ValueClick Settles Sham Sweepstakes Suit for $10M; Winners Offered a Nonexistent Hummer

ValueClick has settled a class-action suit brought by shareholders for $10 million. The shareholders -- union pension funds and the like -- alleged that ValueClick's management damaged its own stock price by not disclosing to investors that parts of its business were based on fraud.

ValueClick previously paid a $2.9 million settlement to the FTC for using deceptive online tactics to gain consumers' information and then not safeguarding their privacy.

According to the complaint, ValueClick was guilty of advertising "free" gifts to consumers, even though consumers were required to make a purchase before receiving the gifts.

Download Waldrep v. ValueClick here.

At one point, ValueClick ran a sham sweepstakes, the complaint alleges. The prizes included a Ford F-150 pick-up truck, a Hummer and a college scholarship. But, the complaint alleges:

... the sweepstakes campaigns were phony.

... No drawings were held, and there were no procedures for selecting a winner.
... sweepstakes prizes were not purchased or secured by the Company for the winner, as these campaigns were nothing more than a phony gimmick designed to gain the entrants' personal information for resale to ValueClick's advertising customers.
... all entry forms received by the Company went into large bags that were not segregated by sweepstakes campaign, and these bags were ultimately disposed of by the Company.

ValueClick denied the claims. Download its motion to dismiss here.

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