A cross-border lottery scam that targeted elderly U.S. consumers has been barred from selling tickets in the United States and from violating federal laws that bar deceptive sales practices. The court hearing the case also entered a judgment in excess of $3 million, a figure predicated on an estimate of consumers' losses. Because of the defendants' limited assets, the parties have now agreed to payment of $500,000, which represents all of the available funds frozen by the British Columbia Ministry of Attorney General in a concurrent law enforcement action in Canada.
In November 1998, the cross-border con artists were targeted by U.S. and Canadian law enforcement officials. The Federal Trade Commission and the Attorneys General of Arizona and Washington filed a complaint against Win USA Services Ltd., IRAL Services Inc., IRAL Enterprises Inc., Michael Ghirra and Bobby Ghirra, and later added Hari Bans Ghirra as a defendant, alleging that the Canadian telemarketers convinced consumers to send them hundreds - sometime thousands - of dollars by promising them that they were likely to win, "guaranteed" to win, or had already won a foreign lottery. Buying and selling foreign lottery tickets is illegal in the United States. The complaint sought a permanent injunction barring defendants' lottery telemarketing activities, and also sought restitution to consumers or disgorgement of ill-gotten gains and civil penalties, where appropriate. The investigation was conducted with the cooperation of the Royal Canadian Mounted Police and the British Columbia Ministry of Attorney General, which filed suit against the same defendants in a British Columbia court. That court issued an asset freeze and appointed a receiver, pending trial.
A Summary Judgment, which was entered by the U.S. District Court in Seattle last April, bars the defendants from selling tickets, chances, interests or registrations in any lottery to U.S. residents and from selling any product or service to U.S. residents in a manner that violates the FTC Act, the Telemarketing Sales Rule, or the Arizona and Washington consumer protection statutes. In addition, the court required that the defendants pay $3,189,373 in consumer redress.
However, based on financial declarations of the defendants, the amount of the assets identified and frozen, and on Canadian law, $500,000 is available to satisfy the judgment. The defendants have agreed to payment of this amount while also settling with the British Columbia Ministry, which will request that the British Columbia court permit release of the frozen funds, less certain investigative expenses, to the FTC.
In a related development, Alvin Cordeiro, doing business as Quick-Checks, has agreed to settle FTC charges that he violated the FTC Act and the Telemarketing Sales Rule by providing "substantial assistance and support" to the Canadian telemarketers, including the WinUSA defendants. The FTC alleged that Cordeiro provided account debiting services to process demand drafts through U.S. banks, and that he knew, or should have known, that the telemarketing scheme was fraudulent and violated federal law.
The Telemarketing Sales Rule prohibits anyone from providing assistance or support to any telemarketer that the person knows or should know is violating the Rule. The Canadian telemarketers made false statements to consumers, in violation of the Rule. They failed to disclose to consumers that the sale and trafficking in foreign lottery tickets is a crime in the United States, in violation of the Rule. They also failed to obtain consumers' express, verifiable authorization before obtaining payment by account debit or demand draft, in violation of the Rule. According to the FTC complaint, over 37 percent of the total dollar volume of Win USA sales presented to Quick-Checks for processing were rejected on submission to consumers' banks, and of the amount successfully debited from consumers' accounts, another 30 percent was later returned or reversed at consumers' request. "Such high rejection and return rates should have signaled to Cordeiro that there were fundamental problems with the Win USA telemarketing efforts," the complaint says.
The proposed settlement would bar Cordeiro from providing substantial assistance or support, including but not limited to customer payment processing services, to anyone who offers or promotes foreign lottery sales to U.S. citizens. It also would bar him from assisting any telemarketer who violates the FTC Act or the Telemarketing Sales Rule, including those who make false statements; fail to make disclosure of material restrictions or conditions to receive goods or services; or fail to obtain customers' express verifiable authorization of payment. The settlement also contains record-keeping provisions to allow the FTC to monitor compliance.
The Commission votes to accept the Stipulated Final Judgments and Orders were 5-0. The proposed Win USA order was filed in the U.S. District Court, Western District of Washington on February 5, 2001. The Cordeiro complaint and proposed order will be filed in the U.S. District Court, Northern District of California, today.
NOTE: A Stipulated Final Judgment and Order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Consent Judgments have the force of law when signed by the judge.
Copies of the complaints and 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. 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. 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.
FTC File No. X99 0006 (Win USA et al.)
Civil Action No. C98-1614Z
FTC File No. 002 3169 (Cordeiro)
No Civil Action No. Available at Press Time.