Real estate infomercial venture files Chapter 7.

Business featured Stephen Murphy as spokesman

By far, the largest creditor of now-bankrupt American Real Estate Company Inc., as listed on the firm's Chapter 7 liquidation petition, is Stephen Murphy, the star of AREC's infomercial and the deposed president of now-defunct American Capital Investments Inc., which was labeled by the Securities and Exchange Commission as a "Ponzi-like scheme."

According to the bankruptcy filing, Murphy is owed $503,000 for "consultant fees," and the firm's total debts are listed at $882,077 owed to nine entities. However, many other people claim to be owed money by the failed infomercial/video business, and some said they have filed or will be filing with the court to be included as creditors. AREC claims it has no assets except some video tapes of unknown value.

Murphy first appeared in the public spotlight when he promoted himself as a former homeless alcoholic Vietnam veteran who had made a fortune investing in distressed real estate and authored books on the subject, including "One Up on Trump." People who bought Murphy's books were later solicited by a telemarketing firm to invest in ACI partnerships. ACI was closed down in 1993 in an SEC civil fraud case.

Last year, Murphy appeared in an infomercial called "Coming Home to America." co-starring former Pittsburgh Steelers football player Rocky Bleier and advertising videos for sale about America's best places to live. Bleier is listed in the bankruptcy petition as still being owed $33,000.

AREC, which sold advertising time on the videos to real estate brokers and other business owners across the country, was investigated by federal authorities and got into a host of legal disputes with contractors. Several business owners said they were paid with rubber checks for services they provided AREC.

New infomercial planned

Last March, Murphy criticized the production of "Coming Home to America" and vowed to air a new infomercial and finish a new video product, including the ads sold, which he would sell to the public. In July, AREC filed for bankruptcy liquidation.

Other major creditors listed include South Bay Film & Video in Long Beach ($100,000) and Video Symphony of Pasadena ($68,000).

Attorney Tom Agawa of Hayes & Stanley, who represented AREC in some litigation with contractors but dropped the company as a client because of non-payment of fees, said if people with claims are not listed on bankruptcy documents, their claims would not be deemed "discharged" in the liquidation. They could, therefore, later seek payment from officers and/or directors of the failed company, but "it's damn hard to do that," Agawa admitted.

Some unlisted creditors of AREC claim to be former employees of the company. If they convince the court their claims are valid, they would get top priority over other contractors, Agawa confirmed.

Video photographer Randy Bellous, for example, claims to be owed about $7,000 in "salary" by AREC and another $5,000 in expenses. He said he was notified by the state Department of Industrial Relations, where he filed a claim against AREC, about the bankruptcy petition and plans to file a priority claim with the court.

"I still owe $15,000 on my American Express (card) because of this," Bellous said.