New Mexico Attorney General Patricia Madrid is claiming victory over a company that was selling tickets for a charitable raffle over the Internet.
Madrid reached a settlement last week with OCR Associates of New Mexico in which OCR agreed to cease offering the raffle online. The company has also agreed not to engage in any internet-based raffle activity within the state that does not conform to New Mexico law.
Instead of raising money for New Mexico charities, OCR will be donating $12,500 in attorneys fees to the Office of the Attorney General.
"I don't think it was their intention to shut us down because of the huge benefits that would have accrued to the state and its charitable organizations," OCR President Ed Hall. "I think they were looking at it, they felt, in their opinion, we had strayed too close to the line. In our discussions, it wasn't directed against our company personally. But they were concerned about others who might follow in our trail who might not follow the rules and regulations."
Interactive Gaming News has obtained a copy of the official statement issued by Madrid's office:
September 15, 1999
ATTORNEY GENERAL MADRID REACHES SETTLEMENT: ON-LINE CHARITIES RAFFLE COMPANY TO CEASE ILLEGAL ACTIVITY
Attorney General Patricia Madrid announced today that a settlement has been reached with OCR Associates of New Mexico, Inc., a for-profit corporation whose business is internet fundraising for charitable organizations. "OCR Associates of New Mexico had been presenting an illegal gambling scheme to New Mexico charitable organizations. In addition, OCR Associates is making false and misleading statements in their presentations to charities enticing them to sign-on to this illegal scheme," Attorney General Madrid stated. "Charities are not prohibited from conducting raffles, but the non-profits may not hire for-profit outside companies such as OCR Associates to conduct the raffle for them."
New Mexico law permits non-profit organizations to lawfully operate a raffle so long as: the raffle is operated by the organization; the gross proceeds of the raffle are not used to pay for anything except the reasonable cost of the prizes; and the number of raffles held is limited. The services offered by OCR Associates included: raffle set-up; creating a website to sell tickets; advertising of the raffle over the internet; selling the tickets and depositing the money into the charities' account; selecting a winner and awarding the prize; doing the government paperwork. "The services offered by OCR Associates of New Mexico provided a turn-key fundraising operation through on-line raffles," Madrid said. "Clearly, the non-profits themselves were not conducting these raffles; OCR Associates was conducting the raffles and in our office's judgment that is illegal under New Mexico law."
OCR Associates of New Mexico had been conducting presentations to encourage non-profit charities to make a three-year commitment, claiming that the approach offered was a "no-risk opportunity to raise money." However, the involvement of a non-profit charitable organization in the scheme operated by OCR Associates exposed the organization and its affiliates to risks, including criminal prosecution and the loss of its tax-exempt status. Additionally, OCR Associates had represented to both New Mexico non-profit corporations and consumers that a portion of each ticket purchased was deductible for U.S. income tax purposes as a charitable contribution. The Internal Revenue Service has concluded, howver, that the cost of a raffle ticket is not deductible.
As part of this settlement agreement OCR Associates have agreed to cease all internet-based raffle activity in its present form related to New Mexico non-profit organizations. Solicitation of New Mexico non-profits to participate in this form of fundraising will cease. OCR Associates further agrees not to engage in any internet-based raffle activity within the state that does not conform to New Mexico law. Within ten days, full restitution shall be made to each purchaser of raffle ticket or tickets and evidence of this shall be provided to the Attorney General. Also, attorneys fees in the amount of $12,500 will be paid to the Office of the Attorney General. Violations of this agreement will result in civil penalties of up to $5,000 per violation.
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