In the Matter of the Complaint Against:

GOZDANOVIC, THOMAS GOZDANOVIC, T.G. INDUSTRIES,
160 Banner Way, and
P. O. Box 4073 at
Pittsburgh, Pennsylvania 15201

P.S. Docket No. 4/109

06/07/76

Grant, Quentin E., Administrative Law Judge

Thomas A. Ziebarth, Esq.
Law Department
United States Postal Service
Washington, D.C., for Complainant

Lewis & Stockey by J. Kerrington Lewis, Esq.
Pittsburgh, Pennsylvania, for Respondent

Before: Quentin E. Grant, Administrative Law Judge

INITIAL DECISION

Complainant initiated this proceeding on October 22, 1975 by filing a complaint alleging that respondent, doing business under the names set forth in the caption, is engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations in violation of 39 U.S.C. § 3005.

Complainant alleges that respondent attracts attention to its scheme by means of advertisements which represent, directly or indirectly, in substance and effect, by affirmative statements, omissions, or implication that:

"(a) He is offering employment and furnishing free supplies to any person sending a stamped, addressed envelope who is interested in earning money at home by stuffing envelopes at a rate of $500.00 per thousand;

"(b) The envelope-stuffing programs require specific training which is contained in the so-called 'training manual';

"(c) The prospective homeworker is not required to buy stamps, envelopes, mailing list or circulars, because these items are furnished;

"(d) There are no costs or investments required of the prospective homeworker other than the price of the so-called 'training manual';

"(e) Nothing is required of the homeworker under 'Program 2' except to stuff and mail the sales material;

"(f) Under 'Program 2' the homeworker 'will receive stamps, envelopes, circulars and names free [and] will also receive $250 per thousand in advance';

"(g) As a result of the mailings made under 'Program 2' the homeworker will receive between 200 and 350 orders which will yield additional commission earnings of $600 to $1,050 for each thousand envelopes stuffed;

"(h) Under 'Program 4' the homeworker will be paid $0.50 per envelope even if no one buys anything; and

"(i) Any person who is dissatisfied with the ' training manual' will, upon application, receive a refund."

Finally, complainant alleges that the foregoing representations are false as a matter of fact.

Respondent filed an answer denying complainant's allegations.

A hearing scheduled to commence in Pittsburgh, Pennsylvania, at 9:30 A.M. on March 1, 1976 was delayed until 10:15 A.M. awaiting the appearance of respondent and his attorney. Neither having appeared by that time, although in receipt of timely notice of the hearing, the hearing was then opened and complainant began to present its evidence. Respondent's counsel finally appeared at 10:35 A.M., was given a summary of the evidence adduced to that time, and the hearing proceeded. Respondent did not personally appear at the hearing and no witnesses were called in his behalf.

Both parties were given opportunity to file proposed findings of fact and conclusions of law following the hearing. Complainant did so. Respondent, although given two extensions of time therefor which have expired, failed to file proposed findings and conclusions.

FINDINGS OF FACT

1. Attention is directed to the alleged scheme and respondent seeks money or property through the mail by means of advertisements with the following content appearing in magazines of general circulation (Exhs. C-1, C-2):

"STUFF ENVELOPES. Earn $500 per thousand. Free supplies. Send stamped addressed envelope. GOZDANOVIC, 160 Banner Way [or P.O. Box 4073], Pittsburgh, Pa. 15201."

2. Persons responding to such advertisements are sent a direct mail brochure inviting them to remit $5.50 for a "training manual." (Ex. C-3).

3. I find that respondent makes the representation alleged in subparagraph (a) of paragraph 3 of the complaint, supra, for the following reasons: Both of the classified advertisements (Exhs. C-1, C-2) represent that employment stuffing envelopes at a rate of $500.00 per thousand is being offered by respondent and that he will furnish "free supplies" to anyone sending a stamped, self-addressed envelope. This representation is repeated and amplified in the brochure (Ex. C-3) wherein respondent states: "With our program you will stuff our sales letters and others into the envelopes and mail. You are not required to buy stamps, envelopes, mailing list, or circulars. It [sic] is furnished to you."

4. I find that the second paragraph of the direct mail brochure (Ex. C-3) makes the representation alleged in subparagraph (b) of paragraph 3 of the complaint, supra.

5. I find that the first paragraph of such brochure makes the representation alleged in subparagraph (c) of paragraph 3 of the complaint, supra.

6. I find that the representation alleged in subparagraph (d) of paragraph 3 of the complaint, supra, is made indirectly or impliedly in the reference to "free supplies" made in the advertisements and in the following wording of the direct mail brochure:

"No product investment . . . you will not have to invest hundreds or perhaps thousands of dollars into products . . . there are no additional training costs . . ."

The net effect of these statements is to represent that the only cost to the prospective homeworker is for the "training manual".

7. I find that the representation that nothing is required of the homeworker under "Program 2" except to stuff and mail the sales material (complaint, par. 3, subpar. (e)) is made in the sentence of the third paragraph of the direct mail brochure which states: "All you do is stuff and mail the sales material."

8. The representation alleged in subparagraph (f) of paragraph 3 of the complaint, supra, is found in the following wording in the third paragraph of the direct mail brochure:

"With program 2 you will receive stamps, envelopes, circulars, and names free. You will also receive $250 per thousand in advance."

9. The representation alleged in subparagraph (h) of paragraph 3 of the complaint, supra, is found in the following sentence in the fourth paragraph of the direct mail brochure:

"You will instead be paid $.50 per envelope even if no one buys anything."

10. The representation that any person who is dissatisfied with the training manual will, upon application, receive a refund (complt. par. 3, subpar. (i)) is made indirectly or impliedly in the words "SATISFACTION GUARANTEED" appearing on the order coupon supplied with the direct mail brochure.

11. Contrary to the representation in his advertisements, respondent does not employ persons respond to his advertisements to stuff envelopes and he does not furnish "free supplies" to prospective homeworkers. He sells copies of his circular which can be used only if the homeworker has first placed an advertisement and has received responses to it. The only thing furnished by respondent, initially, to persons answering his advertisements (Exhs. C-1 and C-2) is a further advertisement (Ex. C-3).

12. The so-called "training manual" (Ex. C-4(a)), contrary to respondent's representation, provides no significant training in stuffing envelopes for respondent. It is, rather, more in the nature of a brochure advising the prospective homeworker of income earning possibilities which might result from placement of advertisements at his expense in various publications requesting people to send $.25 and a stamped addressed envelope for certain information.

13. I find that respondent's representation that the prospective homeworker will be furnished stamps, envelopes, mailing lists and circulars is false. When the prospective homeworker receives respondent's so-called "training manual" he finds that he must purchase from respondent the circulars to be stuffed and that stamps and envelopes will be received, if at all, only from responses to the advertisements which the prospective homeworker must place at his expense.

14. I find that respondent falsely represents that there are no costs or investments required of the prospective homeworker other than the price of the "training manual". To participate in "Program 2", described in the manual, a homeworker must invest in advertising and purchase respondent's circulars.

15. I find that respondent falsely represents that nothing is required of the prospective homeworker but to stuff and mail envelopes. The other input required is set forth in Findings of Fact Nos. 11, 12, 13, and 14, supra.

16. I find that respondent falsely represents that prospective homeworkers will receive stamps, envelopes, circulars, and names free and will also receive $250 per thousand in advance. The "training manual" discloses that stamps and envelopes will be received, if at all, only in response to advertisements for which the prospective homeworker must pay; that he must purchase circulars from respondent; that he must develop his own mailing list; and that respondent does not pay him in advance for stuffing and mailing envelopes but that payment is realized only through responses, enclosing $.25, to the above-mentioned advertisements.

17. I find that respondent, based on his own admission that after being in business at least nine months had shipped fewer than 100 "Collecting Names Manuals" (Tr. 87) as a result of orders generated by homeworkers, grossly exaggerates the potential earnings for each thousand envelopes stuffed. Based on the aforementioned admission not even one homeworker reached the represented minimum 200 orders for the "Collecting Names Manual."

18. On the evidence before me I am unable to find that respondent falsely represents that under "Program 4" homeworkers will be paid $0.50 per envelope even if no one buys anything.

19. Although the evidence is that as of September 9, 1975, respondent had "about three feet of refunds that he had not filled at that time" (Tr. 19), the record is inadequate to support a finding that respondent does not honor refund requests. It may be that refunds are not made promptly, but are made eventually.

20. I find that the representations alleged in subparagraphs (a) through (g) of paragraph 3 of the complaint are materially false in fact.

CONCLUSIONS OF LAW

1. Respondent, doing business under the various names appearing in the caption of this proceeding, is engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations within the meaning of 39 U.S.C. § 3005.

2. Respondent's advertisements make the materially false representations alleged in subparagraphs (a) through (g) of paragraph 3 of the complaint and will be so understood by the average reader. See Donaldson v. Read Magazine, 333 U.S. 178, 179 (1948).

3. Accordingly, an order pursuant to 39 U.S.C. § 3005, in the form attached, should be issued against respondent.