"Project Jackpot" Defendants To Settle FTC Charges

Defendants in two of the eight cases filed as part of Project Jackpot -- a nationwide crackdown by federal and state regulators on phony prize promotions and recovery room fraud -- have negotiated settlements with the Federal Trade Commission. In one of the settlements, individual defendants Marc DuBoise and Gerald LaFrance have agreed to post a $200,000 performance bond before engaging in the marketing of prize promotions or any goods or services connected with prize promotions, and pay approximately $100,000 in consumer redress. Defendant Kenneth Nelson has agreed to pay $1,000 in redress. The company through which these defendants operated, Publishers Award Bureau, has given company assets to the permanent receiver. In the other case, American Exchange Group, Inc. ("AEG") and William Kelly, one of its principals, are required to pay $52,000 for consumer redress, and are banned from engaging in prize-promotion telemarketing and recovery services. A default judgment was also entered against Todd Bishop, the remaining AEG defendant, that requires him to pay $173,273 into the consumer redress fund.

Under the terms of both settlements, all defendants have agreed to an injunction against making misrepresentations and against future violations of the FTC's Telemarketing Sales Rule. The Telemarketing Sales Rule, effective Dec. 31, 1995, requires telemarketers offering a prize promotion to provide clearly and conspicuously to consumers, before payment, several items of information, including the fact that no purchase is necessary to enter, how consumers who do not wish to make a purchase may enter the prize promotion, and the odds of receiving the prize where there are several prizes. The rule also specifically prohibits others from providing substantial assistance to telemarketers whom they know or consciously avoid knowing are violating the rule.

"Project Jackpot," a joint effort between the FTC, the state Attorneys General and the U.S. Postal Service, targeted firms that fraudulently offered purportedly valuable prizes to consumers to induce them to purchase products. Project Jackpot resulted in 56 enforcement actions against 79 defendants in 17 states.

In July 1996, as part of Project Jackpot, the FTC, joined by the state of Missouri, filed a complaint in federal district court against Marc DuBoise and Gerald E. LaFrance, individually and doing business as Publishers Award Bureau and Kenneth E. Nelson. The complaint alleged that these defendants solicited consumers by sending them a "Certificate of Award" which stated that the consumers were "absolutely guaranteed to win" one of five seemingly valuable prizes. In fact, when consumers called Publishers Award Bureau to claim their prize, they were told that they had to pay several hundred dollars for magazine subscriptions to become eligible. Moreover, according to the complaint, almost everyone who "won" anything from Publishers Award Bureau received a "deed of license" to a undeveloped building lot in Rancho de Las Palmas ("RDLP") located in Baja, Mexico. Consumers were required to pay annual RDLP membership fees to maintain their deed of license.

In the other matter, the FTC filed a complaint in federal district court against American Exchange Group, Inc., based in Las Vegas, Nevada, and Todd Bishop and William S. Kelly, alleging that the defendants placed calls to consumers in which they promised the consumers that they would receive a large award on the condition that they purchase magazine subscriptions or pens. The consumers were told that their awards would be worth more than they paid, when in fact, according to the complaint, the awards either were not received or were worth significantly less than represented. The defendants were also charged with failing to disclose, clearly and conspicuously, that no purchase or payment was required to win a prize or participate in a prize promotion.

The FTC vote to authorize filing of the stipulated final judgment and order against Marc DuBoise, Gerald LaFrance and Kenneth Nelson was 5-0. It was filed in the U.S. District Court for the Central District of California, in Los Angeles on March 12.

The FTC vote to authorize filing of the stipulated final judgment and permanent injunction against American Exchange Group and William S. Kelly was 5-0. It was entered by the U.S. District Court, in Las Vegas, on March 13, 1997. A default judgment against Todd Bishop was entered by the U.S. District Court, in Las Vegas, on March 20, 1997.

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

Copies of the stipulated final judgments for both cases, and the default judgment regarding Todd Bishop, as well as other documents associated with Project Jackpot, 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 202- 326-2502. To find out the latest FTC news as it is announced, call the FTC's 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

(for American Exchange Group, et al.)

Jerry Steiner
San Francisco Regional Office
901 Market Street, Suite 570
San Francisco, California 94103
415-356-5270

(Marc DuBoise et al -- FTC Matter No. X960098; Civil Action No.: SACV 96-666 AHS (EEX))
(AEG -- FTC Matter X960080; Civil Action No.: CV-S-96-669-PMP (RLH))