth.

APPENDIX TO STATEMENT BY IRVING W. BLUM

1. Use of Advertisements.—Sections 11(2), 17(b) and, indirectly, 18(a) and 21 of the proposed Interstate Land Sales Full Disclosure Act go considerably beyond the requirement of full disclosure of all pertinent facts in the Registration Statement and Prospectus.

Section 11(2) provides for civil liability on the part of a developer or agent who, in offering, selling or leasing interests, lots or parcels in subdivisions, uses

any material or makes any statement, written or oral, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading.

Section 17 (b) makes it unlawful for any developer or agent in the offer, sale or lease of interests, lots or parcels in any subdivision, to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

Section 18 empowers the Securities and Exchange Commission to bring injunctive proceedings in the Federal Courts against any person who is “engaged or about to engage in any acts or practices which constitute or will constitute a violation of the provisions" of the Act, or of any rule or regulation prescribed thereunder.

Section 21 makes violation of any provisions of the Act a crime.

The exposure to both civil and criminal liabilities for misstating a material fact or omitting “to state any material fact necessary in order to make the statements made ... not misleading” would make it impossible for a prudent developer to advertise. The Securities and Exchange Commission and the courts have made amply clear in a long series of decisions that the test of whether a particular statement is misleading or a particular omission violates the mandate not to omit, is largely a subjective one. Indeed the test necessarily must be subjective—what is insignificant to one person may be most material to another; what is clear to one may be totally misleading to another—all depending upon the intelligence, education, worldliness and experience of the reader.

Clearly, therefore, if the proposed Act becomes law in the present form, no one could prepare an advertisement for subdivided lands without exposing the developer to disaster. Even though the developer and his adviser might be of the firm opinion that a particular advertisement was not violative of the mandate of the Act, a court easily could reach a contrary conclusion. And the developer would run the risk of injunctive proceedings brought by the Commission were an advertisement to be read by some employee of the Securities and Exchange Commission whose experience and background were quite different than that of the person preparing the advertisements.

2. Scope of Court Review.-Section 13(a) of the proposed Act, dealing with court review of orders, provides that the "finding of the Commission as to the facts, if supported by evidence, shall be conclusive.” Such test differs from that mandated by Section 10(e) of the Administrative Procedure Act, that an administrative agency's finding of fact should be set aside if a court finds the finding not supported by substantial evidence. There would appear to be no reason why the proposed Act should deviate from this well-established norm.

3. Time By Which Prospectus Must Be Delivered.Section 4(b) of the proposed Act provides that while a registration statement is in effect it shall be unlawful "to sell or lease, or offer to sell or lease, any interest, lot or parcel in a subdivision unless a prospectus is furnished by such developer or agent to the investor sufficiently before any contract or agreement for the sale or lease of such interest, lot, or parcel becomes binding on the purchaser to afford him a reasonable opportunity to examine it; but in no event shall the time be less than forty-eight hours."

The purpose of this section appears to be to insure that every purchaser or lessee of subdivided land will receive a prospectus at least forty-eight hours before he becomes bound to purchase or lease such land. An element of confusion is added, however, by the fact that unless there is timely delivery of a prospectus it is unlawful not only to sell or lease, but also to offer to sell or lease. This leaves open the possible construction of Section 4(b) as requiring that a prospectus be given before an offer to sell or lease can be made, which varies from the intended purpose.

A further problem is posed by the requirement in Section 4(b) that a prospectus be delivered sufficiently before a contract or lease becomes binding to afford a reasonable time to examine it, which must be at least forty-eight hours. There is no reason why a developer or agent should be required to guess what will be a reasonable time for examination by a particular buyer, and it is suggested that Section 4 (b) be amended to require only that a prospectus be delivered at least forty-eight hours before a contract of sale or lease becomes binding.

LAGUNA BEACH, CALIF., August 12, 1966. Hon. HARRISON A. WILLIAMS, Jr., Chairman, Subcommittee on Securities, Committee on Banking and Currency.

oid Senate Office Building, Washington, D.C. DEAR MR. CHAIRMAN: We are pleased to have this opportunity to add our observations to those of others who are concerned about abuses in the advertising and sale of subdivided land in interstate trade.

Our most recent inquiries seem to indicate that the wide-spread exposure by the nation's press, television and radio several years ago has resulted in the passing or amending of real estate subdivision laws in several of the states with the result that some of the “Paradise Peddlers" as we term them have been forced to cease and desist.

While there now seems to be a trend in many states toward better laws covering the sale and subdivision of land, it seems to us that a very real threat exists that the large retirement and low income market may still be exploited because of the lack of uniformity in those laws.

We believe the statement made in our book, The Simple Truth About Western Land Investment (Doubleday, 1964) that no law can effectively protect "a dedicated damned fool" from his own fiscal folly.

Perhaps then the only practical protection that does not so infringe on man's basic right to conduct his affairs, in such a manner as to render him unable to enterprise freely, is some comprehensive and uniform full disclosure law.

There are many laws that protect the buyer from the seller. But we know of no single law that can really protect the buyer from himself. Neither do we think there can be ; for a man who has been sold (or has sold himself!) a spurious dream can find a thousand rationalizations to camouflage the unpleasant truth.

Even though a subdivider may have complied with existing state laws such as the new California laws, in our opinion the most effective ever written, and, in the future, may comply with a Federal law administered by the Securities and Exchange Commission as provided in S. 2672, there is still no effective way to force a buyer to read a full disclosure statement before handing over his moneytoo often his life savings.

In talking with people who have purchased land in good and valuable subdivisions in California and Arizona we discovered more than a few who were suffering “buyers' remorse" because they had not really understood, or wanted to understand, the full disclosure forms they had been required to sign as evidence of the promoter's good faith.

Some of these purchasers had understood the promoter's legal obligation to correctly represent the facts but they had not troubled to analyze their own responsibilities, both real and implied, in the transaction.

Some had made no provision for illness, or for rising costs while living on fixed retirement incomes. Others had not realistically assessed job opportunities in the new area, had planned to meet all or part of their obligation from work they "felt sure they could find.” Some others had succumbed to the lure of the low down payment and had never bothered to compute the interest they were paying on long term loans, interest that should have been added to arrive at the "true cost” of the land. And we found some who had been misled by something as simple as “the average annual temperature" of an area only to find that an average annual temperature of 50 degrees in their new-found Utopia could, and often did, mean seasonal temperatures ranging from Zero to 100 degrees—the very thing they had fled from.

Next to them we found young couples happily "growing with the area.” The further point being; what was a very poor investment for one couple could well be a very good investment for another. The sellers' responsibilities can be reduced to law; but can the buyers'? And still a very great number of alleged "abuses" were clearly the fault of unrealistic actions on the part of people whose life-long dream did not square with the facts.

One thing that concerns us about a Federal law—and here we reveal our political naiveté—is the possible complication it may cause real estate commissioners in various states if their state laws are equally or possibly more comprehensive.

We are told that by its very definition a Federal law cannot be made to apply in one part of the country and not in another. But is there any practical way that ethical business can be transacted with fewer complications by writing a Federal law that will provide supplementary full disclosure provisions only where the state laws fail to provide any or where the states' full disclosure provisions are less comprehenive than those in the Federal legislation ?

Again, we stand naked in our naiveté, but it would seem that such a law would have the effect of encouraging the states to bring their own subdivision laws up to the Federal standard and, in time, remove the burden of adminstering such laws from the already heavily burdened Federal Government.

The basic problem, it seems to us, proceeds not so much from premeditated larceny on the part of a relatively small group of Paradise Peddlers as from the general climate of permissiveness that prevails in all aspects of our society.

The new Fair Packaging law seems to have come into being as a direct result of this "easy morality” where advertising claims are concerned. But again, we can bind sellers by law until we all but immobilize them. But the abuses will not be ended until we have educated the buyers to be responsible too.

Again-our naiveté : But if our government's propaganda is effective in changing minds overseas, then is it really impractical for the Federal Government to embark upon a press, radio and television propaganda campaign aimed at educating the buyer to his responsibilities?

Certainly the impossibility of the Federal Government providing protections in some socio-economic areas does not exempt it from providing such protection where laws are both applicable and practical.

But as concerned citizens, living in ever-more complicated times, we would hope that where such laws are needed they be kept as simple as possible and free from conflict with other Federal and State laws that provide substantially the same protections. Gratefully yours,

LELAND FREDERICK COOLEY.
LEE MORRISON COOLEY.

U. S. SENATE,
COMMITTEE ON BANKING AND CURRENCY,

SUBCOMMITTEE ON SECURITIES,

Washington, D.C., June 17, 1966. Attorney General BOSTON WITT, State Capital, Santa Fe, N. Mex. (Attention : Mr. Roy Hill).

DEAR GENERAL WITT: This will confirm your telephone conversation with Mr. Hill of your office, during which the enclosed bill was discussed. A summary of the bill is also enclosed. I am writing to you at this time in hopes that it will be possible for you to submit a statement to be used in conjunction with our hearings on this bill on June 21 and 22nd. The hearings will be conducted by the Securities Subcommittee of the Committee on Banking and Currency. We are especially interested in:

1. The new activities of the Fiesta Ranchos Development and activities in providing for full disclosure to the number of new land sales companies established within recent months in New Mexico.

2. Any comments you may wish to give on the very worthwhile activities of substantial developers.

3. Any coments you wish to give on the proposed federal legislation, which is intended to be a helpful supplement to state laws where they exist. We appreciate the continuing interest and help of your office. With best wishes. Sincerely,

HARRISON A. WILLIAMS, Jr.,

Chairman.

STATE OF NEw MEXICO,
OFFICE OF THE ATTORNEY GENERAL,

Santa Fe, July 29, 1966.
Senator HARRISON A. WILLIAMS,
Senator Office Building, Washington, D.C.

DEAR SENATOR : The State of New Mexico opposes Federal legislation in the area of sales of property in land subdivisions. We believe that this matter should more properly be handled by the individual states. In our opinion we have been successful in curbing the “sharp practices” that were occurring when

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