P.S. Docket No. 5/24

December 21, 1976 

In the Matter of the Complaint Against:

1 Appletree Square,
Post Office Box 1218,
Post Office Box 9474 at
Minneapolis, Minnesota 55440; and
Post Office Box 3539 at
St. Paul, Minnesota 55165

P.S. Docket No. 5/24

Sobernheim, Rudolf; Administrative Law Judge

Thomas A. Ziebarth, Esq.
Consumer Protection Office,
Law Department, U. S. Postal Service
Washington, D. C. 20260 for Complainant

Ian D. Volner, Esq.
Brian M. Madden, Esq.
Cohn and Marks,
1920 L Street, N.W.,
Washington, D. C. 20036 for Respondent


This is a proceeding by complainant against respondent under 39 U.S. Code 3005 which authorizes action against respondent on evidence satisfactory to the Postal Service that respondent is "engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations." Complainant alleges that respondent is engaged in such a scheme in the sale of (1) "The U.S. Mint Coin No One Has Ever Been Able to Own", (2) "The World's First Gold Stamp and Matching U.S. Coin Set" (also together referred to as "U.S. Bicentennial Coin Sets") and (3) "The Gold Nations of the World Gold Stamp Issue." Specifically, complainant in paragraph (2) of the complaint alleges that respondent through the use of advertisements (Compl. Ex. 1 and 2) makes false representations regarding the U.S. Bicentennial Coin Sets, set forth in paragraph (3)(a) to (i) of the complaint.

As to this aspect of the proceeding respondent has executed a consent agreement acceptable to complainant and on the latter's motion the portion of the proceeding relating to the U. S. Bicentennial Coin Sets was indefinitely suspended.

About one month after the docketing of the complaint complainant filed an amended complaint alleging that in respect of The Gold Nations of the World Gold Stamp Issue respondent through the use of an advertisement (Compl. Ex. 3) falsely represents, directly or indirectly, in substance and effect, whether by affirmative statements, omissions or implications:

"(h) The ... so-called postage stamps featured in the CALHOUN'S COLLECTORS SOCIETY offers are likely to increase many times in value over the original investment cost;

(i) The Staffa, Scotland gold 'stamps' are bona fide postage stamps having an official postal value of six pounds sterling and a current philatelic value of $20.00;

(j) Staffa, Scotland is a governmental entity having an official postal agency;

(k) Staffa, Scotland gold 'stamps' are collectors' items, destined to be among the rarest of all postal issues;

(l) A substantial portion of the value of the Staffa, Scotland gold 'stamps' is the intrinsic value of the gold from which they are fabricated;

(m) The purchaser of the Staffa, Scotland gold 'stamps' cannot lose money on his investment because 'an agency of Staffa, Scotland guarantees to repurchase the set five years after completion'; and

(n) The gold 'stamps' featured in the CALHOUN'S COLLECTORS SOCIETY offer enjoy royal patronage or are connected with, sanctioned by, or endorsed by the British government"; and that such representations are materially false.

Respondent's answer to the complaint, as amended, admits the solicitation of potential purchasers for the Gold Nations stamp issue by means of the aforesaid advertisement. However, respondent denies that it makes the representations set forth in paragraph 3(j), (l) and (n) of the complaint, except that it admits representing in paragraph (3)(n) of the complaint that the Gold Nations stamps are "sanctioned" by the British Government and asserts that such representation is true. Respondent admits that it makes the representations set forth in paragraph (3)(h), (i), (k) and (m) of the complaint and asserts that the same are true.

After the answer was filed complainant requested an order directing respondent to admit or deny the authenticity of certain documents copies of which accompanied the motion papers and respondent was ordered to comply with complainant's request. It does not appear that the authenticity of the documents is denied but none is in evidence (cf. T 99-100) and they are not part of the evidence on which the initial decision is based.

A hearing was held on 9 September 1976 at which the parties presented testimonial and documentary evidence. In particular, a complete set of respondent's advertising material for the Gold Nations Gold stamp issue (Compl. Ex. 3) and documentation of a test purchase made by a postal inspector through the mails (Compl. Ex. 5) were admitted in evidence. The parties also stipulated to certain facts hereinafter referred to (Stip., dtd 9 Sep. 76, pars. 3, 5, 7). Post-hearing briefs were filed by both parties.


1. Respondent Calhoun's Collectors Society, Inc. is engaged in the marketing through the mails of coins and stamps to collectors thereof.

2. One of the items offered by respondent to collectors is a set of 23 gold stamps, called "The Gold Nations of the World Gold Stamp Issue" (Compl. Ex. 3, p. 1).

3. Each stamp (Compl. Ex. 5) is 2-5/16 inches long and 1-1/4 inches high and contains the flag and another appropriate symbol of the country represented on the particular stamp (Compl. Ex. 3, Pamphl., centerfold). Each stamp also bears the legends "STAFFA-Scotland" and "Postage L 6.00 23 K GOLD". This postage is represented as "legal local postage" (Compl. Ex. 3, p. 17).

4. Each stamp is made from a thin sheet of 23 karat gold with gummed backing and contains 0.0005015 troy ounces of gold. The value of the gold content of each stamp is 5.5 cents at the gold price of $110 per ounce in early September 1976 (Stip., par. 3).

5. The stamps are designed and manufactured by or for a British company called the London and New York Stamp Company, Limited (hereinafter referred to as "L&NYS"), under an agreement with the owner of the island of Staffa (T 88). They are marketed in the United States under an exclusive sales agency agreement between L&NYS and respondent (T 98, 100).

6. The owner of the island of Staffa is sometimes referred to in respondent's advertising material as the "Laird" of Staffa but this Scottish word means solely a "landed proprietor" and does not import a title or any governmental authority or public function transcending the private ownership of land. See WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY OF THE ENGLISH LANGUAGE (Unabr., 1961), s.v. "laird", p. 1265, col. 2. The word is there shown with a small initial "l" whereas respondent in its advertisement has adopted the practice of capitalizing the word as if it were a title or designation of public office.

7. Staffa is a small and now uninhabited island off the island of Mull and the west coast of Scotland. Its basalt formations are unusual and it is the site of Fingal's cave. It is thus a place of interest to tourists and under the agreement between the owner of Staffa and L&NYS (T 92) the owner maintains a ferry service between the island of Mull and the island of Staffa during the tourist season (T 89-90, 91).

8. a. The stamps manufactured under the agreement between the owner of Staffa and L&NYS are sold by the ferryman to tourists visiting the island at the denomination which is given them.

b. These stamps can be affixed to mailable matter (letters, postcards (Resp. Ex. 10, 11) or parcels (T 111)) and mail so franked must be delivered by the owner to a nearby British post office.

c. If in addition the proper price is paid to the ferryman, he is apparently instructed to and does cause a British postage stamp to be affixed to such matter for delivery thereof to the addressee by the British postal service.

d. The post office used apparently is Aros on the island of Mull (see Resp. Ex. 10, 11).

9. The sale of the Staffa stamps to tourists for the purpose described hereinabove is permissible under British law since Staffa has no post office. The Staffa stamps do not, however, purchase mail transportation beyond delivery from Staffa to the British post office on the island of Mull. The foregoing is not contested here and accepted as true but neither party has produced the best evidence as to the facts.

10. a. The testimony of the experts of both parties and the documentary evidence adduced by respondent establish beyond a shadow of a doubt that stamps evidencing the payment of a fee ("postage") for the transportation of a piece of mail fall into two categories: postage stamps of general circulation and postage stamps valid only for the transportation of mail on a particular route or routes (Resp. Ex. 2), bridging gaps in regular service (Resp. Ex. 8).

b. The latter are known as local issues or "Locals" (Resp. Ex. 1) and are in turn subdivided into two or three classes: either governmental and private (Resp. Ex. 14, p. 2) or official, semi-official and private (Resp. Ex. 1).

c. The stamps offered for sale by respondent are British private local issue stamps. They are made up and sold by or on behalf of the owner of the island of Staffa as a private business enterprise.

d. The Staffa stamps as British private local issue stamps are part of a larger group of stamps, referred to as "Cinderella" stamps (T 33, 42), which also include such items as revenue stamps. They are not listed in standard catalogs but specialized catalogs list them.

e. They are collected by stamp collectors (T 33; Resp. Ex. 1, 2) and there is a market for them (T 48, 52; Resp. Ex. 12, 13). However, Rosen's Catalogue of British Local Stamps of late 1975 or early 1976 (Resp. Ex. 12), while listing prices for Staffa stamps, does not list any prices for the L 6 1974 Christmas and Betsy Ross stamps, the Gold Seal of the U. S. stamp of 1974 (Compl. Ex. 4) and the bicentennial gold stamp series, showing the seals of the 13 original States, also of 1974. At least in Great Britain there appears to have been no market for them as late as early 1976 (Resp. Ex. 12, pp. 106, 107).

11. The 1969 and 1975 or 1976 issues of Rosen's Catalogue (Resp. Ex. 12, 13) show that many British local issues have risen in value in that period. However, most individual stamps are priced well below $10.00 for individual stamps or pairs. Set prices reach corresponding levels with the notable exceptions of the most expensive Herm Island stamps at below $20,00 for entire sets and certain Lundy Island World War II issues (Resp. Ex. 12, p. 62 for Lundy Island; for other issued id., passim), reaching a set price of about $170.00.

12. a. Stamps are often issued in unusually high dominations of little practical value where the private or public issuers believe that such stamps would appeal to collectors (T 98, 111).

b. Gold or gold foil stamps have been issued by others besides the owner of Staffa, apparently also for collector appeal.

c. The 1974 gold stamps with the seals of the 13 original states have been sold out by respondent.

d. Twenty thousand (20,000) sets of the Gold Nations stamps will be offered for sale by respondent (Compl. Ex. 3, p. 3). By early September 1976 about 11,000 sets of the Gold Nations gold stamps had been subscribed in the United States (T 115).

e. Only about 100-200 Gold Nations stamps have been sold at Staffa (T 100).

13. Ordinary postage stamps are often issued in very large numbers and I take judicial notice of the fact that postal authorities announce that this is done to avoid the artificial creation of rarities. On the other hand, 20,000 sets of a private local issue collected by a limited number of collectors (cf. Resp. Ex. 2 and 9) represent a substantial number and that many exemplars of each stamp hardly make it one of the rarest of a rarity (T 35, 37).

14. The advertising material used by respondent to solicit customers for the Gold Nations of the World Gold Stamps set consists of the following:

a. (1) A four-page letter to collectors (Compl. Ex. 3, pp. 2-5), signed by respondent's president, stating on the first page and in prominent position in blue capital letters:




(2) Again in discussing the artistic merit of the Gold Nations stamps the letter states:

"Yet the Gold Nations Stamp Issue, like proof sets of gold coins, is much more than art alone. It is a premium issue in gold. An official issue of Staffa Scotland, the collection is made in the manner of embossed emblems and gold seals for the Queen." and a few paragraphs later the stamps are identified as a "British local island issue" and described as follows:

"And contrary to commemorative medallions and ingots which have no official standing at all, the Gold Nations Stamps are a genuine British local island issue, authorized by the Laird of Staffa Scotland, an island with 1100 years of history. Like the Herm Island Pigeon Post and Lundy Island local issues -- whose values have soared five times or more in the past five years -- you could actually use a Gold Nations Stamp to mail a letter or parcel to the mainland. For, in addition to their value as a rare collector's item, each bears a postal value of L 6 into the bargain]"

n regard to value, rarity and future increase in value of the stamps the letter to collectors not only contains the language quoted in subparagraph (a)(2) but other words to similar effect:

"As such, THE GOLD NATIONS OF THE WORLD GOLD STAMP ISSUE -- like the works King Ferdinand sought four centuries ago -- is a treasure of great rarity. And if history is to be a guideline, we believe the Staffa Scotland Gold Nations Issue to present a superior opportunity for the alert collector. For it combines the allure of precious gold, original works or art and that of limited edition rare stamps all in one."

and further

"Sixteen million people in America alone avidly collect postage stamps. Yet of these many million collectors, only a few can ever enter into the exclusive realm of rare postage stamps. These are the issues which -- through age or the very limited quantity available -- come to command ever increasing prices in the marketplace. It is the law of supply and demand. This being the case for rare postage stamps printed on paper, you can well image the clamor in the stamp world for those that have the beauty of 23k gold as well]

A rare collectible of beautiful gold is an opportunity not to be missed

Fine art, rare books, antiques and other items that hobbyists have collected because of their beauty have often, to the delight and even surprise of their owners, gone up in value. And two collectibles that have gone to extraordinary heights in recent years are rare stamps and gold. Since the GOLD NATIONS OF THE WORLD GOLD STAMP ISSUE combines the value of rare stamps with that of gold, it may well prove to be a more rewarding collectible than either one alone.

Of course, the value and attraction of a rare postage stamp does not depend solely on the material of which it is made. Most are printed on ordinary paper, yet still may command enormous prices. The uniqueness of the stamp, its subject matter and artistic merit are just a few of the elements be-rarity that make a stamp a highly desirable collectible."

* * *

"To enhance the value even further, the edition will be limited to precisely the number of collectors who reply by the final expiration date. In no event, however, will more than 20,000 sets be issued. Once this maximum number is met, the dies will be immediately destroyed in the presence of an officer of Calhoun's Collectors Society, sole U.S. agents for this offering of the British issuing agency. The issue will then be closed forever. Their rarity is thus guaranteed."

(4) As a further inducement to potential purchasers the letter contains the following promise of repayment if purchasers for any reason desire to liquidate their investment:


You cannot lose. If for any reason 5 years after completion of your set you should decide to liquidate your investment, the official postal agency of Staffa Scotland guarantees to buy back the issue, provided it is complete and in good condition, for every cent of the purchase price. Calhoun's Collectors Society, Inc. will handle the transaction for you if you wish, and the repurchase price will be sent to you directly from Great Britain by official check."

b. Enclosed with this letter are a recommendation of respondent's trustworthiness, signed by the president of the National Bank of Minnetonka, an order blank (Compl. Ex. 3, p. 1) and a return envelope. The order blank describes the Gold Nations stamps as "rare collector's postage" and contains a repurchase guarantee phrased somewhat differently from that stated in the letter in that the check for the repurchase price is no longer called "official". The guarantee reads as follows:


The postal agency of Staffa Scotland guarantees to repurchase your set of Gold Nations Stamps, if you wish, at the original price five years after its completion, provided the set is whole and in good condition. Calhoun's Collectors Society, Inc. will handle the transaction for you upon your request, and a check will be sent directly from Great Britain."

c. Finally respondent's advertising package includes a pamphlet on glossy paper, 7 by 9-1/2 inches in size and 13 pages long (Compl. Ex. 3, pp. 6 to 18) excluding the centerfold color pictures of all the stamps.

(1) The title page shows on top the legend "An official philatelic offering of STAFFA SCOTLAND" between pictures of the coat of arms of Staffa and of Queen Elizabeth II and in the title page text the stamps are identified as "a major opportunity for collectors of rarities and precious metals" with an "edition ... limited to 20,000 sets" and a "five-year repurchase guarantee ... by the postal agency of Staffa Scotland itself."

(2) The stamps themselves are several times stated to be "an official British local island issue" (Compl. Ex. 3, p. 9), "an official local issue of the fabled island of Staffa Scotland" (id., p. 17) and "British local island stamps" (id., p. 16).

(3) On the inside there is a double-spread in color with pictures of die-striking equipment and a text referring to the Gold Nations stamps as "destined to be among the very rarest of all postal issues" limited to a "numbered edition not to exceed 20,000 sets." (Compl. Ex. 3, p. 7).

(4) The pamphlet continues to emphasize the value of the Gold Nations Stamps as a rarity and an investment which will not only confer prestige upon and give pleasure to the purchaser but will increase greatly in value with time.

(i) Thus, respondent states (Compl. Ex. 3, p. 9):

"... we believe the Gold Nations Of The World Gold Stamp Issue presents a superior opportunity for the alert collector." and continues (ibid.):

"The Gold Nations Stamps are not only gold, they are treasures of history and art as well. It is little wonder that they exert such fascination for serious collectors -- who value rarity and beauty above all else.

"Yet all it costs for an acquisition of such unique desirability is just $20 a stamp. This is the very lowest cost we know of for an item that contains the allure of gold and the collector's value of a rare postage stamp both.

"Yet though the price is low, your money is secure. An agency of Staffa Scotland itself guarantees in writing to repurchase your set five years after completion, if you wish, at the original price you paid. You therefore cannot lose."

(ii) The foregoing encomium is concluded at the top of the following page with the following sentence in heavy and large black lettering for emphasis (Compl. Ex. 3, p. 10):

"A doubly desirable acquisition that combines two major collectibles in one. ... And as more and more collectors seek out an ever limited supply, prices react accordingly."

(iii) After a more general discussion of stamp collecting and gold stamps (Compl. Ex. 3, p. 11; see also id., p. 14) in which it is pointed out that the prior bicentennial Staffa Scotland gold stamp issue "is available in the after-market only from dealers or collectors at whatever price the traffic will bear" (Compl. Ex. 3, p. 11), the theme of future appreciation and gain from a sale of the stamp is resumed with heavy typographic emphasis (Compl. Ex. 3, p. 11):

"An unusually sensible way to participate in the surging market for limited editions and gold...because it is a collection of positive, proven interest." and is explicated in the immediately following paragraphs:

"Ordinarily when one pays so little for a collectible, it is because one is buying an unknown -- a 'pig in a poke' so to speak, which may or may not turn out to be equally desirable to other collectors.

Not so with THE GOLD NATIONS OF THE WORLD GOLD STAMP ISSUE, however. Its predecessor -- the only other gold stamp series ever issued -- was a resounding success, with many thousands of collectors scrambling to acquire the limited number available.

These experienced men and women were quick to realize the advantages of a collectible that united rate postage stamps and gold.

Both gold and selected rare postage stamps have soared in value over the past five years -- 400% and even more. Both are traditionally turned to by investors in time of economic and political turmoil. Both are portable and very private forms of wealth"

(iv) As if to cap this explication, the pamphlet continues three pages later (Compl. Ex. 3, p. 14);

"Right now, there are approximately 16,000,000 collectors in the United States alone, with millions more worldwide. And the number is growing every day, encouraged as well by the U.S. Postal Service. Many collectors have seen the value of selected rare stamps soar 400% and more. With such being the case for stamps printed on paper, you can readily understand the attraction of rare stamps that have the unique attraction of gold as well." and continues on the next page (Compl. Ex. 3, p. 15):

"It is when gold is worked into rare objets d'art that it commands a price higher than that of the raw metal alone. It is the craftsmanship and artistry that adds to the value, of course -- at the time of purchase and in the proceeds received on the after-market as well. The value of a postage stamp is determined by its postage value as set forth by the Postal Authority and/or its desirability by collectors -- not just the material it is composed of." and again (ibid.):

"... most collectors consider themselves amply rewarded by the enthralling hobby of stamp collecting.

However, it would be senseless to ignore the fact that there is definite potential in collecting rare stamps."

* * *

"In effect, The Gold Nations Of The World Gold Stamp Issue is both a philatelic treasure and a limited edition art object. Its importance to collectors is thus doubled."

(v) But if the purchasers have not caught the point, they are informed one page further on (Compl. Ex. 3, p. 16) that:

" i n the past few years alone, such other British local island issues as the Herm Island Pigeon Post and Lundy Island issues have skyrocketed from five to ten times in value. Staffa Scotland stamps, too, are a British local island issue -- with the bonus value of 23k gold]"

(vi) Respondent, however, provides between its reference to soaring prices of 400% and a hinted-at market of 16 million American stamp collectors (Compl. Ex. 3, p. 14), its references to the value of the stamps as an art object and stamps in one (Compl. Ex. 3, p. 15) as well as the "definite potential" in collecting rare stamps (ibid.) and the skyrocketing prices of Herm and Lundy Island stamps (Compl. Ex. 3, p. 16) a brief warning that price rises for the Gold Nations stamps are not guaranteed by respondent. The paragraph, set off with a rhetorical question in blue color, states (Compl. Ex. 3, p. 15):

"Should a stamp collection be acquired purely as an investment or for its gold content?

We think not. No one can guarantee that you will make money from any investment. Your stock broker cannot. Not even your banker can guarantee that the interest he adds to your account will be more than the amount inflation will eat away from it each year. And if it is just raw gold you want, it is obvious that plain bars of bullion, formed in a foundry, will give you more gold per dollar spent."

(5) The remainder of the pamphlet deals with the "Official Collectors Album", a Certificate of Authenticity to be issued by the "Laird of Staffa" to the purchaser of this "official issue of Staffa Scotland" (Compl. Ex. 3, p. 16), and the repurchase guaranty, stated in the following terms (Compl. Ex. 3, p. 18):


The Gold Nations Of The World Gold Stamp Issue is the perfect financial placement in that you cannot lose. For indeed, if after owning your completed Collection for five years you should for any reason wish to dispose of it, the official postal agency of Staffa Scotland will buy it back from you for every cent of the price you paid, provided only that the set is complete and in good condition."

This statement omits any reference to the manner in which the repurchase price will be paid.

15. a. Respondent mails the Gold Nations gold stamps to purchasers together with a letter (Compl. Ex. 5) congratulating the collector (purchaser) upon "acquiring rare art objects" and the "secure feeling of owning precious gold" which are said to have appealed to man as a collector for thousands of years. The letter then refers to the Gold Nations series as "one of the most limited editions of commemorative stamps" followed immediately by references to 400% price increases of "selected" rare stamps and the quadrupling of gold value over the past five years (id., ltr, 3rd and 4th pars.). It also points out that those who subscribe too late will have to buy in the "aftermarket" at "whatever price the traffic will bear." Respondent states that it "expect s " that there will be "quite a few persons eager to do so" and that its "collectors have found out to their great delight" that the stamps represented "an art form that is highly in demand."

b. The letter includes the United States stamp of the series, a bill for the No. 2 (Netherlands) stamp and a green slip entitled "NO RISK 100% REPURCHASE GUARANTEE" which is couched in the same terms as the statement in the pamphlet (Compl. Ex. 3, p. 18; FF No. 14c(5), supra) and omits the reference to the mode of repayment found in the initial order blank (Compl. Ex. 3, p. 1).

16. The U. S. Bicentennial Coin sets include a L 6 Staffa Scotland gold stamp (see Compl. Ex. 4) which, as far as the record shows, is not sold independently. Mutatis mutandis this stamp does not differ in the characteristics and status relevant to this proceeding from the Gold Nations stamps. Accordingly, the ultimate findings of fact made in paragraph 17 below, would apply to it. Any representation found to be false as a matter of fact in respect of the Gold Nations stamps would also be false in respect of the gold stamp which forms part of the "U.S. Bicentennial Coin Sets." However, in the light of the parties' consent agreement no further findings on this stamp are required at this time.

17. Based on the detailed findings of fact made above and the record as a whole, I find:

a. (i) Respondent admits making the representations alleged in paragraph 2(i) of the amended complaint but the advertising material itself does not state that each Gold Nations stamp has a philatelic value of $20.00. Rather, it states that the cost of each stamp is $20.00 and clearly this means cost to the buyer. This statement is indisputably correct and carries in itself no connotation of value.

(ii) The Gold Nations stamps are a so-called British private local issue with a very limited but legitimate postal function and can in good faith be described as postage stamps.

(iii) The representations found to have been made by respondent, as alleged in paragraph (3)(i) of the complaint, are not false.

b. (i) Respondent's denial that it represents that a substantial portion of the value of the Gold Nations stamps is in the value of the gold from which they are fabricated (Compl., par. (3)(1)) is correct. While respondent's advertising material extensively refers to the lure and attractiveness of gold as a material for all manner of artifacts, including stamps, it is the attractiveness of the material and the skill with which it is said to have been worked into stamps rather than the tiny amount thereof in each stamp which is said to enhance the value of the stamps as a collectors' item.

(ii) Respondent does not make the representations charged in paragraph (3)(1) of the complaint.

c. (i) The fact that the picture of Queen Elizabeth II and references to her interest in stamp collecting appear in the pamphlet which is part of respondent's advertising material does not amount to an assertion, even indirect, that the Gold Nations stamps enjoy the patronage of the Queen and even less that such stamps are connected with or sanctioned or endorsed by the British Government.

(ii) Neither party has adduced any direct proof as to the statute, regulations or administrative procedures under which British local issues can be issued. The existence of such catalogues as Rosen's (Resp. Ex. 12, 13) and the affidavit of a British stamp expert (Resp. Ex. 14) indicate that such local stamps have been issued for over 45 years and are apparently traded without let or hindrance by the British Government. The record is insufficient to establish the basis for such issuance except in most general terms and respondent's advertising material makes neither directly or indirectly a false factual representation in that respect.

(iii) Respondent does not make the representation charged to it in paragraph 3(n) of the complaint.

d. Respondent, while admitting that it has stated that Staffa Scotland has an official postal agency, has denied that it represents that Staffa Scotland is a "governmental entity" as alleged in paragraph (3)(j) of the complaint.

(i) Respondent throughout its advertising material has described the Gold Nations gold stamps as an "official issue of Staffa Scotland" (see e.g. Compl. Ex. 3, p. 2, at the top of its letter to purchasers) and has referred in the repurchase offer contained in its advertising material to "the official postal agency of Staffa Scotland" as making the repurchase if a purchaser desires to resell after having held the complete series for five years.

(ii) The word "official" has, of course, many meanings and often means no more, when qualifying some action, than that such action is being taken by a person authorized to act whether the authority arrangement be a governmental or private one. Nevertheless, the use of the word "official" in ordinary speech conjures up the vision of a state, governmental or other public authority quality of the matter referred to as "official."

(iii) Here the use of the word "official" must be viewed against the background of the item offered to the potential purchasers who are solicited. This item is a set of private British local stamps of an unusually high denomination, issued by the private landowner who owns the island of Staffa and for whom the stamps are manufactured under contract with a stamp dealer (L&NYS), located in the London (England) area. To see the Gold Nations stamps described as such may not appeal to many of those who receive respondent's advertising material.

(iv) Appellant obviously has chosen language in referring to the Gold Nations gold stamps, to the role of L&NYS in their issuance and to the owner of the island of Staffa which seemingly enhances their status beyond that of persons engaged in a private enterprise undertaken to make a profit.

(v) Thus the private owner of the said island is referred to as the "Laird", printed with an initial capital letter, as if this word were a title or represented some public authority upon the person so referred to.

(vi) Similarly, the reference to "the official postal agency of Staffa Scotland" conveys the picture of a public agency in the minds of the ordinary reader, having an institutional permanence and status. Clearly, it misleads when the underlying reality is a contractual relationship between a private landowner and a stamp dealer which can be terminated on its terms or breached by either side at any time, subject simply to payment of such damages as may have been suffered by the other party.

(vii) In the same light the repeated emphasis on the "official" character of the Gold Nations gold stamps will not be read by the ordinary reader as meaning that the private owner of the island of Staffa approves of their issuance under a contract with a private party. It will be read as affirming a public authority for the issuance of these stamps by a governmental entity called or located on Staffa Scotland.

(viii) The fact that the Gold Nations stamps are a "private" issue is never mentioned as such.

(ix) The foregoing appears to be the more so the meaning which the ordinary reader will glean from the advertising material mailed by respondent as British local stamp issues are divided into government (or semi-official) and private issues. Repeated use of the word "official" in connection with the Gold Nations stamps reinforces the impression created in the minds of ordinary readers that these stamps are issued by a governmental entity connected with Staffa Scotland. In fact, Staffa Scotland is privately-owned, uninhabited land without any governmental attributes.

(x) Respondent's representations, as charged in paragraph (3)(j) of the complaint, are false.

e. (i) For the reasons set forth in the foregoing subparagraph (d) respondent's admitted representation that a purchaser is protected against loss because the official postal agency or an "agency" of Staffa Scotland will repurchase his or her set of Gold Nations gold stamps for the purchase price therefor is also false, as charged in paragraph (3)(m) of the complaint.

(ii) For there exists no official postal agency of Staffa Scotland to make a repurchase. There exists merely an owner of Staffa, a private firm which under contract with him provides Staffa stamps and an American distributor under contract with the private firm. None of these individuals or legal entities can be properly described as an "official postal agency of Staffa Scotland" or as an "agency of Staffa Scotland." For Staffa Scotland is neither a governmental entity as the first phrase suggests nor an entity of any other kind capable of having an agent.

f. (i) Respondent admits that it makes the allegations that the Staffa Gold stamps are collectors' items destined to be among the rarest of all postal issues but asserts that in proper context these representations are true.

(ii) The Gold Nations stamps are issued in 20,000 sets which for a private British local issue would appear a very large number. It is large even if losses of exemplars from use, lack of care etc., are considered.

(iii) This seems especially true when it is considered that they are private British local stamps which are collected only by specialized collectors and have gained increased popularity only in recent years.

(iv) Accordingly, respondent's representation of rarity, as charged in paragraph (3)(k) of the complaint, is not grounded in fact in the context in which these stamps are issued and is false.

g. Respondent admits that it represents that the Gold Nations stamps offered by it are likely to increase many times in value over the original investment cost but asserts that these representations are properly qualified in its advertising material and, as so qualified, are true.

(i) As found in Finding of Fact No. 14 and set forth in complainant's exhibit 3, respondent's advertising material places great emphasis on the purchase of the Gold Nations stamps as an opportunity for investment and future gain from sale at a multiple of the purchase price.

(ii) The constant repetition of this theme in several variants throughout its advertising material cannot but create in the mind of the ordinary readers the impression that after some wait future profit is well-nigh assured, given the times of rising values for "collectibles" in which we live. Indeed a figure of 400% increase in value is prominently mentioned (Compl. Ex. 3, p. 14). If applied to the $460 cost of the set (without shipping costs) the reader is led to expect a price rise to perhaps $1,800 or more.

(iii) Current prices for British private local issues, as represented by respondent's exhibits 4 and 12, generally quote modest prices, well below $10.00 for individual stamps, pairs or sets of such issues. Even prices for the most expensive Herm Island individual stamp or sets hardly reach $20.00. The only exception which the record shows are the Lundy Island World War II stamps but even the most expensive 8-stamp set of 1940, carries a price of only L 100 or about $170.00 (Resp. Ex. 12, p. 62).

(iv) Moreover, the Staffa Island L 6 gold stamps of 1974 (Christmas Doves, Betsy Ross, Seal of U.S.) and of 1974-5 (Seals of the 13 original U.S. States) carry no price quotation either used or unused (id., pp. 106-107).

(v) Such data do not justify the forecast of large price gains which respondent makes for the Gold Nations stamps.

(vi) Nor are respondent's representations qualified in such a way that an ordinary reader is made fully aware that in purchasing the Gold Nations stamps there is a substantial uncertainty as to whether these particular stamps will achieve either an ongoing market value or a high rate of gain over a few years.

(vii) Respondent's qualifying statement in its advertising pamphlet appears only toward the end thereof and is preceded and followed by glowing statements emphasizing well-nigh assured high gains, such as 400% rises in value and the senselessness of ignoring the stamps' investment potential.

(viii) The warning, thus deprived of most of its attention-drawing emphasis, is in itself rather attenuated. It starts with the question of whether a stamp collection should be acquired "purely" as an investment or for its "gold content" and answers the question in the negative. "Purely" qualifies the entire passage making it clear that "investment" remains of great importance. Inability of stock brokers or bankers to guarantee profit from financial investments is then mentioned and the reader advised to buy bullion if he wishes to invest in gold as a commodity only and not in a rare object d'art of gold (Compl. Ex. 3 (pamphlet), p. 15 at top).

(ix) Such carefully limited language relating in part to the buying of gold as such and emphasizing simultaneously the value of the stamps as an object of artistic craftsmanship is far from sufficient to overcome in the mind of the ordinary reader the effect of respondent's hard-sell, urging purchase of the stamps as an investment for nearly sure future profit.

(x) Respondent's representations, as charged in paragraph (3)(h) of the complaint, are false in fact.

18. The representations made by respondent found to be false are also materially false for the false representations related to the so-called official nature of the gold nations stamps and their rarity and future increase in value concern the essential qualities on the basis of which respondent's sales appeal is made.


1. Respondent is 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. The falsity of the representations made by respondent and found to be false as a matter of fact is apparent when its advertising material is read as a whole and the impression which it will make on the ordinary reader is kept in mind. Donaldson v. Read Magazine, 333 U.S. 178, 188 (1948). Even though particular statements of respondent, when read in isolation or parsed with extreme care, may be literally true, the entire advertising material may still convey a false impression of what is represented especially through omission and ambiguity. See F.T.C. v. Sterling Drug, Inc., 317 F.2d 669, 675 (2d Cir., 1963).

3. The foregoing is true of respondent's representations regarding the official nature, rarity and future increases in the value of the Gold Nations stamps which have been found false. The use of ambiguous words to describe the Staffa Gold Nations stamps, such as the word "official", or of countervailing comment wholly insufficient to overcome the thrust of respondent's selling points in regard to rarity and future value, serves to create a false impression in the potential purchaser's mind that he is offered stamps issued by a governmental entity of some kind and which are well-nigh assured to rise in value, barring an unanticipated complete reversal in the economic trends on which the forecast is based.

4. Accordingly, as a matter of law, the representations made by respondent and charged as materially false in paragraph (3)(h), (j), (k) and (m) of the complaint, are materially false in violation of 39 U.S.C. 3005. The representations made by respondent and charged as materially false in paragraph (3)(i), (l) and (n) of the complaint, are not false in violation of 39 U.S.C. 3005. As to the meaning of "materiality" see F.T.C. v. Colgate Palmolive Co., 380 U.S. 374, 387 (1965) which treats as material any fact which in effect induces the purchaser to buy.

5. The cases cited by respondent do not require findings of fact or conclusions of law contrary to those set forth hereinabove.

a. As to the use of the word "official" respondent here created the very ambiguity, resulting in misleading the reader, which the Sterling Drug opinion condemns. Loc. cit., supra, at p. 675. Nor does respondent's advertising material contain a true statement as did Sterling Drug's (i.e. of Government support for a medical research team) to which greater weight is charged by complainant than it can bear. Here, a word of multiple meanings is used to convey as a matter of fact the impression of governmental status which lacks all basis. Such misrepresentation is in no way countered by F.T.C. v. Sterling Drug, Inc., supra. Wyatt Earp Enterprises, Inc. v. Sackman, Inc., 157 F. Supp. 621 (S.D. N.Y., 1958), also cited by respondent, is an unfair competition case in which plaintiff charged that defendant passed off its good as those of plaintiff, among other things by referring to the playsuits which it sold as the "Wyatt Earp official outfit." The court found that such language was intended to identify defendant's "Wyatt Earp" playsuits with plaintiff's Wyatt Earp television program. (As the court said (157 F. Supp. at p. 625):

"Unless the word 'official' is passed over as sheer gibberish the idea of sponsorship is inescapably implied."

t would not be appropriate here to pass over respondent's use of the word "official" as sheer gibberish. It inescapably implies on the facts of this case governmental status for Staffa and its so-called official postal agency and nothing in the decisions cited or the arguments presented justifies a different conclusion.

b. The decisions cited to support respondent's assertion that its statements on the rarity of the Gold Nations gold stamps and their future increase in value do not exceed permissible limits of puffing and disclose the facts sufficiently so as not to mislead or deceive have little bearing on the issues presented in this proceeding.

(i) One may well agree that the mere use of the word "prevent" does not promise "prevent forever." But the problem here is not the impact of a single word, be it "prevent" or "destined" (Resp. Br., p. 18). For the word "destined" is used in the phrase "destined to be among the rarest of postal issues." (Resp. Br., p. 12) and clearly makes a promise which the known facts found previously do not justify. Such precise and specific assertion exceeds the bounds set, for instance, in In re Better Living, 54 F.T.C. 648 (1957), aff'd Better Living Co. v. FTC, 259 F.2d 271 (D.C. Cir., 1958). The representation of rarity here is not general puffing but the representation of a specific feature in the Gold Nations stamps which induces and in the purchaser's eyes is supposed to justify their purchase. Thus the broad dictum in Carlay Co. v. F.T.C., 153 F.2d 493, 496 (7th Cir., 1946) has no application here.

(ii) One may also agree that where facts or events are shrouded in uncertainty prediction of the future, accompanied by disclosure of countervailing factors, may not exceed in a particular case the bounds of proper advertising. See Carlay Co. v. F.T.C., supra. But, as the Findings of Fact here disclose, one very vice of respondent's advertising material is that the disclosure of factors showing risk in the investment in Staffa Scotland Gold Nations stamps is so internally qualified and so surrounded by strongly affirmative and seductive statements about future increases in value as to deprive respondent's warning statement of all impact on the mind of the reader. The determinative overall impression of respondent's representations on the mind of the reader remains one of well-nigh certain and substantial increases in price with only their actual extent as yet unknown.

(iii) Tractor Training Service Co. v. F.T.C., 227 F.2d 420 (9th Cir., 1955) upholds an F.T.C. order which found false statements of future employability and earnings made in advertising training courses. It does not support respondent's position.

6. Accordingly, an order in the form attached, as provided under 39 U.S.C. 3005, should be issued.