Crimes of Persuasion:

Schemes, scams, frauds.




Sweepstakes Scams Telemarketing Fraud


Sweepstakes as an Industry

Even "legitimate" sweepstakes companies have become masters at creating a web of deception.

The headlines, the words, everything about their mailers are calculated to get people to buy products they wouldn't otherwise buy.

American Family Publishers, a subsidiary of Time, Inc., blankets the country with sweepstakes entries to promote its magazine subscription offers.

Sweepstakes companies prey on a generation that are very trusting. These mailings are carefully designed to look like official government documents.

With convincing personal notes and endorsements by Ed McMahon and Dick Clark it's difficult for anyone not to believe they're a winner, especially with devices such as preauthorization of the manner of the prize payoff and associated publicity release forms.

"How shall we deliver your money? In an armoured truck or straight into your bank account for the rest of your life?"


Ripe for Picking

Some seniors suffer from social isolation as a result of illness, impaired mobility, and the breakdown of social networks due to death and relocation.

These people are particularly vulnerable to solicitations that falsely intimate friendship and individualized concern.

Seniors suffering from cognitive and perceptual impairments are also particularly vulnerable to deceptive advertising practices.

The external packaging and envelopes of sweepstakes solicitations often use deceptive text and graphics to create the false impression that the document is urgent and legally important, when in fact it is simply a mass-market mailing.

Companies misrepresent the likelihood of actually winning through the sophisticated use of graphics which manipulate font, type size, color, layout, and text to hide contest conditions while emphasizing the likelihood of winning.

The actual chance of winning a major prize in a sweepstakes is approximately one in fifty million.


Keep Buying to Win!

Publishers Clearinghouse, which sells magazine subscriptions, videos, collectible figurines, sports memorabilia, coins, household and personal care items, along with books and tapes, has stated the number of respondents over the age of 65 who purchase its products is 30%, or twice the national average.

In one year, more than 450 of these consumers, in West Virginia alone, ordered at least $2,500 worth of merchandise "each", and ten of those spent over $10,000.

Of those consumers who had sent PCH more than $2,500 during 1997, 150 people sent approximately $570,326 during that single year.

Of these, five purchased approximately $5,000 in merchandise, two spent more than $7,000, three spent more than $8,000, one spent more than $9,000, and one spent in excess of $12,000.

The average age of the consumers on the list was 74. The average amount spent was $3,800.

One woman in her 70's spent $400 to $500 a month over five years on products purchased from sweepstakes companies.

A woman in her 80's spent half of her Social Security check each month entering.


Totally Convinced

Many of these victims are too embarrassed to come forward once they find out they've been duped.

One California man, unable to convince his elderly father he was not a winner, flew with him to Florida to "claim" his prize only to find out it was all in vain.

A 78-year-old woman, so convinced she had won the big prize after being asked for a map to her home, "so the Prize Patrol could find her", put a welcome sign for it in her front yard, ordered a cake and was ready to celebrate her great fortune with friends.

Like the California man, she didn't win either.

"They'd send you letters saying "Be home on this day." so you actually thought, "Maybe I am a winner.""

After receiving such a letter, which even indicated that flowers had been ordered for her at the local florist for the big day, she waited expectantly, but in vain, for her check to arrive.

The elderly are targeted not because they want the trinkets being sold, but because they are misled into believing that the more merchandise they buy the better their chances of winning.

But it's not only the elderly that fall for the lure of these sweepstakes come-ons.

One professional woman in her 50's was surprised to find she had spent $3,400 in one year on magazines and other gifts.

She bought because she was convinced it gave her a better chance to win.

Once people purchase something, they keep getting more and more sweepstakes mailers and promises of even greater winnings.

Many people are on multiple mailing lists. Two of the companies sent out 130 separate mailers per year to some individuals.

They also used deceptive billing practices to entice customers into paying two or more times for the same subscription.

The companies have also:

blue bullet point

created a false sense of urgency to respond to the sweepstakes so as to prevent someone else from claiming their prize;

blue bullet point

implied that purchasing a product was a requirement or improved the chances of winning;

blue bullet point

indicated that recipients were part of a select group vying for a prize and;

blue bullet point

falsely claimed that the sweepstakes were endorsed by the state or federal government.


Sweepstakes for Sale

Publishers Clearing House was founded in 1953 and has been holding sweepstakes since 1967.

The company has given out about $137 million in major prizes and awards.

In 1997 and 1998, the company had annual sales of about $375 million.

These companies started out in the business of selling magazines but are now in the business of selling sweepstakes, and instead of people being sold the benefits of the magazines, they're sold on being a winner, finalist, or having a better chance to win.

The director of consumer affairs at Publishers Clearing House says that the majority of people who return their sweepstakes entries do so without ordering and that the majority of their millionaire winners —23 of 30 —did not order with their winning entry.


Not Everyone is Pleased

Regardless of their assurances of propriety, one of the nations largest sweepstakes operators, American Family Publishers, which uses Ed McMahon and Dick Clark as its spokespersons, has agreed to pay various states $1.25 million for violations of consumer laws as well as stop the use of illegal promotional tactics.

"There's a line between hype to sell a product and deception," said Attorney General Christine Gregoire. "They crossed over that line by suggesting consumers were one of only two recipients with the winning numbers."

The Ohio attorney general's office has wrested settlements from sweepstakes companies including Publishers Clearing House, Reader's Digest Association, United States Purchasing Exchange (also known as United States Sales Corp.) and Time Inc. who agreed to repay approximately 4,000 Ohio consumers who spent large amounts of money buying magazines, knickknacks and other items, believing the purchases would boost their chances of winning.

One class action settlement was reached with private attorneys who represent a group of consumers who received mail or purchased merchandise from one such company between 1992 and 1999.

Out of a $10 million settlement, attorneys fees and other costs took away almost $6 million of that amount.

Only $4 million was potentially available to the consumers who spent more than $1 billion for magazines and merchandise during that time.

It's now illegal for sweepstakes to require players to pay money or make purchases in order to win a prize.

Sweepstakes companies are also prohibited from mailing non-negotiable checks and telling people they're winners unless they actually have won a prize.

Plus, if consumers request it, sweepstakes companies have to take the players' names off their mailing lists.


From Fantasy to Fraud

The widespread use and consumer acceptance of sweepstakes to sell legitimate merchandise has provided unscrupulous telemarketers with an opportunity to defraud people using the same concept.

They usually go that one step further though and fail to deliver anything but false promises in return for the victim's money.

A survey commissioned by the National Consumers League found that 92% of adults had at one time or another received a postcard or letter in the mail informing them that they had won "free prizes. "

Nearly one-third, or 54 million people, responded to those offers, and less than 20% of those received their prizes without buying products or paying fees.

Sweepstakes scams have many variations but can generally be described as an "advance fee" scam which attempts, through deception, to get you to send in money, with or without your knowledge or consent, to pay for taxes, products or duties for a non-existent or misrepresented prize.

Such deceitful callers may ask for your credit card details because their "marketing company" has a "free gift for credit card holders", and "if you can just verify the credit card number, the gift will be on its way."


Texas and Illinois enacted new sweepstakes laws that took effect November 1, 2001, and January 1, 2002, respectively.

The Texas law applies to sweepstakes conducted through the mail with a grand prize worth $50,000 or more, with some exceptions. In general, the law makes it unlawful to:

blue bullet point require an individual to purchase or order a good or service in order to enter;
blue bullet point automatically enter an individual in a sweepstakes who has purchased or ordered a good or service;
blue bullet point solicit business using an order form that is related to a sweepstakes;
blue bullet point use an entry form that does not state “Buying will not help you win. Your chances of winning without making a purchase are the same as the chances of someone who purchases something. It is illegal to give any advantage to buyers in a sweepstakes.”;
blue bullet point offer through the mail any non-sweepstakes prize or giveaway, or an opportunity to enter another sweepstakes, for 30 days after the end of the sweepstakes;
blue bullet point require an individual to comply with a restriction or condition in order to enter, unless all individuals must comply with identical restrictions or conditions;
blue bullet point use a scratch-off device or any other game piece that suggests an element of chance to convey information about the sweepstakes;
blue bullet point state that an individual’s chances of winning will be affected by some event that has no relation to how a winner is selected;
blue bullet point state that an individual is a winner, unless that is true;
blue bullet point publish different advertisements for the same sweepstakes that contain inconsistent descriptions of the grand prize; and
blue bullet point award multiple prizes unless all prizes are awarded on the same date and through the same selection process.

The Illinois law applies very broadly to “a written promotional offer”that is:

blue bullet point made to a person in Illinois;
blue bullet point used to induce or invite a person to come to Illinois to claim a prize, attend a sales presentation, meet a promoter, sponsor, salesperson, or agent, or conduct any business in Illinois; or
blue bullet point used to induce or invite a person to contact by any means a promoter, sponsor, salesperson, or agent in Illinois.

It is unclear if the law is limited to sweepstakes conducted through the mail (like the federal sweepstakes law) or whether it applies more broadly to any print advertisement for a sweepstakes or contest. In general, the Illinois law makes it unlawful to:

blue bullet point require an individual to pay the sponsor money as a condition of receiving, using, competing for, or obtaining information about a prize;
blue bullet point representing that a person has won or will unconditionally be the winner of a prize (unless the person is given the prize without obligation, is notified at no expense within 15 days of winning the prize, and such representation of winning is not false, deceptive or misleading).

The law also recognizes that such a “written promotional prize offer" must contain the following disclosures in a clear and conspicuous statement at the onset of the offer:

blue bullet point the name(s) and address(es) of the sponsor(s);
blue bullet point the retail value of each prize and the odds of receiving each prize;
blue bullet point no purchase is necessary to enter and will not increase chances of winning;
blue bullet point whether a person must pay the actual shipping or handling fees or any other charges to obtain or use a prize, and the nature and amount thereof;
blue bullet point a description of any restrictions on the receipt of the prize;
blue bullet point any eligibility limitations;
blue bullet point the number of people in a group such as “finalists”, “specially selected”, “first place”or any other limited group of persons with an enhanced likelihood of receiving a prize.

Additionally, any sponsor who represents that a person has been awarded a prize shall, within 30 days of such a representation, provide that person with one of the following: (i) the prize, (ii) a voucher or certificate awarding the person the prize, or (iii) the retail value of the prize in the form of cash, a money order, or certified check.


Worldly Scam Covers Four Countries

05/13/04 - The Tomah Wisconsin Police Department is warning residents of a mail fraud scam.

Someone reported receiving a letter in the mail from Global Network LTD in Australia. Along with the letter, the individual received a check for $4,500 indicating that person was a winner.

The letter directed the person to deposit the check in the bank, then contact another person in New York.

Immediately after placing the check in the bank, the recipient began getting phone calls from another person saying the check was sent by mistake.

Because of the mistake, the recipient was to send money via Western Union to another subject in Canada.

According to Tomah police, it is believed the $4,500 check is fraudulent and used in an attempt to solicit money from people.


Sweepstakes Scam Fraudster Pleads Guilty to Crime Against Elderly

05/06 - CEDAR RAPIDS --- A New York man has pleaded to his role in a bogus sweepstakes scheme that bilked an elderly Iowa woman out hundreds of thousands of dollars.

Michael A. Van Houten, 39, of Brooklyn, N.Y., was scheduled to go to trial May 30 for 18 counts of wire fraud, but he pleaded to a single count in U.S. District Court in Cedar Rapids.

So far, Van Houten is the only one indicted in connection with the scam, but records filed in his case note the investigation is ongoing and mention possible co-defendants.

His plea agreement remains sealed.

The victim's hometown hasn't been disclosed, but records state she wired money to New York from Waterloo, Hudson and Cedar Rapids.

Authorities have so far declined to talk about Van Houten's specific role in the scheme, although records state he and others picked up money wired to New York.

Records said the scam started sometime in July 2002 when those taking part in the crime called the woman and told her she won a large cash sweepstakes.

But before she could claim her prize, they told her, she needed to pay fees upfront.

In the year that followed, she paid about $200,000 in "taxes" and "advance fees" in installments of between $3,500 and $8,000 by using MoneyGram and Western Union.

They asked her to wire cash payments to New York City using Western Union and Money Gram.

To avoid detection, people involved in the scam sometimes asked her to use a false name when sending the money and told her not to mention the sweepstakes to anyone, including police, because doing so would disqualify her from the prize.

Van Houten faces up to 20 years in prison and sentencing will be at a later date. Until then, he remains free on $50,000 bond and continues to reside in New York.

WCFCourier.com


For more on Sweepstake Scams.

Examples of Overpriced Promotional Sweepstake Prize Product Offerings

Articles on Sweepstakes Scams


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How Con Artists Will Steal Your Savings and Inheritance Through Telemarketing Fraud, Investment Schemes and Consumer Scams

In-depth fraud coverage of computer crimes such as pyramid schemes make this economic crime library of internet crimes the cyber crime location for the schemes, scams and swindles that con artists and shonks perpetrate.

White collar crimes such as prime bank fraud, pyramid scams, internet fraud, phone scams, chain letters, modeling agency and Nigerian scams, computer fraud as well as telemarketing fraud are fully explained.

This organized crime report by Les Henderson includes credit card fraud, check kiting, tax fraud, money laundering, mail fraud, counterfeit money orders, check fraud and other who's who true crimes of persuasion.

Crimes of Persuasion: Schemes, scams, frauds.

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