In the Matter of the Complaint Against:

SPACE ADVERTISING AGENCY, INC., and/or
ACCOUNTING DEPARTMENT, and/or
INTERNATIONAL NEWSPAPER AGENCY, and/or
AMERICAN VETERAN, and/or LABOR NEWS,
1845 South Elena Avenue, 4th Floor at
Redondo Beach, California 90277;

and

NEGRO-AMERICAN ADVERTISER, and/or
NATIONAL HERALD-DISPATCH AGENCY,
6200 Wilshire Boulevard, Suite 903 at
Los Angeles, California 90018;

and

EL MEXICANO AGENCY,
P.O. Box "T" at
Rancho Palos Verdes, California 90274;

and

NEGRO NEWSPAPER GROUP, and/or
SPACE ADVERTISING AGENCY, INC., and/or
VETERAN AMERICAN PAGE,
6000 Sunset Boulevard, Suite 209 at
Los Angeles, California 90028;

and

EL MEXICANO ASSOCIATES,
P.O. Box 1221 at
Torrance, California 90505;

and

SEBCO AGENCY,
1023 North Vermont Avenue at
Los Angeles, California 90029;

and

NATIONAL NEGRO PRESS AGENCY,
10817-1/2 Central Avenue at
Los Angeles, California 90059;

and

MEX-AM COMMUNITY PAGE,
36 14th Street at
Hermosa Beach, California 90254;

and

LA PRENSA POPULAR AGENCY,
1431 West Jefferson Boulevard at
Los Angeles, California 90007;

and

AMERICAN VETERAN,
P.O. Box "T" at
Palos Verdes Peninsula, California 90274;

and

MINORITY VIEWPOINT AGENCY,
5710 West Manchester Avenue at
Los Angeles, California 90045;

and

ACCOUNTS RECEIVABLE,
1312 North Avalon Boulevard, Suite C at
Wilmington, California 90744;

and

MINORITY VIEWPOINT AGENCY,
12333 Washington Street at
Los Angeles, California 90066;

and

LOS ANGELES HERALD-DISPATCH,
1433 West Jefferson Boulevard at
Los Angeles, California 90007;

and

UNITED CLERICAL SERVICE,
#3 Malaga Cove Plaza, Suite 201 at
Palos Verdes Estates, California 90274;

and

UNITED CLERICAL SERVICE,
11633 S. Hawthorne Boulevard, Suite 102 at
Hawthorne, California 90250

P.S. Docket No. 4/64

03/02/76

Grant, Quentin E., Administrative Law Judge

Lee H. Harter, Esq.
Law Department
United States Postal Service
Washington, D.C., for Complainant

Herbert E. Selwyn, Esq.
Selwyn & Capalbo, Los Angeles, California,
for Respondents except Los Angeles Herald-Dispatch

Before: Quentin E. Grant, Administrative Law Judge

INITIAL DECISION

This proceeding was initiated on August 29, 1975, when the Consumer Protection Office of the Law Department of the United States Postal Service, the complainant, filed a complaint alleging that the first ten respondents named in the caption are engaged in a scheme or device to obtain money or property through the mail by means of false representations in violation of 39 U.S.C. § 3005. The other respondents named were added by numerous orders issued in the course of the proceeding.

The scheme alleged may be summarized as the sending of letters, invoices, statements and confirmations, through the mails to various business and institutional addresses; that by means of said documents, respondents represent in substance and effect: (a) that the addressee thereof has a bona fide indebtedness to one of the respondents for advertising services performed with the prior consent of the addressee; (b) that a person associated with the addressee has knowingly authorized such respondent to place the advertising and bill the addressee; (c) that respondents' materials labeled "confirmation" are bona fide confirmations of advertising previously authorized by the addressees; (d) that the aforesaid representations are materially false as a matter of fact.

Complainant and all respondents except Los Angeles Herald-Dispatch appeared by counsel at a hearing held in Los Angeles, California on November 12, 13 and 14, 1975 and presented testimony and other evidence.

FINDINGS OF FACT

1. Respondents, except Los Angeles Herald-Dispatch and United Clerical Service, are engaged in the business of soliciting and placing orders for advertising in various newspapers in the Los Angeles area and charge fees for advertising so placed.

2. The respondents, except Los Angeles Herald-Dispatch and United Clerical Service, are duly registered d/b/a's of respondent Space Advertising Agency, Inc., or otherwise names under which said respondent conducted its business. In the conduct of such business, respondents send letters, invoices, statements and confirmations of advertising services to various business and institutional addressees, often accompanied by reply envelopes furnished for the purpose of obtaining payment through the mails for services rendered (Complt. Par. I; Answer Par. I).

3. By means of said letters, invoices, statements, confirmations or other similar material, respondents obtain money through the mails (Complt. Par. III; Answer Par. I).

4. Through testimony and other evidence received at the hearing complainant proved that eleven different business and institutional addressees had received from one or more of the respondents invoices or invoice-like documents or letters indicating that certain advertising referred to therein had been authorized by the recipient firm and demanding payment therefor.

5. No authorized representative of any of the eleven addressees above referred to had contracted with respondents, or any of them, or in any other manner authorized the services reflected in such documents.

6. The record is short of any substantial evidence concerning the involvement of Los Angeles Herald-Dispatch in the scheme or device alleged in the complaint and its relationship to other respondents. It does appear, however, that the Los Angeles Herald-Dispatch is not a d/b/a of any of the other respondents, is a regularly published newspaper, and that the property at 1433 West Jefferson Boulevard, Los Angeles, California is owned by such newspaper or the owners thereof (Tr. 11).

7. United Clerical Service has been employed under oral agreement by respondent Space Advertising Agency, Inc. to collect accounts receivable, to pay the debts of such respondent and, in general, to preside over the liquidation of said respondent (Tr. 15, 16, 344, 345). It does not solicit new clients or business (Tr. 16).

8. Hereinafter the word respondents, unless otherwise indicated, will include all respondents except Los Angeles Herald-Dispatch and United Clerical Service.

9. For the five-year period preceding the hearing, respondents placed advertisements for approximately 150,000 individual customers. Some of these customers gave repeated authorizations for the placement of advertising (Tr. 306, 307).

10. From 2 to 4 percent of the total volume of business involved claims by customers billed that they had not authorized the advertising for which they had been billed (Tr. 309, 310).

11. Respondents' business is generated predominately by telephone solicitations made by employees in the sales department. Pursuant to respondents' policy of insuring the soundness and validity of sales, for each sale reported by a salesperson immediate telephonic confirmation is sought by the sales manager or other designated employee. If confirmation is not obtained, the sales order is either destroyed or marked "no good." If telephonic confirmation is obtained, it is followed by written confirmation. Approximately two weeks thereafter, during which time the client may cancel the order, the advertisement authorized is placed and the client is billed in due course (Tr. 299-304; 559, 560).

12. The number of sales persons fluctuated from 10 to 15. At one time sales personnel, including the sales manager, were compensated by commissions on sales. It was discovered, however, that this resulted in an unsatisfactorily high rate of unconfirmed or cancelled advertisements. Thereafter, and during most of the year 1975, the sales manager was paid a fixed salary and other sales personnel were paid by the hour rather than by commission on sales (Tr. 321, 322, 589, 590).

13. It is not the policy or practice of respondents to bill for services not authorized or to attempt to collect twice for the same service. Occasionally, however, this did occur. In such cases respondents as a matter of policy, when satisfied that such an error had been made, would cancel the bill (Tr. 462-464).

14. A former employee of respondents named David Bayless was produced as a witness by complainant. Bayless had been a telephone solicitor and, for a short time, sales manager for respondents. He testified, among other things, that about one percent of respondents' business was generated by telephone solicitations and the remaining ninety-nine percent was generated by the "lifting" of ads from other publications, having them printed and then billing and rebilling business addressees who had not authorized such services (Tr. 405).

15. According to other evidence in the record, Bayless had an unsatisfactory employment record with respondents and left their employ following a heated argument with respondents' president Michael Lasky, during which Bayless threatened to make damaging reports concerning respondents' business activities to various federal and local agencies unless he was paid the sum of $10,000 to $15,000 in cash immediately. I find that although Bayless may have been owed some amount of money for services rendered respondents at the time of this argument, such amount was substantially less than the amount he demanded.

16. Many of Bayless' sales during the period he served as a telephone solicitor were unauthorized and were not detected as such in the confirmation process described above because Bayless had arranged with another employee to exempt Bayless' sales from that process (Tr. 604-607).

17. Based on observation of the witness Bayless and evidence given by and concerning him, I find his testimony to be largely incredible.

CONCLUSIONS OF LAW

1. Although complainant proved that respondents billed a small number of business enterprises for services they had not authorized, on the basis of all the credible evidence in the record I am unable to conclude that such billings reflected a scheme, device, or policy of respondents to collect or attempt to collect moneys for services not authorized. I conclude that such billings were either the result of error or the unauthorized actions of employees of respondents inconsistent with respondents' policy of performing and billing for only properly authorized services.

2. Complainant has failed to prove by a preponderance of the credible evidence that respondents are engaged in 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 as alleged in the complaint.

3. Accordingly, the complaint is dismissed.