American Family Enterprises filed for Chapter 11 protection in U. S. Bankruptcy Court, Newark, NJ, last Friday. The parent company of sweepstakes promoter American Family Publishers, APE moved to protect itself from going under after reaching tentative agreements to settle dozens of class-action lawsuits for alleged deceptive advertising,
Terms of the proposed settlements are not expected to be made public for at least a week according to company spokesman, Richard Tauberman and San Francisco lawyer Guy Burns, one of the lead attorneys for the group that’s been suing the company. Neither Burns nor Tauberman would discuss the terms of the proposed settlements, which are expected to cost the Jersey City, NJ-based firm millions of dollars.
“In light of AFP’s financial situation, we felt it was critical to make adequate provision for those customers who may have been misled by the company’s sweepstakes promotions,” Burns said.
AFE, best known for its television pitchmen, Ed McMahon and Dick Clark, uses direct mail sweepstakes to sell magazine subscriptions. It is owned by TAF Holdings Inc., a subsidiary of Time Inc., New York, and a group of investors.
Neither the settlement nor the bankruptcy court filing will have an effect on its ongoing sweepstakes promotions or previous lawsuit settlements, according to both Tauberman and Susan Caughman AFE’s president/CEO. However, the filing did not list the firm’s major assets and liabilities, although it did include the proposed restructuring of AFE with investments in new and different distribution channels for both magazines and merchandise,
“All monies for AFE’s contests have been prefunded and are held in trust by federally insured independent financial institutions until the award date,” Caughman said stressing that all entries in the upcoming sweepstakes are valid and the promised prizes will be awarded.
The company, which expects to award $1 million on Nov. 14 and $10 million on Jan. 31, has been in the center controversy for more than a year, having been sued by various states for alleged deceptive advertising in connection with its sweepstakes promotions.
Last year the firm reached a $1.25 million settlement with authorities in 40 states and agreed to improve the accuracy of its direct mail sweepstakes promotional materials.
And earlier this year the Senate approved legislation that would impose tough new government regulations on the direct mail sweepstakes industry. So far the House has not acted on the proposal.
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