In the Matter of the Complaint That                         )
                                                                               )
E. F. BARROWS, doing business as                      )
BASIC REMEDIES,                                                  )
DR. E. FLETCHER BARROWS,                               )
DR. E. F. BARROWS,                                             )
IBEX,                                                                       )
CY-BEX, and                                                          )
B.R.                                                                         ) H.E. Docket No. 5/20
                                                                               )
at                                                                            )
                                                                               )
Monmouth, Oregon,                                                )
                                                                               )
is engaged in conducting a scheme for                 )
obtaining money through the mails in                     )
violation of 39 U.S. Code 259 and 732.                  )

Ablard, Charles D.

POST OFFICE DEPARTMENT WASHINGTON, D. C.

DEPARTMENTAL DECISION

A complaint having been issued in the above matter charging that the respondent was conducting a fraudulent enterprise for the sale of a hair restorer through the mails and seeking the issuance of an order in accordance with 39 U. S. Code 259 and 732, a hearing was held by the Hearing Examiner in Washington. The Hearing Examiner concluded that the complainant failed to prove that the representations and promises of the respondent were false and fraudulent and that the respondent had not violated the applicable sections of the code. Both the respondent and complainant have excepted to the findings and conclusions of the Hearing Examiner. Oral arguments were presented by both before the Judicial Officer on May 20, 1958.

The respondent has filed eight exceptions. The first of those exceptions is to the failure of the examiner to conclude as a matter of law that the respondent had no intent to defraud. This seems to be an unnecessary finding in view of the fact that the examiner concluded, properly, that there was no fraud in fact. Since Reilly v. Pinkus, 338 U. S. 269, the Department has been required to prove an intent to defraud before a fraud order may be issued. This is an element of proof and not fact required to be found in every case. It is only that it must be affirmatively proved and found to exist in those cases where an order is issued. As to the respondent's contention that without such a finding a stigma remains it can hardly be expected that the Postmaster General can endorse either the product or the person selling the product. The fact that the government failed to prove both fraud in fact and an intent to defraud should remove any stigma. It must be assumed that the government utilized every piece of evidence available to it in the proof of this case and, since this assumption must be made, it can be assumed that if all the evidence indicated that the respondent was not conducting a fraudulent enterprise then for all intents and purposes he was conducting a lawful enterprise. The exception is disallowed.

The second exception is to the failure of the examiner to make a finding of fact that respondent's product was in fact efficacious as represented. This again is not a matter requiring an affirmative finding by the examiner. The finding of the examiner is deemed sufficient for the purposes of this proceeding and, again, surely the respondent would not request the Postmaster General to endorse any product offered for sale on the market.

The third exception is to the examiner's exclusion of certain scientific treatises and periodicals offered in evidence. The respondent challenges Rule 201.16a of the Rules of Practice of 1954 under which this proceeding was conducted. That Rule provided that: "medical or other scientific books or essays will not be admitted in evidence in lieu of oral expert testimony." Respondent cites Dolcin Corporation v. Federal Trade Commission, 219 F (2d) 742, 748 (D.C.Cir.), in support of this position. Judge Washington in that case said "We think authoritative scientific writings can and should be freely used by administrative agencies." Congress has said that "any oral or documentary evidence may be received." 5 U.S.C. 1006 (c). Furthermore, the rationale of Reilly v. Pinkus, supra, points toward use of "scientific texts in adversary proceedings." In view of the Department's Rule, it cannot be said that the Hearing Examiner erred in excluding scientific treatises or texts, in this quasi-judicial administrative proceeding.

The general rule in regard to judicial proceedings is as is stated in 20 Am.Jur. 968. However, the respondent is serving the Post Office Department well in bringing this matter to our attention for possible reconsideration of its desirability in the light of Dolcin and the other cases. Exclusionary rules of evidence are rapidly disappearing and it may well be that the Department should modify this rule of exclusion to permit the use of authoritative treatises for affirmative proof of efficacy.

The fourth exception is to the failure of the examiner to make a finding of fact that respondent believed in good faith that the ingredients listed on the label of his product could assist the growth of hair in a substantial number of cases. The exception is disallowed in view of the discussion of the second exception.

The fifth exception of the respondent is to the failure of the examiner to transfer the hearing to Oregon to take testimony of lay users or in the alternative, failure to take depositions of those lay users. The Hearing Examiner interpreted Rule 201.16g, "testimonials will not be received as evidence of the efficacy or quality of any product or thing sold through the mails," as excluding all testimonials of lay witnesses. The interpretation by the examiner was erroneous in view of the definition of "testimonial" by Webster and Black that it is "a writing or certificate in favor of the value of a ... thing." The reason for the exclusion of testimonials would seem to be obviated either by taking testimony of the person by deposition or in transferring the hearing to take the testimony. Either method would make the testimony subject to cross examination. While the testimony of lay users should probably be given slight weight, such testimony is not incompetent and should be admitted into evidence for what it is worth. Questions of weight and admissibility are separate and merely because evidence will not be accorded a high degree of weight does not automatically exclude it as being inadmissible. The respondent had the right to introduce this evidence and the exclusion of it was error. The right to introduce evidence is fundamental in an administrative hearing. Philadelphia Co. v. Securities Exchange Commission, 175 F. (2d) 808, 817 (D. C. Cir.). There is some confusion in the record as to the complainant's position on this matter. The question is not important however, in view of the ultimate conclusion reached herein; however, it should be pointed out that one of the functions of government counsel is to protect the record of any proceeding from possible error which might be a basis for reversal by the agency or the courts.

The sixth exception of the respondent is to the failure of the examiner to admit testimony as to the efficacy of the product from Dr. Barrows regarding the experiments on students conducted in 1950 and 1951. The examiner admitted this evidence for the purpose of showing the lack of fraudulent intent on the part of respondent but excluded it for other purposes. The complainant objected to the introduction of this evidence on the grounds that the experiments were not properly observed by Dr. Barrows and were not conducted in accordance with the test scientific technique. The complainant extended this type argument during the oral arguments before the Judicial Officer arguing that while Dr. Barrows was a competent researcher and scientist he did not conduct these experiments in the manner that a competent researcher should. It ill behooves the government to come into a proceeding relying solely on expert testimony with no scientific evidence of experimentation and then object to the technique of a person whom they admit is a competent scientist for an alleged failure to conduct himself in a manner in which the government deems to be correct and proper. While the testimony of experts is sufficient upon which to base a decision, U. S. v. One Device, 160

F. 2d 194, 199, (10th Cir.) 1947., the evidence of experimentation should have been admitted for all purposes. This is another problem of the weight to be given testimony rather than the admissibility of that testimony. The Administrative Procedure Act, 5 U.S.C. 1006, allows the introduction of all "relevant evidence." This testimony would then have been subject to cross-examination as to the method used by Dr. Barrows and its scientific accuracy.

The seventh exception is to the exclusion by the Hearing Examiner of the testimonials given to the respondent after the complaint had been issued for the purpose of showing the continuing honest intent of the respondent. The Hearing Examiner, after objection by the complainant, excluded this evidence. The position of the complainant is untenable on this point since the complainant admits that the respondent had an honest intent in the beginning of the operation of this enterprise but seemingly changed this intent in midstream from one of "honest belief" to one of "dishonest belief." Under this theory it would seem imperative that the respondent be allowed to introduce testimonials received all throughout the period of time during which he was selling the product to show that his intent remained "honest." To ask for such a conclusion by the Judicial Officer in view of the objection to evidence on that point at the hearing would only compound the error. The exception is allowed.

The eighth exception of the respondent was waived on oral argument. That was the exception to the separation of prosecuting and adjudicating functions which has been cured by the establishment of a Judicial Officer in the Post Office Department, see Columbia Research v. Schaffer, and Vibra Brush v. Schaffer, 2d Cir. decided May 13, 1958.

The complainant has filed three exceptions to the findings of the examiner. In general he excepts to the findings of the examiner because no cases are cited by the examiner in his decision. This would seem to be a spurious objection in view of the fact that the Hearing Examiner is to make a factual determination and, in this particular instance, the examiner found the facts to be contra to those alleged in the complaint. Thus, his decision turns on questions of fact and not of law. The habit of lawyers to cite cases in abundance, some of which are not applicable to the situation presented, is a practice that is not only superfluous but misleading.

The first specific objection of the complainant is to the finding of fraud in fact. He discusses the problems in regard to the advertising and the money-back guarantee of respondent. It would appear that the doctrine of Jarvis v. Shakleton Inhaler Co., 136 F (2d) 116, (1943), is applicable to this case and not that of Harris v. Rosenberger, 145 Fed. 449 (1905). In the latter case the defendant was selling whiskey supposedly of a certain age when in fact it was only a few months old. Thus, there was no possibility that the product could be as it was purported to be. In this case, although the complainant contends that the product is absolutely valueless there is a conflict of evidence as to its efficacy. This throws it within the purview of the doctrine of Jarvis v. Shakleton, supra, that when a money-back guarantee is offered coupled with a disclaimer of efficacy for every user there is no fraud in fact. When the evidence discussed in respondent's exceptions five and six above is also considered as to efficacy there is even more evidence in the record upon which the examiner had to base his decision.

The second exception of the complainant goes to the question of scientific proof and the problem of the unknown ingredient in the product of Dr. Barrows. The complainant contends that the examiner should have found that modern scientific belief would view the respondent's preparation valueless for the purposes offered to the public. In view of the fact that the complainant objected to any scientific evidence offered by Dr. Barrows and produced none of his own except opinion testimony would belie such a contention. The position of the complainant is made even more untenable by the introduction into evidence of the report of a new discovery based on experimentation on twelve ducks, no matter for what purpose it may have been introduced, while he is contending that an admittedly competent scientist cannot experiment on himself and nineteen other human beings and arrive at some rational scientific conclusion.

The third exception is to the alleged failure of the examiner to find that there was a "transition" in the belief of Dr. Barrows from one of "honest" to one of "dishonest" belief. Again, it would seem that the examiner would have considerable difficulty in reaching such a finding when he, after objection from the complainant, excluded any rebuttal evidence as to this continuing "honest" intent by Dr. Barrows through the introduction of testimonials received after the complaint.

In conclusion the examiner arrived at the correct conclusion in his Initial Decision. The exceptions of the complainant are all disallowed. Those exceptions of the respondent not allowed herein are disallowed.