Court Halts Illegal Canadian Lottery Scheme

A U.S. district court has granted a preliminary injunction halting the operation of Canadian telemarketers who illegally marketed lottery tickets to senior citizens in the United States in violation of federal laws. 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.

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 FTC alleged that the claims were deceptive: the chances of winning the lottery were not good - the odds are long; it is a crime for U.S. consumers to buy Canadian lottery tickets; and the consumers who sent money to redeem large prizes never received them. The deceptive claims violated the FTC Act and the Telemarketing Sales Rule. The FTC asked the court to shut down the operation pending trial, and freeze any assets to preserve them for consumer redress. On October 1, 2002 the court issued a temporary restraining order, granting the FTC's request.

Eleven of the 14 defendants now have agreed to abide by the provisions of the temporary restraining order, pending a trial in this matter. Stipulated preliminary injunctions will bar them from:

• promoting, offering for sale or selling tickets, chances of registrations in lotteries to U.S. residents;
• purchasing or registering any ticket or any interest in any lottery for any U.S. resident;
• misrepresenting or omitting material facts to U.S. consumers in connection with the advertising, marketing, or sale of any product or service;
• making false or misleading statements to induce any person to pay for any good or service; and
• failing to disclose, in a clear and conspicuous manner, before a customer pays for any goods or services, all material restrictions, limitations, or conditions to receive those goods or services.

The preliminary injunction will assure preservation of the assets of the Canadian corporations and two individual defendants, George Yemec and Anita Rapp. If the FTC prevails at trial, it will ask the court to order consumer redress. Two defendants, Steven Rapp and Paul Tesky, are required to provide financial records to the court. The defendants have not admitted to any violations of the law.

The defendants in the case are World Media Brokers Inc., (also known as 913062 Ontario Inc.,) 1165107 Ontario Inc., (also doing business as Canadian Catalogue, Canadian Catalogue Services, CCS, and Interwin Marketing), Faby Games Inc., (also known as1106759 Ontario Inc., and also doing business as Canadian Catalogue Services and CCS, 624654 Ontario Limited, Express Sales, Express Marketing Services, EMS and First Telegroup Marketing), 637736 Ontario Limited, (doing business as Express Marketing Services and EMS), 537721 Ontario Inc., (also doing business as Canadian Express Club), Express Marketing Services Ltd., (also doing business as EMS, Cash & Prizes, Inc.), Intermarketing Services, Inc., George Yemec, Anita Rapp, Steven Rapp, Paul Teskey, Jean-Paul Teskey, and Dean Temple.

Copies of the complaint 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, 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. 02-C-6985 N.D.Illinois)