In the Matter of the Complaint Against JAMES E. SMITH INNOVATION ASSOCIATES, INC. P. O. Box 25546 at Honolulu, HI 96825-0546 P.S. Docket No. 14/61; 11/09/83 Cohen, James A. APPEARANCES FOR COMPLAINANT: Thomas A. Ziebarth, Esq. Consumer Protection Division Law Department United States Postal Service Washington, DC 20260-1112 APPEARANCE FOR RESPONDENT: James E. Smith Innovation Associates, Inc. P. O. Box 25546 Honolulu, HI 96825-0546
Respondent has appealed from the Initial Decision of an Administrative Law Judge which holds that Respondent is engaged in conducting a scheme or device to obtain money or property through the mail by means of materially false representations in violation of 39 U.S.C. § 3005.
On September 9, 1982, the Consumer Protection Division of the Law Department, United States Postal Service (Complainant), filed a Complaint alleging that Respondent, under his own name and the name Innovation Associates, Inc., among others, places orders for merchandise which are accompanied by personal checks drawn on nonexistent or closed bank accounts; and that "by means of these and similar materials," Respondent makes the following materially false representations:
"(a) He has an active checking account at the bank on which the check was drawn bearing the account number set forth on the face of the check;
(b) There are sufficient funds in the account to cover the amount for which the check was drawn; and
(c) The check will be honored by the bank on which it was drawn."
Respondent filed an Answer in which he denied all of the allegations of the Complaint and asserted that the Postal Service was improperly serving as the collection agent for private businesses. In addition, Respondent alleged certain constitutional and statutory violations as the result of the filing of the Complaint.
A hearing was held before an Administrative Law Judge at which Complainant presented the testimony of Postal Inspector Michael J. Bollie, and Respondent testified on his own behalf. Both parties introduced documentary evidence to support their positions. Folliwing the filing of proposed findings of fact and conclusions of law, the Administrative Law Judge issued an Initial Decision in which he concluded that Respondent makes the representations alleged in the Complaint and that these representations are materially false. The Administrative Law Judge further concluded that Respondent's due process and First Amendment rights were not violated. Accordingly, he recommended issuance of a False Representation Order under 39 U.S.C. § 3005.
Respondent has filed a Brief on Appeal in which he argues that there is no direct evidence to support the Initial Decision and that the Postal Service should not become a collection agency for private businesses. Each of these contentions is hereafter addressed.
Respondent first contends that no direct evidence was introduced by Complainant and that the Administrative Law Judge improperly admitted and relied on circumstantial evidence in the form of xeroxed copies of documents to support the Initial Decision. The exhibits referred to by Respondent are xerox copies, but were properly admitted into evidence since no genuine question of their authenticity was raised at the hearing. (See Rules 1001 & 1003 of the Federal Rules of Evidence). Whether these exhibits are considered to be direct or circumstantial evidence does not affect their admissibility or the reliance placed on them by the Administrative Law Judge. Circumstantial evidence is admissible and, if persuasive, may serve as the basis for an administrative decision. See Ellis Fischel State Cancer Hosp. v. Marshall, 629 F.2d 563 (8th Cir. 1980); Zoll v. Eastern Allamakee Community School District, 588 F.2d 246 (8th Cir. 1978).
The exhibits admitted into evidence in this case consist of letters of complaint from different independent businesses and orders submitted with checks signed by Respondent which were returned by various financial institutions because the accounts against which the checks were drawn were closed or contained insufficient funds. The cumulative weight of these exhibits is persuasive that Respondent is engaged in a scheme or device to obtain property through the mail by means of the false representations alleged in the Complaint. No persuasive contrary evidence has been presented. Accordingly, it is concluded that the preponderance of the evidence supports the findings and conclusions of the Administrative Law Judge.
Respondent next argues that the Postal Service should not involve itself in the business practices of private businesses or serve as a collection agent. Essentially, this argument relates to the purpose of 39 U.S.C. § 3005, which is the statute under which the Complaint was filed. Section 3005 authorizes the Postal Service to issue an order restricting receipt of mail upon a determination "that any person is engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations . . ." While this provision may originally have been intended to aid individual consumers "victimized by false representations" by mail order promoters (see, e.g., H.R. Rep. No. 235, 90th Cong., 1st Sess., reprinted in 1968 U.S. CODE CONG. & AD. NEWS 4290, 4292, 4298), Congress subsequently made clear in connection with false billing schemes that businesses were also entitled to protection under § 3005 from deceptive mail practices. (See S. Rep. No. 1077, 95th Cong., 2d Sess., reprinted in 1978 U.S. CODE CONG. & AD NEWS 1366.) The key thrust of the statute is "prevention of future injury to the public by denying the use of the mails to aid a false scheme." Donaldson v. Read Magazine, 333 U.S. 178 (1948), citing Commissioner v. Heininger, 320 U.S. 467, 474 (1943). Businesses, as well as individuals, are part of the public and entitled to protection. Accordingly, the plain language of § 3005 authorizes issuance of a False Representation Order on a showing, supported by a preponderance of the evidence, that an individual is engaged in a scheme or device to obtain merchandise from mail order companies through false representations regarding payment for the merchandise. As previously stated, such a showing has been made.
In implementing § 3005 to protect businesses from deceptive practices, the Postal Service is not acting as a collection agency. The order issued in this proceeding will not result in the collection of any payments due the complaining businesses.
Rather, the order will prevent Respondent from receiving money or property through the mail by means of false representations. Thus, there is no merit to Respondent's argument.
After consideration of the entire record and Respondent's exceptions, it is concluded that Respondent is engaged in a scheme to obtain property through the mail by means of materially false representations. Accordingly, his appeal is denied. A remedial order under 39 U.S.C. § 3005 is being issued with this decision.