In the Matter of the Complaint Against

 LADIES FINANCIAL SECURITY PROGRAM or LSFP
 P. O. Box 33340
 Per Beitel Sta. at
 San Antonio, TX 78233

 P.S. Docket No. 8/18;  
 
 05/08/80
 
 Grant, Quentin E.  

 APPEARANCE FOR COMPLAINANT:
 Kris tin L. Malmberg, Esq.
 H. Richard Hefner, Esq.
 Consumer Protection Division
 Law Department
 United States Postal Service
 Washington, D.C.  20260

 APPEARANCE FOR RESPONDENT:
 James J. Robertson, Esq.
 Richardson, TX 75080 Jack Leon, Esq.
 Sol Casseb, III, Esq.
 San Antonio, TX 78205

In a Complaint filed on March 24, 1980, Complainant alleges that Respondent is 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.

The specific allegations of false representation are set forth below in the Findings of Fact.

Respondent filed an answer to the Complaint denying all the allegations therein. It also asserted eight affirmative defenses which amount to motions to strike the Complaint before hearing. These motions were denied in my Order of April 24, 1980. Those denials are hereby reaffirmed and incorporated herein by reference.

At Respondent's request the location of the hearing was changed from Washington, D.C. to San Antonio, Texas. The hearing was held on May 1 and 2, 1980.

The parties have filed proposed findings of fact and conclusions of law all of which have been considered. They are granted to the extent indicated and otherwise denied.

1. Respondent is engaged in a scheme to obtain money or property through the mails (CX-1a through CX-2c; Tr. 18-21).

2. Respondent conducts its scheme by means of direct mail circulars sent to names purchased by Respondent from various commercial sources (CX-1a, 1b; Tr. 34).

3. Respondent's advertising circular (CX-1a, 1b) makes the representations alleged in paragraph VII (a) through (d) of the Complaint quoted and underscored below in the wording quoted from such circular following each allegation:

a) Ladies Financial Security Program will provide instructions which are adequate to insure one will earn at least $205.80 per week if the homeworker works one hour per day.

"HOW WOULD YOU LIKE TO MAKE A GUARANTEED EVERY WEEK WORKING ONE HOUR A DAY, FIVE DAYS A WEEK AT HOME?"

b) The work to be performed by homeworkers following the instructional materials consists solely or primarily of stuffing and addressing envelopes.

"ARE YOU CAPABLE OF STUFFING 100 ENVELOPES IN AN HOUR?"

"If you can work with your hands, use your head, and direct the handling of mail, this income can be yours sooner than you expect. You do not need a typewriter. All addressing work can be done by hand."

c) Compensation will be determined by the amount of time spent working.

"HOW WOULD YOU LIKE TO MAKE A GUARANTEED INCOME OF $205.80 EVERY WEEK WORKING ONE HOUR A DAY, FIVE DAYS A WEEK AT HOME? ($411.60 weekly if you can spare 2 hours per day)."

d) The "Membership Packet" will provide the member with information adequate to insure earning $205.80 or $411.60 weekly with "no special equipment or experience."

"ANY MEMBER OF THE L.F.S.P. WHO AT ANY TIME FINDS THAT THEY ARE NOT EARNING $205.80 EVERY WEEK BY FOLLOWING THE SIMPLE DIRECTIONS CONTAINED IN THEIR MEMBERSHIP PACKET, CAN STOP WORKING AND RETURN IT FOR A FULL REFUND OF HER $10 DEPOSIT/REGISTRATION FEE."

"This work requires no special equipment or experience. All you need is a willingness to work, a good attitude, and a desire to be a success."

4. Complainant has not sustained its burden of proof as to the allegation made in paragraph VII (a) of the Complaint ("Ladies Financial Security Program will provide instructions which are adequate to insure one will earn at least $205.80 per week if the homeworker works one hour per day").

The $205.80 per week figure is based on an 8% response to direct mail circulars (CX-1a) mailed to a qualified list of names (names of opportunity seekers bought from commercial sources) as set forth in the booklet received by homeworkers (CX-2b).

Complainant's evidence as to this allegation consisted of the testimony of Roger H. Lourie, Vice President for Marketing of Grolier Publishing Company. Mr. Lourie has had about 2 years experience in direct mail sales of records and tapes for CBS Division-Columbia House and 7 or 8 years in direct mail sales of books and records for Time-Life, Inc. (Tr. 68-70). He indicated no experience in direct mail sales to names taken from a qualified list of opportunity seekers. His experience at Time-Life was with purchased lists of names of persons who it was hoped might be responsive but had not demonstrated responsiveness. One percent response to such promotion was considered very good. He expressed the opinion that a 5 to 8 percent response from a qualified list might be expected if the offer were surprisingly good, or the offer was of something significantly free (Tr. 81). As to Respondent's own direct mail circular sent to a prequalified list he expressed the opinion that since $10 was being asked for registration and the membership packet, 5% would be considered a good average response.

Respondent's principal, Lawson F. Benton, Sr. testified that the 8% response was the minimum response that he had personally experienced (Tr. 49, 50). Although Mr. Lourie is highly qualified in the direct mail order field, his lack of personal experience in the use of qualified lists places his opinion as to expected responses thereto in no better than a standoff position against Mr. Benton's testimony based on personal experience and using the very ad in question.

There is no evidence that a homeworker cannot address 100 envelopes (from which the 8% response is predicted) in one hour.

5. The representations alleged in paragraphs (b), (c), and (d) of paragraph 7 are found to be false in fact for reasons set forth under each of such representations quoted and underscored below:

(b) The work to be performed by homeworkers following the instructional materials consists solely or primarily of stuffing and addressing envelopes.

The Ladies Financial Security Program booklet (CX-2b) describes how the homeworker can run her own mail order business. She is expected to develop a product and do all of her own management and marketing. She must also develop skills in name selection, selecting advertising locations, writing and designing advertising, budgeting, accounting, bookkeeping and satisfying customers (Tr. 86, 97, 114). Processing envelopes is only an incidental and minor part of the total program.

(c) Compensation will be determined by the amount of time spent working.

Income which a homeworker may derive from Respondent's program is based on costs of names, advertising, printing and supplies and the rate of return on advertisements. The amount of time spent working is obviously one of the minor variables in determining amount of compensation.

(d) The "Membership Packet" will provide the member with information adequate to insure earning $205.80 or $411.60 weekly with "no special equipment or experience."

The skills required to earn the amounts of money promised in the booklet are effective name selection, effective advertising locations, writing and designing advertising copy, budgeting, bookkeeping, accounting and satisfying customers (Tr. 86, 97, 114; CX-2b, pp. 23, 26). Respondent's program booklet stresses that experience is required to succeed (pp. 8, 9, 14).

The false representations found above are material because they tend to induce readers of Respondent's advertising to pay the $10 fee for registration in Respondent's program.

1. The meaning of advertising representations is to be considered in light of the probable impact of the entire advertisement on the person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 189 (148); Peak Laboratories, Inc. v. United States Postal Service, 556 F.2d 1387, 1389 (5th Cir. 1977); Unique Ideas, Inc. v. United States Postal Service, 416 F. Supp. 1141, 1145 (S.D. N.Y. 1976).

2. The average person reading Respondent's advertisements would interpret them substantially as characterized in paragraph VII, subparagraphs (b) through (d) of the Complaint.

3. Complainant has established its case except as to paragraph VII (a) of the Complaint by a 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.D. 1979); Gard, Jones on Evidence, § 30:4 (1972); Wigmore, Evidence, § 2498 (3d ed. 1940).

4. 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, 169 F. Supp. 746 (S.D. N.Y. 1959).

5. An element of religion in a promotion does not create a constitutional privilege which will protect against a charge of fraud. Fields v. Hannegan, 162 F.2d 17 (1947).

6. The representations specified in paragraph VII, subparagraphs (b) through (d) of the Complaint are materially false.

7. Respondent is engaged in the conduct of a scheme for obtaining remittances of money through the mails by means of materially false representations in violation of 39 U.S.C. § 3005.

8. An order pursuant to 39 U.S.C. § 3005 should be issued against Respondent.