In the Matter of the Complaint Against SPACE ADVERTISING AGENCY, INC., and/or ACCOUNTING DEPARTMENT, and/or INTERNATIONAL NEWSPAPER AGENCY, and/or AMERICAN VETERAN, and/or LABOR NEWS 1845 South Elena Avenue, 4th Floor at Redondo Beach, California 90277 and NEGRO-AMERICAN ADVERTISER, and/or NATIONAL HERALD-DISPATCH AGENCY 6200 Wilshire Boulevard, Suite 903 at Los Angeles, California 90018 and EL MEXICANO AGENCY P. O. Box "T" at Rancho Palos Verdes, California 90274 and NEGRO NEWSPAPER GROUP, and/or SPACE ADVERTISING AGENCY, INC., and/or VETERAN AMERICAN PAGE 6000 Sunset Boulevard, Suite 209 at Los Angeles, California 90028 and EL MEXICANO ASSOCIATES P. O. Box 1221 at Torrance, California 90505 and SEBCO AGENCY 1023 North Vermont Avenue at Los Angeles, California 90029 and NATIONAL NEGRO PRESS AGENCY 10817-1/2 Central Avenue at Los Angeles, California 90059 and MEX-AM COMMUNITY PAGE 36 14th Street at Hermosa Beach, California 90254 and LA PRENSA POPULAR AGENCY 1431 West Jefferson Boulevard at Los Angeles, California 90007 and AMERICAN VETERAN P. O. Box "T" at Palos Verdes Peninsula, California 9027 and MINORITY VIEWPOINT AGENCY 5710 West Manchester Avenue at Los Angeles, California 90045 and ACCOUNTS RECEIVABLE 1312 North Avalon Boulevard Suite C at Wilmington, California 90744 and MINORITY VIEWPOINT AGENCY 12333 Washington Street at Los Angeles, California 90066 and LOS ANGELES HERALD-DISPATCH 1433 West Jefferson Boulevard at Los Angeles, California 90007 and UNITED CLERICAL SERVICE #3 Malaga Cove Plaza Suite 201 at Palos Verdes Estates, California 90274 and UNITED CLERICAL SERVICE 11633 S. Hawthorne Boulevard Suite 102 at Hawthorne, California 90250 P.S. Docket No. 4/64; APPEARANCES: Lee H. Harter, Esq. Daniel S. Greenberg, Esq. Law Department U. S. Postal Service Washington, D.C. for Complainant Herbert E. Selwyn, Esq. Selwyn & Capalbo Los Angeles, California for Respondents
This case is presently before the undersigned on appeal by the Complainant from an Initial Decision by Administrative Law Judge Quentin E. Grant dismissing the Complaint as unsupported by the evidence. The Complaint in this case filed on August 29, 1975, alleged that Space Advertising Agency, Inc. et al., the Respondents herein, were engaged in a scheme or device for obtaining money or property through the mail by means of false representations in violation of 39 U.S.C. § 3005. The nature of the alleged scheme is that Respondents send out letters, invoices, statements and confirmations of orders for advertising which were never authorized. A hearing was held before Judge Grant in November 1975 and, after filing of proposed findings of fact and conclusions of law with supporting argument, the Initial Decision was issued. Complainant has now filed its exceptions with supporting argument, and Respondents their reply thereto, and the case is ready for decision on appeal. The Initial Decision accepted Complainant's proof as sufficient to establish that eleven different business firms and institutions had received one or more of the Respondents' invoices, or invoice-like documents, or letters indicating that certain advertising had been authorized and demanding payment whereas no such authorization was in fact given in those cases. However, Judge Grant also found that in the five-year period preceding the hearing Respondents had place advertisements for approximately 150,000 customers some of whom gave repeated authorizations for the placement of advertising. He specifically rejected, as not credible, the testimony of Complainant's principal witness with respect to Respondents' policy and method of operation. In conclusion Judge Grant held that:
"Although complainant proved that respondents billed a small number of business enterprises for services they had not authorized, on the basis of all the credible evidence in the record I am unable to conclude that such billings reflected a scheme, device, or policy of respondents to collect or attempt to collect moneys for services not authorized. I conclude that such billings were either the result of error or the unauthorized actions of employees of respondents inconsistent with respondents' policy of performing and billing for only properly authorized services." The Complainant takes exception to five separate findings of fact, all based upon the testimony of Respondents' witnesses, in the Initial Decision 1/ . Complainant's Appeal Brief, while not addressing the exceptions individually, concentrates upon the credibility issue which is basic to all of the findings to which exception is taken.
Complainant's opening argument raises the problem of proof inherent in a case such as this. Assuming that Respondents had placed advertisements for 150,000 customers in their five-year history it asks the rhetorical question how many dissatisfied customers would have to be produced to establish a scheme under the postal statute. It contends the answer to this question is qualitative rather than quantitative and that once a number of dissatisfied customers are produced it is incumbent upon the Respondents to rebut their testimony "in a high percentage of the witnesses produced" and failing such that it would be logical to conclude that there is a scheme. It must be kept in mind that the credibility of the witnesses for the eleven companies and institutions is not in issue but was accepted as fact by the Administrative Law Judge. Thus Judge Grant concluded that in these instances the advertising had not in fact been authorized.
The issue remains. Does this establish a scheme? Judge Grant found it did not, based upon his evaluation of the directly contradictory testimony of witnesses produced by the parties. In effect he found that any prima facie showing made by the referenced instances of unauthorized sales was effectively rebutted by the testimony which he accepted.
It is also important to appreciate the fact that the instant case is materially different from the usual case brought under 39 U.S.C. § 3005 2/ wherein the false representation is contained in a physical advertisement and only need be construed from the viewpoint of its probable effect upon the reader under Donaldson v. Read Magazine, 333 U.S. 178 (1948) and the myriad of cases following the principle laid down therein. Thus the "scheme or device" referred to in the statute has its basis in the simple fact that the same advertisement, with its false representations, has universal application. Here, however, the false representations, although reaching their completion in the written billing or collection letter, have their origin in what is said, or not said, in individual oral solicitations. The fact, therefore, that a bill for an individual sale, unauthorized in fact, has been sent through the mail would not appear compelling enough, standing alone, to conclude that a large business operation was engaged in a scheme within the meaning of the postal statute. However, the evidence in this case is more than one instance and contains corroborating testimony which, in these circumstances, becomes crucial. 3/
The essence of the testimony given by Respondents' witnesses is that there was no policy or instruction consistent with a scheme to falsely represent sales but that in those instances where unauthorized bills were sent it was due to mistake or the independent and unauthorized action of a salesperson, giving as a prime example of the latter, Complainant's principal witness, Mr. Bayless. The essence of Mr. Bayless' testimony is that it was company policy to falsely represent sales. The testimony of the witness Leah Fissella while tending to corroborate the latter in part also contained elements inconsistent with that conclusion in that instructions to her from the head of her department were to cancel or destroy orders which her confirming phone calls indicated were not placed. While she testified that during her tenure she had received for collection approximately ten orders she had previously cancelled she further testified she turned these over to her department head and she did not see them again. How these happened in the first instance to be reprocessed to her is not clear from the record. She also placed a large number of collection calls each day on accounts where the customers did not want to pay for one reason or another and the great majority of those contacted by her denied liability claiming that the advertisement was not authorized. Although her testimony raises questions it does ot rise to the level of showing that a scheme existed. Moreover, the absence of explicit reference to this testimony in the Initial Decision I take as more consistent with this conclusion than that the Administrative Law Judge ignored it in evaluating the evidentiary record.
The conflicting testimony regarding Mr. Bayless' departure from Respondents' employ is not a matter which can be reconciled on the theory of misunderstanding or reasonably different viewpoints of the respective witnesses as to the facts. The testimony is in direct and sharp conflict necessarily involving a question of which witness was telling the truth. Respondents' three witnesses, testifying after Mr. Bayless, produced the conflict. Mr. Bayless was not recalled. This type of conflict in testimony is best resolved by the presiding Administrative Law Judge who was in the most opportune position to evaluate it. While Complainant's Brief recognizes this it also points to other indications in the record inconsistent with a lack of harmony between Mr. Bayless and Respondents as evidence that Respondents' witnesses were not telling the truth. However, these other indications are sufficiently removed from the critical conflict at the item of the departure as not to be compelling and do not warrant setting aside the trier of facts conclusions regarding credibility. Moreover, the matter is far from minor, as Complainant would have it, for if Mr. Bayless' testimony is undermined by the credibility determination the major foundation for Complainant's case goes with it. 4/
Complainant's Brief on Appeal also contends that the testimony of the Respondent, Mr. Michael Lasky, is so contrary to the evidence that its acceptance by the Administrative Law Judge should be reversed, citing as support therefor the Administrative Procedure Act, 5 U.S.C. § 557(b) which defines the powers of the agency on review of an Initial Decision. 5/ The acceptance of that proposed result is not persuasive in this case, however, because it gives too much weight to the implication to be drawn from the ancillary evidence in the record and too little weight to the importance to be attached to the judgment of the trier of fact who heard the testimony. The importance, and the limitations of, a presiding officer's opinion under agency review have been treated at some length in numerous cases. 6/
In the instant case it is clear to me that the credibility evaluation was, and properly so, controlling on the outcome. It is recognized in this connection that one of the most difficult duties of a judge sitting as a sole juror is to evaluate the credibility of witnesses where the case turns on this point. Furthermore, the fact that this type of case is one involving greater difficulties in proof than the normal § 3005 false representation proceeding does not reduce the burden of proof that ultimately rests with the Complainant. Although the Appeal Brief of Complainant evidences the depths of its conviction this is not an acceptable substitute for evidence sufficient to convince the trier of fact in the first instance, or support the correctness of reversing him on appeal. In so holding I hasten to add that I do not know whether my personal evaluation of the live testimony would have produced the same credibility determination nd the cold record does not clearly resolve the matter, despite Complainant's contentions to the contrary. This is precisely why the evaluation made by the sitting judge is so important and entitled to great weight in the matter. Complainant, in the final and difficult analysis, fails for lack of carrying its burden of proof.
Accordingly, and for the reasons discussed above, Complainant's exceptions to the findings of fact and the ultimate conclusions of law in the Initial Decision are disallowed and that Decision is hereby affirmed.
04/16/76
Lussier, Edward F.
1/ Finding of Fact 10:
"From 2 to 4% of the total volume of business of Respondents involved claims by customers billed that they had not authorized the advertising for which they had been billed (Tr. 309, 310)."
That portion of Finding of Fact No. 11 which states that: "Pursuant to Respondents' policy of insuring the soundness and validity of sales, for each sale reported by a salesperson immediate telephonic confirmation is sought by the sales manager or other designated employee."
Finding of Fact 15:
"According to other evidence in the record, Bayless had an unsatisfactory employment record with respondents and left their employ following a heated argument with respondents' president Michael Lasky, during which Bayless threatened to make damaging reports concerning respondents' business activities to various federal and local agencies unless he was paid the sum of $10,000 to $15,000 in cash immediately. I find that although Bayless may have been owed some amount of money for services rendered respondents at the time of this argument, such amount was substantially less than the amount he demanded."
Finding of Fact 16:
"Many of Bayless' sales during the period he served as a telephone solicitor were unauthorized and were not detected as such in the confirmation process described above because Bayless had arranged with another employee to exempt Bayless' sales from that process (Tr. 604-607)."
Finding of Fact 17:
"Based on observation of the witness Bayless and evidence given by and concerning him, I find his testimony to be largely incredible."
2/ "?3005. False representations; lotteries
"(a) Upon evidence satisfactory to the Postal Service that any person is engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations, or is engaged in conducting a lottery, gift enterprise, or scheme for the distribution of money or of real or personal property, by lottery, chance, or drawing of any kind, the Postal Service may issue an order***"
3/ Complainant takes the position that even without the testimony of the Respondents' ex-employees, Leah Fissella and David Bayless, it has carried its burden of proving a scheme in view of Respondents' failure to produce witnesses to contradict the eleven instances of unauthorized billing. This presumes, however, a rejection of the testimony of Respondents' three witnesses and thus goes back, in effect, to the entire credibility issue.
4/ The record indicates that Respondent employed a considerable force of employees and also that Respondent's records had been seized in 1974 under a federal search warrant. Whether either potential source of evidence contained better proof than adduced at the hearing before Judge Grant is at best speculative at this stage since this decision, as the Initial Decision, must be based upon the record as made by the parties.