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Texas Sues Sweepstakes Operator

April 27, 2005
Texas Attorney General Greg Abbott has filed suit against an Austin-based operation that heavily promotes sweepstakes drawings for prizes as a way to obtain consumers' personal information, which is then sold to a third-party business without consumers' permission.

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The lawsuit accuses Terry Christopher Bounds, director of Austrends and president of Bounds and Pinto Marketing, of violating the Texas Deceptive Trade Practices Act by duping sweepstakes applicants into providing their personal information to Austrends, which then passes it along to Bounds and Pinto to solicit consumers in a telemarketing scheme.

The lawsuit also alleges the promised prizes, such as $500 shopping sprees, are never awarded.

"This so-called 'sweepstakes' is little more than a ruse to get consumers to divulge their private information for unauthorized uses," said Attorney General Abbott. "Manipulative schemes like this one are all too common and I am determined to shut them down."

According to the Attorney General's lawsuit, Austrends installs displays at cinemas, shopping malls, boat shows and other events that encourage consumers to fill out entry forms for prize drawings, including shopping sprees at various retail outlets. Austrends allegedly evaluates the "visitor survey" portion of the entry forms for certain demographic information about each person, then selects "qualified leads" for timeshare sales.

The lawsuit says Bounds and Pinto, the telemarketing side of the operation, then solicits these consumers to attend sales presentations by one or more vacation timeshare companies. Records show the two defendants received in excess of $1.5 million in 2003-04 for the personal consumer information they provided for those timeshare presentations.

Consumers are not warned when entering the "drawings" that their personal information will be used by the telemarketer and "sold" to the third-party companies, a violation of the Texas Deceptive Trade Practices Act. The law entitles the Attorney General to seek civil penalties of $20,000 per violation.

Attorney General Abbott added: "There is no end to the schemes people will use to get their hands on Texans' personal identifying information. Consumers must always be careful not to give out their information if they don't know how it will be used."

The Attorney General is seeking a court-ordered injunction requiring Austrends and Bounds and Pinto to clearly disclose the details of these "drawings" for prizes, including the fact that consumers' information may be used by telemarketers to solicit them for vacation timeshare presentations.

The companies also may have violated the Texas No-Call law regulating telemarketers by attempting to have consumers waive their "no-call" rights with an ambiguous statement at the bottom of the entry form urging them to call about the drawing.

The lawsuit also notes that under no circumstance should the telemarketer solicit anyone who has enrolled in the Texas No-Call registry unless it can clearly show an exemption from this law.

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