Vegas Contest Promoters Banned From Iowa, Ordered
DES MOINES -- Iowa Attorney General Tom Miller said today that his office has obtained a $90,000 judgment and an order banning four Nevada defendants from operating alleged "puzzle scams" or doing any future business in Iowa.
The civil penalty is the largest ever under the State's special law prohibiting consumer fraud against older Iowans. Defendants named in the judgment are ADMI, Inc. (doing business as Treasure Express) and Moneda Corporation (doing business as Puzzles N' Prizes), both of Las Vegas, NV, and Gary Grande and Lennard Grodzinsky.
"We alleged that the defendants repeatedly targeted misleading mail solicitations at older Iowans under such names as Magic Money Maker, Count Your Cash, Take Home The Cash, Money By Mail, and Stuff Your Pockets," Miller said. "The solicitations were designed to convince victims that they had already won or were almost certain to win valuable prizes and cash awards -- but only if they paid a contest fee with every entry they submitted."
"The entry fees ranged from about $5 to $35, but we alleged some victims lost $4-6,000 because they were deceived into entering time after time after time," Miller said.
Miller said each contest started with an extremely easy "puzzle" -- such as simply adding several numbers -- that the victims would "solve" and return along with an entry fee. Then, follow-up simple puzzles were sent to the victims, each one assuring victims, for example, that they had "worked hard and qualified for this Official Playoff Puzzle," had "made it to the big one," or were otherwise uniquely placed to win the final contest -- if they only entered and paid again.
Miller said the subsequent puzzle mailings often contained a "Publicity Release" or "Authorization Certificate" asking victims to authorize publication of their names as winners, and some instructed victims to designate their preferred form of payment to receive their award. Victims who did not return additional entries were sent "Emergency Memos" warning them that the money would be given to somebody else if they did not respond immediately.
Miller said victims would continue to return puzzles and additional entry fees until the puzzles, at the final level, became unexpectedly and exceedingly difficult and discouraging.
"People were manipulated into spending years of effort and money in these contests, yet the only thing they won was a chance to enter another one of the defendants' contests," Miller said.
The Consumer Protection Division indicated early in the case that one of its concerns was that "puzzle contests" are a device used to develop lists of vulnerable victims whose names could be sold to other "big-ticket" telemarketing and mail schemes. These sometimes are called "mooch lists."
Gary Grande was the president, sole shareholder and sole director of ADMI, Inc. Lennard Grodzinsky was the sole director and president of Moneda Corporation.
Grande and Grodzinsky originally argued that Iowa could not proceed against them because they were acting in their corporate capacity. In an important 1997 decision, the Supreme Court of Iowa rejected their argument and ruled that the state could proceed against them due to their primary participation in the alleged wrongdoing.
"This case puts fraudulent operators on notice that they cannot hide behind corporate titles when they try to defraud Iowans," Miller said. "The judgment includes the highest penalty ever paid under an Iowa law allowing enhanced penalties against frauds that target elderly victims, and it reflects our office's determination to protect older Iowans against consumer fraud."
Miller said that approximately $67,000 of the amount ordered to be paid will be dedicated to investigating and prosecuting frauds against older Iowans. The balance will be returned to elderly victims who filed complaints with his office and lost as much as $6,000 each.
The case originally was filed four years ago, and a temporary injunction was issued then that halted the defendants' operation in Iowa. The State believes Grande closed down his companies in the wake of the Iowa action and transferred his assets out of the country, but the State pursued the case.
Miller asked Iowans to look out for older friends or relatives who might have trouble analyzing solicitations, contests and sweepstakes offers. "Many of the victims in this case sent money because they mistakenly thought they were sure to receive a valuable prize, and by doing so they may have identified themselves as likely targets for even more costly schemes," he said.
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