VALLEY SWEEPS COMPANY TO PAY FIRM'S SETTLEMENT TOTALS $50 MILLION.

Byline: Chris Sieroty Staff Writer

NORTHRIDGE - A giant San Fernando Valley sweepstakes firm that often took advantage of the elderly with misleading promotions has agreed to pay $50 million in restitution and clean up its marketing practices, Attorney General Bill Lockyer announced Wednesday.

Northridge-based United States Sales Corp., which does business as the United States Purchasing Exchange, agreed to the terms as part of a global settlement reached between private parties, California, 47 other states and the District of Columbia. Iowa and Connecticut are exempt.

According to Lockyer, USPE has agreed to pay California more than $1.3 million for the cost of the investigation, and set aside an additional $3.6 million for restitution.

The restitution will go to consumers who spent at least $1,870 with the company in 1997, 1998 or 1999, Lockyer said in a statement.

Consumers eligible for a refund will be notified by mail in the early fall.

Each year, USPE sends out tens of millions of pieces of direct mail nationwide that contain a sweepstakes entry form and sales offers for household and personal products, Lockyer said.

Consumers, especially the elderly, have purchased products believing their chances of winning the sweepstakes would be enhanced, he said.

The settlement includes more than $30 million that will be distributed to consumers by the states and the District of Columbia and an additional $20 million to settle a class-action suit filed in Illinois, said USPE spokesman Harvey Englander.

``These settlements allow USPE to continue to serve our satisfied customers with our mailings offering a variety of merchandise products,'' he said.

Under the settlement, USPE has agreed to include ``a clear and conspicuous sweepstakes fact sheet in all of its future sweepstakes mailings,'' Lockyer said.

The fact sheet will include a statement that the consumer has not yet won; that buying products will not help the consumer win the sweepstakes; that the consumer doesn't have to buy anything to enter; and the odds of winning a prize.

The fact sheet also will contain the entry form that consumers will have to use to enter the sweepstakes.

``Through these disclosures, California consumers will not be lured into buying goods with the mistaken belief they are improving their chances of winning big prices,'' he said.

``We certainly look to having other sweepstakes companies follow the disclosure standard and protections for high-activity consumers being set by USPE,'' added Lockyer.

USPE, which has been in business since 1967 and has undergone a recent downsizing, admitted no wrongdoing under the agreement.

However, in a statement, USPE defended its business practices, saying, ``Consistent with all sweepstakes programs, people do not have to order items from USPE catalogs in order to enter the sweepstakes, in fact, many of the entrants do not order merchandise.''

The agreement is the first reached with the National Association of Attorneys General since the multistate group held hearings into sweepstakes activities in Indiana in February.

Under the settlement, USPE also has agreed to contact so-called ``high activity'' customers with a separate letter to let them know that they can enter the company's sweepstakes as often as they like and they don't have to purchase anything to win a prize.

To stop unnecessary purchases by high activity customers, the company will discontinue mailings to any person who makes 25 purchases or spends more than $935 in a 12-month period.

The company also will immediately stop mailing sweepstakes opportunities to anyone who in the past 12 months has purchased more than $2,500 worth of products.

``Consumers entering sweepstakes should understand they don't have to buy anything for a chance to win and that buying will not help their chances of becoming instant millionaires,'' Lockyer said in a statement.