Sweepstakes Promoters Will Pay $1.4 Million To Settle FTC Charges

A sweepstakes operation that enticed consumers to send money in order to win cash prizes has agreed to pay almost $1.4 million to settle Federal Trade Commission charges that it violated federal laws. Funds collected by the FTC will be used to provide refunds to consumers.

According to the FTC’s complaint, from 2004 until November 2005, the operation sent letters inducing consumers in the U.S., Canada, and the United Kingdom to send money in order to collect lump-sum checks ranging from $245,189 to $728,577. A typical mailing contained statements such as “WINNERS AMOUNT CONFIRMED AS DOCUMENTED IN REPORT $677,519.00 ” and “This is not an eligibility letter or preliminary qualification announcement. YOU HAVE WON A CASH PRIZE.” The solicitation required consumers to sign and return a verification form within a certain time or forfeit their winnings.

The defendants’ letters led many consumers to believe that they had to pay a processing fee to receive the cash prize, but none of those who sent the fee received the promised prize, the complaint alleges. Instead, most consumers received a check for a nominal amount, such as $1, and a list of sweepstakes promotions offered by independent sponsors.

The defendants, all Nevada-based, are Crystal A. Ewing, David F. Ewing, Consumer Direct Enterprises LLC, Classic Productions LLC, Response Processing LLC, and Top Choice Inc., d/b/a/ Sweepstakes Information Reporting Services, Cash Claim Information Center, Consumer Award Advisory Service, Mega Marketing Group, and Prize Distribution Center. They are charged with violating Section 5 of the FTC Act.

Under the proposed settlement, the defendants are banned from any future involvement in prize promotions. They also are prohibited from making material misrepresentations about any other goods or services they market or help others market, and from disclosing personally identifiable information obtained from consumers during the sweepstakes operation.

The settlement imposes a judgment of $10,219,664, which will be suspended subject to the following conditions: the defendants must pay $1 million within five days, plus $375,000 within 12 months; provided, however, that the second installment will be increased to $500,000 if they do not also pay $125,000 to the U.S. Postal Service (USPS) in a related matter by 10 daysbefore the second installment’s due date.

The FTC received invaluable assistance from the British Columbia Business Practices and Consumer Protection Authority, the USPS, and the U.S. Postal Inspection Service.

The Commission vote to authorize the filing of the complaint and the proposed stipulated final judgment and order for permanent injunction was 5-0. They were filed in the U.S. District Court for the District of Nevada on April 11, 2007.

NOTE: The stipulated final order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

Copies of the complaint and stipulated final judgment and order for permanent injunction are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to thousands of civil and criminal law enforcement agencies in the U.S. and abroad.

(Civ. No. 2:07-cv-479; FTC File No. 062-3025)