The Federal Trade Commission recently announced landmark settlements with foreign scam operators of more than $1.3 million in redress for American consumers.
The settlements resulted from the first credit card laundering case brought by the FTC under the Telemarketing Sales Rule (TSR), against Canadian firms targeting U.S. residents in foreign lottery schemes. The suit was brought against Woofter Investment Corporation and its principal Patsy M. Barbour in April 1997, and against Pacific Rim Pools; Michael Loukas; ENA Enterprises; Patricia Lynn Kucey (wife of Loukas and a manager of Pools); Morley L. McElwain, manager of ENA; and Daryl Dyck, sales supervisor for Pools, in November 1997.
The FTC alleged that Woofter 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 deceptive claims made to consumers by the Canadian telemarketers included 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 U.S.
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.
In addition to the monetary settlement, Woofter and Barbour are permanently prohibited from providing credit card processing for any other business, from any involvement in the sale of any foreign or domestic lottery tickets, from selling consumer names acquired from their credit card processing business, and from any future violations of the TSR.
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 TSR 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 asked the court to enter a default judgment against McElwain, who has not defended against the suit. ENA has been out of business since October 1997, and Woofter since April 1997.
Copies of the settlements are available from the FTC’s Web site (www.ftc.gov), by calling 202-FTC-HELP (202-382-4357 – TDD: 202-326-2502), or by writing to them at Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
The FTC reminds consumers that not only are foreign lotteries illegal, the odds of winning are also slim to none.