In the Matter of the Complaint Against

 AMERICAN ASSOCIATION OF HOME INCOME PROGRAMS or AAHIP
 Postal Unit 29309 at
 San Antonio, TX 78229

 P.S. Docket No. 8/19;  
 
 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.

Specifically the Complaint alleges that by means of classified advertisements and direct mail circulars mailed to responders to such advertisements or unsolicited circulars seeking remittances of money to be sent through the mails to Respondent, Respondent expressly or impliedly, falsely represents to the public in substance and effect as follows:

a) American Association of Home Income Programs will provide employment to persons responding to the advertisement.

b) Persons who follow the instructional materials will earn at least $353.88 per week.

c) The day after the instructional materials are received, the homeworker will earn $58.98 for 3 1/2 hours of work.

d) The only expense to the "employee" will be the $15 for the instructional materials.

e) Compensation is limited only by the amount of effort expended by the "employee."

f) AAHIP will provide employment that consists solely or primarily of mailing envelopes.

The Complaint alleges that such representations are materially false in fact and requests that an order conforming with 39 U.S.C. § 3005 (a) (1) and (2) be issued against Respondent.

Respondent filed an Answer to the Complaint denying all the allegations thereof and asserting 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 reaffirmed and incorporated herein by reference.

At Respondent's request the location of the hearing was changed from Washington, DC to San Antonio, Texas. The hearing was held on April 30, 1980.

The parties have handed up 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. Based on the testimony of Postal Inspector Harold Cross as to his having made a test purchase in response to Respondent's advertisements (Tr. 4-9) and further based on Complainant's exhibits CX 1a through CX 2d, and the testimony of James A. Bliss, Respondent's principal, I find that Respondent is engaged in a scheme to obtain money or property through the mails.

2. The scheme is conducted by means of advertisements such as those contained in Exhibit CX-2B at the middle of the page placed in classified advertising in various publications of substantial circulations and through unsolicited direct mail circulars (CX-1B). An inquiry responding to such advertisements brings to the inquirer a circular substantially identical to the unsolicited direct mail circular (CX-1B). That circular invites interested persons to send by mail to Respondent the sum of $15.00 (now $20.00) to become a member of Respondent and receive a Membership Packet containing procedures for participating in two programs. One program is called in the circular the "Home Income Program." The other is called the "Homeworkers Program." After sending Respondent an application for membership (CX-1c) and the $15.00 ($20.00) membership fee, the interest person receives a "Membership Package" containing a Membership Procedure Kit" (CX-2D), a "Special Bulletin (CX-2B), a sheet (CX-2C) reiterating three requirements for application contained in the circular (CX-1B), describing a consultation service for members having questions concerning the programs, and an underscored request that refunds not be asked for until the member has fulfilled the "agreement" contained in the membership application. The only "agreement" designated as such in the application is one to keep all copyrighted information and procedures contained in the Membership Package confidential.

3. Respondent makes the representation alleged in paragraph VII (a) of the Complaint by implication in the following wording contained in CX-1B:

"We also need homeworkers to process envelopes"

"*** you must be honest and dependable *** You will have to agree to work at least 3 1/2 hours a day ***"

"*** you must be able to follow simple directions"

"AAHIP needs dependable Homeworkers to work for us in our circular mailing program immediately"

"We are asking you to go to work for us at home ***".

4, Respondent expressly makes the representation alleged in paragraph VII (b) of the Complaint in CX-1B.

5. Respondent makes the representation alleged in paragraph VII (c) of the Complaint in the following wording contained in CX-1B:

"You will earn your first daily pay ($58.98 ***) the day after you receive your AAHIP Membership Packet and put this program into effect. You will only have to work 3 1/2 hours to earn this $58.98."

6. Respondent makes the representation alleged in paragraph VII (d) of the Complaint by implication in the following wording contained in CX-1B:

"The small deposit and application fee is the only money that you will ever have to pay to AAHIP. It pays the cost of processing your application plus the cost of your Membership Packet and mailing it to you."

This representation is also found by implication in the complete absence of any indication that applicants will be required to make any additional monetary investment to participate in the programs.

7. Respondent makes the representation alleged in paragraph VII (e) of the Complaint in those portions of CX-1b which relate specific amounts of compensation to specific amounts of time spent on the programs.

8. Respondent makes the representation alleged in paragraph VII (f) of the Complaint by implication in placing the greatest emphasis in the circular (CX-1B) on processing envelopes and circular mailing and not describing the details of any other program.

9. The Membership Procedure Kit received by applicants who pay $15.00 ($20) describes 15 programs plus 40 bonus programs. Among the 15 programs are procedures for making money by (1) installing a wide angle door viewer requiring a $33.37 investment for tools;

(2) selling inflatable toys and ballons, requiring an investment of about $50.00; (3) selling hot dogs, requiring an investment of over $160.00; (4) installing a hot chocolate machine in company snackrooms, requiring an investment of over $250.

10. The membership package also contains a "Special Bulletin" (CX-2B) which describes the "AAHIP Homeworker Program" envelope processing program. This program requires members to obtain names for Respondent by running suggested advertisements, similar to those run by Respondent, in classified sections of newspapers on a daily basis. Responses to such advertisements are to be sent to Respondent who agrees to pay participants $.51 for each envelope or postcard received. Participants are advised to buy one or more of seven suggested directories to obtain the names of newspapers in which they may place ads. Placing of each ad would cost participants $5.00 or more for each insertion.

11. The "Special Bulletin" contains an acknowledgement that some people who respond to Respondent's ads and circulars believe they are becoming involved in an "envelope stuffing" program. The bulletin disclaims any mention of envelope stuffing in Respondent's circular (brochures). It says that Respondent has said only that it needs homeworkers for envelope processing.

12. The reason for this mention and disclaimer of "envelope stuffing" in the Bulleting was made apparent by the testimony of three dissatisfied persons who thought they had paid their membership fee to receive from Respondent envelopes to be stuffed with circulars also furnished by Respondent and that no other investment or substantial effort would be required of them (Tr. 17-42).

13. The Better Business Bureau of San Antonio has received 47 complaints concerning Respondent's promotion (Tr. 57). The Postal Inspection Service has received 421 such complaints (Tr. 45-47). The Texas Attorney General's Office has received 28 such complaints, 10 of them concerning dissatisfaction with materials received from Respondent (Joint Tr. 25).

14. (a) The representation alleged in paragraph VII (a) of the Complaint is false. Persons responding to Respondent's advertisements do not become employees of Respondent (Tr. 63; CX-2D).

14. (b) The representations alleged in paragraph VII (b) and (c) of the Complaint are false. Reading the details of Respondent's various programs makes it apparent that it is highly unlikely that the average participant can with reasonable effort and investment earn at least $353.58 per week or $58.98 for 3 1/2 hours of work the day after receiving the Kit.

14. (c) The representation alleged in paragraph VII (d) of the Complaint is false. The so-called "envelope processing" program requires an investment in newspaper advertising and directories. Nearly all the other programs also require significant investments for tools, equipment, etc.

14. (d) The representation alleged in paragraph VII (f) of the Complaint is false. Respondent does not provide employment and participation in its programs does not consist solely or primarily of mailing envelopes.

14. (e) The representation alleged in paragraph VII (e) of the Complaint is false. Compensation derived from participation in programs outlined in the kit depends more on the number of persons willing to buy the product or service involved than on time spent. The compensation of participants in the "Special Bulletin" program depends almost entirely on the number of responses to classified advertisements received.

15. The false representations are material in that their natural effect is to induce readers of Respondent's promotional materials to purchase Respondent's instructional materials.

1. The meaning of advertising representations is to be considered in light of the probable impact of the entire advertise- ment on the person or ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948); 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 (a) through (f) of the Complaint.

3. Complainant has established its case 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. An element of religion does not extend a constitutional privilege which protects against a charge of fraud. Fields v. Hannegan, 162 F.2d 17 (1947).

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

6. The representations specified in paragraph VII, subparagraphs (a) through (f) 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 in the form attached should be issued against Respondent.