In the Matter of the Complaint Against THE AMERICAN HOME INCOME ASSOCIATION (A.H.I.A.) 942 North Main at Boerne, TX 78006 and 4414 Centerview, Dept. 264 at San Antonio, TX 78228 P.S. Docket No. 11/78; 08/19/81 Grant, Quentin E. APPEARANCE FOR COMPLAINANT: Dani el E. Lewis, Esq. Benjamin A. Kilgrow, Esq. Consumer Protection Division Law Department United States Postal Service Washington, DC 20260-1100 APPEARANCE FOR RESPONDENT: A. L. Chavis Respondent pro se 150 Terrell Plaza, #20 San Antonio, TX 78209
In a Complaint filed on May 12, 1981, Respondent is alleged to be violating 39 U.S.C. § 3005 by engaging in a scheme or device to obtain money or property through the mails by means of false representations. The scheme involves a direct mail circular by means of which, the Complaint alleges, Respondent makes, expressly or impliedly, the following representations said by Complainant to be materially false in fact:
a. Full details of the American Home Income Association (A.H.I.A.) program is provided to participants upon payment of an application fee.
b. A Membership Packet is all that is necessary for participants to begin earning a guaranteed weekly income.
c. The A.H.I.A. program provides an opportunity for participants to make a good, steady, guaranteed income every week.
d. A.H.I.A. screens applicants to determine if they are honest, reliable and willing to follow instructions.
e. The A.H.I.A. program does not violate United States Postal Service false representation statutes.
f. A. L. Chavis does not promote businesses that obtain money or property through the mails by means of false representations.
g. The A.H.I.A. program is not a gimmick or a get-rich-quick offer.
h. No capital investment is necessary beyond the application fee.
i. Participants who work one hour a day per week can reasonably be expected to earn $205.80 a week.
j. Weekly earnings of participants are guaranteed by A.H.I.A. in writing.
Respondent filed an Answer to the Complaint denying that is makes the foregoing representations and setting forth several affirmative defenses.
A hearing was held on July 6, 1981, in Washington, D.C. The parties have submitted proposed findings of fact, conclusions of law, and written argument all of which have been considered in arriving at the following decision. To the extent indicated they have been adopted. Otherwise they have been rejected as irrelevant, immaterial or contrary to the evidence.
Andrew C. Ackermann, III, a postal inspector, testified for Complainant. A. L. Chavis, a principal of the Respondent, testified on its behalf.
1. Respondent, American Home Income Association (A.H.I.A.), is headquartered in the State of Texas (Tr. 8).
2. Respondent distributes by mail the direct mail circular attached to the Complaint as Exhibit 1 (EX. A annexed hereto) (Tr. 8).
3. Respondent solicits the remittance of money through the mail by means of such circular (Tr. 8).
4. Such remittances are delivered to the addresses set forth in the caption of this decision (Tr. 9).
5. A. L. Chavis is a principal in Respondent (Tr. 10).
6. Persons responding to Respondent's direct mail circular, ordered a Membership Packet and remitting a $10.00 application fee, receive a booklet entitled "The American Home Income Association - Confidential Report - Blueprint for Success - Updated and Revised Edition, lst printing, September, 1980" (CX-B, C).
Applicable Standards of Interpretation of Advertising
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 Electronic 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).
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7. Applying the foregoing standards of interpretation to Respondent's advertising, I find that the representations alleged in the Complaint underscored below and lettered as in the Complaint with the exception of 3(e) and (f), are made expressly or impliedly in the language from such advertising quoted following the various allegations or for other reasons delineated below:
(a) Full details of the American Home Income Association (A.H.I.A.) program are provided to participants upon payment of an application fee.
"To get started right away, just fill our the application form and send it to the home office with your $10 application fee in the first class envelope provided. This small fee pays for the cost of processing your application and shipping your membership packet."
"Your membership packet will be processed the same day your order is received."
"Please rush my membership packet. Enclosed find my $10 application fee."
"I understand that I will be completely satisfied with the amount of money that I am earning every week by following the simple directions in my membership packet. . ."
"IMPORTANT --START YOUR GUARANTEED INCOME IMMEDIATELY. DEPOSIT/APPLICATION FEES PAID BY CHECK ARE HELD UP TO 3 WEEKS UNTIL CHECK CLEARS. APPLICATIONS WITH MONEY ORDERS, CASHIERS CHECKS, OR CASH ARE PROCESSED (AND PACKETS SHIPPED) IMMEDIATELY."
(b) A membership packet is all that is necessary for participants to begin earning a guaranteed weekly income.
The language used in Respondent's direct mail circular quoted in paragraph (a) above also represents expressly or by implication that a membership packet is all that is necessary for participants to begin earning a guaranteed weekly income. In order to get started "fast" and in order to start your guaranteed income "immediately," participants are informed that they need only to submit the application fee. Nowhere in the direct mail circular does it indicate that the membership packet will not provide all that is necessary to begin earning a guaranteed weekly income.
(c) The A.H.I.A. program provides an opportunity for participants to make a good, steady, guaranteed income every week.
"YOU CAN NOW EARN A GUARANTEED WEEKLY INCOME WORKING RIGHT IN YOUR OWN HOME."
"What it is is an opportunity to learn how to make a good steady guaranteed income every week."
"This is the only program of this kind in the United States that GUARANTEES IN WRITING the weekly income that you will be making."
(d) A.I.H.A. screens applicants to determine if they are honest, reliable and willing to follow instructions.
"We are looking for people who are honest, reliable and will follow directions."
"The reason that we are able to do this is that we make sure before you become a member that you are honest, reliable and willing to follow directions."
"There are two requirements for participation:
1. You must be honest. 2. You must be willing to follow our simple instructions."
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(g) The A.H.I.A. program is not a gimmick or a get-rich-quick offer."
"The weekly home income program is not a gimmick or a get-rich-quick offer."
(h) No capital investment is necessary beyond the application fee.
The only monetary investment mentioned in the advertisement is the $10 application fee. The advertisement conveys the distinct impression that the only other investment required is at least one hour a day of the participant's time. This impression is created in the following wording:
"... you must work at least one hour a day."
"If you need extra money and will work at least one hour a day, this program is for you."
(i) Participants who work one hour a day per week can reasonably be expected to earn $205.80 a week.
"About two years ago he accidently stumbled onto a weekly home income business that has to be seen to be believed. He found that FOR EACH HOUR PER DAY HE WORKED HE MADE $205.80 A WEEK. He devoted only two hours a day to it (or I should say his wife did) AND HE MADE $411.60 EVERY SINGLE WEEK]
"Well, needless to say I started the same business for myself that very week. It was so easy I could hardly believe it]"
The above-cited statement from Respondent's direct mail circular gives a clear impression that the business opportunity formula can reasonably be expected to permit participants to earn $205.80 a week. Respondent stated that he stumbled onto this home income business, that another person was able to make $205.80 a week, and that after starting this business for himself it was so easy he could hardly believe it. This language clearly indicates to all participants that $205.80 a week is an amount which they can reasonably be expected to earn.
(j) Weekly earnings of participants are guaranteed by A.H.I.A. in writing.
"YOU CAN NOW EARN A GUARANTEED WEEKLY INCOME WORKING RIGHT IN YOUR OWN HOME."
"Well, it is completely true and we back it up with an IRON CLAD WRITTEN WEEKLY EARNINGS GUARANTEE that lasts ONE FULL YEAR."
"The money that you are going to be making is guaranteed by the home office."
"What it is is an opportunity to learn how to make a good, steady, guaranteed income every week."
"This is the only program of this kind in the United States that GUARANTEES IN WRITING the weekly income that you will be making."
"We know that it really does seem too good to be true. Well, it is completely true. If it were not we couldn't guarantee it in writing."
"IMPORTANT --START YOUR GUARANTEED INCOME IMMEDIATELY.
8. Complainant has not substantiated the representations alleged in subparagraphs (e) and (f) of paragraph 3 of the Complaint. As to subparagraph (e), Respondent's advertising contains no express language with respect to non-violation of the misrepresentation statute. The ordinary person reading Respondent's advertising, having no knowledge of such statute, would not find in Respondent's advertising an implied representation bearing thereon. I do not find any material representation, express of implied, in the language of Respondent's advertising as to the personal honesty of A. L. Chavis or as to the lawfulness of the business practices in which participants in Respondent's program may be required to engage. If the representations alleged in subparagraphs (e) and (f) may be found, it is only by omission, and of doubtful materiality.
9. Turning now to the alleged falsity of the representations found above (lettering below corresponds to lettering in paragraph 3 of the Complaint).
(a) and (b). The membership packet (CX-C) received by persons remitting $10.00 to Respondent requires them (1) to respond to classified ads appearing in several named national publications, securing sales material from advertisers and (2) to forward such material in a stamped, self-addressed envelope to Respondent. Upon receiving such material Respondent sends participants in second packet (RX-2) that, according to the Membership Packet, "will show you exactly how to get your weekly income started." Clearly full details of Respondent's program are not provided to participants upon payment of the application fee. An additional investment of time and money is required to obtain complete details (Tr. 57, 58, 62, 64). Participants do not start making income until four to six weeks from the receipt of the second packet of instructions (Tr. 67).
(c) Complainant did not sustain its burden of proof as to this allegation. Mr. Chavis's denial of knowledge in response to various questions put to him on cross-examination did not constitute affirmative proof of this allegation. Respondent had no burden of proof on this issue until Complainant made a prima facie case which it failed to do.
(d). It is clear from the testimony of Mr. Chavis that Respondent does not actually screen applicants. All applicants must sign the application form which includes a certification that the applicant is honest, will follow directions, and will work at least one hour per day. Simple ascertainment by Respondent that an applicant has made that certification required of all applicants cannot reasonably be said to constitute screening.
(g). Complainant has not met its burden of proof that the A.H.I.A. program is a gimmick or a get-rich-quick offer. It may well be just that, but evidence is required to sustain the allegation.
(h). The direct mail circular states that a $10 application fee is required of participants in the A.H.I.A. program. The clear implication is that the membership packet is all that is required to begin earning income immediately. There is no indication that additional capital investment is required as an integral part of the program. Such an omission is a material misrepresentation. The Confidential Report (CX-C), which is mailed to participants after Respondent receives their $10 application fee, contains a sample budget and discusses the need to advertise to generate income. The second membership packet (RX-2) provides the actual information necessary to follow the program. The three-step process described in RX-2 requires an expenditure by participants as follows:
Step one: placing an ad in a local weekly newspaper and other publications.
Step two: reproducing the mail piece provided at the participant's expense and mailing copies to persons who respond to the ads. Postage is at participant's expense.
Step three: when orders are received, forwarding check fo $3 to Respondent.
According to the budget provided in RX-2, in order to earn a net profit of $231, a participant must invest $219.
(i). Complainant has failed to sustain its burden of proof as to this alleged misrepresentation.
(j). Throughout the direct mail circular there are references to earning a guaranteed weekly income. As found above, the ordinary person would most likely read the circular to promise a guarantee of income, not just of a refund. Mr. Chavis testified that the only guarantee intended and made was that of a refund of application fee appearing on the back of the direct mail circular.
1. Respondent defended this matter principally on the ground that he devised his advertising for the instant promotion on the basis of the initial decision rendered by the undersigned in Financial Advisor Services, P.S. Docket No. 8/20 (5/8/80). his contention is, therefore, that there can be no misrepresentations in the advertising involved in the instant case. Respondent's position is not well taken. The advertising here is different from that in Financial Advisor Services and the allegations of misrepresentation are different. The instant case must be decided on its own merits without reference to the earlier decision.
2. Respondent's advertising makes representations substantially as characterized in subparagraphs (a), (b), (c), (d), (g), (h), (i), and (j) of paragraph 3 of the Complaint.
3. Complainant's evidence establishes that such representations are materially false in face (except (c), (g), and (i) as to which there was a failure of proof).
4. Respondent argues that Complainant has not established its case because only a few complaints were received from the public. This argument must fall in face of the holding in Farley v. Heininger, 105 F.2d 79, 84 (D.C. Cir. 1939), where, no evidence of complaints from the public having been proved, the Court said that the decisive factor is not whether anyone complains of fraud, or was in fact defrauded, but whether the mails are being used to project a scheme which may result in obtaining money from members of the public by means of false and fraudulent statements.
5. Respondent is engaged in conducting a scheme to obtain money or property through the mails by means of false representations in violation of 39 U.S.C. § 3005.
6. Accordingly, an order in the form attached should be issued against Respondent.