Appeal of P.S. Docket No. 26/101 -- ERWIN KOLTAY d/b/a TELEMATIC & EPSON PRECISION WORKS

In the Matter of the Complaint Against ERWIN KOLTAY d/b/a TELEMATIC & EPSON PRECISION WORKS, 4880 49th Street, No. at St. Petersburg, FL 33709-3860 P.S. Docket No. 26/101 February 26, 1988 James A. Cohen Judicial Officer APPEARANCES FOR COMPLAINANT: H. Richard Hefner, Esq. Alan B. Ostroff, Esq. Consumer Protection Division Law Department United States Postal Service Washington, DC 20260-1144 APPEARANCE FOR RESPONDENT: Erwin Koltay 4910 49th Street, No. St. Petersburg, FL 33709-3860

POSTAL SERVICE DECISION ON BREACH OF AGREEMENT CONTAINING

CONSENT ORDER TO CEASE AND DESIST

Complainant, United States Postal Service, has filed a "Petition For Orders Based On Breach Of Consent Agreement" in which it alleges that Respondent, Erwin Koltay, has breached the terms of an Agreement Containing Consent Order to Cease and Desist (hereafter Agreement) executed by him on November 3, l986. In the Petition, Complainant contends that Respondent, using new names and addresses, has resumed the promotional activities which he agreed to permanently discontinue and abandon. The names and addresses to which Respondent is currently seeking remittances and against which Complainant seeks the issuance of a False Representation Order as authorized by the Agreement are:

                    Epson Precision Works 
                    4910 49th Avenue, North 
                    St. Petersburg, FL  33709-3860 

                    Telematic 
                    4910 49th Avenue, North 
                    St. Petersburg, FL  33709-3860 

                    Paul Mitchell 
                    4910 49th Avenue, North 
                    St. Petersburg, FL  33709-3860 

                    Anna Gordon 
                    4910 49th Avenue, North 
                    St. Petersburg, FL  33709-3860 

                    Paul Mitchell 
                    369 East 900 South 
                    Salt Lake City, UT  84111-4331 

                    Telematic 
                    323 South Franklin Building 
                    Suite E-138 
                    Chicago, IL  60606-7094 

                    Anna Gordon 
                    323 South Franklin Building 
                    Suite E-138 
                    Chicago, IL  60606-7094

On December 17, 1987, an Interim Detention Order as authorized by Paragraph 7 of the Agreement was issued directing the detention of mail to the above names and addresses. The Interim Detention Order granted Respondent a period of ten (l0) days in which to file a reply to the Petition. By letter dated December 21, 1987, Respondent filed a timely reply in which he denies in part that he has breached the Agreement, takes issue with the motives and expertise of Complainant's Declarant, and requests that all mail directed to the Salt Lake City address be released.

Findings of Fact

1. Under Paragraph 3 of the Agreement, Respondent agreed to permanently discontinue and abandon the use of the promotional activities and representations for obtaining money through the mails as alleged in the Complaint.

2. In Paragraph 4 of the Agreement, Respondent agreed to disclose clearly and conspicuously on any future promotional materials:

(a) That the telephone solicitation system sold by

Respondent has outgoing message capabilities but cannot record incoming messages without the purchase of additional equipment at additional cost.

(b) That Respondent will honor requests for refunds. Additionally, in Paragraph 5 of the Agreement, Respondent agreed to provide full refunds of the purchase price to eight individuals listed in Exhibit 1 to the Agreement.

3. The representations alleged in the Complaint which Respondent agreed to discontinue, either directly or indirectly, in substance and effect, are:

(a) Respondent's Telecaller System is a single machine that can both place outgoing calls and receive and record incoming messages.

(b) The Telecaller System will automatically dial numbers and provide a sales message in a fast, error-free and efficient manner.

(d) Respondent will provide refunds to dissatisfied customers.

4. Solicitations distributed by Respondent subsequent to the execution of the Agreement plainly state that the offered merchandise "asks questions and records the replies"; "will record the phone numbers of prospects"; "will conduct a normal two-way conversation"; "asks questions, records the answers"; "and operates EXACTLY as any live phone solicitor would." (Kinnebrew Dec., Exhs. A & H). The solicitations likewise state that Respondent's machines automatically dial numbers and work in a fast, error-free and efficient manner (Kinnebrew Dec., Exh. A). The solicitations also state that the machine "dials the phone numbers" and "is fast, efficient, reliable"; "does the work of 4-5 live solicitors"; "completes about l000 calls per day"; and "that the Telecaller can dial a list of phone numbers such as pages from the phone book"(Kinnebrew Dec., Exh. A). One solicitation describes the Telecaller system as being capable of completing 1500 calls per day (Kinnebrew Dec., Exh. H).

5. Promotional materials distributed subsequent to the execution of the Agreement do not clearly and conspicuously disclose that the telephone solicitation system being advertised has outgoing capabilities but cannot record incoming messages without the purchase of additional equipment at additional cost (See Kinnebrew Dec., Exhs. A & D).

6. Certain of the solicitations distributed by Respondent subsequent to the execution of the Agreement do not clearly and conspicuously disclose that Respondent will honor requests for refunds (See Kinnebrew Dec., Exhs. A, D & H).

7. Contrary to the requirements of Paragraph 5 of the Agreement, Respondent has not made a full refund to one of the eight individuals designated in Exhibit l of the Agreement. (See Kinnebrew Dec., Exh. C).

8. Respondent conducts business under each name and respective address against which the Orders authorized by the Agreement have been requested by Complainant. Respondent's employees orally direct customers to send remittances to the 4910 49th Avenue North, St. Petersburg, Florida address (Kinnebrew Dec., Exh. B). The 4910 49th Avenue North address is an address used by Respondent Koltay (Kinnebrew Dec., Exh. I). Remittances in response to solicitations containing the name Paul Mitchell at 369 East 900 South, Salt Lake City, Utah are forwarded by a mail receiving agency to Respondent's 4910 49th Avenue North address in St. Petersburg, Florida (Kinnebrew Dec., Exhs. D & E). Remittances addressed to Telematic or Anna Gordon at the 323 South Franklin Building address in Chicago are forwarded to Respondent Koltay using the names Telematic or Anna Gordon at Respondent's 4880 or 4910 49th Avenue North addresses in St. Petersburg, Florida (Kinnebrew Dec., Exhs. F-J).

Discussion

Complainant alleges that contrary to the terms of the Agreement, Respondent continues to represent (a) that his system is a single machine that can place outgoing calls and also receive and record incoming messages; (b) that his system automatically dials numbers and provides a sales message in a fast, error-free and efficient manner; and (c) that his machines are non-defective. Respondent does not take issue with this allegation. Moreover, a reading of Respondent's solicitations as they would be read and understood by an ordinary reader supports Complainant's position that these representations are continuing to be made. See Donaldson v. Read Magazine, Inc. , 333 U.S. 178 (1948); Mark Eden v. Lee, 433 F.2d 1077 (9th Cir. 1970); Nancy Pryor, Inc. v. United States Postal Service , C.A. No. 80-1933 (D.D.C. 1981); American Consumer Inc. v. United States Postal Service , 427 F. Supp. 589 (E.D. Pa. 1977); The American Mint , P.S. Docket No. 23/110 (P.S.D. June 16, 1987).

The record also supports a determination that Respondent has failed to make the disclosures and refunds agreed to in Paragraphs 4 and 5 of the Petition. It is therefore concluded that Respondent has breached the terms of the Agreement with respect to these two paragraphs in the manner alleged in the Petition.

Finally, in his reply, Respondent has requested that mail addressed to the Salt Lake City address be released since it is used to receive responses to solicitations for a book he authored, and not solicitations for his Telecaller machine. Contrary to Respondent's contention, however, his solicitation seeking remittances to the Salt Lake City address for the Telecaller machines does contain the representations which he agreed to discontinue. Therefore, it is proper to include the Salt Lake City address in the Orders issued under the terms of the Agreement.

Conclusion

Respondent has breached the terms of the Agreement in the manner alleged in the Petition. Accordingly, as sought in the Petition and authorized in the Agreement, a False Representation Order pursuant to 39 U.S.C. 3005 is being issued with this Decision.