Canadian telemarketers whose companies targeted elderly U.S. citizens in a lottery scam have agreed to settle Federal Trade Commission charges that the schemes violated federal laws. The settlement bars the defendants from selling chances, tickets, shares, or registrations in any lottery or bond program to any U.S. citizen. It also prohibits them from illegally billing consumers' credit cards, selling or sharing consumers' credit card information; and misrepresenting restrictions, limitations or conditions to purchase, receive, or use any product or service. It further prohibits them from proving assistance or support to sellers who they know, or should know, are violating the Telemarketing Sales Rule (TSR). Finally, it provides for the payment of nearly $1 million (USD) for consumer redress.
In December 2000, the FTC and Canadian law enforcers moved to halt a Vancouver-based telemarketing scam targeting senior citizens in the United States. At the request of the FTC, the U.S. District Court in Seattle ordered a temporary halt to the deceptive telemarketing practices, pending further proceedings. The court also ordered a temporary asset freeze and appointed a receiver over any assets obtained. The Consumer Services Division of the British Columbia Ministry of Public Safety and Solicitor General initiated a parallel enforcement action and asset freeze in the Province of British Columbia, Canada.
The FTC charged that the telemarketers, who operated under a variety of names including NAGG Holdings Ltd., Canada Prepaid Legal Services, and BSI Premium Bonds, guaranteed consumers would receive monthly payments between $5,000 and $12,000 in return for a one-time payment of up to $5,000. In addition, the FTC charged that the telemarketers called purportedly to market bonds - in some cases British Premium Savings Bonds - the purchase of which would qualify consumers for cash prizes, monthly cash payments, or bond investments with the chance to participate in monthly drawings for cash prizes. Consumers then received mailings that included a purported British National Savings Premium Savings Bond certificate and other documents indicating that the defendants would enter the consumer's name or bond numbers into the Premium Savings Bond program's monthly drawings for cash winnings. In fact, the consumers who paid the defendants received nothing of value. According to the FTC, National Savings, the second-largest savings institution in the U.K., is the only organization authorized to sell Premium Savings Bonds. Because the bonds have a lottery feature, they cannot legally be sold in the U.S. The FTC also alleged that some of the defendants placed unauthorized charges on consumers' credit cards and in some instances simply charged consumers' credit card accounts without ever having contacted them.
The FTC alleged that the defendants' activities violated the FTC Act and the TSR. It charged that the defendants misrepresented that consumers would receive payments by purchasing bonds; misrepresented that consumers agreed to buy bonds and so owed the defendants money; unfairly charged some consumers they never contacted; and failed to disclose to consumers that the sale of the bonds is a crime. Alleged violations of the TSR included making false or misleading statements about the "cash awards"; falsely claiming that the defendants would not charge consumers' credit cards without authorization; and failing to disclose that the sale of the bonds is a federal crime. In addition, the agency charged a number of the defendants with assisting deceptive telemarketers to violate the law by providing them with access to their merchant accounts for processing credit card charges.
The settlement bars the defendants from promoting, selling, or participating in the sale of any lottery or bond program with a lottery feature, to any U.S. consumer. It also prohibits them from making misrepresentations, and requires that they disclose all material restrictions, limitations or conditions in conjunction with the sale of any product or service. It further prohibits them from charging consumers' credit card accounts without authorization and from selling, renting, brokering, or transmitting consumers' credit card information to others. Finally, the defendants will release all claims to the approximately $1 million (USD) in assets that the British Columbia Solicitor General froze. The settlement calls for almost all of that money to be returned to the U.S. for consumer redress.
The 14 corporate and individual defendants named in the FTC's civil complaint are Canada Prepaid Legal Services, Inc., doing business as BSI Premium Bonds; David John Edwin Hyde; Joseph Shawn Proulx; E.R.S. Holdings Ltd.; Neil John Schuler; ITH Enterprises Ltd.; Kailey Lewis Babuin; NAGG Holdings Ltd.; Wayne Weis; Timothy Ryan Babuin; 557631 B.C. Ltd., d.b.a. Guaranteed Capital Holdings; Fernando Villagran; Calgary Concrete and Home Improvement Corp., d.b.a. Union Global Trading; and Martin Roy Lamb.
The settlement announced today ends the litigation in this matter with Joseph Shawn Proulx and Canada Prepaid Legal Services, Inc., doing business as BSI Premium Bonds. Defendants Neil John Schuler and Wayne Weis settled through stipulated orders in June 2002. The court has issued default judgments against the other defendants, except Timothy Babuin. A motion for summary judgment as to defendant Babuin currently is pending, but that matter has been stayed during the pendency of Babuin's criminal case.
The Commission vote to accept the stipulated final judgment and order was 5-0. It was filed in U. S. District Court for the Western District of Washington at Seattle.
NOTE: A stipulated final judgment and order is for settlement purposes only and does not constitute an admission by the defendant of a law violation.
Copies of the stipulated final judgment and order 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, 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 and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.