In the Matter of the Complaint Against: A.C.L., 1470 Clara Avenue, Columbus, OH 43211-2624 and 626 South High Street, Columbus, OH 43215-5622 and DYNAQUEST CORP., M. T. KLASS, 1524 Candlewood Drive, Worthington, OH 43235-1624 and MITCH KLASS, 8l61 Running Fox, Worthington, OH 43235-4439 P.S. Docket No. 36/90 05/15/91 Finn, James D. Jr., Associate Judicial Officer APPEARANCES FOR COMPLAINANT: Jerry Belenker, Esq., Thomas V. Sottile, Esq., Consumer Protection Division, Law Department, United States Postal Service, Washington, DC 20260-1144 APPEARANCES FOR RESPONDENTS: Robert Ullman, Esq., Bass & Ullman, 747 Third Avenue, New York, NY 10017-2803 & Max Kravitz, Esq., 665 South High Street, Columbus, OH 43215-5685
Respondents have requested reconsideration of the Postal Service Decision issued in this proceeding which holds that Respondents are engaged in a scheme or device for obtaining money through the mail by means of materially false representations in violation of 39 U.S.C. § 3005.
The General Counsel of the United States Postal Service (Complainant) initiated this proceeding by filing a Complaint which alleged that Respondents, using the name A.C.L., made materially false representations with respect to an asset liquidation work-at-home program. Pursuant to the terms of an Agreed Order executed and filed in the United States District Court for the Southern District of Ohio in Case No. C2-90-0450, United States Postal Service v. M. T. Klass, et al., the parties to this proceeding agreed the administrative complaint would be heard in the first instance by the Judicial Officer or the Associate Judicial Officer. Following a hearing and the submission of proposed findings of fact and conclusions of law, the Associate Judicial Officer issued the Postal Service Decision in which it was concluded that Respondents' solicitations made four of the materially false representations alleged in the Complaint. A Cease and Desist Order and a False Representation Order were issued with the Postal Service Decision.
Respondents timely filed a Motion for Reconsideration in which they alleged the Postal Service Decision was in error in regard to the conclusions that their solicitations made four materially false representations. As part of their motion Respondents also requested that the hearing be reopened for the purpose of taking further testimony and that an order be issued directing the release of certain funds held in escrow accounts.
In support of the request that the hearing be reopened, Respondents appended to their motion affidavits executed by two alleged experts in the liquidation business. The affidavits generally state that Respondents' manual is comprehensive in nature. According to Respondents, both individuals will testify that "sans the supplemental services the A.C.L. manual is indeed 'comprehensive.'" Respondents state that the evidence was not previously offered because Complainant offered no expert opinion evidence to support the allegation that the manual was not comprehensive.
No basis exists for reopening the hearing. The evidence to be adduced is not newly discovered. Nor is there any other valid reason why it could not have been presented at the hearing. The issue of the comprehensiveness of Respondents' training program was clearly an issue in this matter as paragraphs 10i and 11 of the Complaint alleged Respondents falsely represented purchasers of its program would receive comprehensive training in the merchandise liquidation field. Respondents failure to introduce the expert testimony was of its own volition, and no persuasive reason has been offered to support its present request.
Respondents' request for an order directing the release of certain funds likewise cannot be granted. The funds in issue are contained in three escrow accounts established under the Agreed Order filed in the United States District Court. It was thus part of that proceeding and signed and approved by the District Court Judge. Accordingly, the District Court, not the Judicial Officer, has jurisdiction over the interpretation and enforcement of the Order.
Respondents challenge the conclusions of the Postal Service Decision which held their solicitation made the materially false representations alleged in paragraphs 10d, g, h and i of the Complaint. Paragraph 10d alleged that Respondents falsely represented that they would assist purchasers of their program to earn large sums of money without the need to make any additional payments to Respondents. The representation was found to be falsely made based on Respondents' subsequent offering of supplemental services which created the perception that the additional purchases were necessary if the participant were to succeed in Respondents' program. Respondents now contend that (1) the supplemental service issue was not raised in the Complaint as their initial solicitation contained no information pertaining to supplemental services, and (2) Respondents have subsequently revised the language in their manual pertaining to supplemental services. Respondents' contentions are not well taken. A component of the false representation was the complete lack of information in the solicitation about the supplemental services. It was only after an unwary buyer expended $149 plus shipping for Respondents' manual, did he learn that additional expenditures would be required in order to succeed in the program. Further, the fact that Respondents may have modified their solicitation does not provide a basis for modification of the orders issued. Otherwise, Respondents could continue such representations in the future. CM/CN, Commission Mailers of North America, et al., P.S. Docket No. 20/33, (P.S.D. Aug. 29, 1986).
Paragraph 10g of the Complaint alleged that Respondents falsely represented they would pay $100 in cash to purchasers of the program. The representation was found to be falsely made as Respondents offered a $100 credit on future purchases, not a $100 payment or bonus. Respondents contend the Decision's conclusion on this matter is in error as no witness at the hearing testified to expecting cash payment of $100 and in fact the witnesses testified to the contrary. There is no merit to Respondents' position. As discussed in the Decision the solicitation could readily be interpreted by the ordinary reader as offering a $100 payment and it is established that the trier-of-fact can determine whether representations are made, their effect on the ordinary mind, and materiality without the assistance of lay or expert testimony. American Testing Institute, P.S. Docket No. 14/114 (P.S.D. July 6, 1983); The Robertson-Taylor Co., P.S. Docket Nos. 16/98-102, 16/120-21 (P.S.D. March 31, 1986); Vibra-Brush v. Schaffer, 152 F. Supp. 46l (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2nd Cir. 1958). The solicitation itself is the most persuasive evidence of whether the representation is made. Delta Enterprises, P.S. Docket Nos. 14/72-75 (P.S.D. July 3, 1984); Fort Morgan Vapor Jet, P.S. Docket No. 12/64 (P.S.D. Sept. 29, 1982).
In paragraph 10h of the Complaint, Complainant alleged that Respondents' solicitation falsely represented that Respondents would accept only a limited number of purchasers from a certain area. The Decision agreed that the representation was indeed falsely made as evidenced by conflicting statements contained in Respondents' follow-up solicitation and its tape, and by the fact that no one has been denied participation in Respondents' program. Respondents contend the Decision erred, as in the future Respondents may well deny participation in its program due to geographic limitation. Again, Respondents contention is without merit. Although Respondents may modify their scheme in the future, that possibility will not negate a present false representation.
Finally, Complainant alleged in paragraph 10i of the Complaint, and the Postal Service Decision so held, that Respondents falsely represented that they will provide their program purchasers with comprehensive training in the merchandise liquidation field. The conclusion was based on the findings that the information contained in the manual and tapes is very rudimentary (Findings of Fact Nos. 5 and 12) and by Respondents' offering of supplemental services, which implicitly acknowledges the deficiencies of the program. In challenging the false representation holding Respondents again contend that expert testimony was a prerequisite to the holding and that none was presented by Complainant. However, as previously stated in the discussion of the paragraph 10g false representation, the trier-of-fact can make his determinations without the assistance of lay or expert testimony.
Respondents' arguments on reconsideration have been fully considered and found to be without merit. Accordingly, Respondents' Motion for Reconsideration is denied.