Attorney General's News Release

Jan. 11, 1999

Nixon announces sweepstakes business will pay $1.2 million to Missouri in restitution under bankruptcy claim settlement

Jefferson City, Mo. — Attorney General Jay Nixon today announced Missouri will receive more than $1.2 million for restitution under a bankruptcy claim settlement with an Irvine, Calif., business that was one of the country's largest direct mail sweepstakes operations.

The $1,265,000 Nixon obtained for Missouri from Direct American Marketers Inc., or DAMI, is the largest obtained by any of the 30 states that collectively pursued claims against the business. The $3 million settlement approved by a federal bankruptcy court in California resolves the collective claims of the states against DAMI.

"This case was doggedly pursued through the state court here in Missouri and in the federal bankruptcy court in California," Nixon said. "The attorneys in our Consumer Protection Division and in our Bankruptcy Collections Unit were not going to let DAMI off the hook after they ripped off thousands of Missourians. I am very proud of what they accomplished."

Most of the $1.2 million will be used to provide restitution to more than 91,000 Missourians who paid for a 900 number telephone call in order to claim a cash prize in 1995 and 1996. In July 1997, Nixon won a court judgment in Boone County against DAMI that eventually totalled more than $10.2 million. In August 1997, DAMI filed for bankruptcy.

Formed in 1986, DAMI sent tens of millions of sweepstakes solicitations nationwide, attracted an estimated eight million participants, and generated hundreds of millions of dollars in sales before it filed for bankruptcy in August 1997. The solicitations -- often containing realistic-looking "checks" for $7,500 or more -- encouraged recipients to call a 900 number to claim a cash prize. If consumers won anything, the prize was almost always a check for $1 for a phone call that typically cost the consumer $20 to $40.

Missouri and 29 other states filed claims in DAMI's bankruptcy action for alleged violations of consumer laws in those states. The states alleged a high level of confusion was caused by the fact that the company used more than 400 alias business and personal names in its solicitations, as well as several addresses as it ran the dozens of sweepstakes.

Regulators also alleged that the solicitations urged consumers to respond quickly by making the 900 call before the contest ended, with the implication that otherwise they might forfeit any prize. Only in the rules did the solicitations disclose that the contests generally did not end for several months.

The settlement with DAMI is believed to be the largest effort by state Attorneys General to collectively pursue claims for violations of their respective consumer fraud laws through the bankruptcy courts.

In addition to the states' settlement with DAMI, several states also will receive portions of a settlement reached by the Federal Trade Commission in August 1997 with the company in which DAMI agreed to end its sweepstakes program. Missouri will receive $31,440 from that settlement.

The company and its chief executive officer, Anthony C. Brown, also consented to state court injunctions prohibiting any future 900 number sweepstakes.

The other states besides Missouri that participated in today's settlement are Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, Oklahoma, Pennsylvania, Rhode Island, Utah, Virginia and West Virginia.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818