Cross-border telemarketers who used high pressure telemarketing techniques to convince U.S. consumers, many of whom are senior citizens, to invest in an international lottery scam have been ordered shut down by a federal court at the request of the Federal Trade Commission. Operating from boilerrooms based in Toronto, Canada, the telemarketers persuaded consumers to send anywhere from $29 to thousands of dollars to enter lotteries some consumers were told they were "practically guaranteed to win." Buying and selling foreign lottery tickets is illegal in the United States.
At the request of the FTC, U.S. District Court Judge George M. Marovich has issued a preliminary injunction against Windermere Big Win International, Inc., Marathon Award Center, Sunshine Fortuity, Inc., and their principals, Ernest Levy (a/k/a Ernie Levy), Alan Silverstein and Michael Levy.
The court froze the U. S. assets of the corporate and individual defendants and appointed a receiver, pending trial. The FTC will seek a permanent injunction barring defendants' lottery telemarketing activities and restitution to consumers or disgorgement of ill-gotten gains. At the Commission's request, the Department of Justice petitioned a Canadian court to freeze the Canadian assets pending resolution of the case, and those assets have been frozen.
"These telemarketers sold U.S. consumers Canadian lottery tickets, at inflated prices, and exaggerated the chances of winning," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "But the people who hit the jackpot were the telemarketers, not the consumers who lost money investing in this scam."
The agency alleges that the telemarketers told consumers -- most of whom were elderly -- that they had been "specially selected" to participate in a system for playing the Canadian lottery that "guaranteed" or "practically guaranteed" that the consumers would win the lottery. The telemarketers told them that they were "registered" or "sponsored" by the Canadian government to sell the lottery tickets and failed to disclose that it was illegal to sell them to U.S. consumers. The agency alleges that a very small percent -- generally less than seven percent -- of the money the telemarketers take in goes toward the purchase of lottery tickets. The seven-count complaint filed in federal court charged them with violations of the FTC Act and the Telemarketing Sales Rule.
Following the hearing for the preliminary injunction, Judge Marovich concluded that, "The high pressure sales made by the Corporate Defendants included false claims and representations regarding: (1) the consumers' odd of winning, (2) the consumers' special selection to play the lottery, (3) Corporate Defendants' special methods and expertise for enhancing the consumers' chances of winning, and (4) the legality for Corporate Defendants to sell foreign lottery tickets to American consumers. Corporate Defendants omitted to inform the consumers that only a small fraction of the monies paid by the consumers went toward the purchase of lottery tickets."
The Commission vote to file the complaint was 4-0. The case was filed by the FTC's Midwest Regional Office in U.S. District Court for the Northern District of Illinois, Eastern Division. The Commission received significant assistance from the Ontario Ministry of Consumer and Commercial Relations and the Department of Justice.
NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. The case will be decided by the court.
Copies of the complaints and a free Consumer Alert, "International Lottery Scams," 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; 877-FTC-HELP (877-382-4357); 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.
(FTC File No. 982-3205)
(Civil Action No. 98C 8066)