The Federal Trade Commission (FTC) put an end to a phony prize scam with a default judgment entered by a California federal court judge in a case that was part of an international law enforcement initiative against mass-mail fraud.

In a September 2016 complaint, the agency alleged that Millennium Direct Inc. and its owner mailed approximately 1,433,987 fake prize notifications to consumers in 2013 and 2014, particularly targeting the elderly.

The personalized mailers created the impression that recipients had already won a substantial prize, with claims including “This is NOT a preliminary or qualification letter of cash prize status; YOU HAVE WON A CASH PRIZE!” and “You have won a GUARANTEED CASH PRIZE payment per disclosed terms and conditions noted within. Your check will be paid by bank check cashable at any banking institution.”

Consumers were instructed to send $25 in order to collect the prize. But instead of receiving millions of dollars, those who sent in money received additional false cash prize notifications and other deceptive offers, the FTC said.

The defendants “created the net impression that the recipient won a substantial prize by using specific statements, personalizing the mailings, claiming that the customer is ‘specially selected,’ and asserting that the customer only has a limited amount of time within which to claim the cash prize,” according to the default judgment order. “This Court finds that the FTC sufficiently alleged that these representations and the ‘net impression’ it creates, are likely to mislead consumers acting reasonably under the circumstances.”

The defendants also sold consumer information to the operators of similar schemes, the agency alleged, by refining, reusing and selling the customer lists to other direct marketers.

Pursuant to the default judgment, the defendants are required to pay $501,895 (based on the 20,076 recipients who sent in the $25 “fee”). In addition, the defendants are banned from the prize promotion business and prohibited from making misrepresentations about any good or service.

To read the complaint and order granting default judgment in FTC v. Somenzi, click here.

Why it matters: The California federal court had little trouble finding that the defendants violated Section 5 of the Federal Trade Commission Act based on the net impression created by the deceptive prize mailers.