Newport Group Owners Settle FTC Charges

Two Canadian brothers and their companies, charged by the Federal Trade Commission in 2003 with deceptively telling elderly U.S. consumers they had won the Australian or other foreign lotteries, have been barred from similar illegal conduct in the future.

Bruce George Alexander Ironside and Stephen Albert Ironside have settled the Commission’s allegations that their companies’ cross-border pitches – which required up-front payments before any “winnings” would be delivered – violated the FTC Act and the Telemarketing Sales Rule (TSR). The orders have been entered by the U.S. District Court in Seattle. Last year, a default judgment was entered against their companies, which did business as Newport Group and West Star. The two brothers have also signed plea agreements resulting from criminal charges brought by the U.S. Attorney in Los Angeles based on the same conduct.

The Commission’s Complaint

The FTC’s complaint against the Newport Group defendants was filed in October 2003. According to the Commission, the Ironsides’ companies called primarily elderly U.S. consumers, telling them that they had won millions of dollars in the Australian or other foreign lottery. They then told consumers that to collect their “winnings,” they had to pay Newport Group or West Star a certain amount, often described as processing fees, duties, or taxes. In other instances, the defendants told consumers they were part of a very small group of people eligible for a drawing or group of drawings, and that they were therefore likely to win a large sum of money if they first paid participation, registration, or entry fees. At times, the defendants allegedly called the same consumers several times to persuade them to send in multiple payments to cover additional “fees.”

Consumers who paid the fees – which ranged from $500 to more than $35,000 – received an “Entry Confirmation Certificate.” The FTC alleged that most consumers received nothing more from the defendants, with only a small number of consumers getting any of their supposed “winnings.” Based on these alleged activities, the FTC charged the defendants with violatingSection 5 of the FTC Act and the TSR. Specifically, the complaint alleged that they falsely represented that consumers were likely to win large cash awards if they purchased lottery tickets – or paid other money – to the defendants. In addition, the defendants allegedly failed to disclose to consumers that the sale and trafficking in foreign lotteries is a crime in the United States. Finally, the complaint alleged that through their misrepresentations – which were made via telemarketing – the defendants violated the TSR.

Terms of the Final Orders

The consent orders settle the Commission’s charges against Bruce George Alexander Ironside and his brother, Steven Albert Ironside, both of whom were joint owners and co-directors of the five corporate defendants in this matter. The orders bar them from promoting, offering for sale, or selling tickets or chances, interests, or registrations in any lottery to any U.S. resident, and from violating or assisting others to violate the TSR, including making any false representations to consumers or failing to make material disclosures during sales pitches. The settlements also require Bruce Ironside to pay approximately $88,700 (CAD) and $11,800 (USD) and Stephen Ironside to pay approximately $144,000 (CAD) and $45,700 (USD) to be used for consumer redress. Each also will be subject to a $1.8 million suspended judgment if he is found to have misrepresented his financial condition. The orders also contain standard monitoring and record keeping requirements to ensure compliance with their terms.

The Commission vote approving the issuance of the stipulated final orders was 5-0 in each case. The orders were filed in the U.S. District Court for the Western District of Washington at Seattle and have been signed by the judge.

The investigation leading to the orders was conducted by Project Emptor, a Royal Canadian Mounted Police law enforcement task force that also includes the British Columbia Business Practices and Consumer Protection Authority, Canada’s Competition Bureau, the Federal Bureau of Investigation, the U.S. Attorney’s Office for the Central District of California, and the FTC. In addition to the FTC’s action in this case, Stephen and Bruce Ironside have signed plea agreements in connection with criminal charges brought by the U.S. Attorney’s Office in Los Angeles.

NOTE: Stipulated final judgments are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Stipulated judgments have the force of law when signed by the judge.

Copies of the consent orders in settlement of the court action 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.

Media Contact:

Mitchell J. Katz,
Office of Public Affairs
202-326-2161

Staff Contact:

Mary T. Benfield,
FTC Northwest Region, Seattle
260-220-4472

 

(FTC File No. X040004; Civ. No. C03-3166Z)