In the Matter of the Complaint Against

MAILFORM MAILFORM ASSOCIATES
Post Office Box 231 at
Victor, New York 14564

P.S. Docket No. 6/42

01/31/78

Sobernheim, Rudolf

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

Anthony F. Leonardo, Jr., Esq.
Presutti & Leonardo,
45 Exchange Street,
Rochester, N.Y. 14614 for Respondents

INITIAL DECISION

This is a proceeding by complainant against respondents under 39 USC 3005 which authorizes action against respondents on evidence satisfactory to the Postal Service that respondents are "engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations." Complainant alleges that respondents are engaged in such a scheme in the sale of a "Financial Prosperity Kit."

Specifically complainant in paragraph 3 of the complaint alleges that respondents through the use of advertisements (Compl. par. 1) make representations, directly or indirectly, in substance and effect, whether by affirmative statements, omission or implication, as follows:

(a) They are offering work at home, stuffing envelopes, to any person sending a stamped, self-addressed envelope;

(b) They are offering employment at home, stuffing envelopes, to any person ordering the FINANCIAL PROSPERITY KIT in response to Exhibit "1";

(c) The homeworker will be furnished with envelopes which are already stamped and addressed as well as the materials to be inserted; and

(d) No further investment (other than the cost of the FINANCIAL PROSPERITY KIT) is required of the homeworker.

Complainant further alleges in paragraph 4 of the complaint that these representations are false and materially so.

Respondents admit in their answer that they publish in periodicals classified advertisements of the tenor set forth in the complaint and that those responding to the advertisements receive a flyer, a copy of which is attached to the complaint. The answer denies, however, that respondents make the representations alleged in the complaint or that such representations are false. Respondents also assert as defenses that the complainant is not properly identified pursuant to 39 CFR 952.5; that only a purchaser has a basis for complaint against respondents; that state law governs respondents' business operations and has not been violated; that the proceeding violates respondents' right to free speech under Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976); that respondents' advertisements do not seek a remittance through the mails; and that they make refunds to all dissatisfied customers.

A hearing was held on 30 November 1977 at which evidence was received. Additional documentary evidence and proposed findings of fact, conclusions of law and argument were submitted after the hearing.

FINDINGS OF FACT

1. Michael Denny is engaged in the business of selling Financial Prosperity Kits (hereinafter sometimes referred to as "kits") through the mails under the trade name of Mailform Associates and also advertises under the abridged name of Mailform (see Compl. Exs. 1, 2, 3; T 45 et seq.). He has been so engaged since March 1977 (T 46).

2. In their activity respondents receive stamped return envelopes through the mails from those who reply to the advertisements and money from those who buy the kits (see Answer, pars. 2, 3; T 11, 13 et seq.).

3. The advertisements which respondents insert in various publications typically read as follows:

"$500/thousand stuffing envelopes. Free supplies] Guaranteed]] Rush stamped, self-addressed envelope: Mailform, Box 231, Victor, New York 14564."

4. The foregoing advertisement appeared in September 1977 in "True Story," in September through November 1977 in "Mechanix Illustrated," in December 1977 in "Day Time TV," "True Confessions" and "Movie Stars" and in predated January 1978 editions (see T 9) of "Photo Screen" and "TV by Day" (Compl. Ex. 1).

5. Substantially similar advertisements with the proposition "Stuff Envelopes" under the headline (in singular or plural) "Moneymaking Opportunities" were published between March and November 1977 in the following publications:

Globe Tabloid Group

Globe Classifieds

The Star

Mechanix Illustrated

Classified, Inc.

Free Enterprise

Home Opportunity Handbook

Moneysworth

6. Each advertisement produced over several months from about 100 to over 1,800 inquiries and these resulted in less than 100 sales of kits in response to 21 advertisements, between 100 and 200 sales in response to 6 advertisements, and over 200 in response to 1 advertisement.

7.a. Respondents' advertisements ask those who are interested to "rush" to them a "stamped, self-addressed envelope." In that envelope respondents mail to the inquirer a flyer (Compl. Ex. 2, 5; Resp. Ex. 1) which bears the framed heading:

"Would you stuff 1000 Envelopes for $500"

b. The flyer next offers those who read it a "golden opportunity" to become members of respondents' "mailing organization" in which experience or special skills are not necessary. Simple instructions are to be found in respondents' kit.

c. Business is done entirely by mail. Envelopes "already stamped and addressed" and "materials to be stuffed" will be supplied. The mailer need only send the orders received to respondents who will fill them. The mailer will "handle all the money" and his or her "earnings will exceed $500 for every 1000 envelopes" that he or she "stuff[s] with" respondents' "sales letter."

d. In addition, those who join respondents' organization will be furnished a list of mail-order businesses "that seek people to do addressing, commission mailing and envelope stuffing at home." Companies are said to "use homeworkers more and more to eliminate the overhead costs that are consuming their profits."

e. Those interested are thereupon invited to purchase respondents' kit for $8.00 with a money-back guaranty if the kit is returned in good condition within 5 days.

8.a. The kit (Compl. Ex. 3, 4) is a 16-page pamphlet with a glossy cover. The first part of 10 pages is headed "Wealth from Commission Mailing," the second of six pages "Wealth from Newsclipping" with a subpart on "Broadening Your Clipping Operation."

b. The introduction to the first part, referring to commission mailing as "stuffing envelopes," states that the way to begin is through placing the "right" classified ad in the "right publication" and to become thereafter a "Mail Order executive." The description of what commission mailing accomplishes, "that you can sell thousands of dollars worth of merchandise without investing any money of your own" and that "[a]ll you have to do is advertise, receive orders as a result of your advertisement, and take the money to your bank" as well as "send the orders to the Suppliers who then mail the items directly to your customers," clearly shows that the scheme does not involve the labor of stuffing envelopes for high compensation and means, as shown by the instructions on pages 2-3, setting-up a full-fledged business.

c. The foregoing is following by three plans.

(1) Plan I involves inserting an advertisement such as respondents use to obtain stamped, self-addressed envelopes and mailing to the senders respondents' flyer (Compl. Ex. 2, 5; Resp. Ex. 1) and await orders for the kit. Respondents state that they do not simply want to recruit more agents and suggest that those who have bought the kit seek to increase their profits by mailing other sales letters. Kit buyers are further told to anticipate 500 replies to their advertisement "in the right publication with a circulation over one million" (p. 4). They are told further that respondents will furnish 50 sales letters free and sell more at $3.00 per 100 (p. 6).

(2) Under Plan II the kit buyer asks in the advertisement that inquirers send him or her 50 cents and a stamped, self-addressed envelope which the kit buyer is to forward to respondents. The kit buyer is to keep the 50 cents.

(3) Under Plan III, offered as a supplement to Plans I and II, the kit buyer offers to stuff circulars for a fee running from $2.50 to $6.00 per 1000, depending on the size of the material.

9. As a result of the Postal Inspection Service investigation respondents changed the flyer (Resp. Ex. 1) by including beneath the ordering blank on the back page in very small italicized letters the words: "This is not intended as an offer of employment" (T 73). The amended flyer was first sent out on 21 October 1977 (T 74).

10. Respondents' records (Resp. Ex. 2) show that respondents incur substantial advertising expenses, running from $12.50 for one of the 28 advertisements to one advertisement costing $169.15 and three each costing $409.28. The other advertisements cost from about $25.00 to $70.00.

11. Respondents' claim of "$500/thousand" is based on calculating from their actual sales records the amount of commissions which would be received from the sales likely to be produced by stuffing 1000 envelopes with their flyers (Compl. Ex. 2, 5; Resp. Ex. 1).

12. Respondents have heretofore made refunds to about 18% of the purchasers of kits.

13.a. Respondents in their classified advertisements and flyers represents, as alleged in paragraph 3(a) of the complaint, that they offer the work of stuffing envelopes and the flyer received in response thereto states with typographical emphasis: "WORK FROM THE COMFORT OF YOUR HOME."

b. Respondents make the representation alleged in paragraph 3(b) of the complaint. The term "employment," as used in paragraph 3(b), is understood to mean "work" and not to imply a particular legal relationship, whether that of employer and employee or that of an independent contractor.

c. Respondents in their advertisements promise "Free supplies]" and in their flyer states that the "envelopes will be already stamped and addressed." Hence, they make the representations alleged in paragraph 3(c) of the complaint.

d. In their advertisements respondents promise "Free supplies" and in their flyer promise "stamped" envelopes and supplies of materials to be stuffed and no reference is made either in the advertisements or the flyer to the costs of acquiring materials and advertising which undertaking the operations set forth in the kit actually entails. Hence, both by promise and omission respondents make the representations alleged in paragraph 3(d) of the complaint.

14. Based on the detailed findings of fact hereinabove made and the record as a whole I find that:

(a) The representations made by respondents as alleged in paragraph 3(a) and (b) of the complaint, are false. For respondents' plans, set out in the kit, require far more of the kit buyer than the stuffing of envelopes. They require business correspondence, procuring or reproducing stuffing materials, selection of advertising media and inserting advertisements which goes far beyond the purely repetitive manual work advertised in respondents' advertisement and flyer. Respondents in fact propose setting up an independent business while advertising routine clerical labor.

(b) The representations made by respondents, as alleged in paragraph 3(c) of the complaint, are false as to materials. For the kit makes it clear that only a small initial supply of stuffing materials is supplied to one who follows respondents' plan as set forth in the kit. As to "stamped and addressed envelopes" the representations are not false since inquirers are requested in the advertisements to, and apparently do, furnish them and the kit buyer need not answer inquiries from those who fail to send their envelopes.

(c) The representations made by respondents, as alleged in paragraph 3(d) of the complaint, are false. For the advertisement and flyer clearly state or by omission imply that no further expense will be incurred by the kit buyer in operating as a member of respondents' mailing organization. Only when the kit has been purchased does the kit buyer learn that he must purchase or procure or produce additional stuffing materials at his own expense and bear the cost of classified advertising.

15. The representations made by respondents are not only false but materially so. For the obvious simplicity and inexpensiveness of the work held falsely out to the readers of their advertisements and flyer is what attracts them to purchase the kits.

CONCLUSIONS OF LAW

1. Respondents are engaged in 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. A remittance of property to respondents (a stamped, self-addressed envelope) is asked for in respondents' advertisements and such property in fact is of value. A payment of money is asked for in the flyer sent thereafter. The terms of 39 U.S.C. 3005 are thus met.

2. Respondents' advertisements and flyer, partly when read separately and partly when read together, make the materially false representations charged in the complaint with the exception noted in Finding of Fact 14(b) and will be so understood by the ordinary reader. See Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948). Respondents, of course, are responsible for the implications from their advertisements to the ordinary reader's mind even if their advertisements, most carefully parsed, might be construed as not making a particular representations. Nothing in Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976), sanctifies obtaining money or other property by false representations through use of the mails, as occurred here, or limits the operative effect of 39 U.S.C. 3005.

3. Respondents' disclaimer of an offer of employment not only is so placed on the revised flyer (Resp. Ex. 1) that it would be readily overlooked but it does not overcome the falsity found in the representations contained in the advertisements and the flyer. It is the nature of the work and not that of the legal relationship offered which is material.

4. While respondents have made substantial refunds, a money-back guarantee, even when scrupulously observed, does not neutralize the falsity of representations inducing payments. 39 U.S.C. 3005 clearly remains applicable in such case. Farley v. Heiniger, 105 F.2d 79 (D.C. Cir. 1939), cert. den. 308 U.S. 587 (1939); Borg-Johnson Electronics, Inc. v. Christenberry, 169 F.Supp. 746 (S.D.N.Y., 1959); Homeworkers, P.S. Docket No. 3/77 (1974).

5. Enforcement of 39 U.S.C. 3005 is entrusted to complainant (see also 39 CFR, Part 952) and does not depend upon respondent's compliance with or violation of state law or a complaint by individuals. The complaint herein is brought properly by the General Counsel of the U.S. Postal Service through his designated representative (see 39 CFR 952.5) and properly identifies the attorney appearing for him in this proceeding.

6. The conclusions reached herein are in accord with those in similar cases involving the same type of classified advertisement for envelope stuffing work. See Homeworkers, supra; Ross, P.S. Docket No. 4/64 (1976); Bumphus, P.S. Docket No. 4/144 (1976); Nasco, P.S. Docket No. 4/105 (1976); Gozdanovic, P.S. Docket No. 4/109 (1976); Danco, P.S. Docket No. 5/15 (1976); Sandco, P.S. Docket No. 5/180 (1977); R.P. Sales, P.S. Docket No. 6/1 (1977); Profit, P.S. Docket No. 6/5 (1977).

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