In the Matter of the Complaint Against

THE AMERICAN HOME INCOME ASSOCIATION (A.H.I.A.)
942 North Main
at Boerne, TX 78006
and 4414 Centerview, Dept. 264
at San Antonio, TX 78228

P.S. Docket No. 11/78;

03/15/82

Cohen, James A.

APPEARANCE FOR COMPLAINANT:
James F. M C L U 4 WcMullin, Esq.
Consumer Protection Division
Law Department
U.S. Postal Service
75 L'Enfant Plaza West, SW
Washington, DC 20260

APPEARANCE FOR RESPONDENT:
M 1 S r. A. L. Chavis
50 Terrell Plaza, #20
San Antonio, TX 78209

POSTAL SERVICE DECISION

Respondent has appealed from an Initial Decision of an Administrative Law Judge which holds that with regard to direct mail advertising circulars promoting a work-at-home income-producing program, Respondent is engaged in the conduct of a scheme or device to obtain money or property through the mail by means of materially false representations in violation of 39 U.S.C. § 3005.

BACKGROUND

The Consumer Protection Division, Law Department, United States Postal Service (Complainant), filed a complaint against Respondent alleging that through the distribution of direct mail circulars Respondent falsely represents:

"a. Full details of the American Home Income Association (A.H.I.A.) program is provided to participants upon payment of an application fee.

b. A Membership Packet is all that is necessary for participants to begin earning a guaranteed weekly income.

c. The A.H.I.A. program provides an opportunity for participants to make a good, steady guaranteed income every week.

d. A.H.I.A. screens applicants to determine if they are honest, reliable and willing to follow instructions.

e. The A.H.I.A. program does not violate United States Postal Service false representations statutes.

f. A. L. Chavis does not promote businesses that obtain money or property through the mails by means of false representations.

g. The A.H.I.A. program is not a gimmick or a get-rich-quick offer.

h. No capital investment is necessary beyond the application fee.

i. Participants who work one hour a day per week can reasonably be expected to earn $205.80 a week.

j. Weekly earnings of participants are guaranteed by A.H.I.A. in writing."

Respondent filed an Answer to the Complaint denying that it makes any of the alleged representations.

A hearing was held by the Administrative Law Judge to take evidence on the allegations of the Complaint. At the hearing Andrew C. Ackermann, III, a Postal Inspector, testified for Complainant, and A. L. Chavis, a principal of Respondent testified on his own behalf.

In the Initial Decision, the Administrative Law Judge found that Respondent makes representations a - d and g - j but not representations e and f. Of the representations found to be made, the Administrative Law Judge concluded that Complainant's evidence establishes that representations a, b, d, h and j are materially false in fact, but that Complainant failed to prove the falsity of representations c, g and i.

RESPONDENT'S EXCEPTIONS AND DISCUSSION

Respondent makes two arguments in support of its appeal. First it argues it was denied due process because the Administrative Law Judge erroneously granted Complainant's request for an extension of time to file proposed findings of fact and conclusions of law. Secondly, Respondent argues that it has revised its advertising to eliminate objectionable representations which were the subject of a prior Postal Service order, and the Postal Service should not be permitted to object to the revised advertising.

Under 39 C.F.R. ??952.13 and 952.23 the Administrative Law Judge was authorized to extend the period for filing proposed findings of fact and conclusions of law upon a showing of good cause. Whether good cause exists is a judgmental matter left to the discretion of the presiding officer and will not be disturbed unless abused. Although the parties disagree on the facts surrounding the extension, on the record as it then existed it cannot be found that the Administrative Law Judge abused his discretion in granting the requested extension or that Respondent was prejudiced thereby. Accordingly, Respondent's contention relating to the extension provides no basis for altering the findings or conclusions of the Initial Decision.

With regard to its second contention, Respondent argues that it is already subject to a Postal Service order issued in Financial Advisor Services, P.S. Docket No. 8/20, and that it removed "every syllable that was objectionable by the Postal Service from the old circular and the new circular is identical to the old circular without the objectionable language" (Resp's appeal, pp 2-3). Respondent contends that since it is in total compliance with the decision in Financial Advisor Services, Complainant should be precluded from raising objections to its new advertising which could have been raised in the prior case.

The Administrative Law Judge found that the advertising and allegations of misrepresentation which are the subject of the proceeding are different from those considered in Financial Advisor Services. He therefore decided this case on its merits without reference to the earlier decision.

The Administrative Law Judge's determination to consider the present case on its merits was proper. In Financial Advisor Services it was found that Respondent was engaged in a scheme in violation of 39 U.S.C § 3005. Although specific portions of Respondent's advertising were cited in the Financial Advisor Services Decision to show the existence of materially false representations, the totality of the advertising was considered in reaching the conclusion that a violation of the statute had occurred. Financial Advisor Services, P.S. Docket No. 8/20, (I.D. May 8, 1980). The absence of the cited language does not establish that the false representations previously found to have been made are no longer continuing in the revised advertisements.* Morever, despite the omission of the cited portions from the revised advertisements, the falsity of the representations alleged in this proceeding is supported by the evidence. Furthermore, the prior proceeding does not serve as a bar to this proceeding on the issues raised in this complaint which relate to Respondent's revised advertising and promotion under its new name. See, F.T.C. v. Raladam Co., 316 U.S. 149 (1942); Porter & Dietsch v. F.T.C., 605 F.2d 294 (7th Cir. 1979); Eden Valley Nursery Sales, P.S. Docket No. 7/23 (P.S.D. Feb. 15, 1980). Respondent's revised advertising and promotion give rise to a new cause of action. See Eden Valley Nursery Sales, supra. Accordingly, this contention of Respondent has no merit.

Neither party has addressed Finding of Fact 8 c. However, because it could be inferred from this finding that the testimony of the Respondent could not be used to establish Complainant's prima facie case, mention of this finding is necessary. In Finding of Fact 8 c the Administrative Law Judge stated:

"(c) Complainant did not sustain its burden of proof as to this allegation. Mr. Chavis's denial of knowledge in response to various questions put to him on cross-examination did not constitute affirmative proof of this allegation. Respondent had no burden of proof on this issue until Complainant made a prima facie case which it failed to do."

It is true that the burden of going forward with rebuttal evidence does not shift to Respondent until Complainant has established its prima facie case. See Rush Industries, Inc., P.S. Docket No. 7/50 (P.S.D. April 10, 1980). However, Respondent's denial of knowledge of facts of which only it should have been aware could be used to establish Complainant's prima facie case since adverse inferences could be drawn from Respondent's testimony and used as affirmative proof of the falsity of a representation. See International Union v. NLRB, 459 F.2d 1329 (D.C. Cir. 1972); see also Standard Research Laboratories, P.S. Docket No. 7/48 (P.S.D. Sept. 24, 1980). Whether an adverse inference should be drawn depends upon a consideration of a number of factors, however, and the Administrative Law Judge's failure to draw an adverse inference from Respondent's testimony was not improper in this case.

CONCLUSION

Respondent has not shown any error in the Administrative Law Judge's decision. The record has been reviewed and it is concluded that the Administrative Law Judge correctly found that Respondent is engaged in a scheme or device for obtaining money through the mail by means of false representations. Accordingly a remedial order under 39 U.S.C. § 3005 is being issued contemporaneously with this Decision.

* Whether the facts would support the issuance of a supplemental order (39 C.F.R. § 952.30 in Financial Advisor Services, has not been raised by the parties, and need not be addressed, since it has been concluded that a false representation order as recommended in the Initial Decision should be issued.