In the Matter of the Complaint Against MARINA LEVINE, ELLEN LEVINE at 218 Tower Drive, #407, Beverly Hills, CA 90211, JOSEPH GUDVI, 860 South Wooster Street, #306, Los Angeles, CA 90035-1702, ALLSTATE MAILORDER COMPANY at P. O. Box 291665, Los Angeles, CA 90029-9665, P. O. Box 291760, Los Angeles, CA 90029-9760, P. O. Box 291821, Los Angeles, CA 90029-9821, UNITED MAILORDER at P. O. Box 67586, Los Angeles, CA 90067-0586, NATIONAL MAILORDER at P. O. Box 85279, Los Angeles, CA 90072 and P. O. Box 93445, Los Angeles, CA 90093 P.S. Docket No. 26/53 July 8, 1987 Quentin E. Grant Chief Administrative Law Judge APPEARANCES FOR COMPLAINANT: H. Richard Hefner, Esq. Robert L. Collins, Esq. Consumer Protection Division Law Department United States Postal Service Washington, DC 20260-1112 APPEARANCE FOR RESPONDENTS: Sandra Stillwater, Esq. 10850 Wilshire Boulevard Suite 800 Los Angeles, CA 90024-4320
This proceeding was initiated on December 16, l986, when the Postal Service filed a Complaint alleging that Respondents are engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations concerning a work-at-home program in violation of 39 U.S.C. 3005. By order dated March 19, l987, Complainant's Motion for Leave to File Amended Complaint was granted. Respondents' Answer to the Complaint denied violation of the statute.
The Amended Complaint alleged that Respondents, by means of classified advertisements in publications of general circulation, falsely represent that potential participants in the program:
"6. a. Will earn $1,000's; and
b. The money earned is for work consist- ing primarily of stuffing envelopes."
The Amended Complaint further alleged that persons responding to such classified advertisements receive direct mail circulars which, considered singly, or in conjunction with the classified advertisements, falsely represent that potential participants:
"12a. Will be paid for work consisting primarily of stuffing circulars into pre-addressed stamped envelopes and mailing them;
b. Will typically make $500-$1,000 a week or more in net earnings;
c. Will receive an income limited only by the amount of time spent stuffing and mailing circulars;
d. Will be paid by Respondents for their at-home-work;
e. Will be paid for each circular stuffed and mailed; and
f. Will receive from Respondents any amount of envelopes and circulars that they want."
On April 7, l987, an evidentiary hearing was held in Los Angeles, CA. Complainant's witness was an expert in the areas of direct response and mail order marketing, Mr. Roger Lourie. Respondent Marina Levine was the sole witness for Respondents.
At the hearing, Complainant and Respondents were represented by counsel. The parties were afforded a full opportunity to be heard, adduce relevant evidence and examine and cross-examine witnesses. The parties have filed proposed findings of fact and conclusions of law all of which have been considered. To the extent indicated below they have been adopted; otherwise they have been rejected as irrelevant or contrary to the evidence.
1. Respondents Marina Levine, Ellen Levine and Joseph Gudvi, are individuals whose mail order activities are subject to 39 U.S.C. 3005 (Stipulations at Tr. 9, 10).
a. Respondent Marina Levine owns and operates Respondents Allstate Mailorder Company and United Mailorder;
b. Allstate Mailorder conducts business at Post Office Boxes 291665, 291760 and 291821, Los Angeles, CA 90029, and Post Office Box 67686, Los Angeles, CA 90067;
c. United Mailorder conducts business at Post Office Box 67586, Los Angeles, CA 90067;
d. Respondent Joseph Gudvi is the applicant and box- holder of the post office boxes identified in (b) and (c) above for Allstate Mailorder and United Mailorder.
e. Respondent Ellen Levine owns and operates National Mailorder at Post Office Box 85279, Los Angeles, CA 90072, and Post Office Boxes 93445 and 931808, Los Angeles, CA 90093; and
f. Respondent Ellen Levine is the applicant and boxholder of the post office boxes identified in (e) above for National Mailorder.
2. Respondent Joseph Gudvi plays no active part in the operation of the promotion and does not share in the profits (Tr. 74, 75).
3. Respondents use a two-step solicitation approach to obtain money or property through the mails for their work-at-home program. First, Respondents place classified advertisements under the heading of "Business Opportunities" in publications of general circulation. These advertisements invite readers to send a self-addressed stamped envelope to Respondents for information about earning thousands of dollars stuffing envelopes, or mailing, to the following addresses:
a. Allstate, Box 291665, Los Angeles, CA 90029 (CX-1); b. Allstate Box 291760, Los Angeles, CA 90029 (CX-2); c. Allstate, Box 67686, Los Angeles, CA 90067 (CX-9); d. United, Box 67586, Los Angeles, CA 90067 (CX-3); e. National, Box 93445, Los Angeles, CA 90093 (CX 5); and f. National, Box 931808, Los Angeles, CA 90093 (CX- 10). Second, Respondents send to persons responding to their classified advertisements circulars inviting the recipient to remit money through the mails for a "Complete Home Mailers Program." The circulars direct remittances to Allstate Mailorder Company, P. O. Box 291821, Los Angeles, CA 90029 (CX-6; RX-1).
4. As alleged in paragraph 6 of the Amended Complaint, Respondents' classified advertisements represent that participants in Respondents' program will earn thousands of dollars for work consisting primarily of stuffing envelopes (CX-1-3, 5, 9, 10; Lourie, Tr. 17).
5. The circular, or flier, received by persons responding to the classified ads makes the representation that persons parti- cipating in Respondents' program will be paid for work consisting primarily of stuffing circulars into preaddressed stamped envelopes and mailing them (Amended Cplt. par. 12a). This representation is found in the heading of each flier:
WOULD YOU STUFF
ENVELOPES FOR
$1,000's
Weekly
$2 For each Envelope You Stuff
Simple, Pleasant Work You Can Do At Home]]]
(CX-6)
1,000's OF DOLLARS WORKING IN THE COMFORT OF YOUR HOME?
WOULD YOU LIKE TO EARN $2.00 FOR EACH ENVELOPE SECURED AND
STUFFED ACCORDING TO OUR INSTRUCTIONS?
(RX-1)
6. The circulars also make the representation that participants will typically make $500-$1000 a week or more in net earnings (Amended Cplt. par. 12b). This representation is found in the heading of each circular quoted in FOF 5, above. It is also found under the application form on page 2 of CX-6 where participants are asked to indicate the following:
"The amount of money I would like to earn each week is:
/ /$500 / /$1,000 or more"
7. As alleged in paragraph 12(c) of the Amended Complaint, the circulars represent that participants will receive an income limited only by the amount of time spent stuffing and mailing circulars. The representation is found in the following portions of the circulars:
"You receive cash daily for the envelopes you stuff. There is no limit. You stuff as many as you wish.
* * *
The money you earn is up to you. We do not require that you mail a certain number of pieces each week. You can take on whatever amount of business that fits your schedule***" (CX-6, p. 1)
We do not require that you stuff and mail a certain number of envelopes each week. Choose your own hours, set your own pace. No need to leave your present job. The possibilities are unlimited. Work as much as you want to achieve the extra monthly income you desire. (RX-1, p. 1)
8. As alleged in paragraph 12d of the Amended Complaint, Respondents represent that participants will be paid by Respondents for their at-home work. This representation is found in the following portions of the circulars:
"You serve a company that pays good commissions to have their circulars mailed" (CX-6, p. 1)
And we promise that you earn $2.00 for each envelope you process for us. CHECKS ARE MAILED OUT THE SAME DAY WE RECEIVE YOUR ENVELOPES. WE GUARANTEE IT]]] (RX-1, p. 1)
9. As alleged in paragraph 12e. of the Amended Complaint, the circulars represent that participants will be paid for each circular stuffed and mailed. This representation is found in the heading of CX-6 and in the portion of RX-1 quoted in FOF 6, supra .
10. As alleged in paragraph 12f. of the Amended Complaint, Respondents represent that participants will receive from Respondents any amount of envelopes and circulars they want. This representation is found in CX-1, page 1 where participants are told "There is no limit. You stuff as many as you wish *** You can take on whatever amount of business that fits your schedule ***" together with the statement near the top of page 2 that "you will be supplied with the materials to be stuffed. Envelopes will be already stamped and addressed."
11. Persons remitting the $15.00 in response to CX-6, or $9.00 in response to RX-1, receive a booklet entitled "Complete Home Mailers Program" (CX-7) The booklet describes two programs in which recipients may participate. In one program, called the "$2.00 per envelope" program, participants work for Respondents in promoting and selling a book entitled "How to Start and Operate Your Own Profit- able Business at Home" (CX-11). Participants in this program are required to place in local newspapers and magazines a classified ad composed by Respondents which reads as follows:
Earn Thousands Working Home
Rush $1.00 and Self-Addressed
Stamped Envelope
On receiving responses to such ads, participants keep the enclosed $1.00, stuff a circular furnished by Respondents into the self-addressed stamped envelope and forward such stuffed envelopes to Respondents once each week. Respondents then pay participants $1.00 for each stuffed envelope received.
Participants choosing the second program are told to select a name for their business, to rent a post office box, to order rubber stamps with the name and address of the business, to place classified ads in national publications or newspapers similar to Respondents' ad to which they responded, to buy mailing lists, and to order printed circulars similar to the sample furnished (CX-7, p. 8 & 9) to be stuffed in self-addressed, stamped envelopes received in response to classified ads. When orders are received, partici- pants keep $5.00 from each remittance and send the balance to Respondents who fill the order.
12. Complainant's expert witness, Roger Lourie, is highly qualified in direct response and mail order marketing. He has a bachelor's degree in engineering from Rennsalaer Polytechnic Institute and master's degrees in business and international affairs from Columbia University. He has held marketing jobs with major companies including Proctor and Gamble, CBS, and Time, Inc. For the past six years he has operated his own firm, Devin Adair Publishing, which markets and sells books. He has been active in the Direct Marketing Association and has been the chairman of its committee on ethical business practices which overviews activities of the direct response and work-at-home industry. He has authored three books on marketing and direct response. He has testified as an expert in approximately fifteen proceedings involving promotions similar to that involved in this case (Tr. 13-15).
13. In Mr. Lourie's opinion Respondents' classified advertisements and direct mail circulars make the representations alleged in paragraphs 6 and 12 of the Amended Complaint (Tr. 44-46).
14. According to Mr. Lourie, successful participation in Respondents' program involves a great deal more than stuffing and mailing envelopes. It requires learning basic marketing tech- niques, writing ads that work, paying for their insertion in publications, dealing with mailing list brokers, buying mailing lists, and maintaining good records. It requires an investment of $750.00 or more (Tr. 33-35) and involves operating a business that calls for an amount of sophisticated direct mail knowledge and know- ledge of marketing and advertising and budgetary and financial wherewithal beyond that possessed by the average individual who would respond to Respondents' advertising (Tr. 26, 27, 31-37, 43, 44).
15. The average person participating in Respondents' program will not make hundreds or thousands of dollars per week (Lourie, Tr. 42; Levine, Tr. 128, 129).
16. Income received by participants is not limited only by the amount of time spent stuffing and mailing circulars (Tr. 29). Participants are not paid by Respondents for their work except to the extent of $1.00 per envelope stuffed in the "$2.00 per envelope" program. In the program involving placing of ads, all income is derived from remittances from persons responding to the ads.
17. Except in the "$2.00 per envelope" program, participants are not paid for each envelope stuffed and mailed. In the other program, participants receive payment only when there is response to a circular.
18. Participants do not receive from Respondents any amount of envelopes and circulars they want. Envelopes are received from persons responding to advertisements. Circulars are furnished by Respondents only in the "$2.00 per envelope" program. In the other program, Respondents must purchase circulars.
19. Based on the foregoing FOF 11 through 17, I conclude that the representations made by Respondents as found in FOF 3 through 10, supra , are false in fact.
Respondent Marina Levine is a person of superior intelligence who impressed me as sincerely believing that this promotion does not involve any false representations. Unfortunately for her, her belief and intentions are not controlling. This promotion is essentially similar to a multitude of other envelope stuffing, work-at-home promotions which have been found to violate 39 U.S.C. 3005.
The testimony of Complainant's highly qualified expert, Roger Lourie, was persuasive, particularly on the falsity issues. His testimony as to efforts required of participants beyond the mere stuffing and mailing of envelopes and the unlikelihood that the average participant would earn hundreds or thousands of dollars per week was corroborated in many respects by the testimony of Marina Levine. See for example Tr. 90 re sources of payment in "$2.00 per envelope" program; Tr. 93, 99-102, 129, 130 re efforts required beyond mere stuffing and mailing of envelopes; Tr. 128 re unlikeli- hood of participants earning $500 to $1000 a week.
Complainant offered no evidence concerning the nature of the article clipping program advertised in CX-4. Therefore, P. O. Box 85279 is not included in the proposed mail stop order.
1. 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 Council , 425 U. S. 748 (1976).
The ultimate impression on the reader results not only from what is stated but also from what is reasonably implied from an adver- tisement. Vibra-Brush Corp. v. Shaffer , supra ; Aronberg v. Federal Trade Commission , 132 F.2d 165 (7th Cir. l942).
The foregoing principles were applied in finding that Respon- dents' advertising makes the representations alleged in paragraphs 6 and 12 of the Amended Complaint.
2. The ordinary person who reads Respondents' advertisements would interpret them substantially as characterized in paragraphs 6 and 12 of the Complaint.
3. Based upon findings of fact numbered 11 through 17, supra , I conclude that such representations are false in fact.
4. The representations made by Respondents are material because they have a tendency to persuade readers to order and pay for Respondents' product.
5. A promise to refund if a customer is dissatisfied does not dispel the effect of false advertisements. Farley v. Heininger , 105 F.2d 79 (D.C. Cir. l939); Borg-Johnson Electronics, Inc. v. Christenberry , supra .
6. Although Respondent Joseph Gudvi was the applicant for the post office boxes used by Respondent Marina Levine, he is not a principal in the promotion, plays no significant role therein, and receives no compensation therefrom. It does not appear that the issuance of a cease and desist order against Gudvi is necessary to prevent recurrence of the scheme. Accordingly, the issuance of such an order against Gudvi is not recommended.
7. The caption of the proceeding is changed to reflect the proper spelling of the last name of Respondent Gudvi.
8. Complainant has proved its case by a preponderance of the reliable and probative evidence of record.
9. Respondents are engaged in the conduct of a scheme for obtaining money or property through the mails by means of materially false representations in violation of 39 U. S. C. 3005. Accord- ingly, a mail stop order and a cease and desist order in the forms attached should be issued against the Respondents.