September 3, 1968
In the Matter of the Complaint Against
DALIDEX INC.
P. O. BOX 42, PARKVILLE STATION
at
Brooklyn, New York 11204
P.O.D. Docket No. 2/295
APPEARANCES:
Abraham Levine, Esq.
Office of the General Counsel
Post Office Department
for the Complainant
Sheldon S. Lustigman, Esq.
Bass & Friend
342 Madison Avenue
New York, New York
for the Respondent
INITIAL DECISION OF HEARING EXAMINER
This matter came before Hearing Examiner Jesse B. Messitte upon the complaint filed May 23, 1968, by the General Counsel, Post Office Department, charging Respondent with fraud under 39 U.S.C. 4001[1] In summary, the complaint alleges Respondent fraudulently obtains money through the mail by false representations in advertising the weight reducing effects of a product known as Dalidex.
On June 4, 1968, Respondent answered the complaint, admitted the advertising (Exhibit A to the complaint) but denied false representations and fraud.
The hearing was originally scheduled for June 21, 1968. Respondent’s counsel obtained from this Hearing Examiner a postponement of the hearing date to July 15 by representing counsel needed time “to obtain experts in the field of obesity to testify.” Thereafter on July 8, 1968, Respondent’s counsel, Solomon H. Friend, by telephone told this Hearing Examiner that more time was needed because of a death which had seriously affected his work-load. The hearing date was for that reason postponed to August 14, 1968.
At the hearing on August 14, 1968, Mr. Friend did not appear but an associate of his law firm was present on behalf of Respondent. Complainant presented two witnesses, Edward C. Tocus, Ph. D., educated and expert in pharmacology, and Lawrence E. Putnam, M. D., educated and expert in internal medicine and chemotherapy. These witnesses testified, in effect, that Dalidex ingredients (including 3 mg. benzocaine and 66 mg. methylcellulose) were worthless for weight reduction and they supported that conclusion with highly persuasive scientific explanations. Respondent presented no witness. The exhibits in the record did not significantly alter the impact of the basic testimony from Complainant’s two expert witnesses.
After considering the whole record including pleadings, testimony, exhibits, Complainant’s brief (Tr. August 15, 1968) and Respondent’s brief (filed August 22, 1968) this Hearing Examiner makes the following findings of fact and conclusions of law.
I
Findings of Fact
A. Respondent Dalidex Inc. obtains money through the mail by false and fraudulent representations.
B. Respondent, by advertising matter a copy of which is marked Appendix A, attached hereto and made part thereof, represents to the public:
1. Respondent’s product, Dalidex, is an effective and proven means for overcoming, treating or curing obesity;
2. By using Dalidex tablets, any obese person, in otherwise normal health, will overcome obesity, without need for significant caloric restriction or other dietary regimen;
3. By taking Dalidex tablets, an obese person may indulge in “*** most all those foods *** (such person) up to now wouldn’t dare touch” and that kind of indulgence would not prevent the obese person from ending permanently the overweight problem;
4. By use of Dalidex tablets, an obese person, in normal health, will lose as many pounds within such periods of time, as such person desires;
5. By use of Dalidex tablets it is possible for any obese person in normal health to lose 20, 45, 93 pounds – even more – in 60 days or less.
6. All an obese person needs to do to end the overweight problem forever is to take 3 Dalidex tablets a day.
7. The use of Dalidex tablets has been positively proven 100% effective in ending the overweight problem forever.
8. By taking Dalidex tablets, as directed, an obese person will “Never Be Hungry.”
C. Respondent’s representations described in 8 items of “B” above are false, singly and in combination, and such misrepresentations are material inducements for obese consumers to part with their money.
1. When taken as Respondent directs, Dalidex tablets (including the ingredients 3 mg. benzocaine and 66 mg. methylcellulose per tablet) are worthless for overcoming obesity. Pharmacological and physiological effects of the Dalidex ingredients – singly and in combination – are non-existent or insignificant for weight reduction purposes.
2. The taking of Dalidex tablets alone will not forestall hunger pains in the stomach.
3. Caloric or other substantial dietary restrictions are generally essential for permanent weight reduction.
4. The extent of weight reduction, even with appropriate dietary restriction, cannot be predicted with reasonable accuracy without taking into account individual variations in energy output and other pertinent factors.
D. Respondent makes the representations in the 8 items of “B” above, with intent to defraud.
1. Universal scientific opinion confirms that the ingredients of the Dalidex tablets, in the dosage prescribed, are pharmacologically valueless to accomplish weight reduction.
2. Universal informed medical opinion confirms that the ingredients of the Dalidex tablets, in the dosage prescribed, are physiologically valueless to accomplish weight reduction.
3. Respondent is charged with actual knowledge that Dalidex tablets alone cannot accomplish weight reduction. Indeed after the consumer sends money $5.98 - $20.00, for the tablets, Respondent then sends not only the apparently worthless tablets but, lo and behold, contrary to the whole tenor of Appellant’s advertising, a severely restrictive set of diet instructions.
4. Intent to defraud is not negated by either (a) deceptive use of words like “method” or “formula” in Respondent’s advertising or (b) Respondent’s refund offer or (c) both.
II
Conclusions of Law
A. The remedy for mail fraud under 39 U.S.C. 4005 should be applied to Respondent.
B. Respondent’s advertisements for the Dalidex product encompass those representations which the advertisements “would most probably product on ordinary minds.” See: Donaldson v. Read Magazine, 333 U. S. 178, 189 (1948).
C. The deliberate failure of Respondent to state in its advertising that it is offering for sale a reducing plan or program consisting of certain pills or tablets plus an essential accompanying diet – and instead using devious expressions to conceal diet requirements – buttresses the conclusion of fraud.
1. Thus, it has long been the law that the mail fraud statute applies where “express misrepresentation” is not apparent from the wording of advertising if the advertising “is artfully designed to mislead those responding to it ***”. See: Farley v. Simmons, 99 F.2nd 343, 346 (CADC, 1938); cert. den. 305 U.S. 651 (1938).
2. Fraudulent is the scheme wherein the advertiser deliberately induces patrons to purchase the product in the belief that “its value far exceeds its true worth.” And such fraud persists “even where there is a promise to refund the purchase price should the article sold prove unsatisfactory.” See: Borg-Johnson Electronics, Inc. v. Christenberry, 169 F. Supp. 746, 751 (SDNY, 1959).
3. The contradiction between what Respondent says in the advertisement and what the purchaser receives is so clear and significant as to lead to the conclusion that Respondent intends to deceive and defraud without any necessity for further proof. See: Gottlieb v. Schaffer, 141 F. Supp. 7, 16 (SDNY, 1956).
D. Respondent is engaged in a fraudulent scheme for obtaining money through the mail by means of false representations, all within the meaning of 39 U.S.C. 4005.
E. A fraud order in the form attached hereto should issue.
Jesse B. Messitte
Hearing Examiner
[1] In pertinent part 39 U.S.C. 4005 says:
“Upon evidence satisfactory to the Postmaster General that any person is engaged in conducting a scheme *** for obtaining money *** through the mail by means of *** fraudulent *** representations ***; the Postmaster General may—
(1) direct postmasters at the office at which *** letters *** arrive, addressed to such a person ***, to return the *** letters *** to the sender marked ‘fraudulent’ ***; and
(2) forbid the payment by a postmaster to such a person *** of any money order or postal note *** and provide for the return to the remitters of the sums named in the money orders or postal notes..”
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