This New House
Hoping to cash in on the "American dream of home ownership" with minimal effort, a Littleton company is holding an essay contest to give away a $150,000 house. There's just one catch: The house doesn't exist--and neither does the $150,000.
In a scheme that has already drawn the attention of authorities, Option 3 America, Inc., is hoping to raise enough cash through its $20 entry fee to pay for the prize as well as turn a profit. An investigator with the consumer-fraud division of the Jefferson County District Attorney's office describes the operation as "kind of screwy" but says officials can't investigate the contest because the manner in which it's organized allows it to operate virtually unregulated. The one aspect of the contest the DA is investigating is the company's distribution of entry forms in church parking lots, which has sparked complaints from at least one congregation.
Option 3 America attorney Pete Moison says he hasn't heard about the Jefferson County investigation. However, he says he's confident that his client will run the contest in a "conservative and above-the-board manner which is intended to make a profit as well as help charity."
But just what charity isn't clear. The two-person "marketing and promotions firm" originally contacted Mile High United Way as a potential beneficiary. But United Way official Laura Rogers says the contest "wasn't our style." Option 3's latest plan, touted in press releases and newspaper advertisements, is to donate 10 percent of its net proceeds to an "educational charity"--one it plans to set up itself.
The idea of raffling off a home is not new. But doing it for profit is, says Jan Zavislan of the Colorado Attorney General's office, which has also received calls from people concerned about the contest. Zavislan says the only other time he's seen anything like it in Colorado was an essay contest in which the owners of a Steamboat Springs restaurant put up their eatery as the main course.
The more traditional method of raffling off a house is to run a game of chance. The Boys and Girls Club of Metro Denver did that successfully last year, when several local contractors built a $300,000 home and then donated it to the nonprofit group for its "Home for Good" contest. Boys and Girls Club volunteers sold raffle tickets for $100 apiece and ended up netting almost $500,000. However, since the raffle was a game of chance that benefited a nonprofit group, it was conducted under the watchful eye of the Colorado Secretary of State.
"It was a very formal process," explains Boys and Girls Club president John Aragoni. "We were licensed by the secretary of state and subjected to a complete review and audit by their staff prior to the drawing. It took us almost two years before we finally announced a winner."
But since Option 3 America is a for-profit company and is billing the contest as a game of skill, it isn't subject to the stringent regulations set forth by the secretary of state. "I could see why someone would want to circumvent the rules, because they are very exacting," says Aragoni. "It took a lot of work for us to make sure that our contest was always in compliance. It sounds to me like this company has found a creative way to get around these rules."
Aragoni says the rules laid out by the secretary of state were focused primarily on protecting the public from possible fraud. He also points out that the Boys and Girls Club was raffling off a house that already existed--not one that had yet to be built.
Option 3 America president John Gallagher couldn't be reached for comment; a phone number for him listed on a "confidential corporate information sheet" supplied by the company turned out to be a wrong number. But Option 3 vice president Ellen Kenworthy says the company didn't want to build the home before the raffle because it couldn't predict where the winner would want to live.
"The way we've set this up allows the winner, not us, to pick the location of their home," says Kenworthy, who works out of her home and uses a rented mail drop as a corporate address. "We could have used an existing home, but our market research told us that people would be much more likely to enter the contest if they got to pick the location."
The fine print on the entry form states that the prize will not be awarded until 7,500 entries have been submitted. So what happens if that minimum isn't reached? Kenworthy claims Option 3 will refund the $20 entry fees.
Kenworthy says the winner will be selected by "an independent panel of judges." As of this week, however, that blue-ribbon panel hadn't been assembled. "We've been talking to teachers, mostly," says Kenworthy. "But right now we've only received about 150 entries, so there's not really much to judge." Even if the entries start to pour in, the judging shouldn't take long: Contestants must limit their essays to five lines.
If the current contest is a success, adds Kenworthy, her company hopes to hold up to eight similar contests annually. "Our vision is to become the preeminent alternative source for providing affordable housing," boasts a press release issued by the company. That same release describes Option 3 as a "philanthropic organization," even though it is organized as a for-profit company.
One day her company would like to donate up to $100,000 per year to charity, says Kenworthy. But all it seems to be raising so far are doubts. "Credibility is a very real issue for us at this point," Kenworthy concedes. "We're going to have to give away a house before we have any."
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