P.O.D. Docket No. 1/153
October 28, 1959
In the Matter of the Complaint Against
TIGRON DISTRIBUTORS
at 906 Summit Avenue
Jersey City 7, New Jersey
P.O.D. Docket No. 1/153
Ablard, Charles D.
APPEARANCES:
Bass and Friend,
342 Madison Avenue,
New York, New York for the Respondent
Robert M. Ague, Jr., Esq.
for the Complainant
DEPARTMENTAL DECISION
The Respondent is charged by a complaint of the General Counsel of the Post Office Department with conducting an enterprise through the mails for obtaining remittances of money by false and fraudulent pretenses. The Respondent sells a preparation containing amino acids called "Tigron" for sex rejuvenation. The complaint was issued May 27, 1959, and on the same day Complainant moved for an interim mail impounding order pursuant to 39 U.S.C. 255, the fictitious fraud statute. All mail was impounded until the owner of the enterprise was identified. On June 19, after a hearing before the Judicial Officer, a new impounding order was issued under the implied power of the Postmaster General under the fraud statute, 39 U.S.C. 259. The Respondent contested the issuance of this order in the U.S. Court for the District of New Jersey. The Court decided that the Department had no authority other than that which was expressed in the statute and ordered the mail released. Greene v. Kern (D.N.J., Civ. No. 507-59, July 1, 1959). The Department appealed and the Court of Appeals affirmed per curiam.
A hearing on the merits was held before a hearing examiner, who ruled that a fraud order should be issued forbidding the Respondent from receiving mail and from cashing postal money orders. That decision is now on appeal before me. The Respondents filed a brief on appeal in which three exceptions have been raised. The Complainant has replied to those exceptions.
The first exception is to the finding of the examiner that the Respondent has made false representations as alleged in the complaint. I have reviewed the advertising matter distributed by the respondents in the light of the leading judicial decisions on interpretation of advertising. Donaldson v. Read Magazine, 333 U.S. 178 (1947); Vibra Brush Corporation v. Schaffer, 152 F.Supp. 461 (S.D.N.Y., 1957) and Linden v. U.S., 254 F.2d 560 (C.A. 4, 1958). Throughout the advertisement such words and phrases as "facts", "positive proof", "complete results guaranteed", and "most important scientific discovery" are used. I find that the examiner correctly concluded that the representations alleged in the complaint were in fact being made by the Respondent. The Respondent also asserts that the testimony produced at the hearing does not prove that the claims are false even if it can be assumed that the claims alleged in the complaint are made. The Respondent relies on the testimony of an expert medical witness, Dr. Bohensky. The examiner discussed the testimony of this witness. I concur in his conclusions as to that testimony and in particular his discussion as to the points of agreement between that doctor and the witnesses who testified for the Complainant, a medical doctor and a nutritionist. All of these witnesses were competent and qualified to testify as they did at the hearing. The nutritionist did not attempt to diagnose diseases, their causes, or treatment but merely discussed nutrition problems, a subject about which he was eminently qualified to testify.
The Respondent also asserts under this exception that the examiner erred by equating the disease of impotency with diminution of sexual energy. I do not agree. The examiner believe that the advertisement represented the product as being efficacious for both complete impotency and a diminished sexual drive which might range from slight to one bordering on impotency. The advertising claims are so gross as to appeal not only to the person with the slight diminution of sex energy but also to those who are completely impotent. I agree with the conclusion of the hearing examiner that the representations are false as to all types of these sufferers.
While the testimony is at a variance on some points it is basically consistent as to the fundamental issue of the affect of such a drug on the persons to whom the advertisement is directed. The hearing examiner has analyzed this testimony, and in particular the testimony of the medical witness for the Respondent, showing that even if it be assumed that all his testimony is accurate and complete,--the representations for the product so far exceed the value of the product that the representations are false. In Vibra-Brush Corporation v. Schaffer, supra, 1/ Judge Weinfeld discussed a similar situation saying:
"the mere fact that in a limited area plaintiff's experts were prepared to and did take issue with others in the field did not necessarily cast the medical problem into the area of scientific uncertainty."
(Missing Footnote)
The same can be said of the various excerpts from medical journals which were introduced and upon which the Respondent relies. These statements fall so short of supporting the claims made in the advertisement as to render them immaterial. The first exception of the Respondent is disallowed.
The second exception of the Respondent is to the finding by the examiner of an intent to deceive. The Supreme Court said in Reilly v. Pinkus, 338 U.S. 269 (1949):
"proof of fraudulent purpose is essential - 'an actual intent to deceive'. Consequently, fraud order under the mail statutes is not established merely by proving that an incorrect statement was made. An intent to deceive might be inferred from the universality of scientific belief that advertising representations are wholly unsupportable."
In addition to the testimony of the medical witnesses, which established a universality of opinion on all material points in issue, the Complainant introduced the testimony of Inspector Hegarty of the Bureau of the Chief Postal Inspector. The inspector investigated the case and interviewed Mr. Irwin Greene, the owner of the Respondent enterprise. He testified that Mr. Greene stated that he had no medical background; that he did not have the product tested; and that he had not at any time obtained a formal medical report on the product. He informed Mr. Hegarty that he prepared his advertising circular by cutting materials and phrases from other circulars and pasting them on a piece of paper. The language of Vibra-Brush, supra, is applicable to this point also. The Court there said:
"the exaggeration of the claims ... far beyond the scope of the advice plaintiff received from its experts, is cogent evidence of intent to deceive."
Here the Respondent apparently asked for no advice other than possibly that which might have been obtained by informal discussions with doctors who were friends. Such a combination of nonfeasance and malfeasance certainly evidences a reckless disregard for the truth and is equivalent to knowledge of falsity. 2/ Intent may be inferred from acts and circumstances. 3/ In Sovereign Pocohontas Co. v. Bond, 120 F.2d 39 (C.A.D.C., 1941), the Court said:
"Where a party represents a material fact to be true to his personal knowledge, as distinguished from belief or opinion, when he does not know whether it is true or not, and it is actually untrue, he is guilty of falsehood, even if he believes it to be true, and if the statement is thus made with the intention that it shall be acted upon by another, who does so act upon it to his injury, the result is actionable fraud."
Here there are indications that even the Respondent knows that the statements were untrue.
The Respondent relies on the fact that a money-back guarantee is offered if results are not achieved within ten days. A similar guarantee was discussed by the Court in Borg-Johnson Electronics Inc. v. Christenberry, 169 F.Supp. 746, (S.D.N.Y., 1959):
"When it appears that an advertiser deliberately induces its patrons to purchase its product in the belief that its value far exceeds its true worth, it is sufficient to support a finding that a fraudulent scheme has been conducted, Leach v. Carlisle, 258 U.S 138. This is so even where there is a promise to refund a purchase price should the article sold prove unsatisfactory."
The exception is without merit and is disallowed.
The third and last exception of the Respondent is to the validity of the procedures of the Post Office Department. The first contention of the Respondent is that the Judicial Officer may not validly authorized to render a final departmental decision for the Postmaster General. A review by the Judicial Officer was held to be valid in U.S. Bio-Genics Corp. v. Christenberry, 173 F.Supp. 645 (S.D., N.Y., 1959), where the Court distinguished the function of review by the Judicial Officer from presiding at the reception of evidence. The latter function was held to be beyond his authority in Borg-Johnson Electronics Inc. v. Christenberry, supra. A similar problem was discussed in Parker v. Summerfield, 265 F.2d 354, (C.A.D.C., 1959) which held that a delegation of authority to the Deputy Postmaster General was valid. Since a duly qualified hearing examiner presided at the reception of evidence in this proceeding reliance upon Borg-Johnson seems misplaced.
The Respondent next raises the question that since the delegation of authority to the Judicial Officer which appeared in the Federal Register was signed by the Acting General Counsel the delegation to the Judicial Officer is not valid since the General Counsel did not have this authority to delegate. The Judicial Officer was in fact appointed by a delegation of authority of April 24, 1958, signed by the Deputy Postmaster General. In signing the entry for the Federal Register the Acting General Counsel was performing only a ministerial function in his capacity as the officer designated by the Postmaster General for authorizing publication of matter in the Federal Register. This would seem to be a capricious argument.
The Respondent also argues that all of the Rules of Practice are invalid because of the decision in Borg-Johnson, supra, which held a single rule to be invalid. The courts have held that this is not the result of such a decision. In Electric Bond Company v. S.E.C., 303 U.S. 419 (1938), the Supreme Court held that where rules are not so interdependent as to be inseparable they should be deemed separable. That part of the rule invalidated by Borg-Johnson was not invoked in this proceeding. The exception is disallowed.
The initial decision of the hearing examiner is affirmed and adopted.
1/ (Reversed on other grounds 256 F.2d 681 (C.A. 2, 1958)