A federal judge has ordered Canadian telemarketers running an illegal foreign lottery scam that targeted senior citizens in the United States to pay $19 million in consumer redress and has ordered a permanent halt to the scam.
Chicago U.S. District Court Judge Amy St. Eve wrote that the defendants made false or misleading statements to induce consumers to purchase shares or interests in lottery tickets, including that it is legal for them to sell foreign lottery tickets and for consumers to purchase them. She ordered defendants George Yemec, Anita Rapp and World Media Brokers, Express Marketing Services, and three other corporations they own and control to pay $19 million.
In September 2002, the Federal Trade Commission (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 agency charged them with violating the FTC Act and the Telemarketing Sales Rule.
On October 1, 2002, U. S. District Court Judge Amy St. Eve issued a temporary restraining order. Eleven of the 14 defendants agreed to abide by the provisions of the temporary restraining order, pending trial. In December, the court granted a preliminary injunction halting the operation.
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, pending trial.
First British National Holdings Ltd.
In another case targeting cross border lottery scams by telemarketers, the FTC charged defendants in British Columbia who offered British Bonds and lottery winnings to mostly elderly consumers in the United States and the United Kingdom with violating federal law.
In a complaint filed in May 2002, the agency alleged that the defendants told their victims they were likely to receive a large return on their bond investment. The agency alleged that consumers were unlikely to receive any return, let alone a large return, and that it is illegal to sell or buy foreign lotteries in the U.S. The defendants were charged with violating the FTC Act and the Telemarketing Sales Rule. The defendants in the case are First British National Holdings Ltd, Omid Tahvili, and Reginald Pal.
A Stipulated Order filed in District Court for the Western District of Washington, in Seattle, bars the defendants from promoting or selling tickets, chances, interests, holdings, or shares in any foreign lottery or bond to any U.S. resident. It also bars them from making misleading or false statements to induce consumers to pay for goods and services and bars them from selling or sharing their customer lists.
A judgment of $1.3 million is suspended on payment of approximately $400,000 for consumer redress. Reflecting the international nature of the scam, the Stipulated Order obtained by the FTC authorized consumer redress payments to victims in both the U.S. and the U.K.
Royal Flush System Network, Inc.
In May 2003, the FTC charged three individuals with using four corporations to engage in illegal telemarketing to U.S. consumers. The agency alleged that the defendants' telemarketers persuaded consumers that they would win the German, Spanish, or other foreign lotteries if they paid the defendants to play on their behalf. Consumers also were told they had won large sums of money but needed to pay a fee to collect their winnings.
Defendants also ran a recovery room scheme, advising consumers that for a fee, the defendants would recover money the consumers had previously lost in the defendants earlier scams. The FTC alleged that two other individuals had improperly taken possession of assets that were the proceeds of the fraudulent lottery operation.
Two defendants, Wilson Okike and Basil Steeves, were arrested in the United States, pleaded guilty to criminal wire fraud charges, and were sentenced to serve time in U.S. prisons. A settlement judgment filed in the District Court in Seattle provides for payment of $371,000 from assets frozen by Canadian authorities from Wilson Okike, Uchenna and Obiagele Okike, Royal Flush System Network, Inc., ECAPS Credit Solutions Network Inc., Globallot Services, Inc., and Flash Productions, Inc.
When combined with funds forfeited in criminal proceedings, more than $500,000 will be available for consumer redress.