In the Matter of the Complaint Against KEYSTONE INDUSTRIES a/k/a Wealthco 8480 Fredericksburg Rd. Suite 205 at San Antonio, TX 78229-3317 AMERICAN FIDELITY CO. a/k/a AMFICO 1040 Lone Star Drive at New Braunfels, TX 78130-2937 CONSOLIDATED INDUSTRIES 211 Eastley at San Antonio, TX 78217-5710 JABACO LTD. Suite 114, 7115 Blanco Road at San Antonio, TX 78216-5022 P.S. Docket No. 17/44; P.S. Docket No. 17/45; P.S. Docket No. 17/46; 11/07/83 Duvall, William A. APPEARANCES FOR COMPLAINANT: H. Ric hard Hefner, Esq. Law Department United States Postal Service Washington, DC 20260-1100 Clark C. Evans, Esq. Southern Region Memphis, TN 38161-0002 APPEARANCES FOR RESPONDENT: Jeremiah Handy, Esq. 147 East Mistletoe San Antonio, TX 78212-8580 Samuel Holliman Bayless, Esq. Leon & Bayless 500 Lexington San Antonio, TX 78215-1930
On August 3, 1983, the General Counsel of the United States Postal Service (Complainant) filed three Complaints alleging that Keystone Industries (sometimes known as Wealthco), American Fidelity Co. (sometimes known as AMFICO), and Consolidated Industries are engaged individually in conducting schemes or devices to obtain money or property through the mails by means of false representations within the meaning of 39 U. S. Code § 3005. These Complaints were filed and docketed in the sequence stated above, respectively, as P.S. Docket Nos. 17/44, 17/45 and 17/46. On September 27, 1983, Complainant's motion was granted to amend the Complaint involving Consolidated Industries (17/46) by adding thereto as a Respondent the name and address JABACO LTD., Suite 114, 7115 Blanco Road, San Antonio, TX 78216.
The schemes are alleged to involve, among other things, the use of advertisements distributed to the public soliciting readers thereof to request further information from the Respondents.
Typical examples of the advertisements are said to be the following:
"HELP WANTED - $250 to $500 weekly paychecks (fully guaranteed) working part or full time at home. Weekly paychecks mailed directly to you from Home Office every Wednesday. Start immediately. No experience necessary. National Company. Do your work right in the comfort and security of your own home. Details and application mailed. Send your name and address to: KEYSTONE INDUSTRIES, HIRING DEPT. 33, 8480 FREDERICKSBURG RD., SAN ANTONIO, TEXAS 78229."
(Keystone's advertisement, 17/44, 1/ Exhibit A; to same effect is AMFICO's advertisement, except for name and address to which reader is to send his/her name and address; 17/45, Ex. A).
. . .
"$106.80 DAILY EARNINGS working three hours a day at home. Your earnings Fully Guaranteed in writing. For complete details and application please send a Stamped, Self-addressed envelope to: (Your Initials & Address Here)" (Consolidated's advertisement as alleged in the Complaint in 17/46; see F.F. No. 2(b)).
. . .
North Side News
Jerome, ID
07-27-83
"$241.20 WEEKLY PAYCHECKS (fully guaranteed). Your weekly paycheck mailed directly to you by computer from our Central Home Office. Part or full time. No skills or experience required. National Company. Equal Opportunity Employer. Complete details, pay scale and application form sent on request. Write to:
JABACO LTD.
7115 BLANCO RD.
SUITE 114/DEPT. 108
SAN ANTONIO, TEXAS
78216 7N/8N/17"
(Consolidated, sub nom. JABACO, 17/46, Ex. A to Motion to Amend)
In paragraph 3 of the Complaints it is alleged that to readers who respond to the above advertisements a circular is mailed by the respective Respondent soliciting remittances of money or property through the mail to Respondent, except that witness Roberts wrote to JABACO (17/46, Ex. J) and received material from Consolidated. (17/46, Ex. M and N)
Attached to each Complaint is a copy of what in paragraph 4 of the Complaint is alleged to be a typical circular relating to the respective Respondent in each of the three cases as originally filed.
Complainant alleges in paragraph 5 of each of the three Complaints that the respective Respondent, by means of such materials and others similar thereto, expressly or impliedly represents to the public, directly or indirectly, in substance and effect, whether by affirmative statements, omission or implication that:
(a) Amounts of earnings derived from participation in the specified program are primarily determined by whatever time participants devote to the routine, mechanical tasks of processing envelopes and stuffing them with sales circulars.
(b) Payment of the initial fee will allow full participation in the specified program without further substantial financial investment by the homeworker.
(c) Respondent offers paid employment for routine, mechanical in-the-home processing of mail.
In the penultimate paragraph of each Complaint, it is alleged that the aforesaid representations are materially false as a matter of fact.
Based upon the foregoing allegations, Complainant requests the issuance of orders as provided by the governing statute.
In timely-filed Answers to the Complaints, Respondents denied engaging in the conduct of a scheme to obtain money or property through the mails by means of false representations in violation of 39 U.S. Code § 3005. Keystone and AMFICO admitted that they distributed advertisements to the public soliciting readers to request further information from these Respondents, but these Respondents denied that such advertisements are part of a scheme. Consolidated denied placing advertisements and soliciting responses from readers of advertisements. This denial is treated as being equally applicable to JABACO.
Keystone and AMFICO admit that the advertisements set forth in paragraph 2 of the Complaints relating to them have, at times, been used by them. Consolidated denied Complaint paragraph 2.
All Respondents admit that they send circulars to persons who respond to the advertisements (Keystone and AMFICO) or to persons listed on mail lists provided by others (Consolidated and JABACO). The circulars contain a registration form which recipients thereof, if they elect to participate in the program, must sign and return to the particular Respondent with the payment of a $15 registration fee or deposit.
Each Respondent admits that the circular attached to the appropriate Complaint is typical of those used by it, but says that other circulars have, from time to time, been used.
Each Respondent denies that it makes the representation set forth in paragraph 5(a) of the Complaint, but alternatively, alleges that if such representation is made by its materials, it is true.
Each Respondent denies making the representation contained in paragraph 5(b) of the Complaint, but alternatively, acknowledges that such representation is in fact made, but denies that it is materially false as a matter of fact. Each Respondent avers that such representation is, in fact, true, and further avers that reimbursement and/or prepayment of financial needs of homeworkers have been and are being paid and/or reimbursed to the homeworkers by Respondent.
Similarly, each Respondent denies the making of the representation set forth in paragraph 5(c) of the Complaint. Alternatively, however, each Respondent alleges that if such representation is in fact made by it, said representation is true, and it is not materially false as a matter of fact.
In a separate paragraph of the Answers, each Respondent denies that any of its representations are materially false, and specifically denies the allegation contained in paragraph 6 of the respective Complaint.
All Respondents requested that the order sought by Complainant be denied.
The cases involving all Respondents listed in the caption hereof, which include all four Respondents named, Keystone and its sub-name, American Fidelity Company and its sub-name, Consolidated Industries and JABACO, were consolidated for hearing, which was held on October 25-27, 1983, in San Antonio, Texas.
Written proposed findings of fact, conclusions of law and supporting arguments were submitted by both parties except that in the Consolidated case Complainant's post-hearing submittals and arguments were orally made. All of such proposals and arguments have been considered in arriving at this decision. To the extent indicated herein, such proposed findings and conclusions have been adopted. Otherwise, they have been rejected for the reasons indicated, or because they are unsupported by or contrary to the evidence, or because they are irrelevant or immaterial, or both.
Thomas G. Husted, Randy Allen Frost, Jo Ann Roberts, and Dr. William G. Mitchell testified for Complainant. The Respondent called no witnesses.
1. The Respondents named in the caption of this decision are operating in the State of Texas. (Keystone, Ex. A; AMFICO, Ex. A; and Consolidated, using the name JABACO as it appears in the advertisement which is a part of Ex. J, and Consolidated, Ex. N-1 and N-2).
2. (a) Respondents distribute by mail the direct mail circulars, copies of which are attached hereto as follows:
Keystone - Appendix A hereto (17/44, Ex. B-1 and B-2)
AMFICO - Appendix B hereto (17/45, Ex. D-1 and D-2)
Consolidated and JABACO LTD. - Appendix C hereto (17/46,
Ex. N-1 and N-2)
(b) No evidence was received or offered into evidence to establish that Consolidated Industries employs newspaper or magazine advertising to invite interested persons to write to it in its own name for information about its program. Consolidated accomplishes its purposes by means of the Jabaco ad (17/46, Ex. J) and Consolidated's circular (App. C). Thus, paragraph 2 of the Complaint in P.S. Docket No. 17/46 is dismissed for want of proof.
3. By means of such circulars Respondents solicit the remittance of money through the mail. (Appendices A, B and C).
4. Such remittances are to be delivered to the addressees set forth in the caption of this decision, except that the evidence does not disclose that any remittances are sent to JABACO LTD., Suite 114, 7115 Blanco Road, San Antonio, TX 78216. This name and address combination is used by Consolidated in its solicitation of requests for information (17/46, the JABACO advertisement portion of Exhibit J) as demonstrated by the fact that the response by Ms. Jo Ann Roberts to the JABACO advertisement was sent to JABACO at the above address. In reply to her letter requesting information Ms. Roberts received a circular bearing the letterhead of Consolidated, instructing that the $15 deposit be sent to Consolidated Industries, New Homeworkers Dept. 88, 211 Eastley, San Antonio, TX 78217. (App. C hereto) Hence, as previously indicated, Consolidated is using the name and address of JABACO to conduct by means of published advertisements the same kind of enterprise it conducts under its own name by mailing its circulars "to persons listed on mail lists provided by others." (Consolidated's Ans., 17/46, par. 3)
The question as to whether Respondents make the representations set forth in paragraph 5 of the Complaints will next be considered and disposed of in the light of the following criteria derived from a number of cases.
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 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 Consumers Council, 425 U.S. 748 (1976).
5. Applying the guidelines just stated, in the circular matter used for solicitation purposes, Respondents make the representations alleged in paragraph 5 of the Complaints. The alleged representations are restated and underscored below, followed in each instance by a quotation from Respondents' solicitation literature on which each charge may be based. The quoted language will be attributed to the appropriate Respondent, but this quotation does not purport to be the only basis on which such charge may be founded.
(a) Amounts of earnings derived from participation in the Respondent's program are primarily determined by what ever time participants devote to the routine, mechanical tasks of processing envelopes and stuffing them with sales circulars.
"***Since we'll make money through your efforts - we are only too glad to pay you 50c / per envelope stuffed. There are no quotas set on the amount of work you can submit. You can send as many as you are able to send and you have our assurance that you will definitely be paid promptly no less than 50c / for each envelope submitted. WE GUARANTEE IT] ***"
(KEYSTONE, App. A, p. 2)
"HOW MUCH CAN YOU EXPECT TO MAKE?
"The number of envelopes that you do each week is up to you, so we cannot guarantee that you will make a specific weekly income. *** The actual amount you are going to be making each week depends on how much you want to make and how much time you can devote to this Program. It's up to you. ***"
(AMFICO, App. B, p. 1)
"The number of sales letters you mail each week is up to you, so we cannot guarantee that you will make a specific income. *** The actual amount you are going to be making depends on how much you want to make. It's up to you. There's no boss looking over your shoulder. Work at your own speed whenever you like. Do as little or as much as you want."
(CONSOLIDATED and JABACO, App. C, p. 1)
(b) Payment of the initial fee will allow full partici pation in the Respondent's program without further substan tial financial investment by the homeworker.
"IN ORDER TO GET YOU STARTED IMMEDIATELY, we must require a one-time deposit of only $15. This covers our expense in showing you what to do and guarantees you can work with us as long as desired. You will not be required or asked to pay for any additional information, manuals, or instructions. ***"
(KEYSTONE, App. A, p. 2)
"There is no charge for participating in our Homeworker Program. However, before we send you your instructional starting supplies, we must require a $15 deposit. *** The deposit shows us that you are sincerely interested in earning money with our program."
(AMFICO, App. B, p. 2)
"There is no charge for participating in our Homeworker Program. However, before we send you your instructions and starting supplies (which will be sent to you in 2 separate shipments), we must require a $15 deposit. We do not want to waste our valuable material on people who are merely curious. *** After you get started, we will add extra money to your weekly paychecks until you receive your entire deposit back. As we said, NO DEDUCTIONS WILL BE TAKEN OUT OF YOUR CHECKS.
(CONSOLIDATED and JABACO, App. C, p. 2)
(c) Respondent offers paid employment for routine, mechanical in-the-home processing of mail.
"NOW YOU CAN EARN EXTRA MONEY IN YOUR SPARE TIME doing simple, pleasant work mainly consisting of stuffing envelopes at home] We'll pay you 50c / for each envelope you secure, stuff with our circulars and submit to us according to instructions. ***"
* * *
"NOW YOU ARE IN LUCK] We are one of the only mail order firms in the homework field that truly offers individuals like yourself the opportunity to stuff envelopes and get paid for each envelope you stuff] Not some kind of commission based on whether or not you receive orders - but simply 50c / for each and every envelope you secure, stuff with our circulars and submit to us according to instructions]"
(KEYSTONE, App. A, p. 1)
"The American Fidelity Company is what is known as a Mail Order Support Company. This means that we supply stuffed envelopes to other companies which they, in turn, send out to their prospective customers. This means that we need a steady supply of envelopes stuffed with their circulars (which we supply). WE NEED HOMEWORKERS NOW] You can make $250 for each 500 envelopes and $500 for each 1,000 envelopes you do. This work is simple and pleasant to do. You can work right in the comfort and security of your own home (while you watch TV, if you like). ***"
(AMFICO, App. B, p. 1)
"We are looking for a number of honest and reliable people to take part in our Homeworker Program. The work is simple and pleasant. You do it right in your own home in your spare time. No previous experience is necessary. ***"
"We have recently obtained the rights to a proven fast-selling offer with an enormous market of 25 million people. *** We want to avoid the cost of renting a larger office, hiring more employees, paying more insurance, etc. We would much rather pay the money to sincere people who are willing to work at home mailing out our sales letters for us.
"That's where you come in] We have developed a plan that pays you a good steady weekly paycheck according to the results of enjoyable work you do at home by following our simple instructions. You will be an Independent Homeworker, not an employee. You will be reimbursed for all expenses. No deductions will be taken out of your paychecks. ***
"THIS IS WHAT YOU DO:
"We supply you with our sales letters. You receive stamped, addressed envelopes by following our easy-to-read instructions. It's as simple as that. We are not talking about one of those complicated mail order programs. You are not required to buy stamps, envelopes, or other supplies. You do not sell anything. Your name is not on the letters that you mail. ***"
(CONSOLIDATED and JABACO, App. C, p. 1)
It having been established that Respondents do, in fact, make the representations charged in the Complaints, the next question is whether the representations found to have been made are material. In cases of this kind statements are regarded as being material if their natural tendency is to cause readers of the statements to do what the maker of the statements intends the readers to do such as, for example, buying a particular product or service. (See In re Columbia Mint, P.S. Docket Nos. 15/98, 15/99, I.D. May 27, 1983, pp. 39-40. No appeal having been taken therefrom, that initial decision became the final Postal Service decision. (39 CFR 952.24(a); 5 USC 557(b)). The criterion has been briefly, but clearly, stated in Chaachou v. American Central Insurance Co., 241 F.2d 889, 893 (5th Cir. 1957) where it was said that to be material a representation must "***cause the other party to do other than that which would have been done had the truth been told."
6. Measured by the foregoing standards, the representations alleged in paragraph 5 of the Complaints in P.S. Docket Nos. 17/44, 17/45 and 17/46 are material representations. The representations in the Respondents' circulars have the tendency to, are of the character calculated to, and do, in fact, cause the readers of them to pay their $15 deposits to engage in the activities which they believe to be those involved in Respondents' programs.
These matters will soon be made more clear in the discussion of the testimony of record.
There remains for resolution the question as to the truth or falsity of Respondents' representations. In the determination of this matter, consideration must be given to the testimony of the witnesses.
The businesses of all Respondents are run in a similar manner. Advertisements of the kind which have been described and copied herein are inserted in various newspapers in the help wanted or similar columns. They indicate that attractive salaries are paid by weekly checks to people who may work at home and who need no experience to perform the work for the Respondents whose ad they encounter. The readers are told to write to the particular Respondent whose advertisement he has read and ask for complete details and an application form. (See the typical examples of the advertisements copied on page 3-4 of this decision.)
When a person responds to one of the advertisements he is sent a circular similar to Appendices A, B, and C to this decision. As has been shown, each of these circulars makes in substance the representations set forth in the respective Complaints. In each instance, also, the person responding to the advertisement is told that a $15 deposit is required before the supplies of sales letters, envelopes, and the like, are sent to the purported enrollee in the particular program about which he has inquired.
Consolidated states in its Answer that it sends communications to persons whose names they obtain on mailing lists provided by others. (17/46, Answer, § 3, p. 2) It admits that the circular identified as Appendix C is typical of those which it mails, although it has mailed others. (Answer, § 4, p. 2) Moreover, it has been shown that Consolidated sends Appendix C to persons who respond to the JABACO advertisement.
When a person sends in his $15.00 deposit and asks to become part of the particular program, he expects to receive instructions, sales letters and starting supplies as outlined in the program of the respective Respondent. He hopes by means of these materials to begin making money right away. (Appendices A, B and C.)
This is the point in the "program" at which the disappointment begins to be set in motion. The following items are sent to those who respond to the various advertisements:
1. In the KEYSTONE operation, the remitter receives a booklet entitled "The Keystone Homeworker Program" and a letter called the second shipment (17/44, Exhibits E and F).
2. In the AMFICO program, the remitter receives a booklet called "Instructional Folio A-1" (17/45, Exhibits J-1 through J-4).
3. In CONSOLIDATED's system, the remitter receives a letter welcoming the new member into the Homeworker Program and two booklets:
"Manual A-1" and "Instructional
Folio B-2." (17/46, Exhibits R, S and T)
In essence, each of the sets of exhibits cited in the preceding paragraph tells the remitter to insert in newspapers and different publications advertisements which are of the same character and thrust as the original advertisement soliciting requests for information, to which the remitters themselves first responded. The reactions of various witnesses to this new trend of events are expressed in some excerpts from their testimony.
Mr. Husted said the following, among other things, in reference to his dealings with KEYSTONE:
"Q. What did you do when you received (17/44, Exhibit E)?
"A. I got upset because it seemed as soon as I had read it and what I had sent away for, what I thought I was sending away for wasn't in actuality what I had - was going to be doing here.
"Q. What did you think you were going to receive for your remittance?
"A. I was under the impression I was going to receive starting supplies, which would have included envelopes and circulars to be stuffed in envelopes." (Tr. 35)
* * *
"I was under the impression that was the actual work I was going to be doing and getting paid for." (Tr. 35-36)
"Q. By whom were you to be employed in these activities?
A. Keystone Industries." (Tr. 40)
Mr. Husted, by certified mail, returned to Keystone the materials he had received and requested the refund of his $15.00. The mailing came back to Mr. Husted marked to indicate that it had been refused (Tr. 50).
Mr. Frost of Butler, Indiana, after he had paid his $15.00 deposit to AMFICO in response to a circular typified by Appendix B expected to receive starting supplies to start stuffing envelopes for this company as an employee of that company (Tr. 77).
In Exhibits J-4, AMFICO told Mr. Frost to send a selfaddressed, stamped No. 10 envelope, his name, phone number and address to AMFICO at the address shown for that Respondent in the caption of this decision. This was a step to be taken prior to beginning the insertion of the ad similar to those in 17/45, Exhibit A. Mr. Frost did not do so because, in his words, he "was under the impression that he was supposed to be doing stuffing work. That's what his fifteen dollar ($15.00) deposit was supposed to be for ***". (Tr. 79)
He tried unsuccessfully to get his money back. Moreover, Mr. Frost was unemployed at the time of his receipt of the post-sale piece, and the expenditures necessary to procure insertions of advertisements in various publications made his participating in the program out of the question (Tr. 80, 94).
Commenting on his reaction to his experience with AMFICO, Mr. Frost said, "I didn't want to place ads. I wanted to stuff envelopes. That's what I paid my deposit for." (Tr. 101)
Ms. Jo Ann Roberts of Jefferson City, Missouri, spoke of her dealings with JABACO and Consolidated. She saw an advertisement offering $241.20 in weekly paychecks over the name of JABACO, Ltd., which appeared in the Jefferson City News and Tribune in May 1983. (Tr. 137; 17/46, Exhibit J) She responded to the invitation to request information and an application by writing to JABACO on May 24, 1983, at the address shown in the caption hereof. (17/46, Exhibit J) She received through the mail from Consolidated a circular, a copy of which is Appendix C to this decision.
Ms. Roberts mailed to Consolidated a Postal Money Order for $15. (Tr. 140; 17/46, Exhibit P) She expected to receive in reply supplies which "would be envelopes, things to stuff in envelopes, the envelopes already addressed or to be addressed," and she expected to stuff and mail these envelopes. In addition, she expected to be paid by Consolidated a sum to be determined based on what she mailed out (Tr. 140-141).
Subsequently, Ms. Roberts received from Consolidated a sheet of instructions and two manuals (17/46, Exhibits R, S and T). In the latter three exhibits Ms. Roberts was told to place newspaper advertisements similar to the JABACO ad to which she had responded. This was not what Ms. Roberts expected to receive because she had been advised that she would not have to pay anything. She said that she knew that if she advertised as directed she would have to make additional payments (Tr. 142).
On page 9 of 17/46 Exhibit T there is a notice that the reader is to send a sheet of paper to Consolidated with a request for a second packet. Ms. Roberts followed these instructions, but she received no reply (Tr. 143-144).
The last witness to testify for Complainant was Dr. William G. Mitchell, Associate Professor Marketing and Director of Continuing Education at the University of Texas at San Antonio. It suffices to say that he is well qualified in the field of marketing and its subset, advertising, as counsel for both parties agreed and commented upon from time to time. His curriculum vitae was received in evidence as Complainant's Exhibit 4.
Dr. Mitchell defined advertising as a device for advising people of the benefits to be derived from purchasing goods or services sold by various firms.
In advertising it is essential to target a particular group. The group of people who may be unemployed, underpaid, who like to have a little more money for their daily needs or pleasures, could well be a target group for advertisements of the type of Respondents'. This group could be characterized as diverse in character, but their needs and desires frequently have a large degree of commonality, according to Dr. Mitchell.
Dr. Mitchell had reviewed the advertisements used by Respondent and he said that it is his opinion that those advertisements make the representations expressed in the charges set forth in paragraphs 5(a), (b), and (c) of the Complaints. He said that the offer of 50 cents per envelope stuffed with the sales letters, such as are mentioned in the first sentence of the last paragraph in Appendix C, p. 1, would be an enormous price to pay. This fact would be known by persons experienced in mail order merchandising but naive people would not be aware of it. Such a price might well raise in the mind of one experienced in the field a question as to the validity of such an offer. It is not beyond the realm of probability, therefore, that Respondents are aware that it is the less sophisticated or less fortunate members of the public who would be looking for ways to earn income in pursuits in which no experience is necessary, which can be carried on in the home, and which hold out the lure of substantial regular weekly checks. Such people would provide a ready and ideal market for advertising of the type found in these cases.
People of less sophistication, learning, and means have not been left to be preyed upon by those who would mislead them to their detriment. As it was said in Gottlieb v. Schaffer, 141 F. Supp. 7, 16 (S.D.N.Y. 1956):
"***The purpose of the statute is to protect the unwary and unsuspecting as well as the knowledgeable and wordly-wise --those who are 'trusting as well as the suspicious'. The public includes 'that vast multitude * * * the ignorant, the unthinking and the credulous.' The fact that informed and sophisticated persons would readily recognize, laugh off, or even be amused by, obviously false and absurd statements in an advertisement does not detract from their power to deceive the ignorant, gullible and less experienced." (Citing F.T.C. v. Standard Education Society, 302 U.S. 112, 116; Florence Mfg. Co. v. J. C. Dowd & Co., 2 Cir. 178 F. 73; Charles of the Ritz Corp. v. F.T.C., 2 Cir. 143 F.2d 676, 679; and Donaldson v. Read Magazine, 333 U.S. 178, 189.)
7. The material representations herein found to have been made by Respondents are false. The representations stated in 5(a), (b), and (c) of the Complaints are so patently false that no expert opinion on the question is necessary. (Vibra-Brush v. Schaffer, 152 F. Supp. 461, 468). The testimony of the witnesses who testified that they sent their deposits to the Respondents in the belief that they were going to engage in envelope stuffing, only to learn that they were really being recruited to engage in advertising schemes, is all the proof of falsity that is necessary. In addition to that testimony, there is documentary evidence that amply supports their beliefs. Excerpts from these documents have been cited and quoted and these excerpts corroborate each major point that the witnesses believed and stated with respect to their relationships with the Respondents.
Based upon the foregoing findings of fact, the following are the conclusions of law:
1. The Complainant has the burden of proof in cases of this character.
2. Complainant has carried its burden of proof by coming forward with the preponderance of the competent, credible evidence in this proceeding.
3. There is no legal impediment, constitutional or otherwise, to going forward with this proceeding at this time.
In connection with this conclusion, it was urged that to go forward with this proceeding now would deprive Respondents of due process required by the Fifth Amendment to the United States Constitution, because of the absence of subpoena power and because, if a mail stop order should be issued, it would be an infringement of the freedom of speech guarantees and it would constitute prior restraint in violation of the First Amendment to the United States Constitution.
Both arguments have been considered by the United States Supreme Court and that Court has rejected such arguments: Lynch v. Blount, 330 F. Supp. 689, affirmed 404 U.S. 1007, 1972.
4. Respondents have admitted the use of the United States mails in the conduct of their businesses.
5. The Respondents do make the representations which are set forth in paragraphs 5(a), (b) and (c) of the Complaints. The average person most likely to see these advertisements, and possibly the group to which Respondents' advertisements are targeted, would construe Respondents' representations to be to the same effect as stated in those portions of the Complaints. In this connection, in the case of Virginia State Board of Pharmacy v. Virginia Citizens Consumers Council, 425 U.S. 748 (1976) in footnote 24 on page 772, Mr. Justice Blackmun, speaking for the Court, said:
"It is not difficult to choose statements, designs, and devices which will not deceive." (Citing U.S. v. 95 Barrels of Vinegar, 265 U.S. 338, 443 (1924))
That is a statement that is applicable here and it is a practice that should have been followed by the Respondents in this case. Either they were not aware of it, or they did not consider it for one reason or another, or they were aware of it and chose not to follow it.
6. The representations made by the Respondents are material. This is so because the evidence in this case establishes that the first three witnesses who testified for the Complainant actually did construe the representations as they are expressed in the Complaints and they acted upon them by sending in the required deposit. Furthermore, they responded in the way in which the Respondents intended that the readers of their advertisements and circulars would respond.
7. The representations made by the Respondents are false in that the Respondents do not furnish to people who respond to the advertisements and circulars the kind of materials which those people expect to receive. In the cases of the three individuals who testified that they did respond to the advertisement, none of them was interested in, or did pursue, any further relationship with the Respondents except to try, unsuccessfully, to obtain refunds of the deposits.
8. Even if a refund of the deposit had been promised, or guaranteed, such fact would not overcome the effect of false representation or excuse a violation of 39 U. S. Code § 3005. Farley v. Heininger, 105 F.2d 79, 84 (D.C. Cir. 1930); Borg-Johnson Electronics v. Christenberry, 169 F. Supp. 746 (S.D.N.Y. 1957).
9. It is concluded, finally, that the Respondents are engaged, as charged, in conducting schemes to obtain money or property through the mails by means of false representations within the meaning of § 3005 of Title 39, United States Code.
Accordingly, a mail stop order, as provided for in that section of the Code and substantially in the form attached, should be issued against each of the Respondents whose name and address appears in the caption of this decision.
*/ This decision was rendered orally at the close of the hearing. It has been edited and transcribed for formal issuance.
1/ The numbers 17/44, 17/45 and 17/46 will be used at times to indicate, respectively, the Keystone, AMFICO and Consolidated cases.