Judge Levies Penalties Against Irvine Marketer
A Missouri judge has ordered Direct American Marketers Inc. to pay $9 million in restitution, civil penalties and fees for defrauding citizens there through its massive sweepstakes mailings.
Boone County Circuit Judge Ellen S. Roper in Columbia ruled that DAMI, based in Irvine, violated state law by sending Missourians solicitations that were deceptive, suppressed material facts and were unfair.
The mailings, often in the form of authentic-looking checks marked “Not Valid” in small type, urged consumers to dial a 900 pay-per-call number to find out what prize they won. About 163,000 state residents responded.
Unknown to most, who didn’t read the small type on the back of one of the enclosures, the calls typically cost $30 each. Some paid as much as $400 on calls. Consumers never won more than $1.
“In essence, you can’t clear deception by trying to explain it away in small type,” said Missouri Atty. Gen. Jeremiah W. “Jay” Nixon.
DAMI Chairman Anthony Brown wasn’t available for comment.
DAMI, one of the biggest direct marketers in the nation, recently agreed to shut down its sweepstakes division to settle a Federal Trade Commission investigation. It also settled a Florida lawsuit and faces a criminal investigation in Oklahoma.
Nixon said DAMI sent 500,000 pieces of mail into Missouri from January 1995 to April 1996, typically using one of more than 100 different names.
Those aliases included Audit Control Bureau, ACG Independent Judging Organization, Things Remembered, Equity Funding Group, NPS, Independent Judging Organization, Equity Disbursement Group and National Publicity Sweepstakes.
The odds of winning anything other than $1 after making the telephone call were about 1 in 5 million, Nixon said. DAMI has pointed out previously that the odds of winning lotteries in many states are greater than that.
Roper ordered DAMI to pay $4 million as initial restitution to Missourians, though she left the door open to a higher payment should more citizens claim refunds. She also ordered the company to pay nearly $4.7 million in civil penalties and $400,000 to a state fund to cover the costs of making refunds to consumers.
The verdict, which came after a nonjury trial earlier this year, is the biggest civil consumer fraud verdict the state has ever won, Nixon said, though he pointed out that some settlements have gone as high as $20 million.
The judge had taken the case under submission after its conclusion and filed her findings and verdict on Monday. Information about it, however, wasn’t released until Wednesday.
