FTC Halts Credit Card Laundering Operation: Millions Lost to Cross Border Lottery Fraud

In a crack down on cross border fraud, the Federal Trade Commission has obtained a court order temporarily halting a credit card laundering service that allowed Canadian telemarketers to bilk U.S. consumers out of tens of millions of dollars by deceptively selling foreign lottery shares. The Commission charged Woofter Investment Corporation, doing business as A.T.M.S., and Patsy Barbour, its principal, with assisting and facilitating numerous Canadian telemarketers who deceptively and illegally sell shares in foreign lotteries by laundering their credit card transactions, acting as a lottery agent and providing "customer service" for them. The sale and trafficking in foreign lotteries is a crime in both the U.S. and Canada.

This is the Commission’s first enforcement action under the credit card laundering provision of the Telemarketing Sales Rule.

The court’s temporary restraining order freezes the defendants’ assets and appoints a temporary receiver to take control of the company. The FTC also asked the court to issue a permanent injunction against the defendants in order to halt the scam and provide redress for consumer victims.

"Transborder telemarketers selling foreign lottery tickets are conning consumers into committing crimes and picking their pockets in the process," said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection. "Many cross-border con artists target the elderly, bilking them out of their life savings. These telemarketers lie about the chances of winning the foreign lotteries and if consumers do win, the swindlers don’t pay off. Cross border telemarketing fraud costs U. S. consumers billions of dollars a year."

According to the complaint detailing the charges, the Canadian telemarketers target U.S. residents -- particularly the elderly -- soliciting them to purchase chances or interests in tickets for foreign lotteries. Consumers are told that the telemarketers have a system for winning, or that the odds of winning are very good, or that they "cannot lose." Most consumers do not win any money; those who do may never receive their winnings, the complaint says. Consumers are not told that the transaction is illegal or that the telemarketers’ or defendants’ policy is to deny cancellation of purchases or refunds of money paid for lottery chances.

According to the complaint, many of the lottery tickets or chances are charged to VISA or MasterCard accounts. Woofter, which has merchant accounts with the charge card companies, makes the accounts available to the lottery telemarketers for processing their credit card transactions for a 15% fee. Use of the merchant accounts to process credit card transactions for their telemarketing clients is alleged to violate the Telemarketing Sales Rule and is not authorized by VISA or MasterCard.

Woofter and Barbour are charged with numerous violations of the Telemarketing Sales Rule which requires that telemarketers disclose restrictions, limitations or conditions on purchases and prohibits misrepresentations, credit card laundering and assisting and facilitating any telemarketer engaged in violations of the Rule.

The Commission vote to file the complaint was 5-0. The FTC’s Seattle Regional Office conducted the investigation, with invaluable assistance from the Nevada Attorney General’s Office.

NOTE: The Commission authorizes the filing of 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 complaint are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326- 2222; TTY 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. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov

(FTC File No. 972 3130)
(Civil Action No. CV-S-97-00515-LDG(RLH))