SWEEPSTAKES PROMOTER TO PAY $9.5 MILLION UNDER SETTLEMENT WITH FTC

FROM:  U.S. FEDERAL TRADE COMMISSION
FTC Obtains $9.5 Million Judgment Against Sweepstakes Promoter for Contempt
Violated Court Order Banning Her from Prize Promotions

A sweepstakes operator is permanently banned from direct mail marketing and is liable for a $9.5 million judgment under a settlement with the Federal Trade Commission, which charged her with violating a previous court order by running a sweepstakes scam.

“There’s a price to pay to violating a court order in an FTC case,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “In this case, that’s $9.5 million and a permanent ban on direct mail marketing.”

In April 2007, Crystal Ewing and other defendants were banned from prize promotions to settle FTC charges that they deceptively enticed consumers in the U.S., Canada and the United Kingdom to send money to collect large cash prizes that, in fact, did not exist.

Ewing now admits to violating the 2007 court order through her work with another FTC defendant, Glen Burke, and a prize promotions company, Puzzles Unlimited LLC, that duped consumers with the illusory promise of sweepstakes winnings in exchange for processing fees.

Using direct mail ads, Puzzles Unlimited enticed consumers to enter promotions by using terms like “Notice of Grand Prize Payout” and “Grand Prize Guaranteed,” which led consumers to believe they had already won thousands of dollars and just needed to fill out a form containing a simple puzzle and submit a “processing fee” of $10 to $15.

But the vast majority of consumers received no “Grand Prize Payout” – or any other payout whatsoever. Instead, the consumers who submitted “processing fees” continued to receive additional rounds of puzzles that they were told they must complete correctly in order to claim the prize money. With each round of mailers, consumers were misled with promises of bonus winnings in exchange for additional fees. At each step of the way, consumers were told they were tied for first place in the promotion regardless of whether or not this was true.

In addition to the $9,513,084 judgment, which represents the amount of consumer harm attributable to Ewing’s work with Puzzles Unlimited, and the ban on any direct mail marketing imposed against her, she is prohibited from making material misrepresentations about goods and services, and from profiting from, and failing to properly dispose of, customers’ personal information.

The Commission vote authorizing the staff to file the stipulated final judgment and order was 5-0. The document was filed in the U.S. District Court for the District of Nevada. Judge James Mahan entered the stipulated judgment on February 3, 2015.

COURT IMPOSES $14.75 MILLION JUDGMENT AGAINST TELEMARKETERS

FROM:  FEDERAL TRADE COMMISSION 
Court Finds Telemarketers in Contempt; Imposes $14.75 Million Judgment
FTC Continues Aggressive Enforcement to Ensure Compliance

At the request of the Federal Trade Commission, a U.S. district court judge in Florida has issued a contempt order against Bryon Wolf and Roy Eliasson, two key individuals who operated a deceptive marketing scheme since 2009.  According to the order, the defendants violated a December 2008 permanent injunction and final order that barred them from making a range of misrepresentations to consumers, billing consumers without their authorization, and failing to make required disclosures in future business endeavors. The contempt order imposes a judgment of $14.75 million against the defendants, which is the amount they illegally took from consumers in their second scheme.

“This pair of defendants showed complete contempt, both for consumers and for a court order,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “And this action shows that if you violate an FTC order, you’ll pay for that violation.  We put orders in place to protect consumers, and we make sure that companies follow them.”

Today’s announcement is the latest example of how the FTC protects American consumers from defendants who are recidivists.  The agency monitors every FTC order for compliance, and quickly deals with those wrongdoers who defy its orders.  In the last 12 months alone, the FTC successfully tried five contempt cases. The defendants in these actions face tens of millions of dollars in judgments and are banned from various commercial activities.

Case History

In 2007, the FTC sued Suntasia Marketing, Inc., charging the operation with deceptively marketing negative-option programs to consumers nationwide. The defendants allegedly defrauded consumers and charged their bank accounts without their consent for a variety of programs, including memberships in discount buyer’s and travel clubs.

In 2008, 14 defendants agreed to an order settling the FTC’s charges, and were required to pay more than $16 million to provide refunds to defrauded consumers. Bryon Wolf and Roy Eliasson were ordered to pay over $11 million for their role in the scheme, and were barred from a variety of unlawful acts in the future, including  misrepresenting material facts regarding an offer, failing to clearly disclose material terms during a sale, and debiting consumers’ accounts without their consent.

But according to the FTC’s motion for contempt, within months of the 2008 order, Wolf and Eliasson devised a new plan to defraud consumers through Membership Services, LLC, a firm they controlled.  In this scheme, they used deceptive phone and internet solicitations to target recent loan applicants and misled them into believing they would provide them with cash advances, loans, or lines of credit. Instead, the defendants debited the consumers’ accounts for membership in a continuity program.  Very few consumers used the program, and many cancelled when they found out the defendants had debited their accounts and planned to take additional payments from them in future months.

Based on this conduct, following a two day evidentiary hearing, the court found that the defendants had violated the terms of a court-ordered permanent injunction by engaging in some of the same kinds of deceptive tactics that led to the FTC’s prior case against them.

According to the court, while the defendants sent messages to consumers communicating they had been “approved” for a loan, none of them ever received a loan. Instead, many of their bank accounts were debited $49.95 or more a month after they provided their financial information to the defendants.

Information for Businesses and Consumers

The FTC has developed two new blog posts to help provide businesses and consumers with information about specific types of telemarketing fraud and how to avoid it. They are called (Con)tempting Fate and An Online Payday Loan Or Window to a Scam?

The contempt order was entered by the court on January 13, 2014, in the U.S. District Court for the Middle District of Florida, Tampa Division.