P.S. Docket No. 13/173
August 27, 1982
In the Matter of the Complaint Against
IAAIC (International American Arab Investment Corporation)
at 8306 Wilshire Blvd. Suite 198
Beverly Hills, CA 90211
at 8383 Wilshire Blvd. Suite 1001
Beverly Hills, CA 90211
P.S. Docket No. 13/173;
08/27/82
Duvall, William A.
APPEARANCES FOR COMPLAINANT:
Hild a Rosenberg, Esq.
James A. Harbin, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260
APPEARANCE FOR RESPONDENT:
Roy Moore, Pro se 8306 Wilshire Blvd.,
Suite 198
Beverly Hills, CA 90211
INITIAL DECISION
The United States Postal Service, (Complainant) acting through the Consumer Protection Division, Law Department, Washington, D.C., charged IAAIC and International American Arab Investment Corporation (which, together with Mr. Roy Moore, an officer of the named enterprises, are hereinafter sometimes referred to as Respondent), 8306 Wilshire Blvd., Suite 198, and 8383 Wilshire Blvd., Suite 1001, both at Beverly Hills, CA 90211, with conducting a scheme for obtaining money or property through the mails by means of false representations as proscribed by 39 U. S. Code § 3005.
Complainant charges that by means of certain advertisements, Respondent represents, directly or indirectly, in substance and effect, whether by affirmative statements, implications or omissions that:
a. Respondent will provide a full and unconditional refund to dissatisfied customers.
b. All "investors" named have authorized the inclusion of their firm in the IAAIC list.
Finally, Complainant charged that the above representations are materially false as a matter of fact.
Thus, the activities of Respondent which are alleged to constitute the scheme are advertising and soliciting remittances through the mails for what is falsely represented to be a list of people in the Arab world who are guaranteed, on a full refund basis in the event the purchaser is dissatisfied, to be interested in investing in real estate projects or other profit-making ventures in North America. Typical advertisements are as follows:
See page 3 of ID hard copy.
Respondent filed a timely Answer to the Complaint which bears some illegible markings in the space over the typed name and title "Roy Moore - Respondent." In the Answer, Respondent admits that Exhibits A and B to the Complaint (similar to RX-2, supra, p. 3, except that Ex. B to the Complaint shows the price of the list to be $100) appeared, respectively, in the May 1982 issue of Surfing, and in The Robb Report during the Fall of 1981. Otherwise, Respondent denied all other allegations of the Complaint and stated that he would appear in person at the hearing.
A hearing was held in Washington, D.C., on July 20, 1982, at which time the parties examined and cross-examined the various witnesses. Later, proposed findings of fact, conclusions of law, and reasons in support thereof were filed on behalf of both parties.
FINDINGS OF FACT
1. Postal Inspector Lewis L. Kinzler, 501 West Fifth Street, Los Angeles, investigates matters under the postal fraud (18 U.S. Code ?? 1341, 1342) and misrepresentation (39 U.S. Code § 3005) statutes. He became familiar with the Respondent companies when the Los Angeles Division of the Postal Inspection Service received a complaint from a publisher, the Bassett Company, early in 1982 about Respondent's advertisements which Bassett was running. (Tr. 71-72) Inspector Kinzler checked Respondent's address as shown in its ad, 8306 Wilshire Boulevard, Suite 198, and found it to be a telephone answering and mail receiving and answering service. Other complaints by Respondent's customers of which Inspector Kinzler is aware include those of Robert Gary Machala, Jefferson Raymond and Stephen S. Dua. (Tr. 73-74)
2. In a letter dated November 13, 1981, from Respondent to the Inspection Service in reference to a complaint by Mr. Raymond, Respondent explained its refund policy. If a person could prove to Respondent that a name or address on the list purchased by the person was so erroneous that mail addressed to that person could not be delivered, Respondent would make what it called a pro-rata refund. Under this system, if it is assumed that a list contains 50 names and cost the purchaser $100, Respondent would refund about $2 plus some postage for each name and address to which mail could not be delivered because of error appearing in the listed name and address. (CX-12; see, also, CX-11 and Tr. 100) Inspector Kinzler spoke with Mr. Raymond in June, 1982, the month just prior to the hearing, and Mr. Raymond stated that he had not received any refund. (Tr. 76)
3. Another complaint received by Inspector Kinzler was that of Stephen S. Dua, Financial Consultant, Chicago, IL. On March 6, 1982, Mr. Dua referred in a letter to having seen Respondent's advertisement of its "Manual," ordered a copy, and enclosed a postal money order in payment therefor in the amount of $190. On April 1, 1982, Mr. Dua wrote to Respondent saying that he was shocked to be charged "such an amount for five xeroxed sheets of paper." He indicated entire dissatisfaction with his purchase, and demanded the refund of his money. Mr. Dua contacted representatives of the Postal Inspector in Charge at Los Angeles, who wrote the Respondent saying that Mr. Dua was dissatisfied with the mail order transaction and wanted his money refunded. The Postal Inspector in Charge of the Los Angeles Office, L. O. Poindexter, in a letter dated May 18, 1982, asked Respondent to take steps to try to resolve the problem and to advise Mr. Poindexter within 30 days as to the results obtained. By letter of May 20, 1982, Respondent wrote to Mr. Poindexter explaining Respondent's pro-rata refund policy and system. On the Friday preceding the hearing, Inspector Kinzler spoke with Mr. Dua by telephone at which time Mr. Dua said he had received no refund. (Tr. 76-85; CX-13-21)
4. Some idea of the extent of Respondent's advertising is suggested by the names of some of the publications in which its advertisements were seen by Inspector Kinzler in the six or seven months prior to the hearing. These publications include, but are not necessarily limited to, California Magazine, January, 1982; Harpers, February, 1982; Runner's World, March 1982; Esquire, March, 1982; and 1001 Home Ideas, April issue. (Tr. 86-89; CX-22-26)
5. On February 22, 1982, Inspector Kinzler visited Respondent's office at 8306 Wilshire Boulevard, Suite 198, which address previously had been discovered to be a mail receiving and telephone answering service. Mr. Moore was picking up the mail from Box 198. After he picked up his mail, the Inspector walked up to him on the sidewalk in front of the building and identified himself as a Postal Inspector. Mr. Moore appeared to be extremely nervous and Inspector Kinzler was under the impression that Mr. Moore was going to flee. At first Mr. Moore said that he was not Mr. Moore, but when asked whether he had just picked up his mail at Box 198 he immediately changed and said that he was Mr. Moore. When asked for some identification he said he had none, but he changed his mind and produced a driver's license bearing the name of Cary Turcell. Inspector Kinzler said that he wanted to talk about the IAAIC advertisement, but Moore said he would not talk to him about it. (Tr. 89-92)
6. At Mr. Moore's invitation the meeting was continued in Mr. Moore's house located nearby. He gave a copy of the list of persons and concerns to Inspector Kinzler. he said that the list were people who had responded to one of his ads in other countries and who had indicated interest in one of his promotions of real estate in Texas. No business resulted from this promotion, so he got the idea to offer the list of names to the American public as a list of potential investors. One of the listed persons gave him permission to so use his name. (Tr. 92-94)
7. During the conversation, the address at 8383 Wilshire Boulevard, Suite 1001, the location of another mail receiving and telephone answering service was discussed. That is the former office of the A-1 Answering Service, which Inspector Kinzler previously had ascertained. That business has moved to an address on Fairfax Avenue in Los Angeles. As of June, 1982, some mail for Mr. Moore at IAAIC was still being received by A-1, (CX-47) as is true, also, of the answering service located at 8306 Wilshire Boulevard. (Tr. 94-96) Mr. Moore also discussed with Inspector Kinzler, and Inspector Ach who accompanied him the refund policy followed by Respondent. (Tr. 100)
8. (a) Inspector Kinzler prepared a letter stating that Respondent's activities were being evaluated to determine whether misrepresentations might have been made through the United States mails in violation of Federal laws. It was stressed that no such determination had been made and that the inquiry should not reflect adversely on the firm, or any individual connected with it. It was stated, also, that the inquiry should be treated as "CONFIDENTIAL." A copy of an advertisement similar to RX-2 (supra, p. 3) and a questionnaire were sent with the letter to the 99 names on the list supplied by Mr. Moore to Inspector Kinzler. The letter was mailed in March, 1982. (Tr. 100, CX-28 and 29)
(b) Fifteen (15) of the 99 persons to whom such letters were sent responded, and all of them said they had given no authorization to anyone at IAAIC to use their names. 1/ Four of the 15 people said they had never heard of IAAIC, and some of them indicated displeasure that their names were so used. (Tr. 104-5; CX-31, 32, 37, 43)
(c) Complainant's Exhibits 45 and 46 are photocopies of envelopes in which Inspector Kinzler's letter and questionnaire were mailed to names and addresses shown on the first page of the list given to him by Mr. Moore. This mail was returned as being undeliverable as addressed. (Tr. 106)
9. (a) Robert Gary Machala, Corunna, MI, an investment advisor licensed by the State of Michigan, related his experience with Respondent. Mr. Machala represents various investors who seek investments in real estate, or for whom he arranges loans for different projects. In 1980, he saw one of Respondent's advertisements (Tr. 9; CX-1) in Newsweek magazine. The statement at the bottom of the ad, "Satisfaction guaranteed or money refunded", caused him to believe that if the list proved to be unsatisfactory, the purchase price ($100) would be refunded. (Tr. 17-18) From the language of the ad Mr. Machala believed, also, that Respondent had, in fact, been authorized to represent Arab investors whom Respondent personally knew to have money available for investment in the United States and North America. (Tr. 21) After telephoning and writing for more detailed information, (Tr. 21, 22; CX-2) Mr. Machala ordered the list of names and addresses (CX-3) and enclosed a money order in the amount of $100. (CX-4; Tr. 21-26)
(b) When the list arrived Mr. Machala was disappointed at the information contained in the list. In his words, "They were totally useless to me." (Tr. 26) The list consisted of names or addresses of embassies, trading companies, and post offices. An illustration of the kind of information desired and expected by Mr. Machala is found in a publication known as U.S. - Arab Commerce, published by the U.S. - Arab Chamber of Commerce, Inc. (CX-4A) Mr. Machala receives a free copy of this publication when it is issued. It contains business opportunities that originate in an Arab country, different kinds of trading companies, and people who wish to purchase goods manufactured in the United States. The firms named in the publication are said, in a notice appearing on page 4 of the exhibit, to have authorized the U.S. - Arab Chamber of Commerce to publish such notices concerning them. (Tr. 27-29)
(c) The usual type of such a listing gives the name of the individual or company, a specific address, and a statement of the kind of investment sought. (Tr. 66, 70) It was this kind of list that Mr. Machala wanted and expected to - but did not - receive from Respondent. Because he was so dissatisfied with Respondent's list, Mr. Machala returned it with a letter dated October 15, 1980. (CX-5) This letter was returned "Unclaimed." (CX-6) Using another letterhead, Mr. Machala wrote again on November 11, 1980, again demanding a refund. (CX-7) A similar letter was written on February 3, 1981. (CX-8) That letter evoked a response on June 22, 1981, from
Mr. Moore 2/ in which he again sets forth the pro-rata refund system. (CX-9) On June 26, 1981, Mr. Machala indicated that he would accept nothing less than a 100% refund of the purchase price of the list. (CX-10) Mr. More replied by letter of November 11, 1981, with a more detailed description of the refund system. (CX-11) This last letter apparently interrupted Mr. Machala's contact with Respondent until he appeared at the hearing as a witness.
10. (a) Mr. Moore was the only witness to testify on behalf of the Respondent. IAAIC and the International American Arab Invest ment Corporation form some sort of organization the nature of which is unclear. Mr. Moore stated (Tr. 164-165) that the company originally had a function of selling, land investment and promoting trade. His own function, he said, is to keep the customers happy, to fill orders for mailing lists, and "to think of new things regarding the company."
(b) A Mr. Achmed is the top executive of the company, but, oddly enough, he is not Mr. Moore's superior. In fact, Mr. Moore had not heard from him for a long time prior to the hearing. According to Mr. Moore, the company was not even "organized" at the time of the hearing. (Tr. 165-166)
(c) Mr. Moore's main point was that in his estimation the Postal Service was not "able to attack the facts." He said that with a group of ten people in a serious, heavy operation, he could be in serious competition with the U. S. Postal Service, and then things like this (presumably, this hearing on the charges) would not exist. (Tr. 166-167)
(d) A form was sent to everyone who is listed advising them that their personal or firm name would be added to the list. He does not contact each and every person each and every time he gets an order. At one point, he said that one person authorized the placing of his name on Respondent's list. (Tr. 94) He said he had no complaints from anybody on the list. (Tr. 167-168)
(e) He has answered all letters of anybody who wrote to him concerning his refund policy and he says he has thousands of satisfied customers, "and they are all the way from the other side of the world." (Tr. 169)
11. It was Mr. Moore's view that those people who responded to the questionnaire in a manner that was adverse to Respondent did so because the receipt of the official looking document and the nature of the questions presented therein, frightened the addresses of questionnaires. This was especially true, he said, with respect to any of the recipients of the questionnaires who may have wanted to emigrate to the United States. Thus, answers that were unfriendly to Respondent were to have been expected. (Tr. 133) This view of Mr. Moore's was unsupported by anything else in the record.
12. Respondent introduced into evidence an undated copy of the publication called Dallas/Ft. Worth Business; the December 14, 1981 issue of the National Law Journal, a publication of particular interest to the legal profession and which is published in Washington, D.C.; and the March 1981 issue of the Los Angeles Trial Lawyers Association Advocate, the title of which suggests the readership at which it is directed. (RX-1, 2 and 3, respectively) Respondent's position was that if it was Respondent's purpose to engage in mail order activities of any but the purest type, it would not have selected these publications to be among its advertising media. This is an interesting argument, but one which will not withstand careful scrutiny. It is noteworthy that Respondent's Exhibit No. 2 carries the unqualified guarantee of satisfaction or refund.
13. Other exhibits introduced by Respondent include the following:
RX No. Origin Date and Summary of Content
5 __ 3/ Trinidad, W.I. 6-30-82 Thanks Respondent for sending list. Asks for aid in persons interested in resort timesharing.
10 Ghana 5-18-78 Indicates pleasure at thought of becoming Respondent's agent.
6 Ghana 7-18-78 Follow-up to RX-10. Wants agency status confirmed.
7 Morocco 7-5-78 Says he would be glad to represent Respondent.
8 Athens 7-14-76 Wants to handle Respondent's advertising account.
9 Sudan 4-13-78 Saw ad in Egyptian magazine. Says he wants to buy land in Texas. RX No. Origin Date and Summary of Content
11 Kuwait 3-27-78 Wants information about Texas land for sale.
12 Saudi Arabia 4-25-78 Wants information about Texas land for sale.
13 Sudan 4-21-78 Wants information about Texas land for sale.
14 Israel 1-15-82 Wants (1) name listed and (2) name of person to sell video recorders for him.
15 Qatar 4-12-78 Wants information about lands for sale in Texas and Mexico.
16 New York, NY 3-2-82 U.S. Arab Chamb. of Comm. wants to be listed in Respondent's publication as informational resource.
17 Mexico 4-16-82 Grants Respondent permission to list his name. Tells of receipt of inquiry about him from postal inspectors. Encloses material concerning sale of hotel in Acapulco.
18 Abu Dhabi 5-20-78 Wants to know how Respondent got his address. Says he is a leading businessman in the United Arab Emirates; interested in investing abroad, especially in Switzerland and United States; and asks how Respondent can assist him.
19 Israel 5-30-78 Says International markets, Ltd. has decided to appoint Respondent as its independent representative in California.
14. As the above exhibits indicate, most of them relate to a special promotion that occurred sometime in 1978 - five years ago -relative to (a) the sale of land in Texas, or (b) the appointment of representatives in this or foreign countries.
These matters have little, if anything, to do with the issues in this proceeding. The remainder of the persons who contacted Respondent had made their contacts so close to the time of hearing that dissatisfaction may not have had time to develop, or their relationships, such as becoming Respondent's representative, may not have produced conflict. The mere absence of complaints does not mean that persons are satisfied with the list of prospective Arab investors. In any event, it is clear that Respondent is not the best source from which to expect voluntary production of records of unsatisfactory relationships.
15. From what heretofore has been stated, it is apparent that the testimony on behalf of Respondent did little to aid its cause. On the other hand, the cross-examination of Complainant's witnesses did not weaken or cause any contradiction of the testimony they gave on direct examination.
COMMENT
There is a practice on the part of Complainant in these types of proceedings which appears to be gaining more and more frequent use, while its value and advisability are becoming more and more dubious. I refer to the citation, quotation and apparent reliance for support upon the regulations of the Federal Trade Commission.
It is true that there are certain similarities in some of the types of cases tried in the two agencies - Federal Trade and Postal Service. But it is equally true that there are differences in the hearing procedures, and even sharper differences in the remedies available under the legislation governing both agencies. These differences neither are nor ought to be regarded as matters giving rise to controversy or competition. Both agencies are part of the same Government and they are capable of - and, I am told, sometimes do - work cooperatively with each other for the benefit of the public. This selective mutuality of interest and effort should continue.
To say that the agencies should continue to work together does not mean that they should lose their separate identities. This is so because at times the very differences in techniques employed by the agencies, when they are called upon to function simultaneously but separately, may produce synergistically, an effect that is greater than that which would be produced if all the functions of each agency were exercised against the same target at different times. Under the present system of independent action, however, the expertise of each staff is permitted to be used to the best advantage.
In enforcing the Federal Trade Commission Act, the Commission has been empowered to provide by regulation certain definitions which assist it in the performance of its functions. This authority is found in various portions of the Federal Trade Commission Act, e.g., 15 U.S.C. ?? 45, 46 and 57. In the Postal Service, questions as to the meaning of language are resolved by the body of case law which has built up over the years going back at least as far as June 8, 1872, when the Congress incorporated an early predecessor of the present 39 U. S. Code 3005 into the Revised Statutes as § 3929. And, of course, both agencies are required by the Administrative Procedure Act to adopt and publish procedural rules.
Nowhere, however, so far as I am aware - and Complainant has given no citation - is the Postal Service authorized to issue regulations, other than those relating to the classification of and rates payable on mail matter, which are binding upon the Federal Trade Commission. Similarly, no authority is known, and none has been shown, under which the regulations of the Federal Trade Commission are binding upon the Postal Service.
If the practice of citing F.T.C. definitions, rules, and regulations in proposed findings of fact and conclusions of law in cases tried, for example, under 39 U.S. Code 3005 continues to increase, the impression may unintentionally be fostered that the Postal Service regards itself as being subject to those pronouncements. The fact is that in a Postal Service proceeding it is immaterial that the Federal Trade Commission, for its own purposes, has set 30 days as a reasonable delivery time for merchandise ordered by mail. It would still be immaterial even if the two agencies were proceeding at the same time against the same Respondent for the sale of the same product under similar representations. Thirty days may be a reasonable or un unreasonable time in which to expect delivery, but what is reasonable or unreasonable in a Postal Service setting should be determined in the same manner as are other matters which depend upon a finding of "reasonableness."
The surrounding facts and circumstances should govern, and these may make a period of less than, or more than, 30 days a reasonable time period.
In essence, then, it is not the function of the Administrative Law Judges at the Postal Service, or, indeed, of the Postal Service, itself, to enforce or administer the regulations of the Federal Trade Commission. Moreover, in order to establish a misrepresentation based, for example, on the 30-day delivery regulation would require proof that the existence of that regulation is a matter of common public knowledge to the extent that compliance therewith could be said to be an implied representation by Respondents upon which the ordinary purchaser would rely when placing an order. The production of such proof would be a most difficult, if not an impossible, task.
The preferable course to follow may be best expressed in the ancient advice: "Cobbler, stick to your last."
CONCLUSIONS OF LAW
1. Respondent seeks remittances of money through the mail.
2. Construing the language of Respondent's advertisements as a whole and in terms of the impact and impression those advertisements would have and make on persons of ordinary minds, Respondent represents that it unconditionally guarantees that purchasers of its list or lists will be completely satisfied with such lists, or that, alternatively, on the purchaser's applications therefor, the purchase price of the list will be refunded. Donaldson v. Read Magazine, 333 U.S. 178 (1948); Borg-Johnson Electronics v. Christenberry, 169 F. Supp. 746 (S.D.N.Y. 1959); G. J. Howard v. Cassidy, 162 F. Supp. 568 (D.C.N.Y. 1958); Vibra-Brush Corp. v. Schaffer, 151 F. Supp. 461 (S.D.N.Y. 1957).
3. The reasonable implication to be derived from Respondent's advertisements and from the lists, themselves, is that the persons and concerns named on Respondent's "list of potential clients" have authorized the inclusion of their names on the list. Donaldson v. Read Magazine, supra; Vibra-Brush v. Schaffer, supra.
4. The foregoing representations are material in that they are of the kind and character by which readers are, and were, persuaded to purchase Respondent's product.
5. The testimony of Mr. Machale, the testimony of Inspector Kinzler relative to (a) his interview with Mr. Moore, (b) his communications with Messrs. Raymond and Dua, and (c) his poll of the names shown on Respondent's list; and the testimony of Mr. Moore, himself, establish the falsity of Respondent's representations.
6. Complainant has established its case by a preponderance of the competent, credible, and probative evidence. Donaldson v. Read Magazine, supra; Leach v. Carlile, 258 U.S. 138 (1922); Cosvetic Laboratories, P.S. Docket No. 8/160 and cases consolidated therewith (P.S. Dec. July 22, 1982, p. 11).
Proposed findings of fact and conclusions of law submitted by the parties have been fully considered, and to the extent indicated herein, they have been adopted. Otherwise, such proposed findings of fact and conclusions of law are rejected for the reasons that they are unsupported by or contrary to the evidence or because of their immateriality, incompetence, or irrelevance.
The Respondent, under the names and at the addresses shown in the caption hereof, is engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations within the meaning of 39 United States Code § 3005. Accordingly, an order of the type authorized by 39 U. S. Code § 3005, substantially in the form attached, should be issued against the Respondent.
1/ One person, David Stry, Cuernavaca, Mexico, after receipt of the questionnaire, responded on April 16, 1982 on the bottom of a letter of March 16, 1982, from More to Stry, by a note saying, "Yes, OK to list me. David Stry, April 16/'82." Another note stapled to Moore's letter reads: "RM: We recently rec'd a letter of inquiry about you from the postal inspectors." (See CX-30 and RX-17) In another instance, a writer from Jeddah, Saudi Arabia, states in the questionnaire in 1982 that he has never contacted Respondent. (CX-42) By letter dated April 25, 1978, however, which letter was signed by someone else for the person whose name is at the bottom of the questionnaire, a request is made for "full details and plans" of the Texas land sale promotion. (See CX-42 and RX-12)
2/ Sometimes Mr. Moore spells his name as just stated, and at other times he uses More, or Mohr, perhaps none of the above or, perhaps, a number of other names. (See CX-27A; Tr. 163-164)