Read the complete article from Consumer Affairs, Publishers Clearing House bankruptcy leaves past winners unpaid.

According to the article, for decades, Publishers Clearing House (PCH) flooded mailboxes, email and television with advertisements for its sweepstakes, which promised huge payouts to the winners. But times have changed. Magazines are not selling many subscriptions these days, and PCH is feeling the pain. The company filed for Chapter 11 bankruptcy protection in New York in April, citing liabilities of $50 million to $100 million and assets of just $1 million to $10 million, according to federal court records. Among its largest unsecured creditors: 10 of its own prize winners.

That list includes longtime recipients of lifetime prize payments, many of whom say their checks suddenly stopped arriving this year with little explanation.

One of them is John Wyllie, 60, of Bellingham, Washington, who won $5,000 a week for life in 2012. For more than a decade, he collected an annual check for $260,000. The payments allowed him to retire and buy a six-acre property. But this January, the money dried up.

“I’m getting the shaft, on top of the shaft,” Wyllie recently said. “Looking at [the giant check] makes me sad and it makes me mad.”

New Owner Limits Payouts to Future Winners

In July, ARB Interactive, an online casino operator, bought PCH out of bankruptcy for $7.1 million. The company announced it would honor only prizes awarded after July 15. Those include two “SuperPrizes” worth a combined $2.5 million, a $975,000 payout in May, and a $1 million award scheduled for September 30.

Payments promised to past winners under PCH's old owners remain uncertain. ARB says it is not responsible for those obligations, and PCH has little left to pay out. A federal bankruptcy judge will ultimately decide how the company’s remaining assets are divided.

A spokesman for ARB Interactive said the company contributed funds to the bankruptcy estate and plans to establish a new system to guarantee all future prizes. “Our vision is to rebuild PCH as a brand synonymous with trust, excitement and long-term integrity,” the spokesman said.

Lives Disrupted by Missed Checks

For some families, the halted payments have already caused financial strain. Tamar and Matthew Veatch, disabled Army veterans in Oregon raising three children, had relied on nearly $200,000 a year in PCH prize money since 2021. They said the loss of their July payment left them unable to cover back taxes and mounting household bills.

Former company executives say the situation was avoidable. Darrell Lester, a retired PCH executive, said the company once safeguarded prizes through prepaid annuities but stopped that practice after 2003.

“You can’t not pay the winners,” Lester said. “That’s a cardinal sin.”

PCH's Spotty Record

PCH may have raised consumers' hopes of getting a big payout, but it also amassed a lengthy record of consumer complaints and allegations of misleading promotions. 

In April, the Federal Trade Commission (FTC) began distributing more than $18 million in refunds to consumers misled by deceptive marketing tactics from PCH. The refunds were part of a settlement reached after the FTC charged PCH with targeting older and lower-income consumers using misleading emails, order forms, and promotions that gave the false impression that purchasing products was necessary to enter or improve odds in sweepstakes.

According to the FTC’s complaint, PCH sent emails with misleading subject lines, implying they were official communications, such as tax documents, to entice users to open and engage with them. Once inside, consumers were misled into believing that ordering products improved their chances of winning a sweepstakes prize — a practice prohibited under federal law.

Deceptive Charges and "Risk-Free" Claims

The agency also accused PCH of adding deceptive shipping and handling charges and falsely claiming that purchases were “risk-free.” In reality, consumers had to return unwanted products at their own expense to obtain refunds.

“The FTC’s action sends a clear message that companies cannot manipulate vulnerable populations with false hope or misleading tactics,” the agency said in a statement.

Consumers' feelings about PCH over the years have been mixed. Many have praised the fact that it is free and gives everyone a chance, however slim, to win. But others have found it annoying, or worse, like Rose of Casa Grande, Arizona. "If you love commercials and don't expect to ever win anything, it is where you want to be. For one entry of a particular contest, there were five commercials. Even when you cash in your tokens, you have to sit through a commercial or two. You should at least get some sort of a token prize just for having to endure all the commercials," she recently said.

Others took a dimmer view: "What a rip off PCH HAS COME TO BE, they have sold my personal information to ex employees who have scammed me and have refused to do anything about it. I have accumulated over 1.3 billion tokens and have never won anything," said Louis of Bensalem, Pennsylvania. 

Discussion Questions

  1. What is Chapter 11 bankruptcy?

    Chapter 11 bankruptcy is a legal process in the United States that allows businesses to reorganize their debts while continuing to operate. It is designed to give financially struggling entities a chance to restructure, rather than shut down entirely.

    The main goal of Chapter 11 bankruptcy is to allow a business debtor to reorganize its debts, reduce its obligations, and continue operating. During the Chapter 11 process, due to what is known as an automatic stay, creditors must stop all collection efforts once the case is filed. The business typically stays in control of its operations and is referred to as a “debtor in possession.” The debtor proposes a restructuring plan, which can include reducing debt, extending payment terms, downsizing, and/or the liquidation of assets. Creditors are entitled to vote on the plan, and ultimately, the bankruptcy judge is empowered to approve or reject the plan.

  2. As indicated in the article, among PCH’s largest unsecured creditors are 10 of its own prize winners. Define “unsecured creditor.”

    An unsecured creditor is a party that is owed money by the debtor but does not have a specific asset pledged as collateral to guarantee payment.

  3. As indicated in the article, in July, ARB Interactive, an online casino operator, bought PCH out of bankruptcy for $7.1 million. The company announced it would honor only prizes awarded after July 15. Those include two “SuperPrizes” worth a combined $2.5 million, a $975,000 payout in May, and a $1 million award scheduled for September 30. Payments promised to past winners under PCH's old owners remain uncertain. Is ARB Interactive legally responsible to pay the past winners? Is ARB Interactive ethically responsible to pay the past winners? Explain your response.

    In terms of its legal obligation, ARB Interactive is only required to satisfy liabilities to the extent that the bankruptcy plan indicates it must. Since ARB Interactive has announced it will only honor prize obligations incurred after July 15, 2025, one should presume that the subject Chapter 11 bankruptcy plan indicates accordingly. If not, ARB Interactive would be in violation of the bankruptcy plan and therefore legally obligated to also honor prizes won before July 15.

    In terms of any ethical obligation, this is an opinion question, and student responses may vary.