In the Matter of the Complaint Against

NORTHEAST ENTERPRISES,
Post Office Box 537 at
Laurel Springs, New Jersey 08021

P.S. Docket No. 7/4

March 14, 1979

Quentin E. Grant Administrative Law Judge

APPEARANCE FOR COMPLAINANT:
Thomas A. Ziebarth, Esq.
Consumer Protection Office
Law Department U. S. Postal Service
Washington, D.C. 20260

APPEARANCE FOR RESPONDENT:
Anthony Pavoni Promoter, pro se
P. O. Box 537
Laurel Springs, N.J. 08021

INITIAL DECISION

The Complaint in this case was filed on December 28, 1978. It alleges that Respondent, doing business under the tradestyle, NORTHEAST ENTERPRISES, is engaged in a scheme or device to obtain money by means of false representations in violation of 39 U.S.C. 3005. Thereafter, one Anthony Pavoni, the apparent promoter of the named respondent, filed a letter dated January 12, 1979, acknowledging receipt of the complaint and stating his intention to appear at the hearing by counsel or personally and with counsel. The letter did not respond to the allegations of the complaint but I treated it as a general denial of those allegations.

The hearing was held as scheduled in Washington, D.C. on January 29, 1979. Neither Respondent nor his attorney appeared. Complainant's evidence, including the testimony of Postal Inspector Warren D. Hickernell, was received.

Findings of Fact

1. Based on the testimony of Postal Inspector Warren D. Hickernell and Complainant's Exhibits 1, 2, 3(a) and 3(b) I find that Respondent is engaged in a scheme or device to obtain money through the mail.

2. Respondent seeks money or property through the mail in a two-stage promotional effort. Initially, prospective homeworkers are invited to send for free details on how to earn "hundreds monthly stuffing envelopes" by means of classified advertisements placed by Respondent in publications of general circulation (CX-1). These ads typically state:

"HUNDREDS MONTHLY stuffing envelopes. Details free.

Northeast Enterprises, P.O. Box 537, Laurel

Springs, N.J. 08021."

National Enquirer

November 23, 1978

Page 49

3. Persons responding to these advertisements are sent a circular entitled, "Your Chance to Make a Stack of Cash" which advertises the availability of an "Instruction Kit" for $13.20 (CX-2).

4. Paragraph (3) of the Complaint alleges that Respondent's promotional material makes a number of direct or indirect representations. These are repeated below, followed by a summary of the portions of the advertisements upon which I base findings that Respondent makes the representations alleged:

(a) He is offering employment which consists simply of folding and stuffing his circulars into preaddressed, stamped envelopes at a rate of $50.00 per hundred to any person remitting the sum of $13.20 for an "instruction kit" and membership in his "Cooperative Mailing Association";

This is an indirect representation. Respondent's circular (CX-2) contains a number of words and phrases which would lead the ordinary reader to believe that employment is being offered. The following are illustrative:

". . . working in your spare time as a homeworker for our company."

(p. 1, lines 3 and 4)

"Many people ask why do we need homeworkers," etc.

(p. 1, paragraph 3)

"You simply fold and insert our circulars into the furnished, stamped, self-addressed envelopes . . ."

(p. 1, paragraph 2)

"We guarantee . . . you will definitely earn $50.00 for every 100 envelopes you stuff."

(p. 2, paragraph 3)

(b) He furnishes all of the circulars and envelopes already stamped and addressed;

This is also an indirect representation. The key words are, ". . . the furnished stamped, self-addressed envelopes you will receive by following instructions."

(p. 1, paragraph 2)

(c) He needs homeworkers to stuff his circulars into envelopes in order to avoid the necessity of renting a larger building, hiring more inside employees, taking out insurance or working present employees overtime;

This representation is expressly made in paragraph (3) of Respondent's circular (CX-2).

(d) The homeworker is guaranteed to earn 50[ or more for each envelope stuffed;

This representation is found on page 1, paragraph 4 of Respondent's "Stack of Cash" circular (CX-2). It is repeated on page 2, paragraphs 1 and 3.

5. I find that Respondent's advertising representations are materially false as a matter of fact.

(a) Respondent does not employ homeworkers. This is clear from a reading of the certificate in the front of the "Instruction Kit" (CX-3) and page 11 of the kit.

(b) Respondent does not furnish his "homeworkers" with circulars and envelopes already stamped and addressed. Once the prospective homeworker receives his "Instruction Kit" he realizes for the first time that he must buy the circulars or have them printed at his own expense. The stamped, self-addressed envelopes are obtained by running at his own expense advertisements similar to that to which he initial responded. (CX-3, p. 13) This obviously involves a substantial risk on the part of the homeworker.

(c) Respondent does not need homeworkers to stuff his circulars into envelopes in order to avoid the necessity of renting a larger building, hiring more employees, taking out insurance or working present employees overtime. It is clear from Respondent's "Instruction Kit" (CX-3, pp. 11-15) that it has no need for additional employees. It is simply in the business of selling a pamphlet in the guise of offering employment. This representation is palpably false and merely tends to reinforce the representation that the homework consists primarily of the simple mechanical task of stuffing envelopes at 50[ apiece.

(d) The homeworker may not earn 50[ cash for each envelope stuffed. Based on Respondent's advertising, the homeworker would expect to be compensated on a "piecework" basis, i.e., receive 50[ for each envelope stuffed. It is only after the prospective homeworker has parted with the $13.20 for the "Instruction Kit" (CX-3) that he or she realizes that the compensation depends on the selection of advertising medium, composition of the ad, the time of the year and a good measure of risk. The homeworker's compensation depends in the first instance on the response rate to the classified ad and, thereafter, on the response to the "Stack of Cash" circular. After deducting all expenses for advertising, printing and supplies, the homeworker's net earnings (if any) can be computed.

6. The Complaint contains a Count Two which realleges the general allegations of Count One as to Respondent's engagement in a scheme to obtain money through the mails by means of false representations and then proceeds to the following allegations:

"(6) Attention is attracted to this scheme by means of the 'instruction kit' furnished by Respondent to those who remit money through the mail in response to the 'STACK OF CASH' circular (Exhibit '2', supra);

"(7) By means of this 'instruction kit' Respondent advises and encourages his homeworker customers to become his dealers by running advertisements which are the same or substantially similar to his (Exhibit '1') and by furnishing the same 'STACK OF CASH' circular (Exhibit '2') to those who respond, thereby perpetrating the scheme described in COUNT ONE, supra;

"(8) Respondent participates in this scheme by seeking the remittance through the mail of a portion of the cash proceeds received by his homeworker-dealers for the fulfillment of orders for the 'instruction kit';

"(9) Under this scheme, Respondent knowingly seeks the remittance of money through the mails by means of the false representations made by his homeworker-dealers at his express direction."

7. The allegations of Count Two are supported by the content of page 13 of Respondent's instruction kit (CX-3).

CONCLUSIONS OF LAW

1. The meaning of advertising representations is to be judged from a consideration of an advertisement in its totality and the impression it would most probably create in ordinary minds. Donaldson v. Read Magazine, 333 U.S. 178 (1948); Vibra-Brush Corp. v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957); Borg-Johnson Electronics v. Christenberry, 169 F. Supp. 746 (S.D.N.Y. 1959).

2. The average person reading Respondent's advertisements would interpret them substantially as characterized in paragraph (3) of the Complaint.

3. The effect of false representations is not dispelled by a money-back guarantee. Borg-Johnson Electronics v. Christenberry, supra.

4. Respondent is engaged in the conduct of a scheme for obtaining remittances of money through the mail by means of representations materially false in fact in violation of 39 U.S.C. 3005.

5. Respondent is knowingly participating and cooperating in a scheme involving the exploitation of third parties by furnishing and urging his customers to use the same "Stack of Cash" circular which he uses.

6. An order pursuant to 39 U.S.C. 3005 in the form attached should be issued.