A federal judge has ordered Canadian telemarketers running an illegal foreign lottery scam that targeted senior citizens in the United States to pay $19 million in consumer redress and has ordered a permanent halt to the scam.
On September 30, 2002, the FTC filed a complaint in U.S. District Court in Chicago charging that a group of related companies operated by six Canadians was running telemarketing boiler rooms targeting seniors in an illegal foreign lottery scheme. The FTC alleged that the telemarketers told the consumers that by investing with them, the consumers had a very good chance of winning the Canadian lottery. According to the FTC, the telemarketers told many consumers that it is legal for U.S. consumers to buy Canadian lottery tickets. They told some consumers that they had already won a large prize and that consumers should send them money to redeem their winnings. The agency charged them with violating the FTC Act and the Telemarketing Sales Rule.
On October 1, 2002, U. S. District Court Judge Amy St. Eve issued a temporary restraining order. Eleven of the 14 defendants agreed to abide by the provisions of the temporary restraining order, pending trial. In December, the court granted a preliminary injunction halting the operation. At the request of the Federal Trade Commission, the court temporarily barred the defendants from selling tickets, chances, or any foreign lottery chances to residents of the United States; barred deceptive claims about the chances of winning the Canadian lottery; prohibited misrepresentations or omissions about material facts; and ordered an asset freeze to preserve funds for consumer redress, pending trial.
In the order announced today, Judge St. Eve wrote that the defendants made false or misleading statements to induce consumers to purchase shares or interests in lottery tickets, including that it is legal for them to sell foreign lottery tickets and for consumers to purchase them. She ordered defendants George Yemec, Anita Rapp and World Media Brokers, Express Marketing Services, and three other corporations they own and control to pay $19 million.
In pursuing cross border fraud, the FTC works with other U.S. and Canadian law enforcement agencies at the federal, provincial, state, and local level. The FTC brought the World Media Brokers matter with assistance from the members of the Toronto Strategic Partnership, a cross-border fraud law enforcement effort that includes the Ontario Provincial Police, the Toronto Police Service Fraud Squad, the Ontario Ministry of Consumer and Business Services, Competition Bureau Canada, the York Regional Police, the U.S. Postal Inspection Service, and the Ohio Attorney General’s Office. Related proceedings in Canada were handled by the U.S. Department of Justice Office of Foreign Litigation.
In another case targeting cross border lottery scams by telemarketers, the FTC charged defendants in British Columbia who offered “British Bonds” and lottery winnings to mostly elderly consumers in the United States and the United Kingdom with violating federal law. In a complaint filed in May 2002, the agency alleged that the defendants told their victims they were likely to receive a large return on their bond investment. The agency alleged that consumers were unlikely to receive any return, let alone a large return, and that it is illegal to sell or buy foreign lotteries in the U.S. The defendants were charged with violating the FTC Act and the Telemarketing Sales Rule. The defendants in the case are First British National Holdings Ltd, Omid Tahvili, and Reginald Pal.
A Stipulated Order filed in District Court for the Western District of Washington, in Seattle, bars the defendants from promoting or selling tickets, chances, interests, holdings, or shares in any foreign lottery or bond to any U.S. resident. It also bars them from making misleading or false statements to induce consumers to pay for goods and services and bars them from selling or sharing their customer lists. A judgment of $1.3 million is suspended on payment of approximately $400,000 for consumer redress. Reflecting the international nature of the scam, the Stipulated Order obtained by the FTC authorized consumer redress payments to victims in both the U.S. and the U.K.
Law enforcement action against First British National Holdings was coordinated through Project Emptor, a cooperative arrangement coordinated by the Royal Canadian Mounted Police that teams Canadian and U.S. law enforcers from the Los Angeles Office of the FBI, the U.S. Attorney’s Office for the Central District of California, the FTC, the RCMP, the British Columbia Business Practices and Consumer Protection Authority, and the Canadian Competition Bureau to target scams that emerge from Vancouver-area boiler rooms.
In May 2003, the FTC charged three individuals with using four corporations to engage in illegal telemarketing to U.S. consumers. The agency alleged that the defendants' telemarketers persuaded consumers that they would win the German, Spanish, or other foreign lotteries if they paid the defendants to play on their behalf. Consumers also were told they had won large sums of money but needed to pay a fee to collect their winnings. Defendants also ran a “recovery room” scheme, advising consumers that for a fee, the defendants would recover money the consumers had previously lost in the defendants’ earlier scams. The FTC alleged that two other individuals had improperly taken possession of assets that were the proceeds of the fraudulent lottery operation.
Two defendants, Wilson Okike and Basil Steeves, were arrested in the United States, pleaded guilty to criminal wire fraud charges, and were sentenced to serve time in U.S. prisons.
A settlement judgment filed in the District Court in Seattle provides for payment of $371,000 from assets frozen by Canadian authorities from Wilson Okike, Uchenna and Obiagele Okike, Royal Flush System Network, Inc., ECAPS Credit Solutions Network Inc., Globallot Services, Inc., and Flash Productions, Inc. When combined with funds forfeited in criminal proceedings, more than $500,000 will be available for consumer redress. A settlement with Natty Osemwengie bars him from engaging in lottery sales in the future and requires him to release his claims against the properties which will be used to provide part of the funds paid as redress. The FTC previously entered into a separate settlement with Basil Steeves in May 2002 in which Steeves agreed to pay $50,000 (CAD).
As with First British National Holdings, the FTC’s law enforcement action involving Royal Flush was coordinated through Project Emptor.
The cooperation of federal, state, local and provincial agencies in all of these law enforcement initiatives has served as a model for a partnership established in Alberta in 2003, and for the recently-established Vancouver Strategic Alliance. The FTC is working with agencies in several other Canadian provinces to establish or join additional enforcement partnerships.
NOTE: Stipulated Final Judgments and Orders are for settlement purposes only and does not constitute an admission by the defendants of a law violation.
Copies of the stipulated final judgments and orders 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 in English or Spanish (bilingual counselors are available to take complaints), 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, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
(Civil Action No. C02-1085L - Royal Flush)
(Civil Action No. C02-1134P - First British National Holdings)
(Civil Action No. 02-C-6985 N. D. Illinois - Express Marketing)