Sweepstakes Scandal Shocks Vulnerable: Were You Affected?


NEW YORK (MainStreet) — The Federal Trade Commission has announced the end of a $2 million jackpot that had just one catch: the game was never real.

In September, the agency filed civil papers against Liam O. Moran of Ventura, Calif., along with several companies that he owns. The complaint alleges that for the past seven years he has run a massive scam to steal money from consumers in the guise of handing out multi-million dollar jackpots.

According to Joannie Wei, attorney for the FTC, Moran would send out mass mailings to people across the world. In the letters he would announce that the recipient had won the grand prize in a sweepstakes, Publisher's Clearinghouse style, and to collect his spectacular winnings, the person had only to mail in a check covering modest processing fees. Typically the mailer asked for $20 - $30.

Unfortunately the only winner was Moran, to the tune of $11 million.

"The defendants would bury in the fine print, either at the bottoms or the backs of the letters, that the consumer had not actually won any money," Wei said, "and that the defendants were actually compiling sort of a consumer report for sweepstakes that the consumer could possibly enter."

No victims ever saw a dollar of money in return.

The dense "legalese" included with each letter tried to create an escape clause to potential law enforcement according to FTC officials, who say that the fine print did nothing to contradict each flier's eager announcements that the recipient had won a huge amount of cash. While the defendant may have attempted to escape responsibility for his actions through some sort of magical fine print, according to Wei that sort of get out of jail free card simply doesn't work.

"Disclaimers are used all the time in advertisements, you see them all the time in print and media, and they're fine if they work," she said. "But if a company hides the disclaimer in such a way that a consumer acting reasonably wouldn't see it, and the disclaimer doesn't correct any impressions in the ad itself, than the disclaimer doesn't work."

"There's nothing there in that disclaimer that would have cured any of the misimpressions in the letter itself," she added, speaking to Moran's case specifically. "Our impression, and our positions that we advanced in the court papers, was that it was just so they could have something to point to when the law caught up to them and say, 'Hey, but we told them.'"

The contest may not have been real, but the scam very much was.

Over the course of seven years, Moran sent out through his companies more than 3.7 million letters to individuals across more than 156 different countries. The vast majority of victims were elderly, 65 and older, as the defendants targeted this population specifically.

It was this international reach which ultimately led the FTC to find and put a stop to Moran's operation, when the Metropolitan Police intercepted several million fliers at London's Heathrow Airport. After tracing the deceptive papers back to California, British authorities alerted the FTC, prompting the organization's investigation.

Unfortunately, according to Wei, scams like this happen all too often.

"It's very common," she said. "It's one of the oldest and most successful scams, and in terms of complaints, the FTC gets this may be either the third or fourth highest category we get."

The problem is so pervasive that the commission has published a Website specifically about the issue, informing consumers about common patterns to avoid. According to Wei, the FTC received more than 85,000 complaints about sweepstakes scams in 2012 alone.

And that, she estimates, is probably under 10% of the total.

Sweepstakes fraud like this succeeds, because it plays off of a very rational decision. When a letter arrives in the mail offering a shot at several million dollars, most people want to take it. If the sender only asks for a modest fee in exchange, some actually decide to roll the dice. After all, what's $20 compared to a fortune?

"I talked to one victim who said he would look at the letters, see which ones looked more believable and he would send money to them," Wei said. "They'll think, 'it's only $20 or $30, I'll try my luck.'"

The offer may probably be fake, but when finding out for sure costs less than a ride to the airport it's often worth the risk. Often enough, at least.

Along with Liam Moran, the complaint names his three companies as co-defendants. Each has been placed into a court-ordered receivership, and the defendants' personal and corporate assets have been either frozen or seized. While Moran personally ran all of the corporate defendants, the various companies did have a small number of employees, although none has been named as co-defendants at this time.

The ultimate goal of the enforcement action will be to repay to consumers as much of the $11 million as possible.

--Written by Eric Reed for MainStreet

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