In the Matter of the Complaint Against

DEAN'S PUBLISHING CO.
1226 Grove Way at
Hayward, CA 94541

and

ATLAS PUBLISHING
16639 E. 14th Street at
San Leandro, CA 94578

P.S. Docket No. 8/17;

Grant, Quentin E.

APPEARANCE FOR COMPLAINANT:
Norm an D. Menegat, Esq.
Assistant Regional Counsel
Western Region, USPS
San Bruno, CA 94099

Sandra McFeeley, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260

APPEARANCE FOR RESPONDENT:
Lee Harter, Esq.
2256 Van Ness Avenue
San Francisco, CA 94109

INITIAL DECISION

This proceeding was initiated on March 24, 1980, with the filing of a COmplaint alleging that Respondents are engaged in various schemes or devices to obtain money or property through the mails by means of false representations in violation of 39 U.S.C. § 3005.

Specifically the Complaint alleges in Count I thereof that by means of advertisements and direct mail circulars, all calculated to induce readers or recipients thereof to remit money or property through the mails, Respondents falsely and materially represent:

a. Respondent Dean is offering home employment stuffing envelopes at $280 per week.

b. Respondent Atlas is offering home employment stuffing envelopes with earnings or $500 per thousand envelopes.

c. The work offered by Respondents "consists mainly of addressing envelopes and inserting circulars into them."

d. A minimum of 300 envelopes per week will be available to the Cooperative Mail Program participant for addressing and stuffing for earnings of $180.

e. That the participant will not have to expend additional money to commence operations under the Cooperative Mail Program.

f. The program participant will earn $60 for every hundred envelopes he or she is able to address and stuff for Respondent.

g. That this envelope stuffing program is a part of an expansion of Respondents' advertising program.

In Count II, the Complaint alleges:

Respondents, through their promotion and scheme, urge and cause participants to make the above representations to third parties, and knowingly seek money or property through the mails to finance distribution of false advertisements of the type described above.

On Respondents' motion the place of the hearing was changed to San Francisco, CA. The hearing was held on May 21, 1980.

By stipulation entered into at the hearing the matter was dismissed as to Dean's Publishing Co., P. O. Box 5022 at Hayward, CA 94541.

All proposed findings of fact and conclusion of law submitted by the parties have been considered. They are found to the extent indicated and are otherwise denied.

FINDINGS OF FACT

1. Steven L. Phillips is engaged in the business of selling the Cooperative Mail Program through the mails with the trade names of Dean's Publishing Co. and Atlas Publishing. In the course of business Respondents receive stamped return envelopes through the mails from those who respond to advertisements and money from those who buy the so-called "starting kit," a booklet entitled "MAKING MONEY IN MAIL ORDER." CX-1a, 3a, 3b, 4, 5a, 5b, 6, 8a, 8b, 8c, 9, 10a, 12a, 12b, 13, 14a, 14b; Tr. 6, 7.

2. The advertisements which Respondents insert in various publications typically read as follows:

WE NEED your help. You easily earn $280 per week at home stuffing envelopes. Guaranteed results. For details, send stamped self-addressed envelope to: DEAN'S, 1226 Grove Way No. 100, Hayward, CA 94541. (CX-1a.)

EARN $500 per 1000 stuffing envelopes at home. No postage or envelopes to buy. Guaranteed results. Send stamped, self-addressed envelope to: ATLAS, 16639 E. 14th Street No. 101, San Leandro, CA 94578. (CX-10a)

The foregoing advertisements appeared in the January 30, 1980, issue of the "The Woodlands Sun," Tomball, Texas.

3. Respondents' advertisements ask those who are interested to send to Respondents a "stamped, self-addressed envelope." In that envelope Respondents mail to the inquirer one of two circulars, one bearing the heading "EARN $180 A WEEK ADDRESSING ENVELOPES IN THE COMFORT OF YOUR OWN HOME", the other entitled "Would You Work A Few Hours A Day ADDRESSING ENVELOPES?" (CX-3a, 8a, 12a; Tr. 59, 60).

a. The "EARN $180..." circular offers those who read it an opportunity to work for Respondents addressing and stuffing envelopes. The work is represented to be simple and pleasant work which can be done in the reader's home in spare time, with no previous experience, the addressing to be done either by typewriter or by hand. (CX-3a.)

b. The "EARN $180..." circular states that the reader will not be required to buy anything else from Respondents and will be shown in the starting kit instructions as to how to get the envelopes, circulars, mailing lists and postage.

c. The reader of the "EARN $180..." circular is advised that he will handle the money and forward orders to Respondent and that his or her earnings based on addressing and stuffing 300 envelopes per week will be at least $180.

d. The "EARN $180..." circular further states that this income is not necessary to pay for supplies or advertising but may be directly spent by the homeworker. Respondents further represent in this circular that they are expanding their mailing program to avoid hiring a huge staff for their main office.

e. The "Would You..." circular (CX-8a, 12a) again offers simple and pleasant work which can be done in one's own home and advises that no previous experience is necessary.

f. According to the "Would You..." circular those who join Respondents' program are to be furnished a list of the names and addresses of "30 companies who are eager to have you mail for them." The circular represents that companies are finding it more profitable to use homeworkers for mailing their circulars than to hire a large staff to mail from a main office.

g. The readers of the "Would You..." circular as well as the readers of the "EARN $180..." circular are advised that the work "consists mainly of addressing envelopes and inserting circulars into them."

h. Both circulars invite those interested to purchase Respondents' starting kit for $12.

4. a. The starting kit (CX-5b, 14b) is a 43-page booklet entitled "Making Money in Mail Order." The first 36 pages of the booklet discuss methods of starting a mail-order business. Information on the Cooperative Mail Program commences on page 37 (unnumbered).

b. The section on the Cooperative Mail Program suggests that the purchaser of the starting kit place an ad in a small weekly paper soliciting people to work at home stuffing envelopes or mailing circulars for commissions. The homeworker is then directed to purchase, or to have printed, circulars to solicit further sales of the booklets "Beginning Mail Order" and "Cooperative Mail Plan." (CX-5b, pp. 37-39. These booklets have now been combined into the "Making Money in Mail Order" booklet. (Tr. 33, 34, 39).

5. a. Respondents in their classified advertisements and circulars represent, as alleged in paragraph 3a of the Complaint, that Dean's is offering home employment stuffing envelopes at $280 per week. Complainant says the term "employment" is used in paragraph 3a to mean "work" and not to imply a particular legal relationship of employer and employee. This finding is based on the meaning intended by Complainant. The circulars stress the simplicity of the work and that it can be done in the home, yet it is clear that the circulars do not mention that the instructions are primarily geared to setting up an independent business as opposed to doing piece work mailing from the home.

b. Respondents in their advertisements and circulars (CX-10a, 12a, 12b) represent that Atlas is offering the same type of home employment stuffing envelopes with earnings of $500 per thousand envelopes.

c. Respondents specifically state, and therefore represent in their circulars that the work offered "consists mainly of addressing envelopes and inserting circulars into them" as alleged in paragraph 3c of the complaint.

d. Respondents represent in their circulars that at least 300 envelopes per week will be available to the program participant for addressing and stuffing which will result in earnings of $180 which representation is alleged in paragraph 3d of the complaint.

e. Respondents in their "EARN $180..." circulars advise that the participants will not be required to buy anything else from Respondents and that Respondents will show the participant how to obtain envelopes, circulars, mailing lists and postage. The circulars indicated that many companies are eager to have the assistance of homeworkers and will be anxious to provide materials for them. The "Would Your..." circular mentions insignificant investment of money and, by implication, represents that no further expenses will be necessary. Thus the representation alleged in paragraph 3e of the complaint is made.

f. The circulars specifically state and therefore represent that the program participant will earn $60 for every hundred envelopes he or she is able to address and stuff for Respondent. (Complaint, parag. 3f)

g. The circulars indicate that this promotion is part of the expansion of Respondents' mailing program. Therefore, the Respondents make the representation alleged in paragraph 3g of the complaint.

6. a. The representations made by Respondents as alleged in paragraph 3a, b, and c, of the complaint are false. Respondents' instructions sent in the starting kit require far more of the starting kit buyer than addressing and stuffing envelopes as indicated in the advertising and circulars. They require business correspondence, securing mailing lists, obtaining or reproducing stuffing materials, selection of advertising media and inserting advertisements and record keeping, all going far beyond the type of repetitive manual work of addressing and stuffing envelopes as represented in Respondents' ads and circulars. Respondents advertise apparently routine clerical work of addressing and stuffing envelopes while actually requiring purchasers of the starting kit to set up an independent business.

b. The representations made by Respondents as alleged in paragraphs 3d and f of the complaint are false. The instruction kit does not advise of any plan whereby the purchaser of the starting kit will, without more, be addressing and stuffing envelopes for Respondents or for others. Substantial additional effort on the part of the homeworker might result in some addressing and stuffing of envelopes, but the instructions do not provide a plan whereby the homeworker, without such effort, is able to commence such a program. The number of envelopes a participant may address and stuff is entirely dependent on the number and effectiveness of classified ads paid for and placed or success in obtaining circulars from commission mailers. Obviously, participants are not assured of receiving responses to classified advertisements or circulars from commission mailers such as to result in earnings of $180 per week or to require stuffing of 100 envelopes to produce the $60 promised for that effort.

c. The representations made by Respondents as alleged in paragraph 3e of the complaint are false. The "EAR $180..." circular clearly indicates, or by omission implies, that no further expenses will be incurred by the buyer of the starting kit in operating as a member of Respondents' mailing organization. The "Would You..." circular provides some hint on the reverse that additional expenditures may be required but indicates they will be minimal only, and both circulars indicate that all money to be earned in the program is money that can be spent for non-business related purposes by the homeworker and, thus, imply that further advertising and other expenditures will not be necessary. Only when the starting kit has been purchased does the buyer learn that he must purchase or procure or produce additional stuffing materials at his own expense and bear the cost of classified advertising.

d. The representations made by Respondents as alleged in paragraph 3g of the complaint are false. Both circulars indicate that the promotion offered is part of an expansion of their mailing business. The starting kit instructions, however, make it clear that the Cooperative Mail Program is little more than a chain promotion for the sale of Respondents' booklets.

7. The representations made by Respondents are materially false when considered separately and when read in conjunction. The advertisements and circulars offer the reader the prospect of simple and inexpensive work, thus inducing the purchase of kits.

8. Respondents encourage participants to engage in schemes similar to that involved in this proceeding. But the evidence falls short of establishing that they are urged and counseled to make the identical representations made by Respondents. Such evidence is required to sustain the allegations of Count II of the Complaint.

CONCLUSIONS OF LAW

1. The meaning of advertising representations is to be considered in light of the probably impact of the entire advertisement on the person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948); Peak Laboratories, Inc. v. United States Postal Service, 556 F.2d 1387, 1389 (5th Cir. 1977); Unique Ideas, Inc. v. United States Postal Service, 416 F. Supp. 1141, 1145 (S.D. N.Y. 1976).

2. Persons of ordinary mind reading Respondents' classified advertisements and circulars would interpret them substantially as characterized in paragraphs 3a, b, c, d, e, f, and g of the complaint.

3. As found above, these representations are materially false in fact.

4. Actual participation by Complainant's investigators in the programs set forth in Respondent's booklet, "MAKING MONEY IN MAIL ORDER," was not required to establish the falsity of the repre- sentations. Falsity is abundantly apparent in simple comparison of the representations with the contents of the booklet. It permeates the entire promotion, including all the plans suggested in the booklet.

5. Complainant's evidence falls short of sustaining the allegations of Count II of the complaint. It is obvious that Respondents' promotion encourages participants to make mis- representations to third parties and, thereby, secure remittances of money through the mails. However, Count IV alleges that Respondents urge and cause participants to make to third parties the same misrepresentations made by Respondents. Complainant has not persuaded me that exactly the same misrepresentations are involved in this aspect of the promotion. Count II is therefore dismissed.

6. Although Complainant did not make a test purchase in response to Respondent Dean's "Would You Work..." circular from the 1226 Grove Way, Hayward, CA address a finding is warranted that the booklet "MAKING MONEY IN MAIL ORDER" would have been received by Complainant had such a purchase been made. This is based on evidence of Respondents' routine practice of sending such booklet in test purchases made by Complainant to the same address but based on another, but similar circular and to Atlas based on the "Would You..." circular (Fed. Rules of Evidence, § 406). It is also based on the impression given to Complainant's inspector by Steven Phillips, who owns and operates both Respondents, that such booklet is routinely sent in response to orders based on both the "Would You ..." and the "$180 ..." circulars.

Moreover, Steven Phillips took the witness stand and testified that he no longer intends to send out the "$180" and "Would You" circulars in response to inquiry mail (Tr. 48) but intends to use another circular in the future (Tr. 49). The purpose for which this testimony was offered was to show that Respondent intends to "clean ed up the misrepresentation" made in the circulars that have been used in the past (Tr. 51). But when on cross-examination Phillips was asked what product he sent in response to orders received based on the "$180" and "Would You" circulars, whether he recognized the booklet (CX-14b) received in test purchases, and why he proposed to stop using those circulars, on advice of Counsel he claimed the Fifth Amendment privilege against self-incrimination. having taken the stand in his own behalf and voluntarily testified to facts working to his advantage, he could not stop short in his testimony and refuse to answer those questions, involving other facts as to which he had to be fully informed, without subjecting his silence to the inference that a truthful answer would have been against his interests in this proceeding. Caminetti v. United States, 242 U.S. 470, 493-495 (1916); Krotkiewicz v. United States, 19 F.2d 421 (6th Cir. 1927); See also United States v. Currency in Total Amount of $2,220.40, 157 F. Supp. 300 (N.D. N.Y. 1957); Hansel v. Purnell, 1 F.2d 266, 273 (6th Cir. 1924); 8 Wigmore, Evidence § 2272 (McNaughton rev. 1961).

7. Respondents are engaged in schemes to obtain money or property through the mails by means of false representations in violation of 39 U.S.C. § 3005.

8. An order pursuant to that statute in the form attached should be issued against Respondents.