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10 States to Benefit From $2.1 Million Charity-Fraud Settlement

January 12, 1991

ALEXANDRIA, Va. (AP) _ A Virginia company and nine national charities agreed to pay $2.1 million to settle lawsuits brought by 10 states alleging they ran a deceptive sweepstakes and bilked millions of consumers.

In what is believed to be the nation’s largest charity-scam settlement, the Watson & Hughey Co. also agreed Friday after 17 months of negotiations with the states to change its fund-raising methods to prevent the direct-mail firm from misstating the value of future sweepstakes prizes.

Between August 1988 and February 1989, the company mailed misleading letters telling residents in 10 states they were winners in a $5,000 sweepstakes. Winners simply had to mail $5 to the company.

When winners returned the letter and a ″winner’s release form,″ they received their prizes, which ranged from 10 cents to 40 cents.

Proceeds allegedly benefited the American Heart Disease Prevention Foundation, Montclair, N.J.; Cancer Fund of America, Knoxville, Tenn.; Center for Alternative Cancer Research, Washington, D.C.; Pacific West Cancer Research Institute, Seattle, Wash.; Walker Cancer Research Institute, Edgewood, Md.; Adopt-A-Pet, Tulsa, Okla.; National Emergency Medicine Association, Baltimore, Md., and Social Security Protection Bureau, Washington, D.C.

Some or all of those charities, all clients of Watson and Hughey, were named in lawsuits filed by Pennsylvania, Connecticut, Illinois, Massachusetts, Minnesota, New Jersey, New York, Oregon, Virginia and Washington.

Texas and Missouri previously negotiated independent settlements with the defendants.

The $2.1 million will be divided among the 10 states, with the largest sums being set aside for the states with the largest number of donors to the charities.

An attorney for Watson & Hughey, F. Joseph Warin, said the settlement doesn’t mean there was wrongdoing or liability on the firm’s part. Few guidelines existed for charities that wanted to conduct sweepstakes-style mail campaigns, he said.

In Pennsylvania, state Attorney General Ernie Preate Jr. said ″terms of the agreement will help protect the public by forcing Watson and Hughey and its client organizations to make significant changes in the way they conduct future fund-raising campaigns.″

He cautioned consumers to be wary of gimmicks that offer people free prizes in return for a donation.

″I urge you to be compassionate and give with your heart, but use your head,″ Preate said.