FTC Settles with Cross Border Con Artists

In an ongoing crackdown on cross-border con artists, the Federal Trade Commission and Canadian law enforcers have settled two separate cases with operators who targeted senior citizens in cross-border lottery schemes. The settlements, which have been entered by the U.S. District Court in Seattle, bar both defendants from selling, promoting, or participating in the sale of chances, tickets, or shares of any foreign lottery or bond program in the future. Taken together, the settlements will return approximately $1.9 million to consumers from assets seized by Canadian law enforcers working in conjunction with the FTC. One defendant also was charged under criminal statutes and will serve a six-year jail sentence for wire fraud.

In December 2000, the FTC and Canadian law enforcers moved to halt a Vancouver-based telemarketing scam targeting senior citizens in the United States. The telemarketers, who operated under a variety of names including NAGG Holdings Ltd., Canada Prepaid Legal Services, and BSI Premium Bonds, allegedly guaranteed that consumers would receive monthly payments between $5,000 and $12,000 in return for a one-time payment of up to $5,000. In addition, the FTC charged that the telemarketers called marketed bonds – sometimes calling them British Premium Savings Bonds – the purchase of which would supposedly qualify consumers for cash prizes, monthly cash payments, or bond investments with the chance to participate in monthly drawings for cash prizes.

Consumers who paid the defendants allegedly received nothing of value. According to the FTC, National Savings, the second-largest savings institution in the U.K., is the only organization authorized to sell British Premium Savings Bonds. Because such bonds have a lottery feature, they cannot legally be sold in the U.S. The FTC also alleged that some of the defendants placed unauthorized charges on consumers’ credit cards and, in some instances, simply charged consumers’ credit card accounts without ever having contacted them. The FTC alleged that the defendants’ activities violated the Federal Trade Commission Act and the Telemarketing Sales Rule. At the request of the FTC, the U.S. District Court in Seattle ordered a temporary halt to the deceptive telemarketing practices, pending trial, and ordered a temporary asset freeze and appointed a receiver for any assets obtained. The Consumer Services Division of the British Columbia Ministry of Public Safety and Solicitor General (BCSG) initiated a parallel enforcement action and asset freeze in the Province of British Columbia, Canada.

The FTC’s settlement announced today with defendant Timothy Ryan Babuin, one of the main defendants in the case and principal of NAGG Holdings Ltd., enjoins him from promoting, selling, or participating in the sale of any lottery or bond program with a lottery feature to any U.S. consumer. It also prohibits him from making misrepresentations, and requires that he disclose all material restrictions, limitations, or conditions in conjunction with the sale of any product or service. It further prohibits him from charging consumers’ credit card accounts without authorization and from selling, renting, brokering, or transmitting consumers’ credit card information to others. Finally, he has relinquished the right to assets that the Director of the BCSG, will liquidate and transfer the funds to the FTC for use as consumer redress. The value of those assets is estimated at $1.9 million. In addition to the settlement with the FTC, Babuin entered into a plea agreement with the U.S. Attorney’s Office in Los Angeles, which had filed criminal charges against him. He will serve a six-year prison term.

In a separate case, in February 2002, the FTC charged that British Columbia-based defendants Dillon Sherif and Melissa Robinson, using a variety of business names, targeted elderly consumers, sometimes trying to sell them shares in foreign lottery tickets, and at other times claimed that consumers had won millions in an Australian or Spanish lottery or a “give-away” sponsored by the Spanish royal family. According to the FTC, the defendants told consumers that, in order to receive their winnings, they had to send money first - described variously as taxes, duties, or currency conversion costs - to the defendants. The defendants repeatedly contacted the same consumers for money according to the FTC complaint. For example, one victim paid $999 to participate in the Spanish lottery. One month later, the telemarketers allegedly told her she had won $2 million, and should send them $19,300 for “currency conversion fees.” The FTC alleged that consumers received nothing for turning over money to the defendants. The FTC charged the defendants with violating the FTC Act and the TSR.

The FTC’s settlement with Melissa C. Robinson bars her from promoting, offering for sale, selling, or accepting funds for tickets, chances, shares or registrations of any lottery winning, award or distribution. It bars her from making misrepresentations or omitting any material facts and from violating or assisting others to violate any provision of the TSR. It also bars her from disclosing consumer lists. She has forfeited her assets, valued at approximately $59,000, to the BCSG. In April 2003, the U.S. District Court in Seattle entered a default judgment in the amount of $1.8 million against Robinson’s co-defendant, Dillon Sherif. Both of the above cases were investigated with assistance from Project Emptor, the Royal Canadian Mounted Police's Vancouver, B.C., Telemarketing Fraud Task Force.

NOTE: A Stipulated final judgment and order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of the legal documents associated with these cases 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. CV02-0294C, FTC v. Dillon Sherif, et al.)
(Civil Action No. CV00-2080Z, FTC v. Canada Prepaid Legal Services, et al.)