The Federal Trade Commission and other law enforcement officials have put the gloves back on to knock out the latest round of prize promotion fraud. In a recent law enforcement effort - "Project Prize Fighter" - the FTC, the U.S. Postal Inspection Service, State Attorneys General and others have joined forces to combat these scams. "Project Prize Fighter" has resulted in 24 law enforcement actions against more than 40 defendants in 9 states. The FTC cases announced today have a slightly different twist to the classic "You Have Won" sales pitch. The bogus prize promoters target consumers who have previously entered sweepstakes and tell them that they have won but must first pay a fee in order to receive their prize.
Prize promotion fraud continues to be a significant problem for consumers and remains one of the top five categories of complaints reported in the FTC's Consumer Sentinel - a multi-agency law enforcement investigative cyber tool. As part of "Project Prize Fighter," the FTC filed 3 actions, the U.S. Postal Service brought 10 actions, Attorneys General from Ohio, North Carolina, Florida, Missouri and Utah took 9 actions, and 2 additional actions were taken by the County of Orange Boiler Room Apprehension (COBRA) Task Force and the Los Angeles County Sheriff's Department. (See attached list.)
"Project Prize Fighter" targeted bogus prize promoters who used telemarketers and the U.S. mail to tell consumers they had won a significant cash prize, ask for and pocket consumers' money in advance of delivering the prize, and deliver nothing.
"These scam artists lied," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "They lured consumers into their schemes with the promise of a prize, then asked them to pay for it. These fraudsters added illegality to insult and injury by failing to deliver the prize. That's when law enforcement got into the ring and stopped the action."
"These criminals victimize consumers hoping to strike it rich by winning a valuable prize," Chief Postal Inspector Ken Weaver said. "If someone says YOU must pay money in order to receive a prize you supposedly have won, then you really haven't won. Consumers across the country lose millions of dollars every year to fraudulent prize promotions. To be a real winner, protect yourself from get rich quick claims. Remember, a prize is won, not bought."
In each of the FTC's cases announced today, the defendants were charged with violating the FTC Act by falsely representing that consumers would receive a prize. In fact, none of the consumers received the "prize" that the defendants promised. In two of the cases, the defendants also were charged with violating the Telemarketing Sales Rule ("TSR") by misrepresenting that consumers had won a prize and that consumers would receive their prize if they made a payment to the defendants. In addition, in numerous instances, the defendants falsely represented that consumers' bank accounts would not be debited until after they received their prizes. In fact, defendants immediately debited the accounts of consumers and never forwarded any prizes.
The FTC filed complaints against: Cecilia M. Castillo, Ian Anthony Suite, Global Network Enterprises, Inc., Republic Enterprises, Inc.; Cory Banks, doing business as National Network Services, New World Services, Inc., d/b/a Services for the New World; and Jeffrey L. Landers d/b/a Adpro, Inc. Two of the complaints were filed under seal and the seals have now been lifted.
Global Network, headquartered in Costa Mesa, California, using the assumed name TCM, contacts consumers nationwide by telephone, and tells them that they have won $5,000 or more in sweepstakes money. Consumers are told that in order to receive the monetary prize, they must pay $289 in state sales or gift taxes. Consumers are then asked for their checking, savings or other bank account information, and in some cases, even their social security numbers. In many cases consumers are assured that no money will be withdrawn from their account until they actually receive the prize money. However, the complaint alleges, within a few days of the initial call, all of the consumers' accounts are debited. None of the consumers contacted by the FTC received the promised prize winnings.
New World Services, located in Long Beach, California, contacts consumers nationwide by telephone, informing them that they have won either $5,000 or $10,000 from a sweepstakes they recently entered. In order to receive the prize, the consumers are told, they must pay a "fee" for income taxes, state taxes or shipping and handling owed on the prize. The fees vary from $250 to $270. The defendants tell consumers that they will have to pay the fees only after their prizes are received, and then ask the consumers for their checking account numbers--either to facilitate payment by direct debiting or to "verify" that the consumer has a valid checking account. The defendants then immediately use the checking account information to debit consumers' accounts. None of the consumers receive the promised prize winnings. According to the FTC, most of the consumers who receive these calls have participated in sweepstakes contests before and are easily led to believe that the company's representatives are calling from sweepstakes they had actually entered.
Jeffrey Landers resides in Marietta, Georgia, and uses a P.O. Box in Birmingham, Alabama for Adpro Inc. Consumers are sent a certified letter postmarked by a mailing processing facility in Dallas, Texas, stating that the defendant is holding prize winnings for the consumer. In order for the consumer to obtain the winnings, they are told that they must pay a $89 assessed fee for research, reporting, confirmation and document delivery. Consumers who send in their money receive nothing. When consumers tried to recover their money, they were unable to do so because Adpro provided no telephone number or customer service address for consumers to contact.
The FTC has sought and obtained temporary restraining orders and asset freezes against the corporate and individual defendants in each of these cases. The FTC has obtained a preliminary injunction from the federal district court in the Global Network Enterprises case and is also seeking permanent injunctions and redress for consumers. Consumer investigators from Ohio Attorney General Betty D. Montgomery's office assisted the Long Beach Police Department in executing a search warrant on New World Services.
The FTC offers the following tips for consumers to keep in mind before responding to an "It's Your Lucky Day" call or letter:
The FTC brochure, "Prize Offers: You Don't Have to Pay to Play," is available on the FTC's Website at: http://www.ftc.gov/bcp/conline/pubs
The FTC would like to acknowledge the assistance provided by the following entities in the preparation of its cases: U.S. Postal Inspection Service; County of Orange Boiler Room Apprehension (COBRA) Task Force in Santa Ana, California; the Attorneys General in the States of North Carolina and Ohio; the Long Beach Police Department; the Los Angeles District Attorney's office; and various Better Business Bureaus.
The Commission votes authorizing staff to file the three complaints in the appropriate federal district courts were 5-0. Jeffrey Landers was filed in the U.S. District Court, Northern District of Geogia, Atlanta Division, on June 22, 2000. Global Network was filed in the U.S. District Court, Central District of California, Southern Division, in Santa Ana, on June 26, 2000. New World Services was filed in the U.S. District Court, Central District of California, Western Division, in Los Angeles, on July 5, 2000. The FTC's Southwest Regional Office coordinated the project for the FTC.
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 against Cecilia M. Castillo, Global Network Enterprises, Inc., Republic Enterprises, Inc.; Cory Banks doing business as National Network Services, New World Services, Inc., d/b/a Services for the New World; Jeffrey L. Landers d/b/a Adpro, Inc. will be available shortly 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.
(Coordinator for Project Prize Fighter)
W. David Griggs
(Global Network Enterprises)
Kenneth Abbe and John Jacobs
Western Region - LA
(New World Services)
Southeast Region - Atlanta
(Jeffrey Landers d/b/a Adpro)
(File No. 0023185 - Global Network Enterprises; Civil Action No. 00-625 (GLT) (ANX)
(File No. 0023183 - New World Services; Civil Action No. CV-00-07225-GHK)
(File No. 0023156 - Adpro, Inc.; Civil Action No. 1:00-CV-1582-RDS)
OPERATION PRIZE FIGHTER FEDERAL/STATE LAW ENFORCEMENT ACTIONS
|U. S. Postal Inspection Service||Case 1303310 - Phillip E. Ruffin/Joseph L. Akins II (Georgia - guilty plea entered by one defendant)
Case 1187758 - Southern Equities (Tennessee - grand jury indicted eight individuals)
Case 1191372 - Providence Foundation Fund, Ltd. (Utah - arrest warrants issued for two defendants and bail set at $100,000, arraignment hearing 7/19/00/ joint case with Utah Attorney General)
Case 1307774 - EMC Capital (Georgia - two individuals arrested)
Case 1102634 - James Blair Down (Washington - two individuals pled guilty)
Case 1298019 - Contest Express/Woodrow Cochran and Laylor (NY, NV & CA - search warrant executed)
Case 1155780 - Park Place Galleries (California - defendant sentenced to 18 months in prison, 3 years supervised release)
Case 1216950 - Eddie R. Littleton (Missouri - one defendant sentenced to 8 years, a second defendant was sentenced to 5 years, two others pled guilty and are paying restitution/joint case with Missouri Attorney General)
Case 1292903 - Michael and Simone Cabaza (Pennsylvania - sentenced co-defendants to identical 5-year probationary sentences with 6 months home confinement and $29,300 restitution)
Case 1182020 - NIK-KOL Company, Inc./R & R Marketing/Office of Procurement and Disbursement/Award Payment Services/Cash Disbursement Office (New York - cease and desist ordered)
|Juliana A. Johnson
|County of Orange Boiler Room Apprehension (COBRA) Federal/State Task Force||Cecilia M. Castillo/ Ian Anthony Suite (California - search warrant executed and indictments obtained against both individuals/done in conjunction with FTC)||Lloyd Downing
|Florida Attorney General||Mellon, Astor & Fairweather (Liberty, NY - cease and desist ordered)
Accuwin Research (Plainview, NY - cease and desist ordered)
Enwood, Pressman & Ingram/EPI/Super Cash Classic (Scarsdale, NY - cease and desist ordered)
C &L (Yorktown Heights, NY and Scarsdale, NY - cease and desist ordered)
|Missouri Attorney General||Eddie R. Littleton (Missouri - one defendant sentenced to 8 years, a second defendant was sentenced to 5 years, two others pled guilty and are paying restitution/joint case with U. S. Postal Inspection Service)||Scott Holste
|North Carolina Attorney General||Global Network Enterprises/G.N.E./T.C.M. (California - TRO obtained)
Red Zone Marketing, L.L.C. (California - TRO obtained)
|Ohio Attorney General & Long Beach Police Department||New World Services, Inc., d/b/a Services for the New World/Cory Banks, d/b/a National Network Services (California - search warrant executed/done in conjunction with FTC)||Stephany Beougher
|Utah Attorney General||Providence Foundation Fund, Ltd./Michael and Deborah Woodard (Utah - arrest warrants issued and bail set at $100,000, arraignment hearing 7/19/00/ joint case with U. S. Postal Inspection Service)||Neal Gunnarson
|Los Angeles County Sheriff's Department||Red Zone Marketing, L.L.C. (California - search warrant executed)||Richard Biddle