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Sweepstakes Firm Settles for $3M

January 12, 1999

SANTA ANA, Calif. (AP) _ Direct American Marketers Inc. will pay $3 million to settle deceptive practices allegations in 30 states, the company and several states said Monday.

The Federal Trade Commission and attorneys general from dozens of states claimed the Orange County-based telemarketer sent sweepstakes notification mailers to consumers urging them to dial toll numbers to claim prizes that were worth less than the cost of the call.

After being charged an average $30 per call, the prizes turned out to be $1 or nothing at all.

``These schemes are nothing more than pure trickery. Anytime you are told to call a 900, or any pay-per-call number, in order to claim a prize that should be a big red flag,″ Maryland Attorney General J. Joseph Curran Jr. said in a statement announcing Monday’s settlements.

Direct American sweepstakes mailings were also sent to consumers under the names ACG Independent Judging Organization, Audit Control Bureau and Equity Disbursement Group.

Some consumers didn’t realize they were dealing with the same company and they made five or more calls to the 900 numbers, each losing $150 or more, the Maryland attorney general said.

Direct American stopped mailing the prize solicitations in August 1997 and petitioned a court under Chapter 11 of the U.S. Bankruptcy Code, which provides for the continued operation of a business under a judge’s supervision while it attempts to reorganize its finances.

Under the settlement approved by the federal bankruptcy court, Direct American agreed to pay $3 million to settle claims filed by 30 states.

The FTC reached agreement with Direct American, which didn’t admit wrongdoing, in January 1998.

The company got out of the sweepstakes business about two years ago and has been reaching final settlements with the states involved, Direct American spokesman Ron Trumbley said Monday.

``We’re hopeful that with the settlements we’ll exit Chapter 11 in the near future,″ he said.

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