In the Matter of the Complaint Against WISDOM, THE WISDOM SOCIETY, WISDOM HALL OF FAME, WISDOM ENCYCLOPEDIA, 9107 Wilshire Boulevard and P. O. Box 4017 at Beverly Hills, California 90213 P.O.D. Docket No. 3/64April 24, 1973
Thomas A. Ziebarth, Esq., Law Department, U.S. Postal Service, for Complainant Leon Gutterman, President of "Wisdom" organization, pro se Before: John Lewis, Administrative Law Judge
This proceeding was initiated by the filing of a complaint by the General Counsel of the Post Office Department (now the United States Postal Service) charging the above-named elements of the "Wisdom" organization (herein referred to as Respondent) with conducting a scheme or device for obtaining money or property through the mail by means of false representations, in violation of Section 4005 (now Section 3005) of Title 39, United States Code. In substance, said complaint charges Respondent with having made various false representations in promotional material concerning the nature of its operations, activities and organization, and the participation therein of various prominent individuals. Respondent appeared without counsel by Leon Gutterman, President of the Wisdom Society and editor and publisher of various "Wisdom" publications, and filed answer denying the making of any false representations as alleged in the complaint.
Following notification by Mr. Gutterman that he would be unable to appear at a hearing then scheduled for Washington, D. C., such hearing was cancelled and rescheduled for Los Angeles, California, where a hearing was thereafter convened before me. Since Respondent was not represented by counsel, a conference in the nature of a prehearing conference was conducted prior to the reception of evidence, for the purpose of advising Mr. Gutterman as to the nature of the charges made in the complaint, including the nature of each of the representations alleged to have been made by Respondent in its promotional material (Tr. 2-8).1/ Since Respondent's answer addressed itself, in a number of instances, to the issue of whether a particular representation was true or false, and might be deemed to have admitted the making of such representation, Respondent was afforded an opportunity to orally amend its answer so as to deny the making of such of the representations as it chose (Tr. 8028). Since Respondent had submitted with its answer a substantial number of documents, Respondent was advised that the Initial Decision which would be issued herein would be based solely on evidence offered at the hearing, and that it would therefore be incumbent upon Respondent to offer in evidence such of the documents as it wished to have considered as evidence in this proceeding. Respondent was also advised that Complainant had the burden of proof and that Respondent was presumed to be innocent of the charges alleged in the complaint until a case had been made out against it by Complainant (Tr. 19-21). In response to an inquiry by Mr. Gutterman whether Respondent would receive a "fair or impartial" hearing and one that was "just" without being represented by counsel, he was advised that the fairness or impartiality of the hearing would in no way be affected by the presence or absence of counsel, but that it was preferable to be represented by counsel familiar with applicable evidentiary and procedural rules (Tr. 31-2). Respondent was offered the option of having the hearing recessed while it sought to obtain counsel, but Mr. Gutterman elected to proceed with the hearing unrepresented by counsel (Tr. 33-4). No claim was made at any time that Respondent was unable to afford counsel.2/ In response to Mr. Gutterman's inquiry as to whether I would "explain or interpret or clarify a point which may not be exactly as clear to me" during the course of the hearing, he was advised that I would be glad to answer any questions which he directed to me, but that I could not undertake to affirmatively assist Respondent in the trial of the case since, as an impartial hearing officer, I could not represent either side (Tr. 34-5).
The hearing was thereafter recessed until the following day, by agreement of the parties, to afford them an opportunity to discuss various stipulations which might expedite the hearing and/or a possible amicable disposition of the proceeding. Upon the reconvening of the hearing the parties advised the undersigned that it had not been possible to arrange an amicable disposition of this proceeding, and that they were ready to proceed with the presenta- tion of evidence. Prior to the calling of any witnesses the undersigned advised Mr. Gutterman as to (1) his right to object to any question asked of a witness by counsel for Complainant, (2) the grounds upon which objection could be made, and (3) his right to cross-examine any witness called by Complainant, as well as to call witnesses in his own behalf (Tr. 40-1).
Thereafter, counsel for Complainant offered testimony and other evidence through the following witnesses: (1) The superintendent of the Beverly Hills post office, through whom he sought to establish the mailing address used by Respondent; (2) a former employee of Respondent, through whom he sought to establish the various activities conducted at Respondent's place of business; (3) a postal inspector, through whom he sought to establish certain admission made by Mr. Gutterman during an interview with him; 3/ (4) a librarian from the Research Library of the University of California at Los Angeles, through whom he sought to establish the falsity of certain of the representations, and (5) the Acting Director of the Central Library of Los Angeles, through whom he sought to corroborate the testimony of the previous witness. At the close of Complainant's case, Respondent offered testimony and other evidence in support of its position through (1) Mr. Gutterman, (2) his assistant Betty-Jane Lang, (3) an advisor, Mr. Ernst Beck, (4) the art director for Respondent Wisdom Society, (5) the owner of a typesetting company doing business with Respondent, and (6) the owner of a printing company doing business with Respondent.
Following the close of the evidence presented by the parties the record was closed and a date fixed for the filing of proposed findings of fact and conclusions of law. However, during the course of the following week, while the undersigned was conducting a hearing in another proceeding in Los Angeles, he was orally requested by Mr. Gutterman to reopen the record herein for the purpose of affording Respondent an opportunity to present certain additional evidence by way of rebuttal to certain evidence offered by Complainant. Such request was granted and the record herein was reopened to permit Respondent to offer the testimony of Miss Lang and to present certain additional documentary evidence, following which the record was again closed. Thereafter, proposed findings of fact and conclusions of law were filed on behalf of both parties. On motion of Respondent, it was afforded an opportunity to file a reply to the proposed findings filed by counsel for Complainant.
After having carefully reviewed the evidence in this proceeding and the proposed findings of fact and conclusions of law, 4/ and based upon the entire record, including my observation of the demeanor of the witnesses, I make the following:
FINDINGS OF FACT
A. The Alleged Solicitation of Money Through the Mail
1. Respondent "THE WISDOM SOCIETY" is a nonprofit corporation organized under the laws of the State of California. It has existed at least since October 1957 and its full name is "The Wisdom Society for the Advancement of Knowledge, Learning and Research in Education" (RX 9). Leon Gutterman is one of its organizers and is its President. Mr. Gutterman was also the publisher and editor of a periodical known as "Wisdom Magazine" which was published from about 1956 to 1964 (CX 11, 13; Tr. 95, 561). Each of the issues of such magazine featured the life and thoughts of an outstanding personality such as Albert Einstein, Albert Schweitzer, Bernard Baruch, Dr. Jonas Salk, General Eisenhower, David Sarnoff and Nehru of India. In connection with issues of the magazine featuring a living person it was customary to present the individual with a certificate known as the "Wisdom Magazine Award". Later the name of the award was changed to the "Wisdom Award of Honor", and certificates evidencing the award were presented to outstanding personalities not featured in issues of Wisdom Magazine.
2. During the mid-1960's Mr. Gutterman conceived the idea of publishing a Wisdom Encyclopedia which would include the wisdom and thoughts of outstanding individuals of the past and those of the more modern period. As conceived by him, the photographs, biographies and thoughts of notable individuals would be included in a separate portion of the encyclopedia to be known as the Wisdom Hall of Fame section (Tr. 423, 425). In this connection, the practice developed of notifying various individuals by letter that they had been nominated for "The Wisdom Award of Honor" and would be elected to the "Wisdom Hall of Fame". A formal reply card was enclosed with the letter and the nominee was requested "to acknowledge your nomination and acceptance of the invitation and to confirm your approval of election to the Wisdom Hall of Fame" (CX 1-B). The reply card also acknowledged acceptance of "your cordial invitation to be a Founder of the Wisdom Encyclopedia", and contained the following statement (CX 1-D):
" In grateful reciprocation of the privilege of being elected to the Wisdom Hall of Fame, and to express my appreciation for the Wisdom Award of Honor-- as well as to show my faith in the future of knowledge and education-- I am pleased to enclose my Encyclopedia Founder check for $100 , payable to the non-profit Wisdom Society, as my gift, to help the Educators and Editors of Wisdom bring this valuable $1,700,000 Wisdom Encyclopedia to publication, for the advance- ment of learning and education, and to 'spread wisdom among all people.'" [Emphasis added.]
3. Respondent contends that its letters, cards and other informational material do not involve a solicitation of money which can be considered to constitute a scheme or device for obtaining money or property through the mail within the meaning of 39 U.S. Code 4005 (now 3005), since there is no commercial transaction or sale of a product involved (RPF at 7).5/ Without determining at this point whether Respondent has made any false representations in its letters or promotional material, it is clear that it is engaged in soliciting or seeking to induce nominees for the Wisdom Award of Honor to send $100 through the mail. While there may be no commercial transaction or sale of a product involved, and the payment is designated in Respondent's reply card as a "gift", this is immaterial since there is no requirement in the law that the scheme or device for obtaining money through the mail must involve the quid pro quo of a commercial transaction. It is sufficient to confer jurisdiction if Respondent's operations involve the inducing of individuals to send money through the mail in response to various representations made by Respondent. Moreover, to the extent any quid pro quo may be required to be shown, it is clear that, with minor exceptions which will be hereafter noted, it has been a condition precedent to the receipt of the Wisdom Award in recent years that the individual nominated pay the sum of $100. It is concluded and found, therefore, that Respondent's method of operation involves the solicitation of money through the mail and that Respondent does, in fact, receive money through the mail pursuant to such solicitation
B. The Alleged Representations
4. As previously noted, Respondent has notified various individuals by letter of their nomination for the Wisdom Award of Honor and has requested them to acknowledge their nomination and their acceptance thereof by returning a reply card. In addition to the letter and reply card Respondent also encloses a copy of a booklet entitled: "Wisdom Hall of Fame for Eminent Recipients of the Wisdom Award of Honor and Notable Founders of the Wisdom Encyclopedia" (CX 1-C). A copy of the notification letter and the reply card are attached hereto as Appendices "A" and "B", respectively. The front page of the Wisdom Hall of Fame booklet and several pages indicative of the contents thereof are attached hereto as Appendix "C". Respondent suggests that the foregoing are not typical in all respects of the literature used by it because certain of the forms cited by Complainant were used only in correspondent with persons in the field of business and finance (e.g., CX 1-B), and because some of them are now "obsolete". However, the record discloses that forms substantially similar to those sent to persons in the business world were sent to people in other fields of endeavor (e.g., CX 2-A, 5-B, 7-A) and that, in any event, such forms were widely used. While changes were made by Respondent in some of the forms, such changes did not occur until after the commencement of this proceeding and, for the most part, did not substantially alter the forms previously in use.6/ It is concluded and found that the promotional literature offered in evidence by Complainant is typical of that used by Respondent until at least the time of the commencement of this proceeding and for some time prior thereto.
a. Prestigious Nature of Wisdom Award. The complaint, in subparagraph (a) of paragraph 3, charges Respondent with making the representation that the "Wisdom Award of Honor' enjoys an established and prestigious reputation in educational circles". In its answer Respondent neither admitted nor denied the making of this representation but alleged that "this statement is true." During the prehearing colloquy Mr. Gutterman stated that Respondent did not deny the making of the representation (Tr. 10). The record establishes that Respondent makes the following statement in the letter notifying persons that they have been nominated for the Wisdom Award of Honor (CX 1-B, 2-A, 5-B):
"You have been nominated by the Board of Editors, and deemed worthy of the highest status, highest prestige award of education in America : The Wisdom Award of Honor." [Emphasis added.] Although previously admitting the making of the representation in question and asserting that it was true, Respondent contends in its reply findings (at 6) that the letter in which the above-quoted statement was made is now "obsolete and [no] longer in use" and refers to a printed invitation which is now used in lieu of the letter (RX 5). The record establishes that the letter in question was in use until at least the issuance of the complaint herein and that Respondent did not begin to use the so-called invitation until some time after the commencement of this proceeding (Tr. 438). It is accordingly conducted and found that Respondent, at all times material herein, did represent that the Wisdom Award of Honor enjoys an established and prestigious reputation in educational circles in the United States.
b. Existence of Board of Editors . The complaint, in subpara- graph (b) of paragraph 3, charges Respondent with having made the representation that "there exists a Board of Editors which selects prospective recipients of the 'Wisdom Award of Honor' on the basis of its independent evaluation of their achievements". In its answer Respondent neither admitted nor denied the making of this representation but alleged that "this point is true." During the prehearing colloquy Mr. Gutterman confirmed that Respondent did not deny the making of the representation, but was relying on the truth thereof (Tr. 11). As noted above, Respondent advises prospective honorees in the notification letter that: "You have been nominated by the Board of Editors" (CX 1-B, 2-A, 5-D). In the so-called printed invitation which Respondent states superseded the invitation letter the prospective honoree is advised of his nomination "by the Board of Editors of the Wisdom Society" (RX 5). It is concluded and found that Respondent does make the representation alleged in the complaint with reference to the existence of a Board of Editors which selects prospective nominees for the Wisdom Award of Honor in the basis of its independent evaluation of their achievements.
c. Prior Recipients of Award Nominated on Same Basis as Present Recipients . The complaint, in subparagraph (c) of paragraph 3, alleges that Respondent has made the representation that prior recipients of the Wisdom Award (referred to as "Eminent Recipients") "were nominated for and have accepted said Award subject to substantially the same terms and conditions as those offered to the present recipients of the solicitations". In its answer Respondent denies the making of such representation, and such denial was confirmed in the prehearing colloquy (Tr. 12). Among the terms and conditions which Complainant claims that Respondent represented prior recipients were expected to comply with, in order to receive the award, is the payment of the sum of $100 (CPF No. 8). In support of its position Complainant notes that the printed reply card enclosed by Respondent with the nomination letter contains the statement that the nominee is "honored to participate with the Eminent Recipients of the Wisdom Award of Honor and Notable Founders of the Wisdom Encyclopedia, such as General Dwight D. Eisenhower", and that "in grateful reciprocation of the privilege of being elected to the Wisdom Hall of Fame, and to express my appreciation for the Wisdom Award of Honor . . . I am pleased to enclose by Encyclopedia Founder check for $100" (CX 1-D). Respondent argues that there is no implication in this statement that "all" prior recipients have participated on the same basis or as to what such basis was (RRF at 7). It is my conclusion and finding that Respondent's promotional literature does, substantially, make the representation alleged in the complaint. Aside from the reference in the reply card to the participation of prior "Eminent Recipients", the invitation letter contains a list of "Eminent Recipients of the Wisdom Award of Honor", all of whom are persons of great prominence. Persons receiving an invitation to participate with these prior "Eminent Recipients" would normally assume that such recipients were initially invited to participate on substantially the same basis as themselves. They certainly would not infer that they were being discriminated against and asked to do something which the other "Eminent Recipients" were not asked to do, viz ., make a contribution of money.
d. Wisdom Society as America's Most Honored Non-Profit Educational Publishing Society . The complaint, in subparagraph (d) of paragraph 3, charges Respondent with making the representation that the Wisdom Society is "America's Most Honored Non-Profit Publishing Society of Education". In its answer Respondent neither admits not denies the making of this representation but asserts that it is "entirely true." Respondent's letter notifying prospective honorees of their nomination for the Wisdom Award of Honor is headed with the name "WISDOM HALL OF FAME", immediately below which appears the legend:
"Published by The Wisdom Society for the Advancement of Knowledge, Learning and Research in Education AMERICA'S MOST HONORED NON-PROFIT PUBLISHING SOCIETY OF EDUCATION"
The Wisdom Hall of Fame booklet enclosed with the nomination letter contains the following statement with regard to the Wisdom Society (CX 1-C at 2):
"The Wisdom Society For The Advancement of Knowledge, Learning And Research In Education is a non-profit educational publishing institution that has won its way to world-wide renown and admiration through sheer merit of distinguished achievement and brilliant public service to the nation in the field of education."
It is concluded and found that Respondent does make the representa- tion, substantially, as alleged in paragraph 3(d) of the complaint.
e. Wisdom Society Actively Engaged in Education and in Publication of Certain Named Publications . The complaint, in subparagraph (e) of paragraph 3, charges Respondent with making the representation that the Wisdom Society "is actively engaged in education and the publication of Wisdom Magazine and Wisdom Books, as well as preparing for the publication of Wisdom Encyclopedia". In its answer Respondent neither admits nor denies the allegation in question but makes certain affirmative allegations concerning the publishing activities of the Wisdom Society, viz ., that it is
(1) "actively engaged in educational publishing", (2) "the publisher of Wisdom Magazine and Wisdom Books", and (3) "actively engaged in preparing and completing editorial material for the publication of the Wisdom Encyclopedia". During the prehearing colloquy, Mr. Gutterman asserted that his organization did not represent that it was "actively publishing" Wisdom Magazine or Wisdom Books at the present time (Tr. 18). The record discloses that in the nomination letter previously alluded to Respondent refers to its organization as "Educators, Editors and Publishers of Wisdom Magazine, Wisdom Books, Wisdom Encyclopedia" (CS 1-B). In the Wisdom Hall of Fame booklet enclosed with the nomination letter Respondent states that the Wisdom Society "publishes Wisdom Magazine, Wisdom Books, and the Wisdom Encyclopedia" (CX 1-C at 2). It further states with respect to the Encyclopedia ( id . at 44):
"The Wisdom Encyclopedia is the greatest advance in learning and education...." "This incomparable intellectual accomplishments is the product of 15 years of painstaking research and extensive editorial development...."
* * * * * * *
"The Wisdom Encyclopedia brings together for the first time, in one single comprehensive source, the great thoughts of the world's greatest minds...."
* * * * * * *
"The Wisdom Encyclopedia covers the entire range of human thought throughout all the ages, on all subjects, all lands, all cultures, all languages. It contains superb pictorial illustrations...."
Respondent contends that some of the material above referred to is obsolete in that the present booklet refers to the Wisdom Society as the "publisher" of the three works, rather than stating that it "publishes" them. Aside from the fact that the new promotional material did not come into use until after the commencement of this proceeding (Tr. 357-8), it is my opinion that even with the minor changes alluded to Respondent has made and continues to make the representation alleged in paragraph 3(e) of the complaint, and it is so found. If the reference to the Wisdom Society as the "publisher" of these works does not imply that it is now actually engaged in publishing them, it at least implies that such works are of reasonable currency and are part of an ongoing publishing effort.
f. Prior "Eminent Recipients" Participation in Encyclopedia and Authorization for Use of Their Names, Etc . The complaint, in subparagraph (f) of paragraph 3, charges Respondent with making the representation that prior "Eminent Recipients" of the Wisdom Award of Honor named in Respondent's promotional literature "are participating with Respondent in the publication of the Wisdom Encyclopedia and have authorized Respondent to use their names, photographs, letters and quotations for and in connection with the present promotional activities on behalf of the encyclopedia". In its answer Respondent denies making the first half of the above representation, and asserts it has not represented that all prior recipients of the award are participating in the encyclopedia. With respect to the second portion of the representation, viz ., that such recipients have authorized use of their names, photographs, etc. in connection with the encyclopedia, Respondent's answer neither admits nor denies it but asserts that under "the freedom of the press" it has a right to use such material. However, during the prehearing colloquy, Mr. Gutterman indicated that Respondent contended it did not make this portion of the representation either (Tr. 25). The letter inviting prospective honorees to participate contains a list of the more prominent prior "Eminent Recipients of the Wisdom Award of Honor" and advises the prospective honoree that on becoming a recipient of the award his "name and photograph will be placed in the Wisdom Hall of Fame, in which the most eminent men of our time are immortalized" (CX 1-B). The reply card enclosed with the nominating letter contains the statement that the individual is "honored to participate with the Eminent Recipients of the Wisdom Award of Honor and Notable Founders of the Wisdom Encyclopedia, such as General Dwight D. Eisenhower" (CX 1-D). The Wisdom Hall of Fame booklet (CX 1-C) contains photographs of a number of the so-called "Eminent Recipients of the Wisdom Award of Honor and Notable Founders of the Wisdom Encyclopedia", including General Eisenhower, Nehru of India, Bernard Baruch and Winston Churchill. The undersigned entertains no doubt that recipients of Respondent's promotional literature, upon being asked to participate with the other "Eminent Recipients of the Wisdom Award of Honor and Notable Founders of the Wisdom Encyclopedia", would understand and infer that the prior recipients of the award are participating in the publication of the Wisdom Encyclopedia and that they have authorized Respondent to use their names, photographs, letters, etc. in the Wisdom Hall of Fame booklet in connection with the promotion of the encyclopedia. It is accordingly concluded and found that Respondent does make the representation, substantially, as alleged in paragraph 3(f) of the complaint.
g. Expenditure of Over $1.7 Million in Development of Encyclopedia . The complaint, in subparagraph (g) of paragraph 3, charges Respondent with representing that "more than $1,700,000 has been invested by Respondent in the vast research and scholarly development of the Wisdom Encyclopedia". In its answer Respondent neither admits nor denies the making of this representation, but alleges that the above quoted statement is "true." During the prehearing colloquy, Mr. Gutterman agreed that he did not deny the making of the representation in question (Tr. 26). The record discloses that in the Wisdom Hall of Fame booklet sent to prospective honorees Respondent states (CX 1-C, at 44):
"...more than $1,700,000 has been invested in the vast research and scholarly editorial development of The Wisdom Encyclopedia...."
It is concluded and found that Respondent does make the representa- tion, substantially, as alleged in paragraph 3(g) of the complaint.
h. Wisdom Hall of Fame as a Place or Building . The complaint alleges, in subparagraph (h) of paragraph 3, that Respondent makes the representation that the Wisdom Hall of Fame "exists in the form of a particular place or building". The answer, in substance, denies that Respondent makes this representation and asserts that the picture of the Wisdom Hall of Fame appearing in Respondent's literature is merely "symbolic of an ancient Greek temple of wisdom". The picture of the Wisdom Hall of Fame appears in the Wisdom Hall of Fame booklet which is enclosed with the nominating letter previously referred to. The picture of the building contains the legend "Wisdom Hall of Fame". In describing what the Wisdom Hall of Fame is the booklet states (CX 1-C at 2):
"The Wisdom Hall of Fame was created by The Wisdom Society For the Advancement of Knowledge, Learning And Research In Education. It was established to honor and pay tribute to the outstanding men of our time eminent in all the worthwhile activities of American life. In the Wisdom Hall of Fame are inscribed the names of distinguished, admired, and illustrious individuals who best symbolize wisdom in every profession and meritorious field of human endeavor."
In the letter enclosing the booklet the prospective honoree is advised (CX 1-B):
"On becoming a Recipient of the Wisdom Award Of Honor, your name and photograph will be placed in the Wisdom Hall of Fame, in which the most eminent men of our time are immortalized, men of greatness worthy of permanent tribute."
It is my opinion and finding that Respondent's promotional literature does, substantially, make the representation alleged in paragraph 3(h) of the complaint. The fact that certain of such literature may have been modified following the institution of this proceeding does not require modification of such finding. Moreover, even the modified literature, including reference to the Hall of Fame as "symbolized by the artist's restoration of the Parthenon" (CX 10) would not prevent many recipients of the literature, upon viewing it as a whole, from inferring that there is a real building or place where their names will be enshrined.
C. The Alleged Falsity of the Representations a. Prestigious Nature of Wisdom Award
6. It has been heretofore found that Respondent makes the representation that the Wisdom Award of Honor enjoys an established and prestigious reputation in educational circles. The record establishes that the Wisdom Award of Honor does not enjoy an established and prestigious reputation in educational circles. The Wisdom Society is not listed in any directory of learned or scholarly societies, and the Wisdom Award is not listed in any of the directories of such awards. A spot check in "Who's Who in America" of the biographies of some of the persons who received the Wisdom Award discloses that they themselves did not regard the award highly enough to even list it among the awards received by them (Tr. 134-8, 170).7/
7. Respondent's contention concerning the prestigious nature of its award in educational circles is based principally on a series of letters received from recipients of the award (RPF at 12). An examination of the letters referred to by Respondent discloses that they do not support its position. For the most part they consist merely of courteous acknowledgements of, or expressions of thanks for, the award (RX 10-12, 14, 16). Such letters can, in no sense, be regarded as constituting a competent evaluation of the standing of the award in educational circles. No inference favorable to Respondent's position on this issue can be drawn from the mere acceptance of the award by prominent individuals. On the contrary, in a number of instances the letters disclose that individuals accepted the award not because they had any definite knowledge as to the prestigious nature of the award, but because of an assumption on their part as to the award's respectability and merit based upon the fact that the award had been previously accepted by other prominent individuals (RX 11-C, E, G, J, K, M, O, P, U, AB; RX 14-B, L, R, W). Respondent's method of operation appears to have involved the conferring of awards, initially, on prominent and outstanding individuals who apparently were flattered to have been chosen as subjects of its Wisdom Magazine articles. It then proceeded to confer awards on other prominent and well-known individuals who were persuaded as to the organization's worthwhileness and respectability on the basis of the list of prior recipients of the award. As the circle of honorees grew an aura of prestigiousness appears to have been generated as each group assumed an honor was being conferred on it because other more prominent individuals had seen fit to accept the award. The process appears to be akin to the situation which is reflected in the fable of "The Emperor's Clothers". Respondent's evidence consisting of what are commonly called "fan" letters certainly cannot be considered as establishing the prestigiousness of the award in educational circles. Aside from the hearsay nature of such evidence and the fact that the letters do not, generally speaking, comment on the standing of the award, most of the recipients are not active in educational circles and do not purport to evaluate the standing of the award in such circles.
8. Respondent argues that the evidence offered by Complainant is insufficient to establish the falsity of its claim concerning the prestigiousness of the award since the experts called by Complainant were not sufficiently prominent in their field. One of Complainant's witnesses was the Assistant Chief of the Reference Department of the Research Library of the University of California at Los Angeles (Tr. 121). The other was Acting Director of the Central Library of Los Angeles (Tr. 167). Both witnesses were professional librarians who showed themselves to be knowledgeable in their field and worthy of credit and, in the absence of substantial countervailing evidence, their testimony is entitled to be accepted. Respondent was offered an opportunity to call its own experts (Tr. 200), but failed to do so. The evidence which it did offer consisting of letters from recipients of the award is insufficient to rebut the evidence offered by Complainant. It is accordingly concluded and found that Respondent's representation concerning the prestigiousness of the Wisdom Award of Honor in educational circles is materially false. b. Existence of Board of Editors
9. It has been heretofore found that Respondent makes the representation that there exists a Board of Editors which selects prospective recipients of the Wisdom Award of Honor on the basis of its independent evaluation of their achievements. The evidence of record, including that offered by Respondent, establishes that there is no Board of Editors, in the normally accepted sense, which selects prospective honorees on the basis of an independent evaluation of their achievements.
10. In its answer, which is signed by Mr. Gutterman, Respondent alleges that there is a Board of Editors consisting of:
"(A) Leon Gutterman, Editor and Publisher;
(B) Betty-Jane Lang, Editorial Director;
(C) Ernst A. Beck, Consultant to the Editors."
However, at the hearing Mr. Beck testified that the Board of Editors consisted of Mr. Gutterman and Miss Lang, and that he was not a member of the Board (Tr. 351, 362). Miss Lange likewise testified that she and Mr. Gutterman constituted the Board of Editors. The so-called selection process involves, basically, a perusal of Who's Who and similar reference works, with Mr. Gutterman and Miss Lang each selecting the names of individuals that he or she considers appropriate. Each shows his or her list of names to the other and unless the other finds any of the names unsuitable the individuals are then sent a nomination letter (Tr. 428-31). Respondent contends that this process involves a bona fide evaluation of the qualifica- tions of prospective nominees and not a routine selection of names. However, the probabilities inherent in the situation tend to negate this. While there is some minimal element of discretion involved in the selection of the names of individuals who will be sent nomination letters, it is clear that in recent years when nominees were expected to contribute $100 to the encyclopedia there has been no real selection process based on an objective evaluation of the prospective nominee's qualifications. During recent years Respondent's principal source of income has been the donations received from nominees (Tr. 579). Without such income Respondent would not be able to proceed with the publication of the encyclopedia. Considering that it has sent out approximately 20,000 to 30,000 invitations to prospective nominees during the past few years, and that the acceptance rate (with the $100 contribution) has been as low as 1 to 4% (Tr. 657-9), it strains credulity to the utmost to believe that there is any bona fide selection of nominees on the basis of an objective evaluation of their achievements.
11. Aside from whether there is any bona fide process of selection involved, Mr. Gutterman and Miss Lang can hardly be deemed to constitute an independent Board of Editors, as that term would normally be understood by those receiving the nomination letters. Such individuals upon receiving a letter from Mr. Gutterman stating that they had been "nominated by the Board of Editors", would be apt to assume that there was some separate, independent Board of Editors which had made an objective evaluation of their qualifications and then nominated them. The record discloses that this, in fact, is what a number of the prospective honorees did infer.8/ In actuality, there was no Board of Editors in such sense but only Mr. Gutterman and Miss Lang who, for all practical purposes, constituted the Wisdom Society and organization, except for two employees doing art work and a few part-time clerical people (Tr. 56, 95, 340, 467, 479). c. Prior "Eminent Recipients" Nominated on Same Basis
12. It has been heretofore found that Respondent has made the representation that prior "Eminent Recipients" of the Wisdom Award of Honor were nominated for and accepted the award subject to substantially the same terms and conditions as those offered to the present recipients of Respondent's solicitations. Respondent disputes making the representation in question, but does not seriously question the fact that present nominees are not offered the award on substantially the same terms and conditions as it was offered to those listed in its offering letter as "Eminent Recipients of the Wisdom Award of Honor".
13. Beginning in 1956 when Respondent was publishing its Wisdom Magazine it issued an award known as the "Wisdom Magazine Award". Such award was given outright, without any solicitation of funds (Tr. 559-62; CX 13, 16). Several years later, when Respondent began experiencing financial problems in putting put the Wisdom Magazine, it began to offer "The Distinguished Wisdom Award" to subscribers who contributed $25 or more to the Wisdom Society (CX 17). Thereafter, it began offering "The Wisdom Award of Honor" to those who renewed their membership in the Wisdom Society by sending a "renewal check for $15" (CX 18-19). Beginning in 1965 Respondent began issuing the "Wisdom Award of Honor" to a number of prominent and outstanding personalities. The list of recipients included presidents and former presidents of the United States, Justices of the Supreme Court, members of the cabinet, military figures, and members of Congress (RX 10 A-J, 11 A-AB; CX 21). Such awards were made outright without any request for the making of a contribution as a condition precedent to the receipt of the award (Tr. 205).
Subsequently, after it had started making plas for the Wisdom Encyclopedia, Respondent did request contributions from some of the prior recipients of the Wisdom Award of Honor to assist in publication of the encyclopedia. During the past few years Respondent instituted the practice of nominating individuals for the "Wisdom Award of Honor" on the condition that they make a contribution of $100 "in grateful reciprocation of the privileges of being elected to the Wisdom Hall of Fame and to express my appreciation for the Wisdom Award of Honor--as well as to ... help the Educators and Editors of Wisdom bring this ... Wisdom Encyclopedia to publication" (CX 1-D; RX 8-C; Tr. 450-2, 664).9/
14. For the most part, the prominent individuals listed on Respondent's invitation letter as "Eminent Recipients of the Wisdom Award of Honor" (CX 1-B), and whose pictures appear in its Wisdom Hall of Fame booklet as "Eminent Recipients of the Wisdom Award of Honor and Notable Founders of the Wisdom Encyclopedia" (CX 1-C), were not requested to make any contribution as a condition precedent to their receipt of the award. Since present nominees are almost universally requested to make a $100 contribution as part of their acceptance of the nomination, it is clear that they are not being nominated for and accepted on substantially the same terms and conditions as prior "Eminent Recipients". Accordingly, it is concluded and found that Respondent's representation, in this respect, as heretofore found, is materially false. d. Wisdom Society as America's Most Honored Non-Profit Educational Publishing Society
15. It has been heretofore found that Respondent makes the representation that the Wisdom Society is "America's Most Honored Non-Profit Publishing Society of Education". The evidence of record establishes that the Wisdom Society is not America's most honored non-profit publishing society of education. Its work has consisted mainly of the publication of Wisdom Magazine which was discontinued some 6 or 7 years prior to the institution of this proceeding. In addition, it published one book some years ago on the life and thoughts of General David Sarnoff, and it is presently preparing an encyclopedia. Aside from whether such works may be properly considered as falling in the field of education, they hardly justify the claim that Respondent Wisdom Society is presently the most honored educational publishing society in the United States. As previously found, the Wisdom Society is not listed in any of the directories of learned, scholarly societies in the United States.
Respondent's case for the claim that the Wisdom Society is America's most honored non-profit publishing society of education rests principally on letters received from recipients of the award. Such letters, as heretofore found (supra, 17), are primarily "thank you" letters and cannot be considered as having any probative weight in establishing Respondent's standing as an education publishing society. e. Wisdom Society as Actively Engaged in Education and Publishing
16. It has been heretofore found that Respondent makes the representation that the Wisdom Society is actively engaged in education and in the publication of Wisdom Magazines and Wisdom Books, as well as preparing for the publication of Wisdom Encyclopedia. The evidence of record establishes that this representation is materially false. The publication of Wisdom Magazine, which was begun in 1956, ceased in 1963 or 1964 with its 39th issue entitled "The Wisdom of the Bible" (CX 11). While some effort was made to put out a 40th issue entitled "Wisdom of Shakespeare", this was abandoned due to financial difficulties, and the magazine has been defunct for a number of years (CX 14, 17, 18, 20; Tr. 18, 95, 125, 128, 643). The only so-called "Wisdom Books" which Respondent ever published was a single book on David Sarnoff, former Chairman of the Board of RCA, which was published around 1967. While General Sarnoff had submitted to an interview in connection with the preparation of a Wisdom Magazine issue on his life and thoughts, and subsequently bought $11,000 worth of the issue, he did not participate in the preparation of the book or purchase any copies. The entire press run of the book was approximately 3,000 to 4,000 copies, which Respondent managed to sell to people in the broadcasting industry or to donate to libraries and colleges (Tr. 582-6). During the time that Respondent was representing to prospective nominees that it "publishes Wisdom Magazine, Wisdom Books and the Wisdom Encyclopedia" it had, in fact, ceased publication of the magazine for at least 6 years and had published only one so-called Wisdom Book some 3 or 4 years previously.
17. With respect to the Wisdom Encyclopedia, the record discloses that during the period when Respondent was portraying the encyclopedia in its promotional literature as a work that was practically in being (CX 1-C at 44), in reality the encyclopedia was far from completion, and the work being done on it was sporadic and minimal. Although Mr. Gutterman claimed that he had begun compiling material for the encyclopedia in 1957 or 1958 (Tr. 636), it is clear that such material was mainly for use in the preparation of Wisdom Magazine. The compilation of material for the encyclopedia, as such, did not begin until around 1967 (Tr. 425), following which Respondent began to seek funds from so-called founders of the encyclopedia.
However, as of the time of the commencement of this proceeding work done on the encyclopedia consisted mainly of the compiling of pages from various Wisdom Magazine issues for possible incorporation into the encyclopedia of approximately 1,500 pages, this consisted entirely of pages from the magazines which, as Mr. Gutterman conceded, "is not the Encyclopedia. It is the concept, based on material that we may or may not use as the volumes [of the encyclopedia] develop" (Tr. 638). Although Respondent had hired a full-time art director in April 1970, purportedly to work on the encyclopedia and was allegedly preparing various portions of the encyclopedia, only about 80 pages of material not previously included in the magazine had actually been prepared and printed as of the time of the hearing in this proceeding (Tr. 488, 415; CX 12; RX 13). The latter consisted principally of loosely-spaced aphorisms from the Bible, arranged under such headings as "Ambition and Achievement", "Brotherhood and Charity", "Faith and Trust", etc. (RX 13). Although Respondent had incurred costs of approximately $29,000 for the setting of type and printing, this covered not merely new pages for the encyclopedia, but preparation of the Wisdom Hall of Fame booklet which it used as promotional material, and preparation of the Wisdom Hall of Fame section of the encyclopedia consisting of biographies and photographs of those who had contributed $100 (Tr. 477, 485, 594). Respondent's plans as to when the encyclopedia would be published or even as what its ultimate format would be were vague and uncertain (Tr. 525, 625, 628, 419-26, 479). Respondent has not segregated contributions received from so-called founders of the encyclopedia, which are in excess of $150,000, from its other funds, and its financial condition is such that there would appear to be no way in which the encyclopedia could be published in the foreseeable future without substantial contributions from the solicitation of other potential "founders". f. Participation of Prior Eminent Recipients and Authorization for Use of Name
18. It has been heretofore found that Respondent makes the representation that prior "Eminent Recipients" of the Wisdom Award of Honor listed in its promotional material are participating in the publication of the Wisdom Encyclopedia and have authorized the use of their names, photographs, letters, etc., in connection with Respondent's present promotional activities. The evidence of record establishes that such representation is materially false.
19. Insofar as the representation that prior recipients are participating in the encyclopedia, Respondent concedes that not all are participating but claims that a majority are participating, and have signified their participation by paying $100 and sending in their photographs and biographies (Tr. 547; RX 14). Respondent's position that the majority of prior recipients are participating is based on the entire list of names included in its Wisdom Hall of Fame booklet. However, this does not take into account the list of persons designated as "Eminent Recipients" on Respondent's invitation letter (CX 1-B, 2-A, 3, 5-B), which includes persons whose names are household words in the United States. Such names were obviously used as the bait to induce lesser celebrities and others on a lower popularity level to contribute $100 and participate in the project (Tr. 618). Out of approximately 160 names of outstanding personalities listed on the letterhead as "Eminent Recipients of the Wisdom Award of Honor", only 5 are included in the exhibit (RX 14) which Respondent contends shows the participation of "Eminent Recipients" in the encyclopedia. While a number of the persons included in Respondent's exhibit did apparently submit photographs and biographies and, in some instances, make a contribution of $100, not a single one of the 5 who are listed in Respondent's letterhead as "Eminent Recipients" sent a photograph or biography or contributed $100 (RX 14-Q, T, U, V, Y). The latter received their awards in 1965 or prior thereto, as did the bulk of the others listed on Respondent's letterhead (see RX 10, 11). This was prior to the time that a decision had been made to proceed with work on the encyclopedia. With a few possible exceptions, such individuals were not requested to submit photographs or biographies, or to pay $100. Assuming arguendo that the sending of a photograph and biography and the payment of $100 can be construed as participation in the encyclopedia, it is clear that the bulk of the "Eminent Recipients" listed on Respondent's letterhead or whose photographs are included in the Wisdom Hall of Fame booklet are not participants in the encyclopedia.
20. Insofar as the portion of the representation that prior "Eminent Recipients" had authorized Respondent to use their names, photographs, letters, etc., Respondent concedes that it did not have specific authorization to use same in its promotional literature (Tr. 617). However, it contends that under the First Amendment to the Constitution it is free, as the publisher of the encyclopedia, to use names, letters and photographs submitted to it (RRF at 37, RPF at 26). Complainant has questioned whether the First Amendment protects the use of such material for advertising or trade purposes (CPF at 15). In my opinion, much of the argument concerning the application of the First Amendment is irrelevant. This is not a private lawsuit against Respondent by recipients of the award based on Respondent's alleged unauthorized use of their names, photographs, etc., in which the issue of the protection of the First Amendment might be relevant. The issue involved in this proceeding is whether third persons receiving Respondent's promotional literature would be apt to interpret it as representing that Respondent had been authorized by prior "Eminent Recipients" to use their names, photographs, etc., thus encouraging such third persons to participate in the encyclopedia project. It has been previously found that they would so interpret it. It is immaterial what rights exist as between Respondent and the prior "Eminent Recipients", insofar as the issue of how third persons receiving the promotional literature would interpret it. Furthermore, even assuming that the furnishing of photographs and biographies were deemed to constitute an implied authorization for Respondent to use such material in its promotional literature, in a number of instances the individuals involved did not supply Respondent with photographs and biographies or other information, and to the extent that they wrote letters thanking Respondent for the award there is no implied authorization for the use of such letters in promotional literature. g. Expenditure of over $1.7 Million in Development of Encyclopedia
21. It has been heretofore found that Respondent makes the representation that it has invested more than $1.7 million in "the vast research and scholarly development of the Wisdom Encyclopedia". Respondent's claim that it has invested over $1.7 million in the encyclopedia is based on the following statement prepared by its accountant in April 1965 (CX 16):
"Our examination reveals that Wisdom Magazine and The Wisdom Society have spent one million and seven hundred thousand dollars ($1,700,000) for educational research, editorial preparation, development and production of the 40 volumes of Wisdom Magazine . This figure does not include the money spent for paper, printing, binding, mailing, postage and distribution of the magazine ." [Emphasis added.]
22. The statement above quoted, by itself, establishes the falsity of Respondent's representation since it reveals that the money referred to was spent principally for the development of the Wisdom Magazine and not for the encyclopedia. Respondent has sought to make the statement applicable to the encyclopedia because of the testimony of its officials that some of the work done on the magazine was preparatory to work on the encyclopedia and, therefore, that the money can be considered to have been expended for the latter purpose. Since no significant work on encyclopedia was done until at least 1967 the expenditures made prior to 1965 cannot be deemed to have been made for the encyclopedia. Even assuming that it was contemplated portions of the magazine would be used in the encyclopedia, it was also contemplated that there would be substantial other material included in the encyclopedia (Tr. 637). Consequently, the expenditure of $1.7 million for the magazine cannot be deemed to have been made entirely, or in major part, for the encyclopedia. It is accordingly concluded and found that the representation in question is materially false. h. Wisdom Hall of Fame as Place or Building
23. It has been heretofore found that Respondent makes the representation that the Wisdom Hall of Fame exists in the form of a particular place or building. While Respondent has denied that it makes the representation in question, it does not deny that there is no such place or building in existence (Ans. at 34). Accordingly, it is concluded and found that the representation is materially false.
CONCLUSIONS OF LAW
1. Since, as has been heretofore found, Respondent has made a number of material misrepresentations in connection with the solicitation of money through the mail, it is concluded that it is engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations, in violation of 39 U.S. Code 3005.
2. Respondent has suggested that in a number of respects its promotional material has been modified and is no longer objectionable. Although not expressly raised by Respondent, its argument may be construed as raising the defense that there is no longer any need for a remedial order herein by reason of its discontinuance of the practices charged in the complaint. However, it is well settled that the mere discontinuance of an unlawful practice does not preclude the issuance of a remedial order particularly where, as here, (a) the practice has not been entirely abandoned, (b) such abandonment as took place occurred under the impetus of litigation, and (c) there is no assurance that the practice has been "surely stopped". Eugene Dietzgen Co. v. Federal Trade Commission , 142 F.2d 321, 330-1 (7th Cir. 1944), cert. denied 323 U.S. 730; Marlene's Inc. v. Federal Trade Commission , 216 F.2d 556, 559 (7th Cir. 1954); Goodman v. Federal Trade Commission , 244 F. 2d 584, 593 (9th Cir. 1957).
3. It is accordingly concluded that an order in the form attached, as provided in 39 U.S. Code 3005 is required, and the issuance of such an order is recommended.
____________________
1/ The following abbreviations are used in referring to the
record herein: "Tr." for the transcript of testimony; "CX" for
Complainant's exhibits and "RX" for Respondent's exhibits.
References to the record herein made are to the principal portions
thereof relied upon by men, in support of particular findings, but
are not intended as an exhaustive compendium of the portions of the
record reviewed and relied upon.
2/ Although Respondent was not represented by counsel at the
hearing, following the close of the hearing the undersigned has received
several letters from a law firm purporting to represent Respondent,
inquiring as to the status of this proceeding.
3/ Although not affirmatively asked for advice by Mr. Gutterman
with respect to the testimony of such witness, I did feel obliged to
advise Mr. Gutterman that he was entitled to look at a copy of a
memorandum by the postal inspector concerning his interview with Mr.
Gutterman, and the inspector was directed to turn over a copy of such
memorandum to Mr. Gutterman (Tr. 207). An explanation was given to
Mr. Gutterman as to how the memorandum could be used in the
cross-examination of the witness, and he was granted a recess until
the following day to enable him to prepare for his cross-examination
of the witness and for the presentation of evidence on behalf of
Respondent (Tr. 219).
4/ Proposed findings not herein adopted, either in the form
proposed or in substance, are rejected as not supported by the evidence or as
involving immaterial matters.
5/ The following abbreviations are used in referring to
proposed findings: "CPF" for Complainant's proposed findings, "RPF" for
Respondent's proposed findings, and "RRF" for Respondent's reply
findings.
6/ The promotional literature cited by counsel for Complainant
(CX 1 A-D) was in use as late as one week prior to the issuance of the
complaint herein. One of the changes referred to by Respondent, a
change in the reply card, did not occur until sometime after the
commencement of this proceeding (Tr. 439).
7/ Respondent suggests that its award was not listed in Who's
Who because that publication may have chosen to exclude it (RRF at 16).
However, the evidence discloses that while the decision to select
persons for inclusion in that publication is made by its editors, the
biographical material appearing in the publication, including awards,
is based on a questionnaire filled out by the persons selected (Tr.
139).