tomhudson's Journal: Here's the text of a second article on starmedia.ca scams

previous - (Ab)using interns and government job retraining programs | next - fake business partners

Update: Please note, the site that ran this scam (770star.com) is being run off an iWeb smart server. That's right, the same iWeb that suspended my hosting account for reporting it. You can draw any conclusion you want. I'm picking "stupidity."

Starmedia runs an illegal lottery to raise its profile

Friday, June 10 2011 @ 09:52 EDT

Submitted by: barbara

Lottery scam

Summary: How Starmedia ran an unlicensed lottery to promote owner Alex Cholella's dysfunctional group buying website, including how the agency in charge of regulating lotteries, rather than investigate, said to report it to the police.

In the ending weeks of last year (2010) Alex hired a guy named Brendan, who was supposed to be some sort of "Internet marketing specialist," to promote his group buying site 770star.com. If you read that as "spammer", I won't say you're too far off the target.

(read more about the fiasco surrounding developing the group buying site here)

Brendan: "We'll get 20,000 people to sign up during the event!" Yeah, r i i i i g h t !

"What event?, I wondered ... It turns out that they had signed a contract with one of the student associations at Concordia University, and they were fully expecting that people would flock to their site because they were giving away a few thousand dollars of promotional material that they had suckered companies into donating.

I foresaw two problems with that.

First, there was no way that they would get 20,000 new users. A co-worker put the figure at maybe 1/10 of that. I said they'd be lucky to get 200. Turns out I was right, but that's another story.

The law

The second problem is that, if you're giving away more than $2,000 in cash or cash equivalents, you have certain laws that you must comply with:

Rules respecting publicity contests

An Act respecting lotteries, publicity contests and amusement machines
(R.S.Q., c. L-6, s. 20)

1. These Rules do not apply to publicity contests where the total value of the prizes offered does not exceed $2,000, with the exception of sections 5 and 6 that apply to all publicity contests in which the total value of the prizes exceeds $100.

2. A person for whom a publicity contest is carried on shall file with the Regie des alcools, des courses et des jeux:

(1) the prescribed form in accordance with section 59 of the Act respecting lotteries, publicity contests and amusement machines (R.S.Q., c. L-6) within the prescribed timeframe;

(2) the text of the rules of the publicity contest 10 days before the date on which it is publicized;

(3) where a contest is carried on for more than 1 person, the name and address of each person, or where applicable, the name and address of their mandatary.

3. A person for whom a publicity contest is carried on shall, 10 days prior to the date that the contest is publicized to the public in the case of a publicity contest in which the total prize value exceeds $2,000, file with the board the text of any advertisement used in the publicity contest.

Brendan: " we'll be out of business by the time anyone finds out."

When I pointed this out, Brendan at first refused to believe it, then said "Who cares, we'll be out of business by the time anyone finds out." This was the same guy who was claiming that the site would draw 20,000 new users within the first few days.

Of course, with an attitude like that, is it any wonder they were out of compliance? So, reading the law a bit more:

5. The rules of a publicity contest must be accessible to the public and must include as a minimum:

(1) the conditions for entering the contest;

(2) the places where the public must deposit or send the contest entry forms;

(3) the deadline for entering the contest;

(4) a description of the method of awarding the prizes;

(4.1) the number and a detailed description of the prizes offered and the value of each prize;

(5) the place, date and precise time the prizewinner will be named;

(6) the media used to inform the winners of the prizes won;

(7) the place, date and deadline for claiming prizes, or where applicable, whether the prizes will be delivered to the winner;

(8) the information that the winners will be selected by a jury, where applicable;

(9) the information that as a minimum the persons specified in section 12 must be excluded in all cases;

(10) the following text: Any litigation respecting the conduct or organization of a publicity contest may be submitted to the Regie des alcools, des courses et des jeux for a ruling. Any litigation respecting the awarding of a prize may be submitted to the board only for the purpose of helping the parties reach a settlement;

(11) the nature of the skill-testing requirement that a winner has to satisfy in order to claim his prize.

None of this was made available on the website where the contest was being promoted.

And good luck with this:

15. A person for whom a publicity contest is carried on shall, within 60 days following the date on which a prizewinner is named, file a written report with the board that specifies:

(1) whether all the prizes offered have been delivered;

(2) the name and address of each winner of a prize valued at $100 or more;

(2.1) the prize won by the participant and the date on which the prize was delivered;

(3) the name and address of any winner who has not claimed his prize, the prize won by him, the reason his prize has not been delivered to him and the measures taken in an attempt to deliver the prize to him, whatever the value of the prize;

(4) the prizes that have not been awarded or delivered, their description and the reason why each prize has not been awarded or delivered.

Fees? What fees?

The total value of the prizes offered was over $100.00, so Starmedia was required to pay 10% of the total prize value in advance. In this particular case, the fees would have amounted to a couple of hundred dollars ... but the fines for non-compliance by a business are up to $70,000.00.

The idea of a fine isn't just to compensate for the money lost, but also as a deterrent, so that all contests have a "level playing field" and that consumers have a way to verify that contests are on the up-and-up.

Filing a complaint

You can file a complaint by email at [e-mail]. I sent one in on February 5th, 2011, while the promotional event was still running, complete with links to some of the prizes that had already been awarded, recipients photographed receiving them, etc. Their response? (translated from the french)

Madame,

To follow up concerning your email below, we would like to advise you that your complaint should be made to the police serving the municipality where the illegal draw is being held because it is their duty to take the appropriate action.

... blah blah blah ...

Marie Picard,
Service aux plaintes,
Regie des alcools, des courses et des jeux.

Isn't that incredible? The agency in charge of regulating games of chance gets a tip with all the information (who, what, when, where, how) just ONE MOUSE CLICK AWAY and rather than following it up, says "oh well, call the police, it's their job". Why have an email address for tips if you're just going to tell people to go elsewhere?

Summary

Whether the government ever gets off its' collective behind and takes action or not, the fact is that Starmedia Communication willfully exposed the university group on whose behalf the fund-raising contest was being held to the possibility of both fines and criminal charges. The law is clear - if someone is conducting a fund-raising contest on your behalf, you are jointly and severally liable to ensure that all appropriate laws are complied with and all fees are paid.

At this point only an idiot would do a group buying fundraiser with Starmedia Communications.