Irvine Firm Settles Colorado Sweepstakes Suit, to Make Refunds

DENVER — An Irvine-based sweepstakes business has agreed to pay Colorado $75,000 and give refunds to consumers to settle a lawsuit claiming the company engaged in deceptive practices, the state attorney general said Thursday.

“This is the first case we have brought to enforce the Colorado Consumer Protection Act against a nationwide direct-mail sweepstakes company,” Atty. Gen. Gale Norton said.

The settlement prevents Direct American Marketers Inc. from using deceptive marketing practices and requires the company to pay refunds to consumers who request them, Norton said. The company also agreed to pay a $50,000 fine and $25,000 in attorney fees.

The settlement stems from a lawsuit filed by the state over Direct American Marketers’ use of direct-mail sweepstakes offers. Some of the mail-order solicitations contained documents that appeared to be checks for $7,500 and advised recipients that they had won substantial cash prizes, Norton said.

Recipients were told to call a 900 number to claim the prize. Those calls cost an average of $30, according to Norton. Nearly all those who responded received checks for $1, Norton said.