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Sweepstakes scams, misleading sweepstakes literature erode public trust

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Residents in Transylvania County are the latest to learn that not every phone call, email or mailed letter promising a prize has been won by the recipient is legit. And on Jan. 31 Blue Ridge Now reported that Sheriff David Mahoney felt led to issue a public warning to some North Carolina residents after two people in the community were swindled out of $11,100 this way.

The ruse goes something like this: A caller phones your home and tells you that you have won some prize, like a car, a new home or lots of money. But you are told that delivery fees or taxes are required up front before your prize can be delivered. And then you are directed in some way to forward those funds to the alleged agent of the company. In the North Carolina example it was through the use of a "Money Pak" card.

The "prize winner" was told to purchase one in the amount required and share the account number with the caller before the winning object could be delivered. Two families did, unfortunately, and are out more than $11,000 as a result.

Ever since American Family Publishers came under the attention of attorney generals in 40 states due to high-pressure promotional language--sending out mailings that made some people think they had won a prize when they had not--the sweepstakes business has gotten a black eye. And the latest ruse of telling people they have to pay fees or taxes up front to claim their prize is making the sweepstakes business seem even worse. Because the fact of the matter is, sweepstakes have no fees. And when it comes to taxes, they are your responsibility to pay, not the company giving you the prize, so you can pay them to the IRS directly after you win and receive the item, when you file your tax return for that year.

American Family Publishers eventually reached a settlement with authorities that cost them $6.9 million for sending out mailers that gave the impression you had to buy from them in order to stand a chance of winning and using language that implied the recipient had already won when they had not, according to the LA Times in Dec. 1999.

And the company, an arm of the American Family Enterprises, assured sweepstakes entrants that they would be staying in business and the litigation would not stop their sweepstakes opportunities from going forward. And they changed their literature language to read that "no purchase is necessary" to win.

The company filed for Chapter 11 bankruptcy, and the sweepstakes opportunities and magazine subscriptions dried up long before Ed McMahon, their spokesman, passed away in 2009. Ironically, AFP was sometimes confused with another sweepstakes company known as Publishers Clearing House, who also came under scrutiny by attorney generals in nine states for similar literature language issues years ago. And they, like AFP, have changed their mailing literature to make it clear that no purchase is necessary to win a prize.

Unlike American Family, however, Publishers Clearing House stayed in business and continues to offer online and mail customers the chance to win millions of dollars--or as little as $5. But that doesn't stop this company from fielding their share of skeptics following the failure of American Family and the continued scams that plaque people like the two families in North Carolina this year.

That's why PCH tries to deflect most of it by sharing the names of winners of their sweepstakes as soon as they are known, which is definitely an important thing to do in order to rebuild American trust and quiet their Facebook naysayers. And it doesn't hurt that they are constantly warning their fans about scams making the rounds, like the "Money Pak" scam faced by North Carolina families recently.

AFP and PCH are not the only businesses offering large prize sweepstakes. HGTV offers a dream home sweepstakes every year, with the current one still open for entries through Feb. 14. And while the winner of that sweepstakes will not be named until April, they have forgotten to post their winners list for their "Piece of the Dream" Round 3 sweepstakes, which they promised would be available online on Jan. 31.

And many more companies besides these mentioned offer sweepstakes every day. But those that keep the public informed promptly about winners lists, and those which fully disclose the details about their winning opportunities (without misleading rules or literature), will be the ones that are kept in business in the long run by the public. Because while many hope to win a prize in America, many more will not look favorably on companies that mislead them about those prizes or winning opportunities.

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