In the Matter of the Complaint Against:

JOHN C. ROCHE d/b/a DAN POTTER INSURANCE AGENCY,
582 Columbia Rd.,
Dorchester, MA 02125

and

DAN POTTER INSURANCE AGENCY,
340 Waverly St.,
Framingham, MA 01701

and

DAN POTTER INSURANCE AGENCY,
1985 Columbus Ave.,
Roxbury, MA 02119

and

DAN POTTER INSURANCE AGENCY,
1671 Blue Hill Ave.,
Mattapan, MA 02126

and

DAN POTTER INSURANCE AGENCY,
241 Washington St.,
Brookline Village, MA 02147

and

KANE/ROBINSON INSURANCE AGENCY,
219 Central St.,
Lowell, MA 01852

and

HUB/KORITZ INSURANCE AGENCY,
396 Washington St.,
Brighton, MA 02135

and

MALDEN SQUARE INSURANCE AGENCY,
211 Middlesex Ave.,
Medford, MA 02155

and

JOHN C. ROCHE INSURANCE AGENCY,
1070 River St.,
Hyde Park, MA 02136

and

JOHN C. ROCHE INSURANCE AGENCY,
664 Pleasant St.,
New Bedford, MA 02740

and

JOHN C. ROCHE INSURANCE AGENCY,
135 Chelsea St.,
East Boston, MA 02128

and

JOHN C. ROCHE INSURANCE AGENCY,
15 Main St.,
Watertown, MA 02172

and

UNIVERSAL PREMIUM FINANCE CO.,
18 Tremont St.,
Boston, MA 02108

P.S. Docket No. 5/112

04/27/77

Grant, Quentin E.; Administrative Law Judge

Daniel S. Greenberg, Esq.

Law Department
United States Postal Service
Washington, D.C., for Complainant

Thomas C. Troy, Esq.
Angelo P. Catanzaro, Esq.
Jerry Charles Effren, Esq.
Dorchester, MA, for Respondent

Catharine W. Hantzis, Esq.
Assistant Attorney General,
Commonwealth of Massachusetts,
for Massachusetts Consumers

Before: Quentin E. Grant, Administrative Law Judge

INITIAL DECISION

In this proceeding initiated on December 17, 1976, complainant charges respondent with engaging in the conduct of 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.

Specifically, the complaint filed herein alleges as follows:

I

"That Respondent is, or holds himself out to be, an agent for the sale of various types of insurance;

II

"That Respondent, in communicating with various persons seeking to obtain or renew insurance (hereinafter referred to as the 'prospective insured'), misrepresents the applicable rates set by the State of Massachusetts for the insurance sought;

III

"That in so misrepresenting the applicable rate, Respondent causes the prospective insured to remit money or property through the mails:

(a) in an amount in excess of that required for said policy, and

(b) in an amount in excess of that permitted under the appropriate regulations of the State of Massachusetts;

IV

"That the aforementioned false representations are material within the meaning of 39 U.S.C. 3005."

At a hearing held in Boston, Massachusetts on February 15 and 16, 1977 both parties appeared and offered evidence and each party has filed proposed findings of fact and conclusions of law.

The Attorney General of the Commonwealth of Massachusetts filed a motion to intervene as a party for the protection of consumers who might be adversely affected by the holding and return of mail relating to insurance coverage. The motion was granted to the extent of permitting the Attorney General to explain for the record a suit brought by the Commonwealth against respondent, the settlement of the matter by a consent judgment, the appointment of a trustee for the benefit of consumers of the Commonwealth, the possible adverse effect on consumers as a result of the instant proceeding by the impoundment and return to consumers of mail relating to insurance coverage. Permission was also granted to the Attorney General to file a brief following the hearing. He has not done so. However, a letter has been received from Assistant Attorney General Catharine W. Hantzis stating that because of modifications made in the temporary order issued by the United States District Court, District of Massachusetts, in related proceedings under 39 U.S.C. 3005 and 3007 the Commonwealth withdraws its objection concerning the return to sender of mail addressed to respondent.

At the opening of the hearing respondent filed a motion to dismiss the complaint on two grounds. First, respondent argues that the instant proceedings "flow from a transaction identical to that for which judgment was entered in the Suffolk County Superior Court of the Commonwealth of Massachusetts, No. 18777, under which the respondent, John C. Roche, d/b/a, was permanently enjoined from misrepresenting the applicable rate set by the Commissioner of Insurance for the purchase of insurance and that these proceedings are thus offensive to the constitutional safeguards against multiple prosecutions, and the theory of res judicata."

The second ground advanced for dismissal of the complaint is that the evidence introduced at the hearing by complainant was obtained as the result of illegal search and seizure by a private party, not the complainant or one of its employees, in violation of respondent's rights under the Fourth Amendment to the Constitution of the United States.

As to the first ground for dismissal, I assume that respondent in arguing that this proceeding is offensive to the constitutional safeguards against multiple prosecution is referring to the Fifth Amendment bar to double jeopardy. This bar applies in criminal proceedings. See Ex parte Lange, 85 U.S. 170, 21 L. Ed. 872; Green v. U.S., 355 U.S. 184, 2 L. Ed. 2d 199. It does not apply to civil or administrative proceedings such as this. The doctrine of res judicata is binding against all parties to the proceedings in which it is rendered and their privies. It does not operate to affect strangers to a judgment. See 46 Am Jur 2d, Judgments, 518. Since complainant here was not a party to the Massachusetts action, as well as for other reasons not necessary to mention, the doctrine is not applicable in this case.

With respect to the second ground urged by respondent, it is supported by an offer of proof to the effect that the evidence adduced by complainant was the product directly or indirectly of an illegal search and seizure of respondent's records by a private party. I find in the offer no suggestion that the alleged search and seizure was with the preknowledge or acquiescence of complainant or any of its officers or employees. The Fourth Amendment was intended as a restraint on activities of the government and its agents. It is not addressed to actions, legal or illegal, of private parties. Where no official of the federal government has any connection with a wrongful seizure, or any knowledge of it until after the fact, the evidence so seized is admissible. U.S. v. Mekjian, 505 F.2d 1320 (Cir. 5, 1975). See also U.S. v. Clegg, 509 F.2d 605 (Cir. 5, 1975). Therefore, if Fourth Amendment protection applies in proceedings of this nature, a matter not free from doubt, respondent has not asserted or proved facts under which respondent may invoke such protection.

Respondent's offer of proof is rejected and the motion to dismiss the complaint is denied.

FINDINGS OF FACT ^*/

1. Respondent, John C. Roche, doing business under the names set forth in the caption of this proceeding, at the time of the initiation of this proceeding and for some period theretofore, held himself out to be an agent for the sale of various types of insurance.

2. Respondent was at all times relevant hereto the owner of the agencies listed in the caption of this proceeding including Universal Premium Finance Co.

3. According to the testimony of Mary Theresa Roche and Gerald S. Miller, both of whom were employed by respondent as office managers of several of the agencies named in the caption hereof, respondent through all agencies named, engaged in the practice of overcharging customers for premiums on insurance policies. Such practice, sometimes referred to as "bumping", consisted of adding, generally, a minimum of $100 to the true premium under the guise of a charge for membership in a motor club, actually non-existent, or in some other manner (Tr. 1-89; 2-33).

4. Actual instances of overcharges made by respondent through various of his agencies are reflected in complainant's Exhibit No. 1 (Stipulation) and the attachments thereto.

5. Premiums were financed through respondent's Universal Premium Finance Company. Customers who financed premiums were given a payment book containing instructions to mail premium payments to that company (Tr. 1-87, 88).

6. Complainant's Exhibit No. 1 shows a large number of instances in which customers who were overcharged for premiums in accordance with respondent's practice made payments by mail pursuant to instructions given by respondent or his agents.

7. Respondent's agencies were required to submit a weekly progress report to the main office at Hyde Park reflecting business done during each week. Overcharges were listed individually in the "remarks" column of the report (Tr. 2-21-24).

8. Employees of respondent or his agencies who performed well with respect to overcharges were sometimes paid bonuses therefor. Mary Theresa Roche on at least one occasion received a bonus check for overcharges signed by respondent, John C. Roche (Tr. 1-64, 65).

9. Rates to be charged for automobile insurance are fixed by law (Annotated Laws of Massachusetts, C. 175, 113B). Overcharges imposed by respondent or his agencies resulted in the insureds remitting amounts in excess of the amounts permitted to be charged under the laws and regulations of the Commonwealth of Massachusetts.

10. At a meeting of office managers attended by the witness, Mary Theresa Roche, and by respondent, John C. Roche, Mr. Gerald Pitts (an employee of the Hyde Park office who gave instructions to respondent's agency office managers) stated that each agency would receive through the mails from insureds deposits for 1977 insurance policy renewals.

CONCLUSIONS OF LAW

1. The evidence shows beyond doubt that respondent personally and through his agencies engaged in a system of deliberate overcharging for insurance premiums. In making the overcharges, respondent personally and/or through his agencies materially misrepresented the amounts of premiums required for the insurance coverage involved.

2. The evidence shows that the mails were used in the operation of this scheme of overcharging in that insureds who financed their premiums through respondent's United Premium Finance Co. were instructed to, and did, use the mails to pay their premiums, including the overcharges. I conclude, therefore, that respondent is engaged in conducting a scheme for obtaining money or property through the mails by means of representations materially false in fact in violation of 39 U.S.C. 3005.

3. Complainant's evidence supports the allegations contained in the complaint.

4. An order pursuant to 39 U.S.C. 3005 should be issued.

___________________

*/ There were two days of hearing. Transcript page citations are preceded by the numbers 1 or 2 to indicate the volume in which testimony supporting the finding is located.