In the Matter of the Complaint Against AMERICAN SERVICE DIRECTORY AMERICAN SERVICE, or AMERICAN COMMERCIAL PUBLICATIONS 8350 Park Lane and P. O. Box 31506 at Dallas, TX 75231 and AMERICAN SERVICE DIRECTORY AMERICAN SERVICE, or AMERICAN COMMERCIAL PUBLICATIONS P. O. Box 140069 and P. O. Box 140600 at Dallas, TX 75214 P.S. Docket No. 8/178 12/04/80 Grant, Quentin A. APPEARANCE FOR COMPLAINANT: Kristin L. Malmberg, Esq.; J. A. Harbin, Esq.; Consumer Protection Division, Law Department, United States Postal Service, Washington, D.C. 20260 APPEARANCE FOR RESPONDENT: John N. Brewer, Esq.; Edwards & Brewer, 4829 S. Western, Oklahoma City, OK 73109
Complainant initiated this proceeding on July 23, 1980, by filing a Complaint alleging that Respondents are engaged in the conduct of a scheme for obtaining money through the mails by means of false representations in violation of 39 U.S.C. § 3005.
By Order dated August 26, 1980, the filing of an amended complaint was allowed. The Complaint in its amended form alleges as Count I thereof that by means of advertisements (Ex. A hereto) and a form letter (Ex. B hereto) mailed to persons responding thereto seeking remittances of money from such persons to be sent through the mail Respondents falsely represent that:
a) By using the American Service Directory homeworkers will earn $2500.00 a month addressing envelopes.
b) By using the American Service Directory homeworkers will earn $280.00 per day.
c) By using the American Service Directory homeworkers will earn $190.00 per 1000 letters worked.
d) By using the American Service Directory homeworkers will earn $20.00 per clipped newspaper item.
e) By using the American Service Directory homeworkers will earn $1.60 per envelope mailed.
f) By using the American Service Directory homeworkers will earn $180.00 per 1000 commission mailings.
g) Hundreds of well-known mail order companies and publications contact millions of customers by hiring individuals to address envelopes at their homes during their spare time.
h) The American Service Directory contains names and addresses of mail order companies that pay homeworkers to address envelopes for them.
i) The American Service Directory includes well known mail-order companies, as well as many retailers, publishers, trade publishers, and mailing list brokerages.
j) The fee for the American Service Directory is the homeworker's final and only cost.
k) Only a limited number of persons will be selected by American Service Directory to participate in this program.
l) American Service Directory will employ homeworkers.
m) Work at home is available through American Service Directory addressing envelopes, addressing circulars, compiling mailing lists, and clipping newspaper items.
n) Work is available through American Service Directory at high rates and the amount of money earned by the homeworker is solely controlled by how much work is performed.
o) No skills or experience are necessary to successfully follow the program offered by American Service Directory.
p) The American Service Directory contains all instructions and information necessary to successfully follow the program.
q) All materials needed will be provided to the homeworkers.
r) The cost of the American Service Directory will be fully recouped by all purchasers by means of a federal income tax deduction.
In Count II of the amended complaint it is alleged that by means of a letter (Ex. C hereto) American Commercial Publications (ACP) seeks dealers for the sale of American Service Directory who employ the same solicitations used by Respondents, as alleged in Count I, making the same false representations alleged in Count I, and that Respondents thereby seek remittances of money through the mails by means of such representations made by its dealers at its express direction.
In Count III of the amended complaint Complainant alleges that Respondents use advertisements (Ex. D hereto) responses to which result in receipt of form letters (Ex. E hereto) calculated to induce remittances of money through the mails to Respondents by means of the following false representations contained therein:
a) By purchasing a dealership with the American Commercial Publications, Inc. a homeworker can earn $3,000.00 per week.
b) For one hour of work per day an American Commercial Publication, Inc. dealer can earn $3,000.00 per week.
c) The work performed by an American Commercial Publication, Inc. dealer is legal.
d) The work performed by an American Commercial Publication, Inc. dealer is not saleswork.
e) The work performed by an American Commercial Publication, Inc. dealer does not involve selling dealerships to other persons.
f) An American Commercial Publications, Inc. dealer will make $500.00 a week doing only one hour of work per week, addressing envelopes.
On motion of Respondents the location of the hearing was changed from Washington, D.C. to Dallas, Texas, where the hearing was held on October 8, 1980.
The parties have submitted proposed findings of fact and conclusions of law which have been fully considered, adopted to the extent indicated, and otherwise rejected as unsupported by, or contrary to, the evidence or because of their irrelevancy or immateriality.
1. Through advertisements and form letter solicitations Respondent seeks remittances of money or property through the mails for its product, American Service Directory (CX-5, 10, 11, 12; Tr. 12).
2. The American Service Directory (CX-5) contains the name of a company called ACP, Inc., P. O. Box 140069, Dallas, TX 75211. ACP, Inc. is a trade name used by American Commercial Publications. American Service Directory is a trade name used by American Commercial Publications (Resp. Admission, P1). Persons making inquiry of ACP, Inc. for work-at-home opportunities receive a letter (CX-15W, 15X) calculated to induce recipients to become dealers or distributors for American Commercial Publications (Resp. Admission, P17). Those who become dealers for ACP, Inc. solicit on behalf of Respondents, with Respondent's knowledge, by means of a form letter substantially identical to that used by Respondents as found in Finding No. 1, above, money or property to be remitted to Respondent, American Service Directory, for the publication American Service Directory (CX-15W, 15X).
3. The representations alleged in Counts I and II of the Complaint are made in the text of Respondent's form letters seeking remittances for American Service Directory (CX-5, 15W, 15X) as follows (allegations underscored):
(a) By using the American Service Directory homeworkers will earn $2,500.00 a month addressing envelopes.
"Would you be interest in addressing or mailing literature or catalogs or commission work or selfstick labeling, etc.? To bring CASH to your mailbox?"
". . . some persons are making up to $2,500.00 per month]"
(b) By using the American Service Directory homeworkers will earn $280.00 per day.
"The workers are now setting these NEW HIGHS: $280.00 per day."
(c) By using the American Service Directory homeworkers will earn $190.00 per 1000 letters.
"The workers are now setting these NEW HIGHS: . . . $190.00 per 1000 letters worked]"
(d) By using the American Service Directory homeworkers will earn $20.00 per clipped newspaper items.
"The workers are now setting these NEW HIGHS:. . . $20.00 per clipped newspaper item]"
(e) By using the American Service Directory homeworkers will earn $1.60 per envelope mailed.
"The workers are now setting these NEW HIGHS. . . $1.60 per envelope mailed]"
(f) By using the American Service Directory homeworkers will earn $180.00 per 1000 commission mailings.
"The workers are now setting these NEW HIGHS:. . . $180.00 per 1000 commission mailings]"
(q) Hundreds of well-known mail-order companies and publications contact millions of customers by hiring individuals to address envelopes at their homes during their spare time.
"Hundreds of well-known mail order companies and publications located throughout the United States are currently in desperate NEED OF additional MAIL HELP. They must reach millions of prospects with their offers."
(h) The American Service Directory contains names and addresses of mail order companies that pay homeworkers to address envelopes for them.
"After four years of research and preparation the greatest directory ever for a person interested in home work. All you will ever want--the AMERICAN SERVICE DIRECTORY."
"You will receive ALL MATERIALS necessary for your home work--envelopes, stamps, flyers, pens, and the like--from the many firms organized within the AMERICAN SERVICE DIRECTORY."
"Hundreds of well-known mail order companies and publications located throughout the United States are currently in desperate NEED OF additional MAIL HELP. They must reach millions of prospects with their offers."
(i) The American Service Directory includes well-known mail-order companies, as well as many retailers, publishers, trade publishers, and mailing list brokerages.
"Hundreds of well known mail order companies and publications located throughout the United States are currently in desperate NEED OF additional MAIL HELP. They must reach millions of prospects with their offers."
"Many of these companies are familiar to you, some retailers, publishers, trade publishers, and mailing list brokerages will not be."
(j) The fee for the American Service Directory is the homeworker's final and only cost.
"The $8.00 will be your FINAL AND ONLY COST...There is nothing for you to buy."
(k) Only a limited number of persons will be selected by American Service Directory to participate in this program.
"We want a limited number of new workers both full and part time..."
(1) American Service Directory will employ homeworkers.
"We want a limited number of new workers both full and part time..."
(m) Work are home is available through American Service Directory addressing envelopes, addressing circulars, compiling mailing lists, and clipping newspaper items.
"AMERICAN SERVICE
Do you want to make HUNDREDS OF DOLLARS a month? Welcome aboard] If you wish to address envelopes, or circulars, or compile mail lists, or clip local newspaper items, your dreams will come true] Right in your OWN HOME]"
(n) Work is available through American Service Directory at high rates and the amount of money earned by the homeworker is solely controlled by how much work is performed.
"If you could receive up to $18.00 in commissions from 100 pieces mailed or $180.00 a 1,000? We think you would."
"You can be AS BUSH or not BUSY...AS YOU LIKE. If you work for a while and become tired...you may simply stop. There is no contract to sigh. You can even stop completely. But we know this is unlikely. Most people don't get tire of receiving big money every day in the mail."
(o) No skills or experience are necessary to successfully follow the program offered by American Service Directory.
"Do you need any specific skill for this kind of work? No, You do not need any training. You DON'T even HAVE to know how TO TYPE."
(p) The American Service Directory contains all instructions and information necessary to successfully follow the program.
"THE DIRECTORY contains the easiest to understand instructions on undertaking addressing, clipping, compiling, labelling, commission or inserting work in the United States."
(q) All materials needed will be provided to the homeworkers.
"You will receive ALL MATERIALS necessary for your home work--envelopes, stamps, flyers, pens, and the like--from the many firms organized within the AMERICAN SERVICE DIRECTORY."
(r) The cost of the American Service Directory will be fully recouped by all purchasers by means of a federal income tax deduction.
"You THIRD BONUS, for the experienced, comes from the Internal Revenue Service which will allow the entire cost of the AMERICAN SERVICE DIRECTORY as tax-deductible."
4. Postal Inspectors Larry D. Rominger and Jesse G. Horton testified for Complainant. The other witness for Complainant was Mrs. Joe Sample, a private citizen who responded to Respondent's advertisement. Respondent called no witnesses.
5. For the reasons given below under each of the underscored allegations of Counts I and II of the Complaint, such allegations are found to be false:
(a) By using the American Service Directory homeworkers will earn $2500.00 a month addressing envelopes.
(b) By using the American Service Directory homeworkers will earn $280.00 per day.
(c) By using the American Service Directory homeworkers will earn $190.00 per 1000 letters worked.
(f) By using the American Service Directory homeworkers will earn $180.00 per 1000 commission mailings.
Complainant's Exhibit 2 contains a request by Complainant for the production of documents which identify individuals who have earned money by following Respondent's instructional materials. In Complainant's Exhibit 3 Respondent stated that no such records are available. It can be inferred that Respondent cannot substantiate the earnings claims made in its ads. Inspector Rominger and Mrs. Joe Sample testified concerning their contacts with the firms listed in the American Service Directory. A large percentage of these firms did not reply to their requests for home employment or the inquiries were returned indicating that the company was no longer in business. It would appear that a large number of the firms listed in the Directory would not supply the earnings promised since they did not or could not respond to potential homeworkers' inquiries. Also three of the firms listed as employers of homeworkers were operated by American Commercial Publications, Inc. Inspector Rominger testified that Mr. Charles Emerson not only operates American Commercial Publications but also the American Service Directory.
(d) By using the American Service Directory homeworkers will earn $20.00 per clipped newspaper item.
The advertisements for the American Service Directory convey the impression that newspaper clipping is a method by which a homeworker can make large amounts of money. The ads indicate that homeworkers will receive $20.00 per clipped newspaper item. On page 8 of the American Service Directory (CX-12), the text shows that homeworkers are not hired by publishers to clip news items. Homeworkers act as independent contractors and are paid only for those clippings which are accepted by publishers for publication. The homeworker may receive less than $20.00 per clipping, if the clipping is accepted at all, and has to pay for all newspapers, postage, and other expenses that would be required in such a venture.
(e) By using the American Service Directory homeworkers will earn $1.60 per envelope.
The American Service Directory advertisements represent earnings of $1.60 per envelope which extrapolates to $1,600 per thousand. However, the American Service Directory (CX-12, p. 4) indicates that envelope addressers will generally be paid $40 to $60 per thousand envelopes addressed.
(g) Hundreds of well-known mail order companies and publications contact millions of customers by hiring individuals to address envelopes at their homes during their spare time.
The mail-order companies listed in the American Service Directory do not appear to be well known to the general population. The fact that so many of them did not respond to Inspector Rominger's and Mrs. Sample's inquiries or were out-of-business would indicate that the firms listed do not contact millions of customers by hiring individuals to address envelopes. Furthermore, the responses that were received by Mrs. Sample and Inspector Rominger were not offers of employment but were solicitations to become dealers or distributors of the American Service Directory or other work-at-home programs. Consequently, the American Service Directory will not assist persons seeking employment. Rather, it may assist them in becoming independent contractors for work-at-home programs.
(h) The American Service Directory contains names and addresses of mail order companies that pay homeworkers to address envelopes for them.
The American Service Directory contains the names of mail-order companies that require purchasers to place advertisements and to conduct their own mail order business. Addressing envelopes is merely incidental to the conduct of this business and payment is made not for the addressing of envelopes but for the successful solicitation of additional persons interested in the program.
(i) The American Service Directory includes well know mail-order companies, as well as many retailers, publishers, trade publishers, and mailing list brokerages.
The American Service Directory contains the names of numerous little-known, or unknown, companies involved in the sale of envelope-stuffing programs. Inspector Rominger and Mrs. Sample contacted many of these companies. Many of them did not respond; some are no longer in business and some moved without leaving a forwarding address. None of them appeared to be retailers, publishers, trade publishers or mailing list brokerages.
(j) The fee for the American Service Directory is the homeworker's final and only cost.
All firms listed in the American Service Directory that responded to Inspector Rominger's and Mrs. Sample's inquiries solicited additional funds for their programs. The programs themselves required expenditures for postage, advertising, printing, envelopes and mailing lists. Three of the responses were from Respondent soliciting a fee to become a distributor of the American Service Directory.
(k) Only a limited number of persons will be selected by American Service Directory to participate in this program.
In the Response to the Application for Production of Documents (CX-2) and CX-3) Respondent states that it has no documents describing the criteria for selection to participate in the American Service Directory and no documents indicating persons who have not been selected to participate. The ACP, Inc. advertisement (CX-17 indicates that the only limitation is the ability to write your name and put a stamp on a letter. This is inconsistent with the American Service Directory ad (CX-29), which indicates that only a limited number of persons will be selected to participate in the program.
(1) American Service Directory will employ homeworkers.
When the purchaser of the American Service Directory receives the directory it becomes evident that the homeworker will not be employed by American Service. Instead the homeworker is advised now to start his own home business and to contact the firms listed in the directory toi attempt to obtain some word to do.
Complainant's Exhibit 2, paragraphs 6 and 12 requests the production of documents identifying employees of Respondent. Respondent's Reply (CX-3) was that no such records are available. Because it appears that no employee records are kept, it can be inferred that Respondent does not employ homeworkers.
(m) Work at home is available through American Service Directory addressing envelopes, addressing circulars, compiling mailing lists, and clipping newspaper items.
The American Service Directory does not provide work at home to its customers. It provides information advising them to become independent contractors or to contact listed firms that are represented to hire work-at-home employees. The experiences of Mrs. Sample and Inspector Rominger show that the work available, if any, from such firms is not as represented. Rather it involves soliciting envelopes for companies like ASD. The clipping work described in the directory consists of clipping items and sending them to publications in the hope that the clipping will be purchased.
(n) Work is available through American Service Directory at high rates and the amount of money earned by the homeworker is solely controlled by how much work is performed.
The American Service Directory does not directly hire homeworkers. In response to Application for Production, Respondents stated that they have no payroll records for employees and no documents reflecting earnings of participants in ASD programs. The directory reveals that the amount of money earned by the homeworker is controlled by many factors. First he must contact firms listed in the American Service Directory. If any of the firms he contacts replies, then he must pay an additional fee for their work-at-home kit or program. These kits or programs generally require the homeworker to start his own business. For example, a response from ACP, Inc. will require the homeworker to place advertisements, have documents printed, and solicit the sale of American Service Directories. The letter from Charles Emerson received as CX-24 indicates that Respondent does not expect the homeworker to earn large amounts at the beginning of the promotion. In order to make the significant earnings the homeworker would have to become an effective mail order manager and advertiser.
(o) No skills or experience are necessary to successfully follow the program offered by American Service Directory.
The homeworker who follows the advice in the American Service Directory will be starting his own mail order business. The homeworker will be contacting automobile dealers, oil dealers, loan and finance companies and other businesses to obtain clients (Page 3, American Service Directory). They will also be advertising and sending direct mail letters (Page 4, American Service Directory). They will have to develop the skills of a small businessman; salesmanship, recordkeeping, and business acumen.
(p) The American Service Directory contains all instructions and information necessary to successfully follow the program.
The testimony of Inspector Rominger and Mrs. Sample showed that firms responding to inquiries requested additional funds for instructions, work-at-home kits, or dealerships.
(q) All materials needed will be provided to the homeworkers.
Many of the companies contacted by Inspector Rominger and Mrs. Sample required homeworkers to supply their own materials. For instance, American Commercial Publications, Inc. required homeworkers to incur expenses for advertising, postage and printing. The American Service Directory (CX-12), pp. 3, 4) instructs homeworkers to contact local printers and companies for addressing work. It also advises advertising and mailing of circulars. It, essentially, directs homeworkers to start their own businesses and furnish all their own supplies and materials.
Complainant has not established the falsity of allegation (r) under Count I.
6. By means of advertisements and form letters (Cplt. Ex. C), Respondent seeks remittances of money or property through the mails for purchase of dealerships with American Commercial Publications, Inc. (ACP) (Cplt. Ex. E; Tr. 48, 49).
7. The representations alleged in Count III of the Complaint are made in the text of such form letters as follows (allegations underscored):
(a) By purchasing a dealership with the American Commercial Publications, Inc. a homeworker can earn $3,000.00.
"I want you to sit back, get comfortable, relax and make $3000.00 per week too."
(b) For one hour of work per day an American Commercial Publication, Inc. dealer can earn $3,000 per week.
"$500.00 per week addressing envelopes in your own home for an hour a day. ... And if you don't believe $500.00 per week, how in the world could I ever persuade you to believe $3,000.00 per week?"
(c) The work performed by an American Commercial Publications, Inc. dealer is legal.
"Perfectly legal, very respectable, very honorable and self-fulfilling work."
(d) The work performed by an American Commercial Publications, Inc. dealer is not saleswork.
"You will be addressing envelopes in the privacy of your own home -- no sales, no hassle, nobody bothering you."
(e) The work performed by an American Commercial Publication, Inc. dealer does not involve selling dealerships to other persons.
"You are not required to sell a dealership to somebody else."
(f) An American Commercial Publications, Inc. dealer will make $500.00 a week doing only one hour of work per week, addressing envelopes.
"$500.00 per week addressing envelopes in your own home for an hour a day."
8. For the reasons given below under each of the underscored allegations of Count III of the Complaint, such allegations are found to be false:
(a) By purchasing a dealership with the American Commercial Publications, Inc. a homeworker can earn $3,000.00 per week.
The testimony of Inspector Horton established that he received a $4.00 check from ACP, Inc. as a commission on his sale of an American Service Directory. This would indicate that in response to Complainant's Application for Production of Documents Respondent could have supplied bank records which would reflect the earnings of its suppliers. The failure to present these records leads to the inference that earnings are not as advertised. Also, the letter Inspector Horton received with his commission check (CX-24) indicates that dealers are urged not to become discouraged if earnings are less than expected because over a period of time, with additional advertising, earnings will increase. This would suggest that Respondent's distributors have obtained less than the represented earnings in the past and that such letters are needed to encourage them to continue the operation.
(b) For one hour of work per day an American Publications, Inc. dealer can earn $3,000.00 per week.
In response to Complainant's Application for Production of Documents Respondent indicated that there are no payroll records for its dealers and that the names and addresses of the dealers were not available. This refusal to supply records creates an inference that hourly income is less that what was represented.
(c) The work performed by an American Commercial Publications, Inc. dealer is legal.
The homework to be performed by an American Commercial Publications, Inc. dealer is exactly the same as the scheme alleged in Count I of the amended complaint. The same advertisements are used and the same booklet is sold.
(d) The work performed by an American Commercial Publications, Inc. dealer is not saleswork.
The American Commercial Publications, Inc. dealer is to answer phone calls, mail advertising circulars and place newspaper advertisements (CX-20). All of these activities are to promote and sell copies of the American Service Directory. Indeed, it appears that the only function of an American Commercial Publications, Inc. dealer is to sell copies of the American Service Directory for which he or she receives a sales commission of $4.00 per copy.
(e) The work performed by an American Commercial Publications, Inc. dealer does not involve selling dealearships to other persons.
Indirectly the American Commercial Publications, Inc. dealer assists in selling American Commercial Publications, Inc. dealerships to other persons. The dealer sells American Service Directories to other persons. Three of the "employers" listed in the directory solicit inquirers to become American Commercial Publications, Inc. dealers. Thus by selling directories the dealer is involved in recruiting new dealers.
(f) An American Commercial Publications, Inc. dealer will make $500.00 a week doing only one hour of work per week, addressing envelopes.
The work that a dealer is required to perform is more than addressing envelopes. The dealer must place advertisements and mail out circulars. The dealer's primary function is to sell American Service Directories. The addressing of envelopes is merely an incidental part of this function. The earnings depend on the dealer's ability to develop expertise as a mail order manager. As found above, Respondent has refused to provide the documents which show dealers earnings. Even if the earnings could be substantiated, the earnings are for selling American Service Directories, not for addressing envelopes.
9. The representations alleged in paragraphs 5 (except (r)), 10 (except (r)), and 17 are materially false as a matter of fact.
10. A homeworker responding to the false representations alleged in Count III of the amended complaint and purchasing a dealership is expected to send the same circular which American Service Directory sends to persons requesting further information about the directory (Count I). The instruction sheet (CX-20), sent by Respondent to its dealers instructs the dealers to use that advertisement to solicit purchasers of the directory. As found above, the representations made by those circulars are materially false. The circulars solicit the remittance of money to Respondent.
Directing this scenario by means of Complainant's Exhibit 20, Respondent knowingly seeks money or property through the mails by causing dealers to make to third persons the misrepresentations alleged in paragraph 5 of the Complaint.
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, Inc. v. Christenberry, 169 F. Supp. 746 (S.D.N.Y., 1959). Express representations are not required. It is the net impression which the advertisement is likely to make upon purchasers to whom it is directed which is important, and even if an advertisement is so worded as not to make an express representation, if it is artfully designed to mislead those responding to it the mail fraud statutes are applicable. G. J. Howard v. Cassidy, 162 F. Supp. 568. See also Virginia State Board of Pharmacy v. Virginia Citizens Council, 425 U.S. 748 (1976).
2. Applying the foregoing standards, I find that Respondent's advertisements make the representations alleged in the Complaint excepting (r) under paragraph 5 thereof.
3. The representations found are materially false in fact.
4. Complainant has established its case by preponderance of the reliable and probative evidence of record. S.E.C. v. Savoy Industries, 587 F.2d 1149, 1168 (D.C. Cir., 1978); S.E.C. v. National Student Marketing, 457 F. Supp. 682, 701 n. 43 (D.D.C., 1978); Wilmont Products, P.S. Docket No. 6/46 (P.S. Decision, 7/19/79, p. 7).
5. A promise to refund if a customer is dissatisfied will not dispel the effect of false advertisements. Farley v. Heininger, 105 F.2d 79 (D.C. Cir., 1939); Borg-Johnson Electronics, Inc. v. Christenberry, supra.
6. Knowingly causing persons to make misrepresentations to third persons in seeking the remittance of money or property through the mails is a violation of 39 U.S.C. § 3005. U. S. v. International Term Papers, Inc., 477 F.2d 1277 (1st Cir. 1973).
7. Respondents are engaged in the conduct of three schemes for obtaining remittances of money through the mails by means of materially false representations in violation of 29 U.S.C. § 3005.
8. An order pursuant to 39 U.S.C. § 3005, in the form attached, should be issued against Respondents.