In the Matter of the Complaint Against

CM/NA COMMISSION MAILERS OF NORTH AMERICA
P.O. Box 464
Woodstock, IL 60098-0464

and P.O. Box 950
Woodstock, IL 60098-0950

and

ISDC INTERNATIONAL SUCCESS DEVELOPMENT CORPORATION
P.O. Box 464
Woodstock, IL 60098-0464

and

MICHAEL NARCUM
1954 Hilltop Ct.
Woodstock, IL 60098-2539

and

DIVISION HEADQUARTERS
P.O. Box 464
Woodstock, IL 60098-0464

and

ORACLE INTERNATIONAL DEPARTMENT
H POLB 464 Woodstock, IL 60098-0464

and

MAILERS
P.O. Box 464
Woodstock, IL 60098-0464

P.S. Docket No. 20/33

Cohen, James A.

APPEARANCES FOR COMPLAINANT:
H. Richard Hefner, Esq.
Timothy J. Kruthaupt, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260-1112

APPEARANCE FOR RESPONDENTS:
Michael Narcum
1954 Hilltop Court
Woodstock, IL 60098-2539

POSTAL SERVICE DECISION

Respondents have filed an appeal from an Initial Decision of an Administrative Law Judge which finds that Respondents are engaged in conducting a scheme for obtaining money 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) initiated this proceeding by filing a Complaint, alleging that Respondents are engaged in the conduct of a scheme to obtain money through the mail by means of materially false representations used in advertisements for a home-operated circular mailing venture. Specifically, Count I, paragraph 6 of the Complaint alleges that Respondents make the following representations:

(a) Respondents' plan will enable the user thereof to make $360 or more per week;

(b) Very little work and time will be required to make $360 per week;

(c) The major expense involved is the purchase price to be sent to the Respondents for their plan;

(d) The work required by Respondents' program consists principally of mailing circulars; and

(e) The plan they sell is legal.

Paragraph 7 of the Complaint alleges that these representa tions are materially false. Count II of the Complaint alleges that Respondents induce participants in the plan to make these representations to third parties, and thereby knowingly seek the remittance of money through the mail by means of false representations made by participants at Respondents' express direction.

In their Answer, Respondents denied that they make the repres entations alleged in paragraphs 6(a)-(d) of the Complaint, but admitted that they make the representation alleged in paragraph 6(e). Respondents also denied that the alleged representations are materially false. At a hearing before an Administrative Law Judge, the parties presented evidence in support of their respective positions. Thereafter the Administrative Law Judge issued an Initial Decision in which he found that Respondents make the representations alleged in the Complaint and that those repre sentations are materially false in violation of 39 U.S.C. § 3005. He therefore recommended the issuance of a False Representation Order and a Cease and Desist Order against Respondents.

RESPONDENTS' EXCEPTIONS

Respondents' Brief on Appeal contains 49 numbered exceptions. These exceptions have been combined where appropriate and are discussed hereafter.

Exceptions 24-28, 39

By these exceptions Respondents question the Administrative Law Judge's findings that the representations alleged in the Complaint are made in Respondents' promotional materials. Contrary to Respondents' assertions, as found by the Administra tive Law Judge, the ordinary reader would understand that the overall wording as well as individual passages of Respondents' promotional materials make the representations alleged in the Complaint.

The language "$360 weekly/up" in Respondents' classified advertisements makes the representation alleged in subparagraph 6(a) of the Complaint that Respondents' plan will enable the user thereof to make $360 or more per week (CX-3). The contents of a circular, entitled "Earn Extra Income Working at Home in Your Spare Time" (CX-2), mailed to prospective customers to solicit purchases of Respondents' materials, supports the allegation of subparagraph 6(b). The circular contains such sentences and phrases as "The work you will be doing is not difficult."; "You ... need work a few hours a day. You can do this on your kitchen table, or even while watching television ..."; "NO EXPERIENCE IS NECESSARY"; "They the instructions are not difficult to follow, and the average person can do it. You need no previous experience ... it doesn't matter how old you are ... Your education level is not important. All it takes is a wish to make extra money and the willfulness to follow proven instructions ..." (CX-2).

Respondents' circular (CX-2) also makes the representation alleged in subparagraph 6(c) of the Complaint pertaining to the major expense involved. The circular conveys the impression that upon mailing Respondents a $19 "Association fee" which pays for "Association rights, participation and processing, and entitles you to receive your FREE Beginner's Package" purchasers can start earning hundreds of dollars weekly.

The representation in subparagraph 6(d) of the Complaint that the work involved consists primarily of mailing circulars, is made in Respondents' advertisements. Respondents' classified advertisements state, "$360/weekly and up mailing circulars]" Respondents' circular also contains numerous references to mailing circulars. The heading states:

"YOU CAN MAKE HUNDREDS OF DOLLARS PER WEEK IN YOUR OWN HOME-OPERATED CIRCULAR MAILING VENTURE--SPARE TIME OR FULL."

The first paragraph of the circular reads, "Mainly, you will be stuffing commission circulars into pre-addressed, stamped envelopes and mailing them." The third paragraph states, "Simply follow our proven directions for getting stamped, addressed envelopes (SASE'S). Then stuff them with the proper circulars, and mail them out." This language clearly conveys the impression that a participant in the program only has to obtain the enve lopes, stuff them with circulars and be paid for that work; and that stuffing the envelopes is the most difficult aspect of the program.

In their Answer to the Complaint, Respondents admitted making the representation alleged in subparagraph 6(e) that the plan is legal. In their exceptions Respondents disagree with the Administrative Law Judge's finding that this representation is made. Respondents' arguments in their exceptions are not persua sive. The first paragraph of Respondents' circular states, "The CMA Commission Mailer's Association provides the proven materials you need to do this, and they do not deal with anything objectionable." The second paragraph states, "The CMA has several firms which we furnish you the names of, that are in need of commission mailers. These are reputable firms which want more business, ..."

Accordingly, Respondents' exceptions 24 through 28 and 39, which take issue with the findings in the Initial Decision that the representations alleged in the Complaint are made in Respond ents' promotional materials, are without merit.

Exception 45

Respondents' exception 45 takes issue with the finding in the Initial Decision supporting Count II of the Complaint. As alleged in Count II of the Complaint, Respondents induce participants to make the above misrepresentations to third parties. Respondents' circular and their Personal Success Manual (How to Make Hundreds as a Commission Mailer]) (CX-4) instruct participants how to operate their own circular stuffing programs. The manual contains information on how participants can be eligible to use Respond ents' Plan B program which consists of mailing CM/NA's circulars (CX-4; Tr. 165-66, 169). Respondents' circular also contains references to the use of Plan B. Accordingly, there is no merit to this exception.

Exceptions 31-34

Respondents' exceptions 31-34 alleging that the Administrative Law Judge erred in finding that Respondents' representations are materially false also lack merit. The Administrative Law Judge's findings are based on the documentary evidence introduced by the parties and the testimony presented at the hearing. Based on a review of the entire record, it is concluded that the Administra tive Law Judge's findings are supported by a preponderance of the evidence and that his conclusions are correct as a matter of law.

The testimony and exhibits establish the falsity of the representations. In regard to Respondents' representation of possible income of $360 and more per week (subparagraph 6(a) of the Complaint) Complainant's expert, Mr. Robert F. Bobowski, testified that a person without experience would have "very, very little chance" of earning $360 per week by following Respondents' program (Tr. 56). Respondent Michael Narcum essentially substan tiated this conclusion when he testified that only 20-35 of 70,000 participants receive payments each week and few receive over $360 (RX-6; Tr. 170-75, 185). Further, the testimony of purchasers of the program support the view that ordinary individuals would encounter great difficulty earning money through Respondents' program (I.D. pp. 28-29).

The representation alleged in subparagraph 6(b) of the Complaint that little time and work are required to earn the $360 weekly amount also is false. As explained by Mr. Bobowski, several components are required to establish a successful direct mail business. These include developing a mailing list, developing a saleable product, creation or purchase and production of adver- tising materials, and selection of appropriate advertising medium. The components are not complex, but the disciplines of their use are very complex. Great efforts must be exerted by entrepreneurs in achieving success in the direct mail business (I.D. pp. 14-16).

The representations alleged in subparagraphs 6(c) and (d) of the Complaint - "The major expense involved is the purchase price to be sent to the Respondents for their plan" and "The work required by Respondents' program consists principally of mailing circulars" - clearly are false. The record demonstrates that in addition to paying the original purchase price and mailing circulars great expense and work are required by participants in order to earn money through Respondents' plan. Respondents' "Beginner's Package" primarily seeks to persuade program partici pants to operate a commission mailing business similar to Respond ents'. As Respondent Narcum testified, participants in the program must generate their own mailing lists for the circulars, place classified advertisements, print circulars in some instances, and maintain extensive records (Tr. 164-72). According to Complainant's expert, Mr. Bobowski, success in any mail order program, including Respondents', entails attending seminars or reading books to determine the best medium for advertising, testing in the appropriate media, testing various modes of advertising, diligent record-keeping, and researching the market (Tr. 54-58). Additional expenses include printing costs, postage and other related expenses (Tr. 52-54). The experience of the witnesses who purchased the program and followed Respondents' instructions also supports the conclusion that the purchase price is only a small part of the expense involved.

Representation 6(e) of the Complaint - "The plan they sell is legal" - is also false. To earn money through Respondents' plan, purchasers must make the same false representations that Respond ents make. As has been found, such false representations violate 39 U.S.C. § 3005.

Exceptions 4-10, 13-15, 17, 20, and 30

By these numerous exceptions, Respondents take issue with the findings made and/or conclusions drawn by the Administrative Law Judge from the testimony of Complainant's expert, Mr. Robert Bobowski. Mr. Bobowski has been involved in the direct mail and mail response business for over 20 years, and in the advertising business for approximately 36 years. He is chairman emeritus of a direct marketing association in New York. As the past chairman, he developed standards for establishing credibility and evaluating direct mail programs world-wide. Mr. Bobowski served on the Board of Directors of the Chicago Association of Direct Marketing. He is on the faculty of Roosevelt University in Chicago where he teaches courses on direct mail marketing (I.D. pp. 11-12).

In making his findings the Administrative Law Judge placed considerable reliance on Mr. Bobowski's testimony. While Respond ents' owner to some extent presented contradictory testimony, the Administrative Law Judge found Mr. Bobowski's testimony to be more persuasive. A review of the record supports the Administrative Law Judge's evaluation of Mr. Bobowski's testimony.

Exception 31

Respondents except to the Administrative Law Judge's findings which pertain to versions of their advertisements which allegedly are no longer in use. The modification or discontinuation of promotional materials does not render moot a proceeding under 39 U.S.C. § 3005 or preclude the issuance of the orders authorized thereunder. Otherwise Respondents would be free to resume the use of false representations in the future which would frustrate the purpose and intent of 39 U.S.C. § 3005, particularly as it was amended in 1983 to grant cease and desist authority to the Postal Service. See P.L. 98-186, 97 Stat. 1315. See also United States v. W. T. Grant Co., 345 U.S. 629, 632 (1953); Sharon Woodman Associates, P.S. Docket No. 2/122 (P.S.D. Feb. 12, 1974).

Exception 40

Respondents object to the finding that persons of ordinary mind would interpret Respondents' materials as alleged in the Complaint. Respondents argue that the Postal Service failed to prove its allegations by a representative sample of readers because, out of a potential 240,000 persons exposed to the adver tising, it produced only two witnesses who were deceived. This exception is without merit. That a person of ordinary mind would interpret the promotional materials as alleged in the Complaint is evident from a reading of the materials. The impression of advertising on the ordinary mind may be determined by the trier of fact solely on the basis of the advertising itself. Vibra Brush Corp. v. Schaffer, 152 F. Supp. 461, 468 (S.D.N.Y. 1957), rev'd on other grounds 256 F.2d 681 (2d Cir. 1958); Associated Telephone Directory Publishers, Inc., P.S. Docket No. 13/191 (P.S.D. Jan. 25, 1984). Accordingly, the Administrative Law Judge's findings regarding the understanding of persons of ordinary mind are affirmed.

Miscellaneous Exceptions

Respondents' other exceptions are either incorrect or do not affect the decision. In exceptions 11, 12, 48 and 49 Respondents contend its advertisements do not represent that participants will be stuffing envelopes. These exceptions are without merit. Respondents' circular, previously quoted, promises an envelope stuffing program. Exceptions 3, 16, 18, 22 and 23 object to findings or conclusions made by the Administrative Law Judge based on the oral testimony of certain witnesses, or based on one of Respondents' exhibits (RX-6), which showed yearly commissions paid by Respondents to certain participants in its plan. The findings and conclusions are supported by a preponderance of the evidence. Other exceptions (e.g., exceptions 1, 2, 19, 21), relate to misunderstandings or minor discrepancies. Respondents complain that the Administrative Law Judge did not set forth additional facts in a finding, even though such facts do not affect the decision (e.g., exception 19), or disagree with figures of speech which are of no consequence to the result reached in the Initial Decision (e.g., exception 29).

Exceptions 35-38, 41-44, and 46-47 challenge the conclusions of law of the Initial Decision (I.D. pp. 31-34). The Administra tive Law Judge correctly interpreted the cases cited in support of his conclusions of law, and correctly applied the law to the facts.

CONCLUSION

Upon consideration of the entire record, it is concluded that Respondents are engaged in a scheme to obtain money through the mail by means of materially false representations. Accordingly, a False Representation Order and a Cease and Desist Order as author ized by 39 U.S.C. § 3005 are issued herewith.