In the Matter of the Complaint Against JASON D. MORGAN, MORGAN COUNCIL, Commerce Commons, Post Office Box 22113, at Lake Buena Vista, Florida 32830 P.S. Docket No. 7/15 April 13, 1979 William A. Duvall Chief Administrative Law Judge Thomas A. Ziebarth, Esq. Law Department United States Postal Service Washington, D.C. 20260, for Complainant Terry S. Freedman, Esq. Suite 510, 151 Wymore Road, Altamonte Springs, Florida 32701, for Respondent Before: William A. Duvall, Chief Administrative Law Judge
This proceeding was initiated on January 25, 1979, when the Consumer Protection Division of the Law Department of the United States Postal Service filed a Complaint in which it is charged that under the names Jason D. Morgan and Morgan Council, at Lake Buena Vista, Florida, the Respondent is engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations in violation of 39 U. S. Code 3005.
The specific representations which the Complainant alleges are (1) made by Respondent in connection with the business now under consideration and (2) materially false as to matters of fact are as follows:
"(a) Persons who accept the nomination for an 'exclusive position on the MORGAN COUNCIL' will be 'authorized to engage in an exciting and profitable activity';
"(b) Persons who become members of the MORGAN COUNCIL will be furnished with an 'incredibly easy' method to make as much money as they want;
"(c) The MORGAN COUNCIL provides its members with everything they need to begin making money at once;
"(d) Members of the MORGAN COUNCIL may expect net profits in excess of $80,000 per year by utilizing the method furnished;
"(e) Members will be able to test the viability of the 'method' for themselves before putting it to actual use;
"(f) The 'method' is guaranteed since the MORGAN COUNCIL'S first responsibility is to insure the member's success;
"(g) Membership in the MORGAN COUNCIL is prerequisite to making money by means of the method provided; and
"(h) Respondent's offer is backed by a complete and unconditional money-back guarantee."
The Respondent filed an Answer in which he admitted that Exhibit 1 attached to the Complaint is a genuine copy of the original, but he denied every other allegation of the Complaint.
In proceedings of this type, the Complainant has the burden of establishing that the Respondent does engage in business through the United States mails, and that in such business the person who is the Respondent does seek remittances of money or property. The Complainant must also establish that the Respondent does make representations which are set forth in the Complaint, and finally, the Complainant must establish that the representations found to be made are materially false as a matter of fact.
Therefore, the first matter to be taken up is whether the Respondent does use the mails in the business which it is operating, and whether it seeks remittances of money through the mails.
The first witness who appeared in this hearing was Postal Inspector B. W. Barren, who is domiciled at Orlando, Florida. The Inspector received a solicitation from the Respondent, and the Inspector acted upon that solicitation. The solicitation was received through the mails. The Inspector placed his order through the mail, and in response to his order he received a packet of material through the mails from the Respondent.
Therefore, it is clearly established that the Respondent is engaged in business; that the Respondent, in the conduct of his business, utilizes the United States mails; and that the Respondent, in the conduct of his business, does solicit remittances of money through the United States mails.
The next matter to be resolved is whether the Respondent does make representations which are set forth in the Complaint.
In the making of this determination, reference is made and reliance is placed on the following excerpt from Donaldson v. Read Magazine, 333 U.S. 178, 188-9, in which the Supreme Court of the United States said:
"Advertisements as a whole may be completely misleading although every sentence separately considered is literally true. This may be because things are omitted that should be said, or because advertisements are composed or purposefully printed in such way as to mislead. Wiser v. Lawler, 189 U.S. 260, 264; Farley v. Simmons, 99 F.2d 343, 346; see also cases collected in 6 Eng. Rul. Cas. 129-131. That exceptionally acute and sophisticated readers might have been able by penetrating analysis to have deciphered the true nature of the contest's terms is not sufficient to bar findings of fraud by a fact-finding tribunal. Questions of fraud may be determined in the light of the effect advertisements would most probably produce on ordinary minds. Durland v. U. S., 161 U.S. 306-313, 314; Wiser v. Lawler, supra at 264; Oesting v. U. S., 234 F. 304, 307. People have a right to assume that fraudulent advertising traps will not be laid to ensnare them. 'Laws are made to protect the trusting as well as the suspicious.' Federal Trade Commission v. Standard Education Society, 302 U.S. 112, 116."
The solicitation letter used by the Respondent was received in evidence as Exhibit 1B. 2/ The first paragraph in Exhibit 1B reads as follows: r
"You are nominated for an exclusive position on the Morgan Council. On acceptance, you will be authorized to engage in an exciting and profitable activity."
Thus, the representation found in charge (3)(a) of the Complaint is made by the Respondent.
On page two of Exhibit 1B, there is the following statement, in paragraph six on that page:
"Nothing is expected of you other than the use of your special abilities in combination with our derivations that will enable you to achieve more money and more power than you have ever dreamed possible. You will find it incredibly ease..."
The Respondent makes the representation which is stated in charge (3)(b) of the Complaint.
In the ultimate paragraph on page two of Exhibit 1B, there is the following statement:
"Your First-Line membership includes everything that you will need to begin making money at once."
The Respondent makes the representation which is stated in charge (3)(c) of the Complaint.
On page three of Exhibit 1B, there is a tabulation of figures. In this tabulation there is a column headed by the letters P.T.D., indicating profits to date. There it is shown that this individual realized a profit in excess of ninety thousand dollars.
I find that the Respondent makes the representation which is found in charge (3)(d) of the Complaint.
On page three of Exhibit 1B, also, immediately under the tabulation just referred to, there is the following statement:
"I agree this seems incredible. In the beginning I felt the same way, but your First-Line membership will enable you to test the plan for yourself, before putting it into actual use. It is simple, but you reap fantastic results."
Respondent, therefore, makes the representation which is stated in charge (3)(e) of the Complaint.
In the first paragraph appearing on page three of Exhibit 1B, there is the following statement:
"The Morgan Council is also interested in money, but not in insignificant amounts. By providing you with the necessary plans, computer-plotting your individual success, and combining the data from all members, the Council has the means to move in vast areas of finance. Yes, you must begin as a small part of the total plan, but the plan will not work properly unless you are successful. Therefore, our first responsibility is to insure your success."
This language demonstrates that Respondent does make the representation which is set forth in charge (3)(f) of the Complaint.
The first three paragraphs on page one of Exhibit 1B read as follows:
"You are nominated for an exclusive position on the Morgan Council. On acceptance, you will be authorized to engage in an exciting and profitable activity.
"You are free to engage in this activity as often as you wish until you have gained Directorship profits -- at which time you qualify for a Senior Chair.
"Our activity makes use of unusual derivations which are applied to a common plan of moneymaking. For obvious reasons, the exact details can only be revealed to active members."
Further, on page two of Exhibit 1B, in the fifth paragraph, there are the following statements:
"The formulas used are simple, but it is unlikely that you would find them on your own. Their discovery was a happy accident. Neither is it likely that you will learn about them from the so-called 'experts.' If any of these individuals had access to our methods, I can assure you that they would never reveal them to you, just as you will guard them if your membership is accepted."
Considered together, the impression that would be created in the mind of the reader is that there is some special status that membership in this Morgan Council confers upon the member, some special status not enjoyed by the average person, which authorizes the member to engage in the business, which is the business of the Morgan Council. Therefore, the Respondent does make the representation which is set forth in charge (3)(g) of the Complaint.
On page four of Exhibit 1B, preceded by an asterisk and the notation "PPS" is the following statement:
"On receiving your First-Line membership, follow my instructions exactly. If, for any reason, you wish to decline membership, return all that we have sent you, and your money will be cheerfully refunded. This assurance is unconditional, and is assured by my personal corporate bond in the amount of $250,000 US #jdm 343974.***"
Further down on that same page is this language, also preceded by an asterisk:
The Respondent makes the representation which is set forth in charge (3)(h) of the Complaint.
Inspector Barren testified that when he corresponded with the Respondent the first time, he made the required remittance of thirty-seven dollars and sixty cents ($37.60), which the Respondent exacts from persons who wish to become members of the Morgan Council.
When Inspector Barren received the packet of papers from the Respondent which set forth the plan of operation, he discovered that the business in which he was about to be engaged, if following the instructions of the Respondent, would be the collection of pre-1964 silver coins of the dollar, half dollar, quarter and dime denominations. He and any other member following the plan would then be supposed to collect these to the minimum amount of forty dollars and then remit them to the Respondent, who would pay approximately three times their face value.
Inspector Barren undertook to engage in this business, and again following instructions of the Respondent, he went to various banks and to bars and to other places where money is handled, including his own church, of which he is on the audit or some other committee that relates to the finances of the church. In all of these places he conducted a search for the coins in question. The search extended over a period of approximately two months and consumed about an hour or an hour-and-a-half per day on the average. The Inspector estimated he devoted a total of approximately eighty hours to this search. In this entire time he was able to find one pre-1964 coin, which turned out to be a dime that he had in his own home.
The Inspector had an advantage in engaging in this type of activity by reason of the fact that he is a Postal Inspector. He has a sizable territory which is within his jurisdiction, and from time to time he would go to different banks and ask the officers of the bank if he might examine their coins. He was permitted to do this which an ordinary citizen would not be allowed to do. In addition, in connection with his church duties, he sees more coins than the average person would. Despite his unusual access to coins, nevertheless he was able to turn up only the one coin.
Also, in the course of his investigation, the Inspector testified that he received various complaints from individuals who had received a solicitation from the Respondent. The complaints varied in character. Some of them were from people who received the initial solicitation and felt that it looked very peculiar on its face, and they had questions as to the propriety of such a scheme. There were other persons who complained after they had made the purchase and received the material which was received in evidence as Complainant's Exhibit 2 and is quite voluminous. Other persons had complained that even though they might have received checks in payment of the refund, the checks, when they were presented for honoring by banks, were not honored for one reason or another, so that the unhappy individual got no refund.
Also called as a witness by the Complainant was Grover C. Criswell, who is in business at Fort McCoy, Florida. Mr. Criswell is a professional numismatist and an author. He stated that he is a member of approximately one hundred fifty professional associations, and he is the president of the American Numismatic Association, which is the largest association of its kind in the world.
Mr. Criswell is a dealer in coins and currency, and he has written books on numismatics, among which are books entitled Confederate and Southern States Currency, Confederate Bonds, Confederate Money and Civil War Tokens. Mr. Criswell contributed to periodicals dealing with the subject of numismatics for the past twenty years; has lectured in schools. He conducts seminars and other educational endeavors.
He has also been called to testify in court proceedings in both civil and criminal cases. He has testified before committees of the House and the Senate of the United States in matters relating to numismatics, and he has been a consultant to the Smithsonian Institution in Washington, D.C. in numismatic matters for twenty years.
He is a graduate of The Citadel at Charleston, South Carolina, majoring in history. He also attended law school at Stetson College, but he did not complete that course.
Mr. Criswell was asked by Mr. Barren to look at the packet of material which the Inspector received in return for his remittance, and the balance of Mr. Criswell's testimony relates to his analysis of the material in that packet. He testified that there is no requirement that a person become a member of the Morgan Council in order to engage in the search for coins described by the Respondent. Any person may engage in that activity. Mr. Criswell testified that the coins of the vintage called for by the system employed by the Morgan Council, namely pre-1964 silver coins of the United States, are extremely rare and that there is no such thing as an incredibly easy method to make as much money as one wants by engaging in the activity being promoted by the Respondent.
The Respondent does not provide persons who become members of the Morgan Council with everything they need to begin making money at once, because the primary need of the person who is engaged in this business, if he is to make money, is a supply of coins of the type sought by the Respondent. And, as previously stated, these coins are very rare, and it is difficult to find them in circulation. Some are available in the hands of dealers, but they are not in general circulation at this time, except in the rare situation in which a person, a private individual, may have collected some of his own. But they are not available in commercial exchange today.
Mr. Criswell characterized as ridiculous any assertion that an individual would be able to make as much as eighty thousand dollars per year by utilizing the method furnished by the Respondent. The expert testified that there are very few people who make as much as one-tenth of that amount per year on coins of the vintage and type emphasized by the Respondent's system.
The Respondent does not furnish any way in which the viability of the Respondent's method may be tested by the member, again for the reason of the scarcity of the coins of the type and vintage sought. The methods available to persons who are interested in locating these coins just do not produce that type of results, and for a person who is not familiar in the business, it is virtually impossible to make even a tenth of the amount represented by Respondent. Certainly, they cannot engage in the test of this system without being subjected to grave disappointment.
The guarantee by the Respondent of the efficacy of its system is worthless for the reasons previously indicated, the primary reason being the scarcity and unavailability of the coins needed to engage in this system.
Comment has already been made on the fact that membership in the Morgan Council is certainly no prerequisite to engaging in the business of the type described by the Respondent in the literature which is Complainant's Exhibit 2. Also, the testimony by Inspector Barren indicates that people have not been successful in obtaining refunds when they have sought them from the Respondent.
Summarizing the testimony that has been heard today, it is found as a fact as follows:
1. That the Respondent does engage in business through the mail, and it does seek remittances of money through the mail.
2. The Respondent does make the representations which are set forth in the Complaint.
3. The testimony of the witnesses in this case (a) is uncontroverted, (b) is unopposed, and (c) it is persuasive and convincing, that the representations made by the Respondent as set forth in the Complaint are materially false as to matters of fact.
It follows that the Respondent is, as charged, engaged in conducting a scheme or device for obtaining money or property through the mail by misrepresentation as proscribed by Section 3005 of Title 39 of the United States Code.
An Order of the type provided for in that Section of the Code, in substantially the form attached hereto, should be issued against this Respondent.
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