August 14, 1958

In the Matter of the Complaint That

THE PAY OFF

P-Y-F PUBLISHING CO.

"SPRECKLES" ROWE, RACING EDITOR,

"SPRECKLES: ROWE, and

S. R. KING

at

New York, New York,

Is engaged in conducting a scheme for

Obtaining money through the mails in

Violation of 39 U. S. Code 259 and 732.

P.O.D. Docket No. 1/29

ORAL INITIAL DECISION OF HEARING EXAMINER

            I have examined all the documentary evidence, considered the testimony in this case which came from the inspector for the Department, Mr. Fein, and from the Respondent, himself, and I make these findings:  that the evidence shows, the record, the entire record shows that the Respondent, Mr. King, is operating under the names given in the caption of the complaint, the enterprise charged, namely, that he is distributing or causing to be distributed through the mails, various circulars to the public generally, in which he makes certain representations concerning the giving of information on horse racing.

            I further find from the record that he is obtaining, as charged in the complaint, remittances of money through the mails by means of these representations.  This is supported by the testimony of the Respondent that he receives approximately seventy per cent of his remittances from the persons who are involved in his enterprise through the mails.  That, as I stated, establishes the background of this case.  The questions, therefore, devolves down into the important phase of this case:  that is, whether or not, Respondent is representing through the circulars he sends out, and which are in evidence, that he will furnish to persons who call him on the phone, on the numbers given, horses which will win, some of them being at long odds, large odds.

            That, in substance, is what I gather amounts to the representation charged.

            Now, on that issue, in determining the question -- I have presided at similar hearings in this question and I am familiar, therefore, with the various cases applicable to this kind of case -- and I have made some notes on this particular point in case I felt that the record would show that an oral decision should be given; so, the reason for that is to be able to point to you gentlemen the particular cases that you may look up and review.

            Now, in determining this issue of whether or not Respondent is making these representations of guaranteeing a winner, I apply the test laid down in these cases:  Donaldson versus Read Magazine, 333 U.S. 188, in 1958.

Florence Manufacturing Company versus J. C. Dowd and Company, 178 Fed. 73, cited in the Ritz case, 143, Fed. 2nd 681, and F. T. C. versus Standard Education Society, 302, U.S. 112,

            Also, in determining this question, the case of Linden versus U.S., 254 Fed. 2nd 560.

            In the Donaldson case, it was held, in determining the meaning of representations, it is the effect that such representation will most probably produce upon ordinary minds.  In other words, I apply this test, that you take the average person, because this is in ordinary, everyday language, the circulars, and determine what does this mean, the ultimate impression is on that person, as stated in the Ritz case, "The law", referring to the Federal Trade Commission law, and I believe in this sense it is applicable to this case, "is not made for the protection of experts, but for the public, that vast multitude, which includes the ignorant, the unthinking and the credulous" -- and there is a statement made in one case in which I am familiar, which I think it pertinent to this case, but I can not give you the citation.  However, it states, and it is true, that the credulity of mankind as yet remains unmeasured.

            Now, another statement which I think is applicable is from the Standard Education Society mentioned, "The fact that a false statement may be obviously false to those who are trained and experienced does not change its characteristics."

            And then we find from the Linden case, "Deception is not necessarily confined to a direct statement of fact, not words alone, but their arrangement, their manner of display, and the circumstances in which they are used, which may create an appearance which is false and deceptive, even though the words themselves fall short of this.  Sometimes circumstances are more eloquent than words, and they import their meaning to the words used."

            So, in substance, the test is, if this goes to the average person, not a special group, as I gathered from the evidence, and when I say special group I don't mean to confine it to betting on races, as being a special group, it is the general public. So that we have to determine what does the average -- what is the impression, the ultimate impression from these circulars -- that will be obtained by the reader.

            Now, I will make this ultimate finding of fact, that the Respondent is representing, in substance and in effect, the representations charged in paragraph 3, and the various subparagraphs thereof.  Now, I cite in support of that -- and I want to make it clear at this time for the record -- as the record shows, that the Respondent is operating this enterprise under two different names generally speaking.

            We have what is know here as "The Pay Off", in which it is signed in the circular in each instance, "Spreckles Rowe, Racing Editor."  Then we have another circular which is entitled -- styled, rather, "S. R. King".  I am breaking this down into two different operations.

            Now, in support of that ultimate finding, I point to, in the one enterprise, the so-called "Pay Off" enterprise, to Department's Exhibits 18, 19, 20, and 21.  In Department's Exhibit 20 we have a statement that "I have repeatedly tried to contact you on the many winners coming out of my office.  The Flat Play profits on the service in the last two months are amazing.  This is definitely the time to follow the payoff service!  Connections are 'hitting' one after another and considering the wonderful prices I've come up with, the few misses don't even count.  I've already released such Winners as:"  Then he lists the name of the winner at various prices, and he promises that the future should produce even the same good news.

            So, I am taking the advertisement or the circular as a whole.  It seems to bear out my finding, and I say it does because he is promising, when you take the whole circular the way it is emphasized, that he is guaranteeing that if you place a bet on a horse, that he would give you on the phone, you are going to get a winner.  Now, some of the circulars are not -- are doubtful, but I am pointing, for the record, to Department Exhibits 18, 19, 20, and 21, in support of my finding.

            As I said, in some of the circulars, it probably could be construed that the Respondent is representing to the reader that he is giving or will give an opinion as to what horse would win in a certain race, but in these circulars, I pointed out, I believe, from all of the circumstances, and the way, the format, and the representations expressly stated, that he is representing that he is going to guarantee that you are going to have a winner and some of them will pay off in good money.

            Now, on the other enterprise, the S. R. King, I point specifically to Department Exhibit 23.  There he has headed in that circular the list of winners which he says he has given previously, and the odds, and it says, "You don't have to look any further."  And he says, "If you had been in constant touch with this office, you would have really cleaned up", and he says further, "that there are plenty more of these type of winners"; thus the impression "that they would pay off from this office", and he says the horse that he is going to predict will for certain be "heading for payoff dirt".  So I conclude, as a matter of fact, that Respondent has gone further than just exaggerating, or what is called "permissible puffing".  To the average reader he is telling him that "I have got a horst that is going to win.  If you want that winner, you call me up and I will give him to you and he will pay good odds in some instances."

            Now, on the second issue, on the merits, there is the question of whether or not these representations that I have found are false, and I might state that the direct proof of this is not necessary.  Although we have proof in here that some of the horses that the Respondent recommended to be played did not win, that just bolsters what is known, and that is, as a matter of common knowledge, and as the Respondent himself testified, it is impossible to know the names of winners, so that it has been the subject of judicial recognition that you can not select a winning horse in a horse race, nor how much a horse will pay off, and the testimony of the Respondent bears that out, of course.  So that that is false; that is, all those representations which I have found that he is making, namely, guaranteeing consistently to furnish the names of winning horses to be false representations.

            Now, we have the question of intent.  Of course, to find that this statute is being violated, that element is necessary under the Reilly Pinkus case, 228 U.S. 370.  There is no doubt that the Respondent is making material representations that is, representations upon which persons who want to bet on a race are entitled to rely.  The representations, as I have stated, are false; therefore, you have a material misrepresentation.

            Now, the Respondent has testified that he didn’t intend to make these kind of representations or to defraud anyone.  However, considering that testimony, I have here in plain English, in these circulars, in which he has gone out and said "The horses will win."  Now, he is responsible for the conduct that he has performed here.  He has made these representations and now he comes in and claims in his testimony that he doesn't intend that, he didn't intend to make those representations.  As I stated, in some of the circulars there is doubt that he did promise winners; that he was giving an opinion .  But it seems to me that in the circulars that I have pointed out that he has got up specifically, directly, and told people who are reading his literature which he sends unsolicited to the public, that "I can tell you the name of winners."  So, I say, and find, that Respondent has willfully made false, material representations.  And therefore, of course, it is well settled under the law that if you make willful false, material representations, that that constitutes intent to deceive.  Therefore, in view of these findings, there has been shown that Respondent, and I so find and conclude as a matter of law, in the operation of this enterprise conducted under the various names in the complaint, is a violation of the fraud statute invoked in this case, and therefore I must recommend that the usual customary order be issued against this Respondent, and I refer to that order for the purpose of this decision, and I will furnish to you a copy, or rather the blank form of the order so you will be familiar with what is recommended, and I will hand to you, both parties, copies of the usual customary fraud order, and, of course, it shows that  it is in blank, to the extent, rather, than only the names of the parties may be inserted.

As taken from pages 92-100 of the Official Transcript of Proceedings with some minor changes.

                                                                        Edward Carlick

                                                                        Hearing Examiner