In the Matter of the Complaint Against INDEPENDENT GOOD WILL PROMOTIONS, OLYMPIAN PROJECT, Post Office Box 1013 at Twin Lakes, WI 53181 P.S. Docket No. 7/26 May 22, 1979 Quentin E. Grant Administrative Law Judge APPEARANCE FOR COMPLAINANT: Thomas A. Ziebarth, Esq. Consumer Protection Office Law Department U. S. Postal Service Washington, D. C. 20260 APPEARANCE FOR RESPONDENT: Thos. E. Appel Director - Promoter, pro se Twin Lakes, Wisconsin 51181
The Complaint in this case was filed on February 27, 1979. It alleges that Respondent, doing business under the trade style, INDEPENDENT GOOD WILL PROMOTIONS (OLYMPIAN PROJECT) (hereinafter sometimes IGWP) is engaged in a scheme or device to obtain money or property through the mails by means of false representations and that he is engaged in conducting a lottery (COUNT I) in violation of 39 U.S.C. 3005. The Complaint further alleges (COUNT II) that Respondent seeks further remittances through the mail by means of the promotional efforts made by his IGWP Co-workers in perpetuating the scheme. Respondent appearing through Thos. E. Appel, filed a timely Answer on March 9, 1979. The answer denied all the material allegations of the Complaint.
The hearing was held as scheduled in Washington, D.C. on April 2, 1979. Postal Inspector John M. Hubbard testified on behalf of the Complainant. Respondent did not attend the hearing.
1. Based on the testimony of Postal Inspector John M. Hubbard and Complainant's Exhibits 1 and 2, I find that Respondent is engaged in a scheme or device for obtaining money or property through the mails.
2. Attention is directed to such scheme by means of direct mail circulars which invite recipients thereof to become IGWP Co-workers by mailing to Respondent a $3.00 postal money order (CX-1, 2).
3. Paragraph (3) of the Complaint alleges that Respondent's promotional material makes a number of direct or indirect representations. The specific allegations are repeated below, followed by a summary of the portions of the advertisements upon which I base findings that Respondent makes the representations alleged:
(a) Persons who become IGWP CO-WORKERS "can earn up to $130,000 or more in the next 90 days . . . with very little effort" ;
This is a direct quotation from Respondent's initial mailing piece (CX-1, p. 1). It is repeated on page 2, paragraphs 1 and 9; page 3, paragraph 3, and it is further repeated in the letter sent to persons responding to the initial letter (CX-2).
(b) An IGWP CO-WORKER "does virtually nothing, spends virtually nothing" in order to participate ;
This is a direct quotation from Respondent's initial mailing piece (CX-1, page one, paragraph 9). The same representation is repeated a number of times throughout the promotional materials.
(c) The charitable organizations listed in the promotional materials are either connected with Respondent or have authorized Respondent to use their names in connection with this scheme ;
On page 4 of the initial mailing piece (CX-1) a number of charitable organizations are listed as suggested recipients of donations by IGWP Co-workers. While there is no direct representation that these organizations are connected with Respondent or have authorized Respondent to use their names in connection with the scheme, the implication is clear particularly in paragraph two on page 2 wherein it is stated that "the charities it will aid * * * rely implicitly upon mutual trust and follow-through."
(d) The IGWP program is legal .
This representation is found in paragraph 5 on page one of the initial mailing piece (CX-1, p. 1, paragraph 5): . . . "Carefully and legally structured." This representation is repeated indirectly on the bottom of page 2 of the second mailing (CX-2, p. 2) under the paragraph heading, "Legal requirement."
4. According to Respondent's literature a person who elects to participate in Respondent's program (i.e., by becoming an IGWP Co-worker) must do the following:
STEP I
Mail a $3.00 postal money order to IGWP at Twin Lakes, Wisconsin and another $3.00 postal money order to a favorite medical charity (CX-1, p. 2).
STEP II
Mail the two postal money order receipts to the Step II correspondent named in the original solicitation letter (CX-1) together with a stamped, self-addressed envelope. The Step II correspondent mails the prospective IGWP Co-worker the remaining program particulars (CX-1, p. 2).
The remaining program particulars are contained in the second letter (CX-2). This letter is mailed by the Step II correspondent.
Upon receipt of the second letter, the new IGWP Co-worker is instructed to do the following:
Reproduce 48 (or more) copies of the first letter, substituting his name in lieu of the Step II correspondent's name contained in the letter he received. These letters are to be sent to prospective new recruits. Each IGWP Co-worker is expected to recruit a minimum of 16 new co-workers.
Since his name now appears in the box as a Step II correspondent, the new IGWP Co-worker must also duplicate a supply of the second letter (CX-2) with the following changes: The name appearing in the Number One position in the "Program Participants Section" (CX-2, p. 4) is deleted. The names appearing in the Numbers 2, 3 and 4 positions are moved up into positions 1, 2 and 3, respectively, and the new IGWP Co-worker adds his name in the Number 4 position.
The new participant is also supposed to send a $2.00 postal money order together with a stamped, self-addressed envelope to the Number One name (which was removed from the letter when it was reproduced). That person is supposed to send back something which he deems to be "valuable" - such as a brief written report.
Copies of all postal money order receipts are to be sent to IGWP at Twin Lakes, Wisconsin for "control purposes."
5. Respondent's literature represents that when the new IGWP Co-worker's name rises to the top of the list in the "IGWP Program Participants Section" (CX-2, p. 4), he will begin to receive $2.00 postal money orders from the new IGWP recruits then entering the program. According to Respondent's representations, the IGWP Co-worker should receive over $130,000 - from over 65,000 other co-workers - after his name reaches the Number One position. Respondent estimates that this should come to pass within 90 days.
Although Respondent's literature states that the new Co-worker should be able to recruit his quota of 16 new workers by making a mailing of only 48 letters (CX-2, p. 4, paragraph (2)), Mr. Appel's own experience as recounted to Postal Inspector Hubbard, demonstrates that it may take a mailing of 500 to interest 16 people in the program (a return of 3.2%) (R. 9). Presumably, the IGWP Co-workers would fare no better than Mr. Appel on the average.
6. The original 16 (Level I) IGWP Co-workers already recruited by Respondent will not receive their $130,000 bonanza until 65,536 Level IV recruits have chosen to participate. Each of these persons is expected to send $2.00 to one or the other of the original 16, depending on the root source of his particular "chain." For these 16 persons at least there is a theoretical possibility of recovery.
There are 256 Level II IGWP Co-workers. In order for them to receive their $130,000, a total of 1,048,576 new recruits would have to participate and each of them would have to pay $2.00 to one or the other of the 256 Level II recruits. (Tr. 16, 17).
Simple mathematical computations reveal that by the time the 4,096 Level III recruits reach the Number One position, close to 17 million people would have to send $2.00. Finally, in order for the 65,536 Level IV recruits to receive their money, 268 million people would be involved.
7. It is clear that only a few of the very early participants have any hope -- even theoretical -- of receiving a large return. The later participants -- the very people whose participation is needed in order to pay off the early co-workers -- will probably never realize any return because of the inevitable collapse of the scheme. (Tr. 17). According to Mr. Appel, his initial mailing of 500 letters in June 1978 resulted in 16 recruits for the IGWP program. Five months later the total number of recruits had only grown to approximately 100. (Tr. 9 - 11). Yet, if Respondent's projection were true, the original 16 recruits should already have been enjoying their $130,000. It follows that the representation that "persons who become IGWP Co-Workers 'can earn up to $130,000 or more in the next 90 days . . . with very little effort'" (Complaint, paragraph 3a) is materially false as a matter of fact.
8. The representation that "an IGWP CO-WORKER 'does virtually nothing, spends virtually nothing' in order to participate" is also false. In addition to the $8.00 required in order to participate, the co-worker must enlist a minimum of 16 new recruits. Respondent's own experience indicates that this will require the printing and mailing of approximately 500 copies of Letter Number One. Based on an average cost of 25[ per letter (including printing, list rental and postage) the IGWP Co-worker would be required to spend an additional $125.00 of his own funds to participate.
9. Complainant's Exhibit 3 (affidavits from eight of the charitable organizations listed in Respondent's promotional materials) reveals that the organizations in question are neither connected with Respondent nor have they authorized Respondent to use their names in connection with the scheme (CX-3; R. 13 - 15).
10. Respondent's promotional material advises and encourages prospective IGWP Co-workers to duplicate letters and mail them to prospective new recruits (CX-1, 2). Thus, Respondent seeks to perpetuate and expand the scheme described in Finding of Fact No. 4, supra . Respondent participates and benefits from this scheme by receiving $2.00 from each new participant in the IGWP program.
1. The meaning of advertising representations is to be judged from a consideration of an advertisement in its totality and the impression it would most probably create in ordinary minds. Donaldson v. Read Magazine , 333 U.S. 178 (1948); Vibra-Brush Corp. v. Schaffer , 152 F. Supp. 461 (S.D.N.Y., 1957); Borg-Johnson Electronics v. Christenberry , 169 F. Supp. 746 (S.D.N.Y., 1959), Baslee Products v. U.S.P.S. , 356 F. Supp. 841 (D.C. N.J., 1973).
2. The average person reading Respondent's advertisements would interpret them as making representations substantially as characterized in paragraph (3) of the Complaint.
3. The representations alleged in paragraph (3) of the Complaint are materially false.
4. Respondent is engaged in the conduct of a scheme for obtaining remittances of money through the mail by means of false representations as proscribed by 39 U.S.C. 3005, thus warranting the issuance of an appropriate mail stop order.
5. A lottery is defined as a scheme or device for the distribution of prizes by lot or chance or an event or affair whose outcome is or seems to be determined by chance (Webster's Third New International Dictionary; see also 18 U.S.C. 1301, 1302). The scheme promoted by Respondent is a lottery in that it offers a prize - the receipt of money orders - dependent in whole or in part on the chance that recipients of Respondent's promotional material will send such money orders. See Success Institute , et al., P.S. Docket No. 6/72, Initial Decision 5/23/78. See also New v. Tribond Sales Corp. , 19 F.2d 671 (DC Cir. 1927); cert. den. 275 U.S. 550; Horner v. U. S. , 147 U.S. 449 (1893); Public Clearing House v. Coyne , 194 U.S. 497 (1904); Nickles v. U. S. , 381 F.2d 258 (10th Cir. 1967); U. S. v. Blachly , 380 F.2d 665 (5th Cir. 1967) and Fabian v. U. S. , 358 F.2d 187 (8th Cir. 1966); Zebelman v. U. S. , 339 F.2d 484 (10th Cir. 1964); Martin Corp. v. F.T.C. , 242 F.2d 530 (7th Cir., 1957); 20th Century Co. v. Quilling , 110 N.W. 174 (Wisconsin 1907).
6. Respondent is knowingly participating and cooperating in a scheme involving the exploitation of third parties by furnishing and urging his IGWP Co-workers to use the same solicitation materials which he uses.
7. Any incidental benefits to medical charities do not mitigate or negate the illegal character of Respondent's scheme.
8. An order pursuant to 39 U.S.C. 3005 in the form attached should be issued.