Editor’s note: This article was first published in October 2012. This is news from that month, and it also refers to Donald Trump’s ACN endorsement of that period, before his political career. Robert Kiyosaki did not declare personal bankruptcy. In 2012 his company Rich Global LLC filed for bankruptcy after a court judgment against it; references below to his own bankruptcy should be read in that light.
The financial guru we’ve so often held up as an example, Robert Kiyosaki, author of Rich Dad Poor Dad, has just declared bankruptcy. For some years now, Robert Kiyosaki, a champion of building assets and income-generating investments, ended up building those assets through pyramid-style schemes, specifically the Amway system with the backing of Oprah Winfrey, in the same way that Donald Trump has lent his image to other pyramid-style schemes (ACN).
Kiyosaki and one of his companies were recently sued by an American producer, who accused him of not paying what they had agreed. A court ruled in the plaintiff’s favor and ordered Robert Kiyosaki to pay just over 23 million dollars. Unfortunately for the plaintiff, he won’t be able to collect that amount, because Kiyosaki’s company doesn’t have the assets to cover it. The company has declared bankruptcy.
Since the lawsuit was also directed at Robert Kiyosaki, he then declared bankruptcy himself, so he won’t have to pay the penalty either, as he doesn’t have enough money.
So far, we could be talking about the failure of a finance guru, and Kiyosaki’s reputation could take a hit. The truth is, though, that Kiyosaki has once again given a masterclass in finance, because Robert Kiyosaki is obviously still a millionaire: he has resorted to asset protection, so his wealth is safe.
As our colleague Victoria Bernal points out, Kiyosaki was very clever to leave a few million in the company (around 3 or 4), which is all the plaintiff will collect. If he had left nothing, the plaintiff wouldn’t have settled for it and would have kept digging.
In these cases, the lawyer usually tells the client that they can take those 4 million and be sure of getting paid, or turn it down and go after the full amount, at the risk of getting nothing. So, as a rule, people follow the old saying: “A bird in the hand…”.
Kiyosaki’s image will take a hit.
The bankruptcy itself won’t damage Kiyosaki’s image, because it’s a very common strategy for businesspeople: it’s a way of getting rid of a problem by closing one company and opening another the next day. This guru’s image is starting to suffer, though, first because of his new pyramid-style businesses, and second because he was sued, with good reason, by someone who kept their side of the contract while Robert Kiyosaki chose not to keep his, and who also turned to offshore asset protection, something most Americans (the middle-class and poor ones) frown upon.
Personal opinion: I’ve always recommended some of Robert Kiyosaki’s books, because I think they can help anyone change their mindset. Likewise, I’ve always found that the best advice for entrepreneurs came from Donald Trump (see the entrepreneur’s mindset). But when I see them today promoting all kinds of affiliate systems and pyramid-style businesses, they start to look out of place to me, because they’re using their influence to mislead people who were once inspired by these two men. Like some artists, they lost their way a long time ago and stopped producing works of art.
Further reading
- The best books on financial education
- Why the poor keep getting poorer and the rich keep getting richer
Featured image: Gage Skidmore, CC BY-SA 3.0, via Wikimedia Commons.
