In the Matter of the Complaint Against

DELTA ENTERPRISES
P. O. Box 2903
at Rock Hill, SC 29730

and
FUTURE PUBLICATIONS

and
B.N.S. ENTERPRISES
P. O. Box 63-5087
at Margate, FL 33063

and
ALLTIME ENTERPRISES
P. O. Box 26353
at Tamarac, FL 33320

P.S. Docket No. 14/72;
P.S. Docket No. 14/73;
P.S. Docket No. 14/74;
P.S. Docket No. 14/75;

Dicus, Carroll C. Jr.

APPEARANCES FOR COMPLAINANT:
H. Richard Hefner, Esq.
Clark C. Evans, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260-1100

APPEARANCE FOR RESPONDENT DELTA ENTERPRISES:
Cade L. Austin, Esq.
711 Law Building 730 E. Trade Street
Charlotte, NC 28202-3021

APPEARANCE FOR RESPONDENTS FUTURE PUBLICATIONS,
B.N.S. ENTERPRISES and ALLTIME ENTERPRISES:
Robert A. Shupack, Esq.
Suite 301 1550 N.E.
Miami Gardens Drive
N. Miami Beach, FL 33179-4893

POSTAL SERVICE DECISION

Respondents have appealed from the Initial Decision of an Administrative Law Judge which holds that Respondents' envelope stuffing program is a scheme or device for obtaining money or property through the mail by means of false representations in violation of 39 U.S.C. § 3005.

BACKGROUND

On September 20, 1982, the Consumer Protection Division, Law Department, United States Postal Service (Complainant), filed Complaints, alleging that Respondents by means of direct mail solicitations are engaged in a scheme or device for obtaining money through the mail by means of false representations in violation of 39 U.S.C. § 3005. The specific allegations of the various Complaints which are relevant to this appeal are set forth below:

Docket No. 14/72

"4...(a) Payment of the initial membership fee will allow immediate participation in the Delta Enterprises promotion without further substantial financial investment by the homeworker.

"(b) Many ordinary participants will make sizeable earnings.

"(c) Names and addresses of sales prospects will be available without further monetary expenditure.

"(d) Amounts of earnings are primarily determined by whatever time participants devote to the routine tasks of addressing envelopes and stuffing them with sales circulars.

"(e) Advertising circulars to be furnished will promote the sale of items other than the kind of program being purchased by the homeworker."

. . .

"8...(a) Persons remitting $25 will receive envelopes, circulars, prospect names and postage stamps having a commensurate value.

"(b) Attractive compensation will be made by homeworkers by addressing envelopes and stuffing them with sales circulars.

"(c) Advertising circulars to be furnished will promote the sales of items other than the kind of program being purchased by the homeworker.

. . .

"13...(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars.

"(b) Earnings will be made by homeworkers by addressing envelopes and stuffing them with sales circulars."

Docket No. 14/73

Count I of the Complaint charges Respondent with the same false representations set forth in ??4(a)-(e) of Docket No. 14/72. Count II of the Complaint charges that the following false representations are made:

"8...(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars.

"(b) Attractive compensation will be made by homeworkers by addressing envelopes and stuffing them with sales circulars."

Docket No. 14/74

The Complaint alleges that Respondent makes the following false representations:

"4...(a) Payment of the initial membership fee will allow immediate participation in the Delta Enterprises promotion without further substantial financial investment by the homeworker.

"(b) Amounts of earnings are primarily determined by whatever time participants devote to the routine tasks or addressing envelopes and stuffing them with sales circulars.

"(c) Participants will promote the sale of a product or service substantially different from the program they are purchasing.

. . .

"8...(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars.

"(b) Earnings will be made by homeworkers by addressing envelopes and stuffing them with sales circulars."

Docket No. 14/75

In Count I of the Compliant, Respondent is charged with making the same false representations that were alleged in ??4(a)-(e) of the Complaint in Docket No. 14/72. Counts II and III of the Compliant allege that the following false representations are made:

"8...(a) Payment of the initial membership fee will allow participation in the Delta Enterprises promotion without further substantial financial investment by the homeworker.

"(b) Amounts of earnings will be primarily determined by whatever time participants devote to addressing envelopes and stuffing them with sales circulars.

"(c) Participants will promote the sale of a product or service substantially different from the program they are purchasing.

. . .

"13...(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars.

"(b) Earnings will be made by homeworkers by addressing envelopes and stuffing them with sales circulars."

In Count IV of each of the Complaints in Docket Nos. 14/72, 14/73, and 14/75 it is alleged that Respondents were conducting a lottery or a scheme for the distribution of money by chance. Respondent, Delta Enterprises filed an answer admitting that it uses the mail to obtain money, but denying all other substantive charges in the Complaints. Respondents Future Publications, B.N.S. Enterprises and Alltime Enterprises denied all Complaint allegations. At a hearing before an Administrative Law Judge, Complainant presented the testimony of Postal Inspector Gary W. Kay and two consumers who ordered Respondents' programs, Ms. Regina Clark, and Ms. Rebecca Lynn Crabtree. Respondents presented the testimony of Mr. Burton Gladstone, owner of Future, B.N.S. and Alltime; and Mr. William S. Thomas, owner of Delta Enterprises. Both parties submitted documentary evidence. Following the filing of Proposed Findings of Fact and Conclusions of Law, the Administrative Law Judge issued an Initial Decision in which he found that none of the Respondents were involved in a lottery. Respondents B.N.S. Enterprises and Alltime Enterprises were not found to be in violation of 39 U.S.C. § 3005. Respondents' Delta Enterprises and Future Publications were found to have made various materially false representations set forth in the Complaints. Respondents appealed the Initial Decision to the Judicial Officer. All parties have filed written briefs.

Exceptions of Delta Enterprises

"A. The Respondent, Delta Enterprises, takes exception that Delta Enterprises is a 'person' under 39 U.S.C Sec. 3005"

Respondent argues that the Administrative Law Judge erred in finding that "Delta Enterprises," a trade name, is a "person" under 39 U.S.C. § 3005. Under Rule 17(b) of the Federal Rules of Civil Procedure (FRCP) the capacity to sue or be sued is determined by the law of domicile. Respondent contends that adherence to Rule 17(b) should result in dismissal of this matter, as the owner of Delta Enterprises is domiciled in North Carolina and North Carolina will not entertain a suit filed by trade name. It is further argued that the definition of "person" in the Rules of Practice of the Postal Service, which the Administrative Law Judge relied on, is overly broad. The Rules provide at 39 C.F.R. § 952.5 that "person" includes "any name, address, number or other designation under or by use of which the Respondent seeks remittances of money or property through the mail." Respondent also argues that the definition is inconsistent with the Administrative Procedure Act, 5 U.S.C. § 551 et seq. (APA), which defines "person" at § 551(2) as including "an individual, partnership, corporation, association, or public or private organization other than an agency."

The Federal Rules of Civil Procedure are not mandatory to Administrative Procedure Act proceedings. Athena Products, Ltd., P.S. Docket No. 7/99 (P.S.D. June 26, 1981). Thus, Rule 17(b) of the FRCP is not determinative of the appropriate law to be followed in false representation cases. Moreover, it is questionable that application of Rule 17(b) would result in state law on capacity to be sued overriding a Federal statute involving the public interest. Cf. Almond v. Kent, 459 F.2d 200, 203 (4th Cir. 1972).

In determining who is a "person" under 39 U.S.C. § 3005, the Postal Service is not restricted by the APA definition. It has the right to adopt such rules as are necessary to accomplish the objectives set for it by Congress. 39 U.S.C. § 401. The authority to promulgate rules of practice for execution of its responsibilities under 39 U.S.C. § 3005 falls within that mandate. Cf. Federal Communications Commission v. Schreiber, 381 U.S. 279 (1965). The Administrative Law Judge acted properly in relying upon the definition of "person" at 39 C.F.R. § 952.5. Respondent's arguments are rejected.

"B. Delta Enterprises takes issue with the findings of the Administrative Law Judge that the advertising done by Delta Enterprises was a misrepresentation to the people who bought its products"

Respondent argues that its advertising contained only "puffing" and that a complete reading of the advertisements would have revealed that more than envelope stuffing was involved. Respondent further contends that the rule caveat emptor should be applied.

Respondent's advertisements present the impression of a program where, upon payment of a registration fee, participants are paid for the simple act of stuffing envelopes with circulars and mailing them (see, e.g., Exhibit Ex. A-72, B-73, B-74). However, after payment of the fee, participants learn that to earn money they must solicit other participants (see, e.g., Exs. C-72, C-73, C-74 and C-75). In creating false impressions, Respondent's advertising distorts material facts. Thus, there is more tha mere "puffing" involved. The New Body Boutique, Inc. et al., P.S. Docket No. 11/95 (P.S.D. July 30, 1982).

Respondent's argument that a complete reading of the advertisements would prevent the reader from being misled is not well-founded. Advertisements need not be analyzed in the manner of a sophisticated or wary reader. M.K.S. Enterprises, Inc. et al. v. United States Postal Service, 459 F.Supp. 1180 (E.D.N.Y. 1978). Moreover, the purpose of 39 U.S.C. § 3005 is to protect the public. Lynch v. Blount, 330 F.Supp. 689 (S.D.N.Y. 1971) aff'd 404 U.S. 1007 (1972). Thus, caveat emptor does not apply in false representation proceedings. The arguments of Respondent Delta Enterprises are without merit.

Exceptions of Alltime Enterprises, B.N.S.

Enterprises and Future Publications

Respondent raises exceptions to the Initial Decision on various bases, including the contention that the findings are not supported by substantial evidence. However, the standard applied by the Judicial Officer in reviewing an Initial Decision under 39 U.S.C. § 3005 is the preponderance of the evidence standard. Telex & twx Directory, P.S. Docket No. 13/6, (P.S.D. April 1,

1983). Therefore, in addressing Respondent's arguments on the sufficiency of evidence, the record will be reviewed to determine if the findings are supported by a preponderance of the evidence.

"A. Judisdiction - Conclusions of Law nos. 1-2"

Respondent argues that the Administrative Law Judge erred in holding that it is a "person" under 39 U.S.C. § 3005, as Alltime, B.N.S. and Future are divisions of a Florida corporation, Gladstone, Inc., which was not named in the Complaint. This argument is rejected, as it "exalts form over substance far beyond that which is either required or expected in the quest for due process." Diet Lake, Inc. d/b/a Doctor's Diet Plan v. United States Postal Service, No. 79-2563, slip op. at 3 (5th Cir. July 18, 1980); Diet Lake, Inc. d/b/a Vitahair v. United States Postal Service, No. 78-6436 (S.D. Fla., May 3, 1979); Everywoman's Water Pill, P.S. Docket No. 6/113 (P.S.D. May 31, 1979); The Doctor's Diet Plan, P.S. Docket No. 6/77 (P.S.D. April 18, 1979); Vitahair, P.S. Docket No. 6/76 (P.S.D. Jan. 16, 1979). Moreover, the Administrative Law Judge did not err in relying upon the definition of "person" at 39 C.F.R. § 952.5. See Exception A of Delta Enterprises, supra. Respondent's argument is without merit.

"B. Applicable Standard of Review - Conclusion of Law no. 3"

Respondent excepts to what it characterizes as the Administrative Law Judge's holding in Conclusion of Law 3 that the advertisement in question can be evaluated "without any regard to the evidence." While the Administrative Law Judge states in Conclusion of Law 3 that "The impression of advertising on the ordinary mind is a question of law for the presiding officer to determine," he nonetheless makes the determination on the evidence presented. He relies on the advertisements in the record to reach the conclusion that certain of the representations are made.

The impression of advertising on the ordinary mind is a question of fact for the presiding officer to determine. The advertisements at issue are the most persuasive evidence on whether the alleged representations are made, and the determination may be made from the advertisements alone. Fort Morgan Vapor Jet, P.S. Docket No. 12/64 (P.S.D. Sept. 29, 1982). Thus, the holding in the Initial Decision that testimony on interpretation is not required to determine whether the representations are made is correct. Kimberly Jewels, Inc., P.S. Docket No. 9/65 (P.S.D. July 23, 1981). The Administrative Law Judge did not err in relying upon the advertisements instead of testimony or other evidence of record.

Moreover, the Administrative Law Judge limited Conclusion of Law 3 to the question of whether Respondent makes the representations allegedly contained in the advertisement, while clearly relying upon testimony and other evidence to resolve issues dealing with the truth or falsity of those representations (see, e.g., Findings of Fact 10 and 21). The statements parsed from the cases cited by Respondent all address issues other than the determination of whether the representation is made. The Administrative Law Judge correctly stated the standards to be applied at pp. 42-43 of the Initial Decision. Donaldson v. Read Magazine, Inc., 333 U.S. 178 (1948). Respondent's conclusions are without merit.

"C. Fundamental Fairness and Due Process of Law - Conclusion of Law no. 4"

Respondent argues that the Administrative Law Judge erred in concluding the Complaints were specific and adequately alleged the misrepresentations at issue. Respondent states that the Administrative Law Judge's quotation of long excerpts from the advertisements in the Initial Decision supports its contention. According to Respondent, it was unable to adequately defend against Complainant's allegations because of the lack of specificity, and was thereby deprived of due process.

A Complaint should contain a short and plain statement of the matters at issue. There is no requirement to state facts sufficient to state a cause of action. Schaedler v. Reading Eagle Publication, Inc., 370 F.2d 795 (3rd. Cir. 1967). Further, in false representation proceedings, the impression conveyed by the total advertisement is at issue:

"Advertisements as a whole may be completely misleading although every sentence separately considered is literally true. This may be because things are omitted that should be said, or because advertisements are composed or purposefully printed in such a way as to mislead." Donaldson v. Read Magazine, Inc., supra at 188.

Thus, while portions of an advertisement may be more explicit than others with respect to certain alleged representations, the whole advertisement is placed in issue under the Donaldson standard. Accordingly, the Complaint need not identify particular language which is likely to mislead. Indeed, it may not be possible to do so where it is the total impression of the advertisement that creates the representation.

In the same vein, the Administrative Law Judge's quotation of "long portions" of the advertisement is not supportive of Respondent's position, but is consistent with the application of the Donaldson standard. Moreover, Respondent has not alleged on brief what specific difficulties were encountered in defending its position and it did not seek to ascertain with greater specificity the nature of the Complaint allegations (Tr. 7). Its arguments are without merit.

"D. 'Opportunity Is Knocking' circular - Findings of Fact Nos. 14, 15, 18 and 23, and Conclusion of Law no. 6"

Respondent argues there is no substantial and probative evidence to support the cited Findings of Fact and Conclusion of Law with respect to its "opportunity is knocking" advertisement (Ex. C-72). In those Findings and Conclusions, the Administrative Law Judge found that the advertisement makes the representations in Complaint allegation 8(b) of Docket No. 14/72, that the representation is materially false and that Respondent, through the misrepresentation, seeks the remittance of money through the mail. Complaint allegation 8(b) provides:

"(b) Attractive compensation will be made by homeworkers by addressing envelopes and stuffing them with sales circulars."

Respondent's arguments focus on the finding of falsity. The advertisement (Ex. C-72) purports to present a home mailing program "in which everything is supplied," including name lists and postage, and tells readers they will be paid through orders resulting from the program ("YOU TAKE out your BIG Commission ..."). It describes the participant's involvement in stuffing the circulars into the envelopes, affixing labels and postage and mailing them. As the Administrative Law Judge found in Finding of Fact 14, the advertisement makes the representation in Complaint paragraph 8(b). Respondent does not deny that it is in the mail order business and uses the advertisement to solicit money through its mailer/dealers (Respondent's brief Resp. brief , p. 1). Thus, only the portion of Finding of Fact 18 dealing with false representations is in dispute.

The representation was found to be false by the Administrative Law Judge because participants are provided only 23 names, envelopes and stamps, and the instructions (Ex E-72) make it clear that additional names and addresses are necessary for success. Respondent argues there is no evidence that success will not result from the initial supply. According to Respondent, the instructions only "suggest" greater success will result from use of initiative to expand the business. However, the instructions state that while the majority of participants get one or more responses, there is no guarantee that anyone on the list will be interested in the product, which is a circular offering to place people on a mailing list of mail order firms for $15.00 (Ex. D-72). Participants are given more circulars than names and told to find ways to distribute the circulars, and that successful mailers built their businesses out of ingenuity and perseverance "using methods other than those prescribed by us." (Ex. E-72). Thus, Respondent's instructions contain evidence that to make more than minimal compensation, participants must do more than address envelopes and stuff them with advertising circulars. Moreover, evidence of the success alleged by Respondent should be readily available to Respondent, while evidence of the negative is not readily available to Complainant. All orders are filled by Respondent and "drop shipped." Thus, records should exist to show how many orders are filled from which the success of participants can be determined. Where, as here, such evidence is not produced by Respondent, "we must presume it does not exist, which of itself establishes a negative." United States v. Denver & Rio Grande RR Co., 191 U.S. 84,92 (1903); Athena Products, Ltd., P.S. Docket No. 7/99 (P.S.D. June 26, 1981); Standard Research Laboratories, P.S. Docket No. 7/48 (P.S.D. April 4, 1980). Accordingly, it is concluded that participants do not make attractive compensation in Respondent's program. The representation is false, as the Administrative Law Judge found in Findings of Fact 15 and 18.

The representation is material, because it would induce readers of the advertisement to participate as the Administrative Law Judge found in Finding of Fact 23. As found in Conclusion of Law 6, Respondent seeks the remittance of money through the mail by means of false representations through its mailer/dealers. Use of mailer/dealers, as opposed to direct solicitation, does not alter the conclusion that Respondent's program violates 39 U.S.C. § 3005. United States v. International Term Papers, Inc., 477 F.2d 1277 (1st. Cir. 1973). Respondent's arguments are without merit.

"E. 'Your Key to Extra Income' circular - Findings of Fact nos. 9, 27, 28, 29 and 31, and Conclusions of Law nos. 10 and 16"

Respondent argues there is no substantial or probative evidence to support Findings of Fact 9, 27, 28, 29 and 31 and

Conclusions of Law 10 and 16. In those Findings and Conclusions, the Administrative Law Judge found Respondent's advertisement makes the representations in Complaint allegations 4(d) in Docket No. 14/72, 8(a) and 8(b) in Docket No. 14/73 and 4(a) thru (d) in Docket No. 14/75; that those representations are materially false; and that, through those misrepresentations, Respondent seeks remittance of money through the mails.

The relevant Complaint allegations provide as follows:

"4....(a) Payment of the initial membership fee will allow immediate participation in the Delta Enterprises promotion without further substantial financial investment by the homeworker.

"(b) Many ordinary participants will make sizeable earnings.

"(c) Names and addresses of sales prospects will be available without further monetary expenditure. (Docket No. 14/75).

"(d) Amounts of earnings are primarily determined by whatever time participants devote to the routine tasks of addressing envelopes and stuffing them with sales circulars." (Docket Nos. 14/72 and 14/75).

. . .

"8....(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars.

"(b) Attractive compensation will be made by homeworkers by addressing envelopes and stuffing them with sales circulars." (Docket No. 14/73).

The Administrative Law Judge found the representations to be made from a review of the advertisement in Findings of Fact 9, 27 and Conclusion of Law 16. The advertisement, a circular with the heading "Your Key to Extra Income" (hereafter "Key" circular, Exs. B-72, B-73 and B-75), solicits payment of $12 through the mail. It describes a program paying handsome compensation for stuffing and addressing envelopes, with all materials provided and no investment to the participant beyond the "application fee." Respondent argues with regard to Complaint allegation 8(a) in Docket No. 14/73 that no evidence was adduced to show that "at-home-employment" is offered. Respondent contends that the "Key" circular expressly presents an offer for independent contractors. While the advertisement informs readers that they will be working independently and not as employees of Respondent, it also represents that participants will be working at home addressing and stuffing envelopes. Participants are not informed that the program requires the solicitation of additional homeworkers through the use of classified advertising. Therefore, the substance of the representation set out in Complaint allegation 8(a) is contained in Respondent's advertisement, and the finding of the Administrative Law Judge is, to that extent, affirmed. Moneymakers, et al., P.S. Docket No. 16/1 (P.S.D. June 20, 1984).

It is determined that the record also supports the rest of the Administrative Law Judge's findings. A reader of ordinary mind would conclude that the representations in the relevant Complaint paragraphs are made. Donaldson v. Read Magazine, Inc., supra. Although supportive testimony was presented, the advertisement itself is sufficient evidence to support the Initial Decision. Vibra-Brush v. Schaffer, 152 F.Supp. 461, (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2d. Cir. 1958). Those who respond to the "Key" circular receive a booklet called the "Cooperative Mailing and Income Program" (hereafter CMIP booklet, Exs. C-72, C-73 and C-75; Tr. 128). The Administrative Law Judge compared the program as described in the CMIP booklet to the "Key" circular and found the representations to be false in Findings of Fact 10 (not raised by Respondent) and 28 and Conclusion of Law 16. Respondent disputes the Findings and Conclusions, contending there is no evidence on time and money spent on activities other than envelope stuffing, and no evidence that participants would not succeed using only the materials initially supplied. However, the CMIP booklet is replete with information provided by Respondent that leaves no doubt about the additional time and expense necessary to institute Respondent's program, as succintly summarized on page 7: "We know a lot of people can't afford to put these plans to work right away." (Exs. C-72, C-73 and C-75). Further erosion of Respondent's arguments appear under the "Some Questions Frequently Asked" section in the following question which is admittedly asked frequently: "I didn't know that I had to spend more money to put these plans to work? sic " (Id.).

Respondent cites United States Postal Service v. Stimpson, et al., 515 F.Supp. 1149 (N.D. Fla. 1981) in support of its argument that inadequate evidence is presented to support the Initial Decision. In that case, Complainant was denied a preliminary injunction under 39 U.S.C. § 3007 for failure to show probable cause that 39 U.S.C. § 3005 was violated. However, when that scheme was the subject of an administrative proceeding under 39 U.S.C. § 3005, a False Representation Order was issued based upon findings of material misrepresentation. N. Stimpson, et al., P.S. Docket No. 11/80 (P.S.D. April 30, 1982). That decision, which specifically held that a proceeding under 39 U.S.C. § 3005 is not affected by a proceeding on the same scheme under 39 U.S.C. § 3007, was affirmed on appeal. Stimpson v. United States Postal Service, No. GCA 82-0024 (N.D. Fla. Nov. 19, 1982). Moreover, in a case involving a similar envelope stuffing scheme, Complainant's burden of proof was met by a comparison of a classified advertisement, a circular and a booklet describing the program. The Court commented:

"Plaintiff makes much of the fact that the Postal Service did not test or otherwise attempt to ascertain the validity of the schemes in plaintiff's booklet. This is besides (sic) the point ... the judicial officer could reasonably assume that many subscribers had neither the resources or the energy to advertise and market a new product as a source of income, especially where those of ordinary mind expect to quietly address and stuff envelopes in the 'comfort of their own home.'" Paul Harvey v. United States Postal Service, No. Civ. S-80-571 PAR (E.D. Cal. 1981).

The finding of materiality (Finding of Fact 31) is supported by the record as the representations would be inducements to purchase. The record amply supports Findings of Fact 9, 27, 28, 29 and 31 and Conclusions of Law 10 and 16. Respondent's arguments are without merit.

"F. 'We'll Pay You 30 Cents' circular - Findings of Fact nos. 35-39, 52-54 and 57, and Conclusions of Law no. 17"

Respondent argues there is no substantial and probative evidence to support the cited Findings of Fact and Conclusion of Law. In those Findings and Conclusions, the Administrative Law Judge found Respondent's advertisement makes the representations in Complaint paragraphs 4(a) and 4(b) in Docket Nos. 14/74 and 8(a) and 8(b) in Docket No. 14/75; that the representations are materially false; and that, through those misrepresentations, Respondent seeks remittance of money through the mail.

The relevant Compliant paragraphs are the same in both cases, and provide as follows:

"(a) Payment of the initial membership fee will allow immediate participation in the Delta Enterprises promotion without further substantial financial investment by the homeworker.

"(b) Amounts of earnings are primarily determined by whatever time participants devote to the routine tasks of addressing envelopes and stuffing them with sales circulars."

The Administrative Law Judge examined the advertisement (Ex. B-74) and found the representations alleged in Complaint paragraph 4(a) to be made in Finding of Fact 35. In Findings of Fact 36 and 37 the representation in Complaint paragraph 4(a) was found to be false by comparing the advertisement and the booklet received by participants for the $15.00 "registration fee" (Exs. B-74 and C-74). Respondent argues that the evidence does not support the Findings because "the true nature of the program is revealed in the first sentence following the heading" (Resp. brief, p. 23). That sentence refers to "...your own mailing advertising business consisting mainly of the securing of envelopes via classified ads, and DELIGHTFULLY EASY - PROFITABLE - STUFFING - ENVELOPES at home." The portions of the circular relied upon by the Administrative Law Judge (I.D. pp. 27-28) support Finding of Fact 35. Respondent places emphasis on envelope stuffing by the advertisement's use and arrangement of large black lettering. This conveys an overall impression that envelope stuffing is the enterprise being advertised, and the insertion of a phrase about "securing of envelopes via classified ads" is not sufficient to alert the reader of ordinary mind to the true nature of the program. Moreover, Complainant presented a witness who testified to being misled on just this basis (Tr. 97-99). The record amply supports the finding that the representation in Complaint allegation 4(a) is made.

Participants receive a booklet which describes two programs. In one, participants are told to secure envelopes by classified advertising. As this involved a further investment, the Administrative Law Judge found the Complaint paragraph 4(a) representation to be false. Respondent argues there is no evidence of the cost of advertising. However, the booklet (C-74) refers to an "inexpensive" classified advertisement as costing $10.00. Accordingly, the record supports the finding of falsity.

The other program described in the booklet involves securing envelopes by posting notices on bulletin boards at supermarkets, landromats, etc. The Administrative Law Judge found that this would involve substantial time and transportation costs. Respondent argues there is no evidence as to the time and transportation costs involved. However, the Administrative Law

Judge could reasonably assume the existence of costs, just as in Paul Harvey, supra, he could: "reasonably assume ... the lack of resources or the energy to advertise and market a new product... ." The representation is also false as regards this program.

Respondent's advertisement was found to be materially misrepresented as alleged in Complaint paragraph 4(b) in Findings of Fact 35 and 39. Respondent again argues that the circular is not misleading because participants are told they will secure envelopes through classified advertisements. However, the advertisement lacks candor. It emphasizes and conveys the impression that earnings result from the routine task of stuffing and mailing envelopes. Participants are actually engaged in an enterprise in which earnings are dependent upon the solicitation of other participants. This is not conveyed in the fleeting reference to "classified ads" as a means of "securing envelopes." As the Supreme Court observed in United States v. 95 Barrels of Vinegar, 265 U.S. 438, 443 (1924): "It is not difficult to choose statements, designs and devices which will not deceive." Moreover, the original classified advertisement may be considered in determining the impression conveyed. Paul Harvey, supra. That advertisement's characterization of a "home mailing program" contributes to the misleading nature of the scheme.

Respondent also argues that evidence was presented to prove that people understand and were satisfied with the program. The evidence cited does not demonstrate whether the advertisement was "understood," but consists of endorsements of the program by participants. Evidence of satisfied customers will not defeat a finding of material misrepresentation, as the issue under 39 U.S.C. § 3005 is not whether customers are dissatisfied or whether anyone complains, but whether the mails are being used to receive money by means of false representations. Farley v. Heininger et al., 105 F.2d 79, 83-84 (D.C. Cir.) cert. denied, 308 U.S. 587 (1939).

Respondent restates its arguments on Findings of Fact 35-39 in excepting to Findings of Fact 52-54 and 57. Conclusion of Law 17 is excepted to on the basis that the advertisements are not misleading. As Respondent's arguments have been previously considered, the exception to Findings of Fact 52-54 and 57, and Conclusion of Law 17 are rejected. Respondent's arguments are without merit.

"G. Conclusion of Law no. 21"

Respondent argues again the lack of evidence to support the Findings and Conclusions previously addressed as the basis for this exception. In Conclusion of Law 21, the Administrative Law Judge summarized his findings on the false representations made by Respondent's advertising. As the record adequately supports the Initial Decision on the matters previously raised by Respondent, the exception to Conclusion of Law 21 is rejected.

"H. Exceptions as to all Findings of Fact and Conclusions of Law"

Respondent contends that the Administrative Law Judge acted in an arbitrary and capricious manner because he made his determinations without regard to the testimony presented. According to Respondent, it was deprived of due process under the

Fifth Amendment to the Constitution. While the Administrative Law Judge did rely upon testimony on certain matters, it is true that he relied heavily on the advertisements and the booklets describing Respondent's program in his determinations. In so doing, he acted properly. Vibra-Brush v. Schaffer, supra.

Respondent's argument that it was denied due process is not supported by specific examples or case citations. Its argument is addressed primarily to the way in which the Administration Law Judge evaluated the evidence. The record reveals no violation of Respondent's right to an opportunity to present its case, nor any improper intereference with Respondent's presentation. Basic due process requirements were met, as Respondent was served with a proper Complaint and given the opportunity to be heard. ViAids Laboratories, Inc. & Metro Mailers Service, Inc. v. United States Postal Service, 464 F.Supp. 976 (S.D.N.Y. 1979). Accordingly, Respondent's arguments are without merit.

CONCLUSION

After consideration of the entire record and Respondents' exceptions to the Initial Decision, it is concluded that Respondents are engaged in a scheme to obtain money through the mail by means of materially false representations. A false representation order under 39 U.S.C. § 3005 is being issued with this decision.