McGraw Operates Grecian Health Spa in Topeka, Kansas with Family in 1971

In 1971, Phil McGraw lived in Topeka, Kansas, and ran the Grecian Health Spa alongside his father and two friends. McGraw abruptly closed the business, filed for bankruptcy, and moved out of state in September 1973. McGraw had sold the lifetime membership contracts customers had signed to another company, resulting in customers being still legally responsible for the membership even though the spa was closed. McGraw and his business partners were investigated by the state's Attorney General office. Lead investigator Emory Goad said 'McGraw had been pulling off a textbook example of a membership scam. He was signing up hundreds of customers to long, expensive contracts, then turning around and selling the contracts to a financial institution for a percentage of the total value up front in cash. He then simply shut down the spa at some point after collecting that money and left town. It was a total rip-off because the customers would still be liable for the contract payments, only now to the financial institution.' McGraw was sued by several Topeka banks for $41,000 they claimed he owed, but the lawsuits and investigation stalled when he left the state.