The Federal Trade Commission today announced landmark settlements with foreign scam operators netting more than $1.3 million in redress for American consumers. These settlements stem from the FTC's first credit card laundering case under the Telemarketing Sales Rule (TSR), and its first multi-agency enforcement effort against Canadian firms targeting U.S. residents in foreign lottery schemes. Woofter Investment Corporation, a Las Vegas firm that processed credit card sales drafts for over 50 Canadian foreign lottery telemarketers, including Pacific Rim Pools International, has agreed to pay $1,000,000 in redress. Pools and its owner Michael Loukas, will pay $165,000 obtained from the sale of a Las Vegas condominium, and will forfeit $216,000 owed to them by Woofter, as redress.
"These settlements are a terrific opportunity for consumers lured with lottery offers to take off these rose colored glasses," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "Not only are foreign lotteries illegal, the odds of winning are also slim to none."
According to the FTC, Pools and other Canadian telemarketers, deceived consumers telling them that they had been "specially selected" to play for a large prize pool, that their odds of winning were "one in six" and that winnings were tax free in the United States. The FTC alleged, however, that these claims were false, and that the telemarketers made several other false claims in order to induce consumers to purchase foreign lottery tickets. The FTC also charged that the defendants failed to disclose that trafficking in the sale of foreign lottery tickets is illegal.
The FTC alleged that Woofter Investment Corporation assisted and facilitated the Canadian lottery telemarketers and laundered their credit card sales drafts. Woofter made its VISA and MasterCard merchant accounts available to the telemarketers for a 15% fee. Use of the merchant accounts to process credit card transactions for telemarketers violates the TSR.
The FTC filed its action against Woofter Investment Corporation and its principal Patsy M. Barbour in April 1997. The FTC obtained a court order temporarily halting Woofter's business, which was converted to a preliminary injunction in July 1997. The company has been out of business since April. The settlement, which was issued by the Court on December 21, 1998, requires Woofter to pay redress and permanently prohibits Woofter and Barbour from providing credit card processing for any other business, and from any involvement in the sale of any foreign or domestic lottery tickets. The defendants would also be prohibited from any future violations of the TSR in connection with the sale of any product or service and from selling consumer names acquired from Woofter's credit card processing business.
The FTC filed its complaint against Pools, its owner Michael Loukas, another Loukas-owned company, ENA Enterprises, Patricia Lynn Kucey, wife of Michael Loukas and a manager of Pools; Morley L. McElwain and Michael Saguri, managers of ENA, and Daryl Dyck, sales supervisor for Pools, in November 1997. The action was taken in cooperation with the British Columbia Ministry of Attorney General, and the Washington Attorney General's Office. The Washington Attorney General filed a similar action against two other British Columbia-based foreign lottery ticket telemarketers.
The Pools' settlement, which awaits Court approval, requires Pools, Loukas, and Kucey, to pay redress, and permanently bans them from the sale of foreign lottery tickets, credit card laundering, and from violating any provisions of the Telemarketing Sales Rule in connection with the future telemarketing of any product or service. A separate settlement with Daryl Dyck contains similar conduct prohibitions but does not require him to pay redress. The FTC has dismissed the charges against Michael Saguri, who was never served, and has asked the court to enter a default judgment against Morley McElwain, who has not defended against the FTC's lawsuit. ENA has been out of business since October 1997.
The FTC filed the proposed settlement with Pools in the U.S. District Court for the Western District of Washington, at Seattle, on December 11, 1998. The settlement with Woofter was filed in the U.S. District Court for the District of Nevada on December 15, 1998. The Commission votes to file the settlements were 4-0. These cases were handled by the FTC's Seattle Regional Office.
NOTE: The orders for permanent injunctions are for settlement purposes only and do not constitute an admission by the defendants of a law violation. The settlements are subject to court approval and have the force of law when signed by the judge.
Copies of the settlements 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; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(Pools: Civil Action No. C97-1748R)
(FTC Matter No. X98 0011)
(Woofter: Civil Action No. CV-S-97-00515-LDG(RLH)
(FTC Matter No. X97 0041)
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