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 04/15/69 Rosenblatt, Peter R. APPEARANCES: For the Complainant: Abraham Levine, Esq.; Office of the General Counsel, Post Office Department, Washington, D. C. 20260 For the Respondent: Sheldon S. Lustigman, Esq.; Messrs. Bass & Friend, 342 Madison Avenue, New York, New York 10017
By complaint filed May 23, 1968 the General Counsel (the Complainant) charged that the Respondent, Dalidex, Inc., is engaged in a fraudulent scheme in violation of 39 U.S.C. 4005. The Respondent denied the charges and the matter went to hearing before a Department hearing examiner on August 14 and 15, 1968. The hearing examiner's initial decision, filed September 3, 1968, upheld the contentions of the complaint and recommended the issuance of a fraud order against the Respondent.
On September 18, 1968 the Respondent appealed the initial decision to the Judicial Officer, and the Complainant filed its answering brief on September 27, 1968.
The complaint charges the Respondent with obtaining remittances of money through the mails by means of false and fraudulent pretenses, representations and promises in that the advertisement of which a copy is annexed to the complaint (hereinafter the "Advertisement") allegedly makes the following false and fraudulent claims1/ for the Respondent's product "Dalidex" (hereinafter the "Product"):
"a. That Respondent's product, 'DALIDEX', advertised in Exhibit 'A' attached hereto, is an effective and proven means for overcoming, treating and/or curing obesity;
"b. That by the sole use of 'DALIDEX', '* * * IT IS POSSIBLE FOR ANYONE...MAN OR WOMAN IN NORMAL HEALTH TO LOSE 20-45-93 POUNDS - EVEN MORE * * * IN 2 SHORT MONTHS * * *';
"c. That the Respondent's means for effectively '* * * ENDING THE OVERWEIGHT PROBLEM FOREVER]', as advertised in Exhibit 'A' attached hereto, has been positively proven to be '100 %';
"d. That by the sole use of and reliance upon 'DALIDEX', any obese person in normal health will effectively overcome, treat and/or cure obesity, without the need for caloric restriction, will-power, dietary regimens, medical advice or supervision, or re-orientation of eating habits;
"e. That 'DALIDEX', 'DALIDEX FORMULA', 'DALIDEX METHOD', 'DALIDEX Tablets', and 'SYSTEM' ('DALIDEX') are one and the same;
"f. That when an obese person ingests 'DALIDEX', such person may indulge in '* * * most all those foods that up to now you wouldn't dare touch', (i.e., the use of 'DALIDEX' enables the obese person and indulgent eater to permanently end the overweight problem without denying himself of any foods desired, regardless of caloric content);
"g. That 'SOME OF THE FOREMOST MEDICAL JOURNALS AND CLINICAL EVALUATIONS IN THE WORLD' support the advertised efficacy of 'DALIDEX' as a sole modality for 'ENDING THE OVERWEIGHT PROBLEM FOREVER';
"h. That all an obese person needs to do 'IN ENDING THE OVERWEIGHT PROBLEM FOREVER' is to 'Take 3 DALIDEX Tablets a day', as directed, 'And that's all.';
i. That by means of 'DALIDEX' an obese person (in normal health) will lose as many pounds as he or she desires, within the periods of time indicated by Respondent in Exhibit 'A', attached hereto;
"j. That by ingestion of aforesaid product, as directed, an obese person will 'NEVER BE HUNGRY';
The Complainant's case was presented through a stipulation as to the testimony of the investigating postal inspector and the actual testimony of two expert witnesses, Edward C. Tocus, Ph.D., a pharmacologist, and Lawrence E. Putnam, M.D., an internist. These witnesses testified, in essence, that the Product's ingredients (e mg. of the anesthetic benzocaine and 66 mg. of methylcellulose, which absorbs fluid to form a bulk in the intestines) could, neither alone nor together, possibly support the claims of the Advertisement or cause the user to experience significant weight loss.
The Respondent did not present any witnesses.
The hearing examiner's initial decision supports the charges of the complaint. It holds, specifically, that the Respondent's Advertisement makes the claims attributed to it by the complaint; that these claims "are false, singly and in combination, and such misrepresentations are material inducements for obese consumers to part with their money"; and that the Respondent makes these representations with intent to defraud. The hearing examiner therefore found that the Respondent is engaged in a fraudulent scheme for obtaining money through the mails by means of false representations, within the meaning of 39 U.S.C. 4005. He therefore recommended the issuance of a fraud order.
The Respondent's appeal assigns the following four errors to the initial decision:
1. The Initial Decision is defective and violative of the Administrative Procedure Act and the Post Office Department Rules
of Practice in that the purported "findings of fact" set forth therein are not supported by any reasons or bases.
2. The hearing examiner was in error in finding that universal informed medical and scientific opinion confirms that the Product is valueless to accomplish weight reduction.
3. The hearing examiner was wrong in concluding that the representations which he found to have been made were made with fraudulent intent, i.e., with knowledge on the Respondent's part of their falsity.
4. The cases cited by the hearing examiner are inapposite.
The initial decision is affirmed in all respects.
Extended discussion in support of this finding is unnecessary in view of the fact that the Departmental Decision in In re Ama-Tol Industries, P.O.D. Docket No. 2/266, (November 1, 1968), covers the situation completely.
In that case the Department, represented by the same individual attorney who speaks for the Department herein, charged the Respondent, who was also represented by counsel who appears for the Respondent in this case, with falsely and fraudulently making claims virtually identical to those made by the Respondent herein on behalf of a similar product. In both cases a worthless reducing remedy was advertised as capable of causing weight reduction, when the instructions actually sent to the remitters with the Product directed them to utilize the Product as a mere supplement to a stringent diet. The instructions also advised the remitter to use only low-calorie ingredients in the preparation of the normally fattening foods which the Advertisement claimed could be consumed during the process of losing weight with the Product. Counsel's claims of error on appeal herein are virtually identical to those which he raised in the prior case.
For all of the reasons set forth in my decision of November 1, 1968 in the Ama-Tol case my ruling on all of those claims remains the same. More specifically:
1. The Initial Decision herein, just as in Ama-Tol, covers all of the necessary points, basing its holding on the yawning gap between the Advertisement's promises and the Respondent's actual delivery. The Respondent relies on the Advertisement's careful and unexplained mixture of references to "Dalidex Tablets", "Dalidex" and "the Dalidex Method" as its defense against the Complainant's charge that the Advertisement failed to advise the remitter that the Product's usefulness was dependent on a strict
diet. There is no question that these references are deceptive and conceal the true fact which is, as Dr. Putnam put it, that a person following the restrictive Dalidex diet will probably lose weight whether or not he takes the Product itself, and that the latter has no effect one way or the other (Transcript, pp. 163-4, 167-70). The Ama-Tol decision's holding on this point applies here with equal force (Decision, p. 9):
"The Advertisements contain a few oblique references which one might be able to link with the diet plan set forth in the instructions if one were forearmed with a knowledge of the Respondent's system. Thus the references to 'My amazing method' and 'THE FORMULATED PLAN OF "AMA-TOL"' are presumably intended to cover the combined use of the Product and diet plan. However the Advertisements' studied confusion of the words 'method' and 'formulated plan,' with 'formula' and 'formulation' which are used to refer to the Product alone, is ample proof that the references to the diet plan were carefully designed to conceal its existence without, technically, misstating."
2. The Hearing Examiner's findings with regard to the worthlessness of the Product are amply supported by the record.
3. The Advertisement contains all of the indications of a deliberate attempt to deceive. Here as in Ama-Tol (Decision, p. 10):
" Each and every one of the claims cited by the complaint is also fraudulent. Each is supported by a partial truth which is nullified by a vital, withheld qualification--a certain indicator of the Respondent's intent to deceive. The Advertisements constitute a tissue of thinly veiled misrepresentation, obfuscation and duplicity. 'The artful wording of the advertisements' is such as to give rise to an inference of intent to deceive, even though it avoids express misrepresentations Borg Johnson Electronics, Inc. v. Christenberry (S.D.N.Y. 1959) 169 F. Supp. 746, 751."
The Respondent's reliance upon the inclusion of a money-back guaranty in the Advertisement is similarly misplaced In re Ama-Tol Industries, Inc., supra, pp. 12-13; In re The Arzana Co., Inc., P.O.D. Docket No. 2/277 (September 20, 1968), p. 11 .
4. The Respondent's criticism of the Hearing Examiner's citation of certain precedents reflects a concept of the case which, as indicated herein and in the previous departmental decisions cited, I do not share.
Respondent's activities complained of constitute a fraudulent scheme violating 39 U.S.C. 4005. The order requested by the
complaint and recommended by the Initial Decision will issue forthwith.
Peter R. Rosenblatt
Judicial Officer
ANAPAX-P.231
04/15/69
1/ These claims, designated "(3)(a)" through "(3)(j)" in the complaint, are set forth directly below and are hereinafter referred to as claims "a" through "j".