In the Matter of the Complaint Against

PHONE LINE PRODUCTIONS (PLP)
PHONE LINE AMERICAN SWING COMPANY
9ASC0 SWING FRIENDS and PRIVATE
SERVICES GROUP (PSG) at
P. O. Boxes 130, 240, 650 and 645
Fenton, MO 63026
P. O. Boxes 493, 455 and 246
Arnold, MO 63010 and
P. O. Boxes 160 and 40
Dupo, IL 62239

P.S. Docket No. 11/23;

Bernstein, Edwin S.

APPEARANCE FOR COMPLAINANT:
Stev en Caver, Esq.
H. Richard Hefner, Esq.
Law Department
Consumer Protection Division
United States Postal Service
Washington, D.C. 20260-1100

APPEARANCE FOR RESPONDENTS:
James L. Homire, Jr., Esq.
314 North Broadway
St. Louis, Missouri 63102

BEFORE: Judge Edwin S. Bernstein

INITIAL DECISION

Complainant alleged and Respondents denied that Respondents are engaged in a scheme or device for obtaining money or property through the mail in violation of 39 U.S. Code § 3005. I held a hearing on May 18, 1981 at which Michael Jones, Rebecca Swarts, and Patricia Conn testified for Complainant and Roger Willis Benson testified for Respondents.

FINDINGS OF FACT

Michael Jones is an inspector with the U.S. Postal Service. Jones testified that in approximately December 1980, using the fictitious name Mike Dysen he wrote Respondent, Swing Friends, "I read your ad in Hustler Magazine. Could you tell me how much your service costs and what I get. I would like to know this before I join..." emphasis added (CX-12, Tr. 9) He stated that approximately one week later he received an envelope from Swing Friends requiring him to pay $24.95 C.O.D. (CX-14, Tr. 10, 11). He also testified that he found an advertisement for Respondent, Phone Line in a magazine. That advertisement (CX-1) reads:

"PHONE LINE

GET OFF OVER THE PHONE

You will get: LIVE Sex talk with

Brandy and her sexy friends as often as you like, 42-page book of revealing photos, New and LIVE numbers monthly. CALL NOW 1-314-287-1900

P.O. Box 645, Fenton, MO 63026"

On February 2, 1981, Jones telephoned Phone Line Productions, using the fictitious name of James Moran. Exhibit CX-15A is a transcript of that conversation. In the transcript, the female representative of Phone Line stated, "OK babe the membership in the club is $20. It's one-time pay life-time membership"

In the telephone conversation Jones gave Phone Line's representa- tive a Master Charge number for James Moran and authorized her to charge $20 as a membership fee to that account. On February 6, 1981, Jones signed receipts for two certified envelopes addressed to James Moran. (Tr. 14) CX-16A are copies of those signed receipts before they were returned to Phone Swing. Subsequently, Jones received a draft (CX-16B) indicating that Moran's Master Card Account had been charged in favor of "Enterprise TAW" for $25.50 listed as:

"Phone Order $20.00

Postg. Hdl. Cert. Mail 5.50

On the reverse side of the charge was a copy of the return receipt that Jones signed (CX-16A) to which had been pasted a label which read "I authorize Enterprise TAW to Charge $25.50 for the Enclosed Merchandise to Credit Card No. Moran's No. and Expiration Date ."

He also received a similar charge for $26.00 consisting of $20. as a phone order and $6. for "Postg. Hdl. Cert. Mail" in favor of "Systems PLP." (CX-20B) On the reverse side was the other receipt that he signed for Moran to which had been pasted a similar label which read, "I authorize Systems P.L.P. to charge $26.00 for the enclosed merchandise to Credit Card No. Moran's No. and Expiration Date ." Thus, although Jones ordered a $20. membership from Phone Line in the name of James Moran, Moran's account was charged for a total of $51.50 through labels subsequently added to the two receipts that he signed. (Tr. 16, 17)

Complainant also introduced into evidence a transcript of a telephone call that Inspector James Sikes made to Phone Line Productions' on February 2, 1981. (CX-21A) Sikes used the fictitious name of Clark Duvall in that telephone conversation. Phone Line's representative stated, "OK. The Membership is $20. and that's a life time membership." Later the transcript read:

"Sikes: Yea. OK. I'm kind of skeptical about this and I just want to make sure that. OK you say that it'll cost me 20 bucks?

Party: Uh huh.

Sikes: And that I'll get that you mentioned something about a book?

Party: Right.

Sikes: And I'll get some numbers?

Party: Right.

Sikes: Are these numbers, how often will I get them.

Party: OK. I think they change like every two to three weeks.

Sikes: OK. Will the $20 fee include that. Do you say it was like a life-time thing or is it?

Party: The $20 membership is a life time.

Sikes: OK. OK. And for that I'll get, every time the new numbers come out I'll get them. Right?

Party: OK. What you have to do there is you do have to send in for the new numbers."

Sikes agreed to membership and agreed to pay for it by C.O.D. mail. Subsequently Jones received an envelope addressed to Duvall with a C.O.D. charge $24.95 for which Jones signed. (CX-21B and CX-22, Tr. 20-23)

Later on February 2, 1981, Jones telephoned Respondent, Swing Friends giving his real name. CX-23A is a transcript of his conversation with Respondents' female representative. In the beginning of the conversation, Respondents' representative said, "Our club membership is $20." Later in answer to his question, "The whole thing is just 20 bucks?" she replied "Yeah Right." He agreed to join and pay with a VISA charge. As he gave his VISA account information, he asked, "You'll just charge me $20., right?" She replied "Yeah, its $20. I don't know if there's some kind of a service charge on there for postage or something. I don't know." Subsequently, Jones signed certified mail receipts for two envelopes. A few days later, he received a VISA charge in favor of "Enterprise TAW" for $25.50 consisting of a "Phone Order" charge of $20. and a "Postg. Hdl. Cert. Mail" charge of $5.50. (CX-24B) On the reverse side was a certified receipt that he signed to which had been added a label, "I authorize Enterprise TAW to charge $25.50 for the enclosed merchandise to my credit care card number and expiration date ."

Jones also received another charge to the same account in favor of "Systems PLP" for $26. consisting of $20. for "Phone Order" and $6. for "Postg. Hdl. Cert. Mail." (CX-26B) On the reverse side was the other certified receipt that he signed to which had been pasted a label that read, "I authorize Systems P.L.P. to charge $26.00 for the enclosed merchandise to my credit card card number and expiration date ." Both labels were pasted on the return receipts after Jones signed and returned the receipts. Thus Jones testified that his account was charged a total of $51.50 as a result of his agreement to pay a $20. membership charge to Swing Friends. (Tr. 28)

CX-28 consists of copies of the receipts that Jones signed as Jones with labels pasted over them. These receipts were seized during a search of Respondents' offices pursuit to a Federal search warrant. (Tr. 28)

On February 6, 1981, Jones again called Swing Friends. This time he used the fictitious name of Jeff Marshall. The transcript of that conversation (CX-29A) indicates that early in the conversation, Respondents' representative said, "OK, it's $20. for the membership..." Jones agreed to charge Marshall's Master Charge Account and gave his account number, expiration date and bank number. He subsequently received two certified envelopes and signed receipts for them. (Tr. 29, 30) He received a draft showing that Marshall's Master Charge Account had been charges $26. in favor of "Systems PLP" consisting of $20. for "Phone Order" and $6. for Postg. Hdl. Cert. Mail" (CX-30B). On the reverse side was one of the certified receipts that he signed as Marshall to which a label subsequently had been added. The label read, "I authorize Systems P.L.P. to charge $26. for the enclosed merchandise to my credit card card number and expiration date ." He received a second draft showing that Marshall's Master Charge Account had been charged $25.50 in favor of "Enterprise TAW" consisting of $20. for "Phone Order" and $5.50 for "Postg. Hdl. Cert. Mail" (CX-34B). On the reverse side was the other certified receipt that he signed as Marshall to which a label had been added. The label read, "I authorize Enterprise TAW to charge $25.50 for the enclosed merchandise to my credit card card number and expiration date ." Thus, Jones testified that Marshall's account was charged a total of $51.50 as a result of Jones' authorization of a $20. membership charge. (Tr. 32)

CX-37 is a pitch sheet to be used by Respondents' female representative when speaking to prospective members for American Swing Company. CX-38 is a pitch sheet to be used by Respondents' female representatives when speaking to prospective members for Phone Line Productions. Both were seized when Respondents' premises were searched pursuit to a federal search warrant. (Tr. 36) CX-37 states that membership is only $20. and "a new updated listing comes to you free every month during the year." CX-38 states, "The lifetime membership is $20. and you can remain a member for as long as you can handle it."

The Postal Service also received a complaint letter from Mr. A. Thomas DeCarlo. (CX-39A) That letter complained that two sets of charges were made to Mr. DeCarlo's credit card based on unsolicited certified letters receipted by his 11 year old daughter. The letter corroborated Inspector Jones' testimony about "authorization" labels that were subsequently pasted onto receipts. Mr. DeCarlo and his wife complained that they never ordered anything from Respondents or agreed to membership in Respondents' services.

Rebecca Swarts testified that on April 3, 1980 she was hired as an order taker for Swing Friends and Phone Line by Roger Willis Benson, Respondents' owner. She identified CX-37 and CX-38 as the pitches that she was told to use and used. (Tr. 59, 60) She testified that she was told to tell prospective members that the cost was $20. and she was instructed not to quote the actual price. (Tr. 61) She also stated that Respondents would change their telephone numbers every 10 or 15 days and if members wanted to obtain the new phone numbers, they were required to pay an additional $2. each time that the numbers were changed. (Tr. 62) She testified that most people who joined either American Swing or Phone Line would not join the other club. Of each 100 subscribers only about one or two people would join both services. (Tr. 63) She stated that her supervisor instructed her to shred complaint letters and letters requesting refunds. (Tr. 67)

On cross-examination, Ms Swarts testified as follows:

"A. A lot of times Roger would come up and blew up at us about that.

Q. Are you saying he told you not to say the exact price?

A. Do not quote the exact price.

Q. If you were asked if there was a mailing or handling charge, you would say, yes?

A. You would say there is a couple dollars more for COD charges, yes.

Q. And there were also handling charges on the credit cards?

A. No, you never did say that. I never said that.

Q. You were not instructed not to say there were handling charges?

A. We were told to quote the price. We never gave the exact price.

Q. You were not instructed to tell the people that there were no handling charges, though, were you?

A. Like on CODs we would say there is a few dollars more for CODs." (Tr. 69-70)

Ms. Swarts further testified that she was instructed to send charge slips for both American Swing and Phone Line Productions when an individual ordered just one service. She stated that this was the practice also followed by other order takers. (Tr. 75, 76)

Patricia Conn began working for Respondents on October 17, 1979. She began order taking two weeks later. She used the spiels at CX-37 and CX-38. She stated:

"We were always instructed not to give out the full amount. We were allowed to say a couple of dollars for postage and handling, but never $24.95. On the charges we just always told them $20. membership and full money-back guarantee." (Tr. 80)

Ms. Conn stated that she became an office supervisor for Respondents in late August or early September 1980. She stated that from the beginning of her employment she was instructed not to mention that there would be an additional $2. charge for new phone numbers each time that REspondents' phone numbers were changed. (Tr. 82) She stated that although only about five percent of the callers would join both services, she would send billings for both services to 100 percent of the callers. (Tr. 83) She was instructed to do this by Roger Willis Benson and his wife, Sue. (Tr. 84) She testified that it was the practice to verify a charge but only to verify for the service ordered and not for both services. (Tr. 84, 85) With respect to complaints or refund requests she stated, "Roger would just say, 'They belong in File 13', which was the shredder." (Tr. 86) She confirmed that Respondents changed their telephone numbers every 10 to 15 days and subscribers were required to pay an additional $2. for the new phone numbers each time the numbers were changed. (Tr. 87-89) Ms. Conn explained that Respondents changed their numbers because members circulated the numbers to non-members and after a while the lines were used by too many non-members. (Tr. 91) She stated that the $2. charge for new telephone numbers was made at least monthly. (Tr. 98)

Roger Willis Benson stated that he has owned and operated Phone Line Productions and American Swing Company since about September, 1979. He stated that Phone Line offers sexually stimulating telephone conversations and American Swing Club is a publication of sexually oriented advertisements. The companies advertise in 50 different magazines. (Tr. 99-101) He stated that the fees for these services are $20. plus $1. for shipping and handling. If the customer orders COD, the cost is $20. plus a $2. handling charge, a $2. shipping charge, 15 cents for postage and 80 cents for a postal money order for a total of $24.95. (Tr. 103) He stated that the girls used the telephone spiel "from day one." (Tr. 105) He testified that a competitor in Clayton, Missouri also uses the name "Brandy" in his literature and this has created "mass confusion." (Tr. 115)

On cross-examination, Mr. Benson stated that has received about 30,000 orders since he began these businesses in September, 1979. (Tr. 120) He further testified on cross-examination:

"Q. Did you ever tell Becky Swarts or Patricia Conn to tell them it is $24.95, $25.50, $26, the exact price, if someone asked what the cost was?

A. In fact what I said to the order girls, including Becky and Trish, Patricia Conn, they were instructed not to linger on the phone. If they were asked an additional cost, they were told to tell them, COD charges or whatever. The verification operator could be more specific on verifying the call, when they called back." (Tr. 123)

I found that Mr. Benson's answer to that question was evasive. It was as evasive as were the responses of his employees who spoke to the postal inspectors in the transcripts at CX-15A, CX-21A, CX-23A and CX-29A. It seems that Mr. Benson and his order takers were skillful in avoiding specifics when asked about charges.

When cross-examined about the $2. charge, he replied as follows:

"Q. Did you ever overhear one of your girls saying that, 'To get new numbers you will have to pay $2 every month or so?'

A. Two dollars is the handling charge, only; the numbers are free.

Q. Did you ever overhear your girls making that representation over the phone that they would have to pay two dollars for additional numbers?

A. I honestly can say I have not heard that. But again, I am not in the order department." (Tr. 124)

Mr. Benson admitted that he personally paster the "I authorize labels on the return receipts after they were signed and returned to him. (Tr. 129) He denied throwing away legitimate refund requests. (Tr. 130) When asked if the majority of subscribers ordered both services, Mr. Benson replied "I don't take the orders, sir; I don't know." (Tr. 134) I find it hard to believe that Mr. Benson would not know this information. I found Mr. Benson to be evasive and unreliable. Another example of evasive and unbelievable testimony is:

"Q. Did you ever tell anyone that if a person orders either American Swing or Phone Line Productions, to mail them both?

A. No, sir. I kept my face out of the order department as much as possible. I relied on the girls taking the orders to take whatever order was given to them.

Q. Were you aware of the employees sending out both to someone who ordered only one?

A. The possibility did not arise until after Mr. Jones visited me on the day of the search execution, and explained many things that might be going on. I then looked into certain situations and tried to make changes, which I did make changes to have a tighter rein on the situation, tighter control." (Tr. 135)

Later Mr. Benson admitted that he considered a request for information to be an order. He stated:

"Q. What if someone sent in a letter requesting information on Phone Line or American Swing, what would you do when you received that?

A. Very simply, send them out an order. Most letters stated, 'Please send me American Swing. Please send me information, please send me this.'

We interpreted that as, 'Please send me the article.' I assumed that somebody had called in and talked to somebody about the services and they were merely following through a letter of request, 'Please send it.' If you mean to take time to correspond with other than a COD, there are too numerous amounts of mail coming in for that, to respond to individuals, 'We do this' or 'We do that.' I just took it as an order and processed it as such.

Q. Even if they were just asking for information?

A. I assumed that would mean, send them the information, and out information costs.

Q. You realize they were not authorizing you to send them a COD. They were not authorizing you to charge them for a COD; did you not?

A. Sir, a lot of the individuals could hardly write. I interpreted the letters as best I could." (Tr. 136, 137)

When cross-examined about prior convictions, Mr. Benson answered as follows:

"Q. Mr. Benson, have you ever been convicted of a felony?

A. Yes, sir.

Q. What was this?

A. I don't know the exact details of it, sir, it was several years ago.

Q. Was it wire fraud?

A. Yes, sir, something. I was in negotiation with another company to buy them out. The negotiations fell through.

Q. Have you ever been convicted of bank fraud?

A. Not in that text, sir; giving false information to a financial institution.

Q. What was the purpose?

A. There was no purpose, sir. It was part of a financial statement. The other side felt I did not have all the assets I stated and I agreed to it. That led to what if called a negotiated settlement.

Q. Did you plead guilty to it?

A. Yes, sir, I did, under duress." (Tr. 137, 138)

CONCLUDING FINDINGS
AND CONCLUSIONS OF LAW

I. The Use of The Mails

Respondents are engaged in seeking money through the mails in connection with the businesses named in this proceeding. The testimony of Postal Inspector Jones and the exhibits introducted in connection with his testimony established this. This was also corroborated by the testimony of Rebecca Swarts and Patricia Conn and was not controversial by any of Respondents' evidence.

II. The Advertising Representations

The testimony of Complainant's witnesses and its exhibits also substantiated that, as alleged in Paragraph 3 of the Complaint, Respondents made the following representations:

(a) The total cost of the services of $20.00.

(b) The $20.00 is a one-time fee good for life.

(c) The addressee has previously consented to or requested the mailing of merchandise.

(d) The addressee has previously consented to the payment of COD charges claimed.

(e) The charges made to credit card accounts were authorized.

(f) Credit card billing will be limited to the amount agreed to for the established charges for the services.

Allegation (a) states "The total cost of the services is $20.00." The transcripts of the test purchases (Exhibits 15A, 21A, 23A and 29A) state the cost is $20.00. Both former employees testified that they were instructed to tell customers the cost of the services was $20.00 (Tr. 61, 79, 80 and 98). Mr. Benson testified that the fee for the service was $20.00 (Tr. 100 and 103).

Allegation (b) states "The $20.00 is a one-time fee good for life." The transcripts introduced as Exhibits 15A and 21A state the $20.00 fee is a lifetime membership. Patricia Conn testified that the telephone sales girls were instructed to tell the customer that the Phone Line membership was a life-time membership for only $20.00 (Tr. 79)

Allegation (c) states "The addressee has previously consented to or requested the mailing of merchandise." The inference can be made from the mailing of an article COD that the receiving party consented to or requested the mailing of the merchandise.

Allegation (d) states "The addressee has previously consented to the payment of COD charges claimed." The mailing of merchandise COD by nature indicates that the addressee has previously consented to the payment of COD charges claimed.

Allegation (e) states "The charges made to credit card accounts were authorized." All charges to credit card accounts must be authorized. Respondents represent the charges were authorized by the act of making the charges.

Allegation (f) states "Credit card billing will be limited to the amount agreed to for the established charges for the services." All businesses represent their billing of credit cards will be limited to the amount agreed to by the customer for the services or product purchased. Respondents represent that the credit and billing authorized over the phone will be limited to the amount the customer has agreed to for the established charges for the services.

III. The Falsity of The Representations

I find that the representations made by Respondents, as listed in Paragraph 3 of the Complaint, were materially false.

Complainant's test purchases and the testimony of Complainant's witnesses overwhelmingly support these findings. Mr. Benson's testimony does not contradict this evidence.

The copies of the charges show that Respondents charged their customers more than the $20. quoted. Also the testimony of Respondents' former employees and Mr. Benson substantiated the falsity of this representation.

The testimony of Respondents' two former employees and Mr. Benson proved that, contrary to Respondents' representations, $20. was not an one-time fee, good for life. As the telephone numbers were changed every two to four weeks, Respondents' subscribers were required to pay additional $2. fees for the new telephone numbers. (Tr. 88 and 124)

The representation that the addressee had previously consented to or requested the mailing of merchandise was also proven false. Inspector Jones requested only information yet was mailed a COD for $24.95. (CX-12, Tr. 9) Both Patricia Conn (Tr. 85) and Mr. Benson (Tr. 136, 137) also substantiated this allegation.

The evidence also shows that although customers agreed to $20. memberships their accounts were charged with as much as $51.50. Thus, Respondents also falsely represented that (1) the addressee had previously consented to the payment of COD charges claimed (2) the charges made to credit card accounts were authorized and (3) credit card billing will be limited to the amount agreed to for the established charges for the services.

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, Inc., 333 U.S. 178 (1948); Vibra-Brush Corp v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957).

I find that Respondents are engaged in conducting a scheme for obtaining money through the mail by false representations in violation of 39 U.S. Code § 3005. Therefore, a mail-stop order, substantially in the form attached, should be issued against Respondents.