Canadian Scam Fleeced U.S. Elders

December 5, 2002
Canadian telemarketers whose companies targeted elderly U.S. citizens in a lottery scam have agreed to paynearly $1 million to settle Federal Trade Commission charges that the schemes violated federal laws.

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 FTC charged that the telemarketers, who operated under a variety of names including NAGG Holdings Ltd., Canada Prepaid Legal Services, and BSI Premium Bonds, guaranteed 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 purportedly to market bonds - in some cases British Premium Savings Bonds - the purchase of which would qualify consumers for cash prizes, monthly cash payments, or bond investments with the chance to participate in monthly drawings for cash prizes. Consumers then received mailings that included a purported British National Savings Premium Savings Bond certificate and other documents indicating that the defendants would enter the consumer's name or bond numbers into the Premium Savings Bond program's monthly drawings for cash winnings.

In fact, the consumers received nothing of value. National Savings, the second-largest savings institution in the U.K., is the only organization authorized to sell Premium Savings Bonds. Because the 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 settlement bars the defendants 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 them from making misrepresentations, and requires that they disclose all material restrictions, limitations or conditions in conjunction with the sale of any product or service. It further prohibits them from charging consumers' credit card accounts without authorization and from selling, renting, brokering, or transmitting consumers' credit card information to others. Finally, the defendants will release all claims to the approximately $1 million (USD) in assets that the British Columbia Solicitor General froze. The settlement calls for almost all of that money to be returned to the U.S. for consumer redress.

The 14 corporate and individual defendants named in the FTC's civil complaint are Canada Prepaid Legal Services, Inc., doing business as BSI Premium Bonds; David John Edwin Hyde; Joseph Shawn Proulx; E.R.S. Holdings Ltd.; Neil John Schuler; ITH Enterprises Ltd.; Kailey Lewis Babuin; NAGG Holdings Ltd.; Wayne Weis; Timothy Ryan Babuin; 557631 B.C. Ltd., d.b.a. Guaranteed Capital Holdings; Fernando Villagran; Calgary Concrete and Home Improvement Corp., d.b.a. Union Global Trading; and Martin Roy Lamb.