United States Postal Service(TM) 


 In the Matter of the Complaint Against: 

 NATIONAL SCHOLASTIC RESOURCES ADMINISTRATION, INC.,
 6046 Cornerstone Court West, Room 202,
 San Diego, CA 92121-4733;

 ACADEMIC COUNCIL ON FINANCIAL ASSISTANCE
 at
 1133 15th Street N.W., Suite 1220,
 Washington, DC  20005-2792
 and at
 P. O. Box 18198, Washington, DC  20077-5715
 and at 7576 Trade Street,
 San Diego, CA 92121-2412;

 ACADEMIC COUNCIL ON FINANCIAL ASSISTANCE,
 Western Region Division,
 at,
 P.O. Box 80967,
 San Diego, CA 92138-9433
 and at
 P.O. Box 90609,
 San Diego, CA  92109-0142;

 MICHAEL POUSTI,
 6046 Cornerstone Court West #202,
 San Diego, CA  92121-4733;

 RAMIN NIAKIANI,
 P. O. Box 779 La Jolla, CA  92038-0779


 P.S. Docket No.  

 6/29/90

 Masolph D. Mason, Administrative Law Judge

 APPEARANCES FOR COMPLAINANT: Elizabeth P. Martin, Esq., Timothy J.  
 Mahoney, Esq., Consumer Protection Division, Law Department, United States Postal Service, Washington, DC 20260-1144  

 APPEARANCES FOR RESPONDENTS: William J. Olson, Esq., John S.  
 Miles, Esq., Gilman, Olson & Pangia, 1815 H Street, N. W. #600,  
 Washington, DC 20006

INTIAL DECISION

This proceeding was initiated on January 19, 1990, when the Postal Service filed a Complaint alleging that Respondents National Scholastic Resources Administration, Inc., Academic Council on Financial Assistance ("ACFA"), Michael Pousti, and Ramin Niakiani are engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations in violation of 39 U.S.C. § 3005.

By Order dated March 2, 1990, Complainant's first two motions to amend the complaint, which included new addresses for ACFA, were granted. During the hearing, Complainant filed a Motion to Amend the Complaint to Conform to the Evidence to allege six additional false representations. On May 4, 1990, the Administrative Law Judge granted the Motion with respect to four of those representations, which have been designated (g) through (j), below. Specifically, the Amended Complaint alleges in paragraph 12 that Respondents falsely represent, directly or indirectly, in substance and effect, whether by affirmative statement, implication or omission, that:

In timely filed Answers, as amended at the hearing (Tr. 85), Respondents deny that they make the false representations alleged in the Complaint or that they have otherwise violated the statute.

A hearing was held by the Administrative Law Judge on March 28- 29, and April 17, 1990, in Washington, DC. All parties were represented by counsel and afforded full opportunity to be heard, adduce relevant evidence, and examine and cross-examine witnesses. Complainant presented the testimony of Postal Inspectors Thomas Krautheim and Richard Schlueter, and consumer witnesses William Blandford, James Marks, and Brenda Buck. Respondents presented the testimony of Michael Pousti, expert witness Michael Rutter, and consumer witnesses Angela Sheffey, William Swartz, and Kristin O'Connell. Both parties presented documentary evidence.

After the hearing, Complainant filed a Motion to Correct the Record. For good cause shown, that motion is granted and the record will reflect that Respondents have received 70,000 applications from paying customers.

On May 17, 1990, the parties filed proposed findings of fact and conclusions of law which have been duly considered. To the extent indicated below, proposed findings and conclusions have been adopted; otherwise, they have been rejected as irrelevant or contrary to the evidence. The following findings of fact and conclusions of law are based on the entire record herein, including observation by the Administrative Law Judge of the witnesses and their demeanor, the exhibits, stipulations, and other relevant evidence adduced at the hearing:

FINDINGS OF FACT

Respondents

1. Respondent National Scholastic Resources Administration, Inc., ("NSRA") is a corporation doing business at three locations: 6046 Cornerstone Court West, #202, San Diego, CA 92121 (Ans. para. 1; CX-5, -6; Tr. 321); 7576 Trade Street (research facility where orders are processed); and, 6122 Nancy Race Drive (marketing) (Tr. 321-322). NSRA has been in business since about October 1989 (Tr. 366).

2. Respondent Academic Council on Financial Assistance ("ACFA") is a fictitious name used by NSRA (CX-7; Tr. 62, 322). ACFA is not a separate entity (Tr. 369).

3. NSRA, doing business as ACFA, also leases an office and receives mail at 1133 15th Street, N. W., Washington, DC 20005-2792 (Ans. para. 3) and at a P. O. Box in Washington, DC (Tr. 375). However, all business has been conducted in San Diego, CA (Tr. 370). Respondents never staffed the Washington office (Tr. 331). Mail sent to the Washington P. O. box would get picked up by Respondent Pousti or someone else flying in from San Diego, and mail sent to the office would get shipped to San Diego by employees of the building (Tr. 376-377).

4. Respondent Michael C. Pousti is president of NSRA and is responsible for its activities (Tr. 322, 398). He also uses the name Michael Reller (Tr. 365). Respondent Ramin Niakiani is treasurer and secretary (Tr. 365; Ans., para. 6). Pousti and Niakiani are the sole stockholders and directors of NSRA (Tr. 367). They receive a salary and have authority to write checks (Tr. 224). They make management decisions and both approved the use of the solicitations herein (Tr. 405-407).

Respondents' Solicitations and Product

5. Respondents have a computerized service which matches the characteristics of individual student customers with the characteristics required by a large number of scholarships, and furnishes a list of the names and addresses of the appropriate scholarships to the customers. The parties have stipulated, and it is found, that the service is valuable (Tr. 57).

6. Respondents initially contact college and high school students (CX-1, p. 3) by sending an initial solicitation letter revealing the availability of large amounts of scholarship funds and inviting the student and/or his parents to call a toll-free "800" number for more information (CX-1, p. 1). Many of the students have never had any experience with college student financial aid.

7. When a customer calls the 800 number, one of Respondents' telephone counselors answers the call, reads from a phone script (CX-12), and answers any questions the customer may have (Tr. 327, 332). Each phone counselor has a Question and Answer handout (RX-6) by his phone from which he is instructed to answer such questions (Tr. 332). However, answers provided on the Q & A handout are not communicated to a customer unless he happens to ask the question corresponding to that answer (Tr. 404). The counselor also has an employee handbook which contains information on the company (Tr. 390). Phone counselors get a commission for each sale (Tr. 414).

Thereafter, if requested to do so, the company sent the customer an application package consisting of a second letter, an application, and a return envelope (CX-1, pp. 2-4)(Tr. 327).

8. (a) Version 1 of the solicitation materials contained only the above items listed in FOF 6-7 (Tr. 151, 167; see also Tr. 171). Contrary to Mr. Pousti's assertion, Version 1 did not also contain a guarantee letter with the application package, but the initial letter contained a guarantee (Tr. 328, 151, 167).

(b) Version 2 - In late 1989 Respondents added a guarantee letter addressed "To: Participating Student" to the application package (CX-1, p. 5).

(c) Version 3 - In January 1990, the guarantee letter was replaced by a color brochure (CX-1, pp. 6-7; RX-5).

9. The application is two pages and requires the student to list various characteristics about himself, including grade point average, race, religion, major, minor, educational goals, career goals, and hobbies. Typical financial aid forms require more extensive demographic, financial, and family information (Tr. 285, 318). However, the scholarships in question were not necessarily based upon need.

10. The student customer would then return the completed application to Respondents with a check for $60 (previously $50).

11. Respondents' computer contains a large number of sources of scholarship funds (Tr. 262, 266). Upon receipt of the completed application, Respondents take the data supplied on customers' applications and code it into the computer. The data are then matched against the characteristics required by the scholarships. Due to the large number of sources, it takes about a half an hour for the computer to complete the matching process for each student (Tr. 264). Respondents then send the resulting list of scholarships to the customer together with advice on how to apply.

12. Initially Respondents only received mail at the following Washington, DC addresses:

13. Respondents have mailed out between 2 and 2.5 million solicitations since November (Tr. 414). At least 10-15% of the recipients called the toll-free number, and about 70,000 customers have sent the application and $60 (or $50) remittance to Respondents (Tr. 382, 415).

Respondents' Expert Witness

14. Thomas M. Rutter is an expert in college financial aid who has been the Director of Student Financial Services, University of California at San Diego, CA since 1974. He is responsible for all financial aid and scholarships. He coordinates all aid to students from private and public sources, and in some cases actually administers the scholarship program for private sources. He is familiar with the Respondents' operation and how it works.

The False Representations

15. Respondents make Representations (a), (b), (d), (f), (g), (h), and (i) as alleged in Paragraph 12 of the Amended Complaint. The language contained in Respondents' solicitations which makes each representation is set forth below under the quoted representation. All of these representations are materially false. Respondents make Representation (b), but it is not material. Complainant has failed to prove that Respondents make Representation (c). Representation (e) is made except to the extent NSRA is portrayed as providing services described in Respondent's solicitations. Representation (j) is not made, and assuming it is, it is not material.

Representation (a)

(a) Academic Council on Financial Assistance is a government agency or is affiliated with the government;

16. Respondents represent that the Academic Council on Financial Assistance is affiliated with the government. Several factors combine to make this overall impression on many ordinary readers. The name and address gives the impression of being a formal deliberative or advisory body located in Washington, DC. The official seal of the "Council" employs an eagle. In addition, the following statement appears in capital letters at the bottom of each solicitation letter: "ACFA is made possible through funds from the National Scholastic Resources Administration in Washington, DC" (CX-1, p.1; Tr. 342).

17. Complainant's witnesses corroborate that Representation (a) is made in Versions 1 and 3 (Tr. 155-156, 173; CX-4), and they are representative of a significant group of ordinary consumers. The fact that a separate group of consumers, such as Respondents' consumer witnesses, also exists who did not think ACFA was government affiliated does not alter the conclusion that a significant number of ordinary consumers would be deceived. Nor is this conclusion altered by the fact that many students might, in the absence of the solicitations, assume no government affiliation because the government would not ordinarily be involved in non-need based financial assistance (Tr. 283). The contrary suggestion of government affiliation seen in the solicitations would outweigh the latter impression for many student consumers.

18. The representation is false (Tr. 395; Respondents' Proposed Findings of Fact No. 22). The representation is material since it tends to induce people to deal with Respondents. In this regard, many people would trust a government affiliate more than an unknown company and would feel more comfortable about dealing with the former (Tr. 156, 174).

19. Version three contains the following disclaimer in the brochure in the last paragraph of page four: "Since ACFA is not state or government funded, ACFA does charge a $60 processing fee in order to cover operating costs." Many ordinary readers would not notice this disclaimer, which is buried at the end of a section entitled "How ACFA Does It". Also, although the use of the color brochure itself and the money-back guarantee is not typical of a government agency, here it is merely found that ACFA is "affiliated" with a government agency. Finally, the color brochure, guarantee and the above disclaimer do not dispel the otherwise strong impression of government affiliation.

20. Respondents also contend that consumers wondering whether a government affiliation existed could have inquired by calling the toll-free number. This is true. However, many consumers would have had the impression that Respondents were government affiliated and would not have had any reason to ask a question about this.

21. Finally, Respondents point to the disclaimer in the Question & Answer handout which would be read to a customer who asked "Is your company government funded?". The telephone counselor would answer: "No. We are an independent organization." (RX-6). Suffice it to say, a significant number of people would never hear this disclaimer because they would not have asked the question. Moreover, this statement does not dispel the impression of government affiliation given by the name, address, eagle logo, and tag line about being funded by the National Scholastic Resources Administration, Washington, DC.

Representation (b)

(b) Academic Council on Financial Assistance directly provides i.e. acts as a conduit for Tr. 233 scholarships or grants to students;

22. This representation was made in Version 1, which did not contain either the guarantee letter to "Participating Student" or a brochure. The application states that a refund would be given "if the Council does not secure funding for me" (CX-1, p.4). Although it has always been represented that the scholarships would come from private corporations and foundations, many ordinary "applicants" who responded to Version 1 would assume that the Respondents, having secured the funding, would act as a conduit for the scholarship money.

23. The second and third versions contain language in the guarantee letter and brochure ("student guarantee") which makes it clear that customers would be hearing directly from the corporations about scholarship money and that ACFA would not even be notified if a scholarship were granted. Accordingly, the representation is not made in Versions 2 and 3.

24. The representation is false since Respondents only provide a list of scholarship sources (Tr. 387, 395).

25. However, Representation (b) is not material. It would not matter to a prospective customer whether the money would be sent directly to him from the scholarship sources or would be channeled through Respondents to the customer.

Representation (c)

(c) Academic Council on Financial Assistance receives funding for scholarships from the National Scholastic Resources Administration.

26. Although the Respondents' solicitation letters state that "ACFA is made possible through funds from the National Scholastic Resources Administration, Washington, DC," the solicitations do not indicate that the scholarship money comes from NSRA. The solicitations indicate that the sources of such funding are primarily private and are unrelated to the Respondents. The initial solicitation letter informs the recipient of "a number of scholarships, fellowships and grants ... available through corporations, foundations and other private and public sources" (CX-1, p.1). In the toll-free call, the counselor reiterates that "these funds are obtained through private sector corporations, foundations, and other organizations. These organizations receive a tax write-off for donating these funds to you...." (CX-12). Also, the application states that the Council is not affiliated with any funding source (CX-1, p. 4). Since Respondents' solicitations give the impression that ACFA is affiliated with NSRA (see Representation a), NSRA would not be viewed as one of the scholarship sources.

27. Although it is possible that some readers may not have been aware of the above language, and assumed that the "National Scholastic Resources Administration" provides the scholarships, it is unlikely that the number of such customers was significant.

28. Finally, Versions 2 and 3 also make it clear that the scholarship money will be coming from outside sources and that ACFA will not even be notified if scholarships are given to its customers.

29. Accordingly, Respondents do not make Representation (c).

Representation (d)

(d) National Scholastic Resources Administration is a government entity or is affiliated with the government;

30. As previously indicated, the initial solicitation letter and the cover letter with the application both state at the bottom of the page: "ACFA is made possible through funds from the National Scholastic Resources Administration, Washington, DC,". It is clear that a significant number of readers would have the impression that the "National Scholastic Resources Administration" is a government entity or is affiliated with the government. This impression is amplified by the name, the eagle logo used by ACFA, and the fact that NSRA is allegedly located in Washington, DC.

31. Respondent Pousti's contention that it merely sounded impressive (Tr. 338-339) and did not sound like an entity affiliated with the government is rejected.

32. The representation is false (Tr. 396). It is material because many people would tend to trust the government more than an unknown company and would feel more comfortable dealing with the former on financial aid matters (Tr. 156, 174).

33. As indicated under Representation (a), the disclaimer in Version 3 in the brochure ("Since ACFA is not state or government funded. . .") would not be noticed by many ordinary readers, and would not dispel the impression that NSRA was a government agency. Moreover, the San Diego postmark on the solicitation, which was noticed by one witness (Tr. 458), would not be noticed by many readers.

Representaiton (e)

(e) Both Academic Council on Financial Assistance and National Scholastic Resources Administration maintain offices in Washington, DC which are staffed and which provide the services described in Respondents' solicitations;

34. ACFA used only a Washington, DC address in at least the first three versions of its solicitations (Tr. 375). Thus the ordinary reader would have assumed that Respondents' business was operated in Washington, DC.

35. However, the representation with respect to ACFA is false since all business has been conducted in San Diego, CA (Tr. 370), and Respondents have never staffed the Washington office (Tr. 331, 396). The representation is material since it furthers the image that Respondents are affiliated with the government. See, Representations (a) and (d).

36. Respondents represent that NSRA is a government agency which is also located in Washington, DC, and this is a materially false representation. However, there is no indication in the solicitations that indicates that NSRA provides any of the services described in Respondents' solicitations. NSRA is merely portrayed as an agency which provides some undescribed funding for ACFA.

Accordingly, Respondents do not make Representation (e) to the extent that it pertains to "NSRA" providing services described in Respondents' solicitations.

Representations (f) and (i)

(f) Academic Council on Financial Assistance directly submits applications to scholarship sources on behalf of students;

(i) Submission of the documentation and fee as directed to the Academic Council on Financial Assistance constitutes an application for academic financial assistance;

37. In the initial solicitation letter from the "Academic Council on Financial Assistance," the reader is informed of the "availability of a number of scholarships, fellowships and grants for most majors" and is told that his "eligibility is guaranteed" (CX-1, p. 1). Then during the toll-free call, Respondents explain to the customer that they are "dedicated to assisting students in obtaining financial aid" (CX-12). Then Respondents send the customer an "Application" (although no one is rejected) to complete instead of an order form. In the cover letter, they state that "the more complete information you provide, the better the chances of receiving the most awards available." The customer is instructed to complete the application and send it back with the $60 processing fee, and told that "the processing fee will be returned to you if, for any reason, a scholarship is not secured" (CX-1, p. 2).

38. The "Application" is two pages and requires the student to list various characteristics about himself, including grade point average, race, religion, major, minor, educational goals, career goals, and hobbies. Typical financial aid forms require more extensive demographic, financial, and family information (Tr. 285, 318). However, the scholarships in question were not necessarily based upon need.

39. In the certification above the signature line on the application, the following words appear:

The underscored language sends a strong signal that the Council will be doing the work of applying for the scholarships. Also, the warning that "misinformation" may result in loss of the scholarship only makes sense on this document if the Respondents' "application" is viewed as an application for financial assistance rather than an order for a list of names.

40. All of the above-quoted language from the letters and telephone call makes Representations (f) and (i). Many ordinary customers of this promotion would believe that they are sending in an application for academic financial assistance which will be sent by Respondents to the appropriate scholarship sources. Many students would assume that ACFA, which appears to be a government-affiliated "Council," would have a special arrangement with the sources under which it could simply send a copy of the "application" with a cover letter, and that it would not have to fill out the various applications usually provided by the sources.

41. This finding by the Administrative Law Judge is based on the solicitations. It is also corroborated by the Complainant's witnesses (Version 3: Tr. 127, 135, 137; Version 1: Tr. 155, 160, 166, 171-172, 177-178, 182, 174-175, 180). See also, CX-2, 3, 4.

42. In Version 2, the guarantee letter refers to the application as a "Student Application for Awards and Scholarships." (CX-1, p. 5). This also furthers the impression contained in Representations (f) and (i).

43. Also, the brochure in Version 3 contains the following language:

44. The above language focuses the reader's attention on the money they will receive if a customer takes advantage of Respondents' program. The reader is told "(a)ll you need to do" is send in the application, and no mention is made of the fact that he will have to secure, complete and mail a number of applications to the scholarship sources.

45. The brochure contains a disclaimer under a section entitled "How ACFA Does It" on the last page. After describing how ACFA matches funding sources with each student customer by computer research, it states:

This sentence, which appears only in Version 3, would not be noticed by many ordinary readers of the brochure. Moreover, many readers who did notice this language would believe that their scholarship funding would come from 5 to 25 sources (Tr. 136, 147). Similarly, on the last page, the reader is told "ACFA can provide you with these . . . scholarship sources and ensure you the ability to receive the funds necessary for your college education." The latter language also would not be noticed by many readers. Moreover, its ambiguous language focuses on the money that ACFA will ensure that the student receives, and thereby enhances the impression of Representations (f) and (i).

46. Finally, it is undoubtedly true, as Respondents contend, that there are many college students who understand the usual scholarship application process and may not assume that ACFA would send out the applications to the sources on the student's behalf. Many of those students may simply be interested in ordering a list of names of scholarship sources. However, it is reasonable to assume that a significant number of college and college-bound students have had little or no experience in this area and would not find it unreasonable for ACFA to perform this service. In fact, Complainant's witnesses Blandford and Buck had had such experience but still thought the service would be performed. Their testimony was forthright and credible.

47. Respondents also contend that the students should have asked a question about this point if there was any doubt in their minds. As previously indicated, a student who simply assumed that the applications would be sent by ACFA would have not had any reason to ask a question about it.

48. Representations (f) and (i) are false (Tr. 385, 387, 396). In addition, they are material since they tend to induce a customer to remit money to the Respondents for the service. Many students would not wish to pay for the service if they knew they would have to spend time obtaining, completing and mailing applications to many scholarship sources (Tr. 162, 176).

Representation (g)

(g) A person who utilized the Academic Council on Financial Assistance's service was awarded a $10,000 grant;

49. This representation is made on the Questions & Answers handout used by all of Respondents' telephone counselors (RX-6; Tr. 332). If a student asked about the amounts given by the scholarship sources, the counselor was instructed to say the following (RX-6, p.2):

"The average amounts given range from $300 - $1,500 per award. The lowest grant we've seen is $300, the highest was $10,000 which was awarded to a handicapped student."

50. Many ordinary consumers would assume that grants "we've seen" refer to those obtained by ACFA's customers.

51. Although there is no direct evidence that this specific representation was orally made by phone counselors, circumstantial evidence exists from which a reasonable inference may be drawn. At least 200,000-375,000 persons have called the toll-free number and spoken with Respondents' telephone counselors (Respondent admitted that 10-15% of 2 to 2.5 million students who were sent the initial mailing called the toll-free number) (Tr. 414, 382). Since the amount of money to be received would be a topic of interest to many consumers, it is reasonable to infer that the telephone counselors made this statement to a significant number of students. Also, it is noted that counsel for Respondent essentially admitted the frequent use of the Q & A handout (RX-6) because he wanted to "use (the handout) by way of rebuttal to the testimony of the . . . [Complainant's witnesses] . . . who testified what they were told on the phone by NSRA employees" (Tr. 334).

52. This representation is materially false (Tr. 398). It is material since it points to the success and ability of ACFA to match a particular individual with, and obtain, a $10,000 scholarship and thereby tends to induce student customers to remit money for the service.

Representation (h)

(h) The minimum amount of a scholarship or grant which a person who submits an application and payment to Academic Council on Financial Assistance will obtain is $300;

53. This representation is first made by the telephone counselors when they read the following from the phone script (CX-12):

54. The above language is read to all persons calling the toll-free number. In addition, this representation is also made in the Q & A handout (RX-6) in the paragraph quoted above with respect to Representation (g) which includes the words "The lowest grant we've seen is $300."

55. This finding is corroborated by the testimony of consumer witnesses (Tr. 126, 170; see also CX-4).

56. The representation is materially false (RX-4: $100 award; RX-12, p.7: $150). Representation (h) is material since many students might not take the trouble to complete an application and send in the $60 if they thought they would get only a $100 scholarship and have to submit to the refund procedure. This would be particularly true with respect to that group of students who were able to ascertain that they would be receiving a list of sources to which they would have to apply, since they would have realized that more work was required to obtain a scholarship.

Representation (j)

(j) The Academic Council on Financial Assistance is composed of or advised by a group composed of individuals associated with the academic community, i.e., professors, financial advisors, academic financial counselors.

57. A "council" is defined as "an assembly of persons summoned or convened for consultation, deliberation, or advice" or a "body of persons specially designated or selected to act in an advisory, administrative, or legislative capacity." Random House College Dictionary, 1980. An "academic" council in the context herein would be an advisory or administrative body "of or pertaining to" higher education. Some ordinary readers would interpret the name Academic Council on Financial Assistance as a body of people associated with the academic community who are concerned with financial assistance. However, Complainant has failed to prove that a significant number of readers would have that impression. On the other hand, many readers would simply perceive that the council's business pertains to higher education. Thus Respondents do not make this representation.

58. Assuming arguendo that the representation was made, Complainant has not shown that it is material. Students are induced to purchase the service because they wish to be matched by a sophisticated computer with scholarship sources and have their application submitted to those sources. The additional credibility arising out of Respondents appearing to be part of the academic community is not sufficient to induce the purchase of the service.

CONCLUSIONS OF LAW The False Representations

1. (a) Each of Respondents' advertisements must be considered as a whole and the meaning is to be determined in light of the probable impact of this material on a person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948); Peak Laboratories, Inc. v. U.S. Postal Serv., 556 F.2d 1387, 1389 (5th Cir. 1977). The statute is intended to protect the gullible, naive, and less critical reader, as well as the more sophisticated, wary reader. Fields v. Hannegan, 162 F.2d 17 (D.C. Cir. 1947), cert. denied, 332 U.S. 773 (1947); M.K.S. Enterprises, Inc. v. United States Postal Service, 459 F. Supp. 1180, 1184 (E.D.N.Y. 1978); Gottlieb v. Schaffer, 141 F. Supp. 7 (S.D.N.Y. 1956); Leo Deboub, P.S. Docket No. 19/185 (P.S.D. July 10, 1986). Express misrepresentations are not required. It is the net impression which the advertisement is likely to make upon individuals 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 false representation statute is applicable. G.J. Howard Co. v. Cassidy, 162 F. Supp. 568 (E.D.N.Y. 1958); $See also, Virginia State Board of Pharmacy v. Virginia Citizens Consumer Counsel, 425 U.S. 748 (1976).

(b) Where an advertisement is ambiguous or capable of more than one meaning, if one of those meanings is false, the advertisement will be held to be misleading. Rhodes Pharmacal Co. v. F.T.C., 208 F.2d 382, 387 (7th Cir. 1953); Ralph J. Galliano, P.S. Docket No. 19/15 (P.S.D. May 2, 1985 at p. 9). It is not difficult to select words that will not deceive. See, United States v. 95 Barrels of Vinegar, 265 U.S. 438 (1924).

(c) An inconspicuous disclaimer is not sufficient to dispel the effect of false representations. Leo Deboub, supra; Gottlieb v. Schaffer, supra.

(d) The Administrative Law Judge can determine whether the representations are made, their effect on the ordinary mind, and materiality without the assistance of lay or expert testimony. Standard Research Labs, P.S. Docket No. 7/78 (P.S.D. Oct. 27, 1980); The Robertson-Taylor Company, P.S. Docket Nos. 16/98-102, 16/120-121, (P.S.D. March 31, 1986 at page 29); Vibra-Brush v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2nd Cir. 1958).

(e) Whether anyone actually complains or has been deceived by Respondents' advertisements is irrelevant on the issue of false representation. Farley v. Heininger, 105 F.2d 79 (D.C. Cir. 1939). It is the likelihood of deception or the advertisement's capacity to deceive which must be judged. Montgomery Ward & Co. v. FTC, 379 F2d 666 (7th Cir. 1967); Mid-Am Marketing, Inc., P.S. Docket No. 24/12 (P.S.D. on Recon., May 7, 1987).

2. Applying the foregoing standards, I find that Respondents' advertisements make Representations (a), (b), (d), (e) (to the extent described in FOF 34-36), (f), (g), (h), and (i) as alleged in Paragraph 12 of the Amended Complaint. The language contained in the advertisements and toll-free telephone calls, when read and/or heard in context, which directly or impliedly makes these representations is set forth in the findings of fact. Complainant has failed to prove that Respondents make Representation (c). Representation (j) is not made, and assuming it is, it is not material.

3. As set forth in the findings of fact, Representations (a), (d), (e), (f), (g), (h), and (i) are materially false. Respondents make Representation (b), but it is not material.

4. Representations (a), (d), (e) (to the extent described in FOF 34-36), (f), (g), (h), and (i) are material because they have a tendency to persuade readers to order and pay for Respondents' service.

5. (a) Complainant has established its case by a preponderance of the reliable and probative evidence of record. S.E.C. v. Savoy Industries, Inc., 587 F.2d 1149, 1168 (D.C. Cir. 1978).

(b) Respondents argue that certain representations are no longer made. For example, they argue that even if they are made in the first two versions of the solicitation, that they are not made when viewed with the brochure in the third version. Even if this were so (and except for Representation b it is not), voluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, i. e. does not make the case moot. United States v. W. T. Grant Co., 345 U.S. 629, 632 (1953). Such a result would leave the Respondent "free to return to his old ways."

(c) Respondents point to the fact that only 50 complaints have been filed with the Postal Service and that most of these are simply copies of the solicitation sent in by consumers. Whether anyone actually complains or has been deceived by Respondents' advertisements is irrelevant on the issue of false representation. Farley v. Heininger, 105 F. 2d 79 (D.C. Cir 1939). It is the likelihood of deception or the advertisement's capacity to deceive which must be judged. Montgomery Ward & Co. v. FTC, 379 F.2d 666 (7th Cir. 1967); Mid-Am Marketing, Inc., P.S. Docket No. 24/12 (P.S.D. on Recon., May 7, 1987).

(d) Respondents also argue that the statute is unconstitutional as applied to them because it abridges their First Amendment rights. However, this contention is rejected since it is established that false commercial advertising, such as employed by Respondents, has no constitutional protection. Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 771-72 (1976); Konigsberg v. State Bar, 366 U.S. 36, 49 (1961); United States Postal Service v. Athena Products, Ltd., 654 F.2d 362 (5th Cir. 1981) cert. denied 456 U.S. 915 (1982).

6. Respondents are engaged in the conduct of a scheme for obtaining remittances of money through the mail by means of materially false representations in violation of 39 U.S.C. § 3005. Individual Respondents and the Cease and Desist Order

7. Congress amended 39 U.S.C. § 3005 in 1983 to provide in subsection (a)(3) that the Postal Service may order a "person" who is engaged in a scheme to obtain money through the mails through false representations to "cease and desist" from such conduct. Congress's purpose in granting the Postal Service this power over individuals was to strengthen the deterrent effect of the statute and reduce the possibility of evasion of Postal Service orders. W.G. Charles Company, P.S. Docket Nos. 19/103-105, 161-62, 179, 182-84; 20/16, 32 (Decision on Motion to Dismiss, January 28, 1985 at p. 10).

8. A cease and desist order will be issued against individuals who are responsible for the conduct of a business. Federal Trade Commission v. Standard Education Society, 302 U.S. 112 (1937). The individuals need not have been responsible for the false advertising itself (although they were here); it is sufficient if they played some other significant role in the scheme, such as receiving the money from customers. W.G. Charles Company, P.S. Docket Nos. 19/104, 19/162 (P.S.D. Sep. 10, 1985) and W.G. Charles Company, P.S. Docket Nos. 19/105, 19/161, 20/32 (P.S.D. Sept. 30, 1985 at pp. 10-13) (affirming W.G. Charles Company Docket Nos. 19/103-105, 161-162, 179, 182-84; 20/16, 20/32, Decision & Order on Motion to Dismiss, January 28, 1985 at page 10); Barrett Carpet Mills, Inc. v. Consumer Product Safety Comm., 635 F.2d 299 (4th Cir. 1980).

9. Both Respondents Ramin Niakiani and Michael Pousti admittedly exercised complete control over, and played major roles in the business and should be subjected to the Cease and Desist Order.

10. Accordingly, the attached False Representation Order and Cease and Desist Order should be issued.