Personal finance guru and author of the New York Times bestseller "Rich Dad, Poor Dad," Robert Kiyosaki, has filed for Chapter 7 bankruptcy protection for one of his companies, Rich Global LLC, after losing a $24 million judgment to Learning Annex.
According to the New York Post, Kiyosaki's Rich Global LLC filed for Chapter 7 bankruptcy protection on August 20 after he was ordered to pay nearly $24 million to Learning Annex and its founder/chairman, Bill Zanker.
US District Judge Shira A. Scheindlin in April, ordered Rich Global LLC to pay $23,687,957.21 after a jury ruled that Zanker and his firm Learning Annex, were entitled to a percentage of the profits accruing to Rich Global LLC. According to Forbes, Learning Annex was one of Kiyosaki's earliest backers. Kiyosaki's Rich Global LLC reportedly used the platform of Learning Annex for some high profile speaking engagements, including a 2002 appearance at Madison Square Garden and on the Oprah Winfrey show.
According to the Daily Mail, US District Court Judge Scheindlin ruled that Learning Annex was entitled to a certain percentage of the profits from the speaking engagements it helped Kiyosaki obtain. The New York Post reports that Zanker said he and his firm were directly responsible for the success of Kiyosaki's book, "Rich Dad, Poor Dad."
Zanker said: "I took Kiyosaki's brand and made it bigger. The deal was I would get a percentage and he reneged... We had a signed letter of intent. Learning Annex is the greatest promoter. We put his 'Rich Dad' brand on a stage. We truly prepared him for great fame and riches. But when it was time for him to pay up, he said no."
Zanker continued: "This has taken years in court. I won even more money than I asked for from the jury, then he declared corporate bankruptcy. Oprah believed in him, and Will Smith believed in him, but he didn't keep his promise to us.”
Kiyosaki's 1994 book, "Rich Dad, Poor Dad," became a hit with millions of people looking to rely on his guidance in issues of their personal finances. His book took inspiration from a story of the good financial advice he got from a fictitious rich "father" in contrast to the bad financial advice he got from a fictitious poor "father."
Although he became a personal finance guru to millions, he was harshly criticized by others. Forbes' Helaine Olen, for instance, wrote of his "tips [that] ran the gamut from ridiculous to illegal and downright hurtful and included advocating for insider trading, arguing for the purchase of multiple real estate properties with little or no money down and telling followers they could purchase stocks on margin via unfunded brokerage accounts."
Since he published “Rich Dad Poor Dad” in 1994, Kiyosaki has written 11 other books. ABC News reports his books include, "Retire Young, Retire Rich," and "Midas Touch," which he co-authored with real estate mogul Donald Trump. Trump also co-authored a book "Why We Want You to be Rich" with Kiyosaki in 2006.
According to the Daily Mail, Mike Sullivan, CEO of Kiyosaki's Rich Dad Co., told reporters that Kiyosaki declared bankruptcy because he would not put his personal assets towards the judgment. He said the judgment was far more than the value of Rich Global LLC.
According to the Daily Mail, Sullivan said: "The dealings we had with the Learning Annex were with a company that hasn't been in business for a number of years. I am not surprised Learning Annex is upset and angry, the money doesn't exist in that company, and we can't bring money out of the group. We got hit for what we think is a completely outlandish figure."
The bankruptcy does not mean that Kiyosaki has gone personally bankrupt. On the contrary, he only made a business move to protect his personal and business assets outside Rich Global LLC. Companies file for bankruptcy when their liabilities are in excess of net realizable value of assets. Kiyosaki, in a business move to protect himself from the full impact of the judgment, has simply moved from doing business under the name of Rich Global LLC to doing business under the name of another company that he owns, Rich Dad Co.
ABC News reports that according to the bankruptcy filing, Rich Global LLC's assets are $1.8 million, as against liabilities of nearly $26 million. Learning Annex is the company's major creditor with a claim of $23.7 million.
According to MSNBC, Forbes has estimated Kiyosaki's personal wealth at about $80 million.
Sullivan added for the benefit of Kiyosaki's fans who may think their guru had gone personally bankrupt: “Robert and Kim (wife) are not paying out of personal assets."