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A total of $1.25 million will be available for consumers victimized by a massive sweepstakes scam because of a settlement the Federal Trade Commission reached in a case it filed last year to stop three individuals and three corporations from mailing millions of deceptive solicitations. The settlement announced today requires one individual to pay $900,000 for consumer redress. A settlement with another individual announced in July 1995, netted another $350,000 for redress. In addition, the settlement announced today permanently bars the five remaining defendants from offering any sweepstakes, lotteries, games of chance or prize promotions. The settlement also prohibits the defendants from making any false statements in connection with offering any product or service by direct mail and requires each to first obtain a $1 million performance bond.

In its case against Research Awards Center, two affiliate corporations, and three individuals, filed in Baltimore in March 1995, the FTC alleged that the defendants' initial solicitations falsely promised consumers that they were "guaranteed winners" of up to thousands of dollars in cash or a new car. In fact, the only award a consumer was guaranteed to receive was a check for a nominal amount, such as 50 cents, according to the FTC complaint., making them eligible to win thousands of dollars in cash and valuable prizes.

The same solicitations offered consumers membership in a sweepstakes-entry club that promised to enter them in various independent sweepstakes, in which their chances of winning thousands of dollars in cash or other valuable prizes purportedly were highly favorable, the FTC alleged. The defendants told consumers that their clubs were leading research firms using "inside information" or scientific methods to identify appropriate sweepstakes in which to enter club members, according to the complaint. The membership fees varied with the club, the number and size of sweepstakes into which consumers would purportedly be entered, and the term of membership. In fact, the entries did not occur because the defendants' entries either violated the sweepstakes rules or were received after the close of the sweepstakes.

In subsequent solicitations, the defendants then offered members, for an additional fee, the opportunity to increase their potential winnings by entering additional sweepstakes or to join an even more exclusive sweepstakes entry club. (The companies did business using such names on the solicitations as: Cash Bureau, Instant Cash, Inc., Locate and Notify Service, National Win Center, and Prize Claim Center.)

In addition to Research Awards Center and Alvarez, the settling defendants are Quality Marketing, Inc., Financial Research Group, Inc., and Nicholas Creighton Parr (also known as Creig Parr and Nicholas Creighton). The remaining defendant in the case, Deborah C. Taylor, paid $350,000 in redress as part of her settlement with the FTC, which was announced in July 1995.

The proposed consent order to settle these charges would permanently prohibit the defendants from offering or selling any sweepstakes, lottery, game or other prize promotion. The settlement would require the defendants to obtain a performance bond in the amount of $1 million before selling or offering any product or service by direct mail, unless they have no ownership in, or controlling interest in the business or its employees. And it would bar them from making any false statements in operating the business.

Additionally, the proposed settlement would require defendant Alvarez to pay approximately $900,000 to Federal Trade Commission to be used for consumer redress. The redress funds are secured by real estate and other interests of Alvarez.

Further, the proposed settlement would prohibit the defendants from selling, transferring, or renting the name, addresses or telephone numbers of any person who purchased any product or service from them prior to this settlement.

The FTC filed the proposed settlement in the U.S. District Court for the District of Maryland, Northern Division, in Baltimore, today. The proposed settlement is subject to the court's approval. The Commission vote to approve the proposed settlement for filing was 5-0.

NOTE: The consent order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. The proposed settlement has the force of law when signed by the judge.

The FTC has developed a consumer brochure on "Sweepstakes Scams" that warns consumers to be wary of unsolicited sweepstakes solicitations. In addition, consumers may call this number: 202-408-5545, for updates on the status of this case.

Copies of the proposed settlement, as well as other documents associated with this case, 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

 

(Civil Action No. S-95-636)
(FTC File No. 942 3246)

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