In the Matter of the Complaint Against

RICHARD W. VERRET,
2480 Overbrook Street
Beaumont, TX 77703-2828

MILTON VERRET,
925 Shakespeare Street
Beaumont, TX 77706-5340

VERRET ENTERPRISES, INC.,
450 Bowie Street
Beaumont, TX 77701-3004

U. S. COIN RESERVE,
Post Office Box 13587
Denver, CO 80201-3587

U. S. COIN RESERVE,
Post Office Box 7736
Beaumont, TX 77706-7736

U. S. COIN RESERVE,
Post Office Box 148
Houston, TX 77001-0148

and

U. S. COIN RESERVE,
Post Office Box 2832
Beaumont, TX 77704-2832

P.S. Docket No. 20/63

Finn, James D. Jr. Acting Judicial Officer

APPEARANCES FOR COMPLAINANT:
Thomas A. Ziebarth, Esq.
Timothy J. Mahoney, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260-1112

APPEARANCES FOR RESPONDENTS:
Theo W. Pinson, III, Esq.
Diana Resnick, Esq.
Greenwood, Koby, Old, Pinson & Bussey
1900 American General Tower
2727 Allen Parkway
Houston, TX 77019-2115

POSTAL SERVICE DECISION

Respondents have appealed from the Initial Decision of an Administrative Law Judge which finds 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. Complainant has appealed from one of the findings of fact the Administrative Law Judge made in his decision.

Background

The Consumer Protection Division, Law Department, United States Postal Service (Complainant), initiated this proceeding by filing a Complaint, alleging in paragraph 4 thereof, that Respondents make the following representations relating to their sale of coins:

(a) U.S. Coin Reserve distributes currency on behalf of the United States Government;

(b) The offer for sale of Silver Dollars by U.S. Coin Reserve has been directed or authorized by the United States Government or an agency thereof;

(c) The market price of Silver Dollars has recently risen dramatically;

(d) The Silver Dollars sold by U.S. Coin Reserve are in uncirculated condition;

(e) The Silver Dollars sold by U.S. Coin Reserve have a normal market value of $150 to $285;

(f) The representations alleged to be made in subparagraphs (d) and (e) were arrived in accordance with standard sic of the American Numismatic Association;

(g) There have recently been volatile fluctuations in the precious metals market price of silver;

(h) Silver Dollars in the condition of those sold by U.S. Coin Reserve are almost impossible to find;

(i) A Silver Dollar minted in 1891 at the New Orleans Mint (1891-O) in the condition of the Silver Dollars sold by U.S. Coin Reserve has a market value of

50;

(j) The price at which U.S. Coin Reserve is selling its Silver Dollars is unusually low for those particular coins sold in their actual condition;

(k) The Silver Dollars sold by U.S. Coin Reserve are rare;

(l) Meltdowns of Silver Dollars ordered by Congress created a shortage of the Silver Dollars sold by U.S. Coin Reserve;

(m) The American Numismatic Association was associated with U.S. Coin Reserve in an audit of the Silver Dollar supply in the United States;

(n) The group of Silver Dollars sold by U.S. Coin Reserve is the last group of its size of Silver Dollars in that condition;

(o) There is great demand for Silver Dollars in the condition of those sold by U.S. Coin Reserve, which demand is causing the market value of such Silver Dollars to skyrocket;

(p) The sale of Silver Dollars by U.S. Coin Reserve is a release of silver by or on behalf of the United States Government;

(q) U.S. Coin Reserve has each Silver Dollar listed in its advertisements in uncirculated condition at MS-63 to MS-65 grade available for sale at the price advertised; and

(r) U.S. Coin Reserve is a depository for federal government-owned coins.

Paragraph 5 of the Complaint alleges that these representations are materially false.

In its Answer Respondents admitted making the representations of paragraphs 4(d) and (k) of the Complaint, but denied making the remainder of the representations. They additionally denied that the representations alleged were false. At a hearing before an Administrative Law Judge, the parties presented testimonial and documentary evidence. Thereafter the Administrative Law Judge issued an Initial Decision in which he found that Respondents made all the allegations alleged in paragraph 4 of the Complaint. He further found the representations of paragraphs 4(a) through 4(p), and 4(r) to be material and false in violation of 39 U.S.C. 3005. In regard to paragraph 4(q), he determined that there was insufficient proof of the falsity of the charge. Based upon these findings and conclusions the Administrative Law Judge recommended the issuance of a False Representation Order and a Cease and Desist Order against Respondents.

Respondents' Exceptions

Respondents have filed four exceptions to the Initial Decision. Three of the exceptions pertain to findings of fact made by the Administrative Law Judge, while the remaining exception addresses certain conclusions of law.

Exception One

"The Administrative Law Judge erred in finding that Respondents made the representations contained in paragraphs 4(a), (b), (c), (p), (g) and (r) of the Complaint."

Paragraphs 4(a) and (b) of the Complaint allege that Respondents represent that they distribute currency on behalf of the United States Government and offer their coins for sale under direction or authority of the Government. Paragraphs 4(p) and (r) likewise allege a representation of a connection between Respondents and the United States Government. Paragraph 4(p) alleges that Respondents represent the sale of their Silver Dollars is a release of silver by or for the United States. Paragraph 4(r) alleges that Respondents represent that U.S. Coin Reserve is a depository for Government coins.

The advertisement in issue states in large bold print across the top "UNITED STATES GOVERNMENT SILVER DOLLAR PRICES SOAR." Thereafter, the left hand column in smaller dark print contains the heading: "United States Coin Reserve," followed by the statement in smaller print:

U.S. Coin Reserve, a distributor of Government Currency is officially announcing as of November 8, 1984, the release of its famous collection of 20,000 high grade uncirculated U.S. Government Silver Dollars.

Due to the market surge and tremendous demand from the American Public the Board of Governors of the U.S. Coin Reserve has been forced to authorize the release of its last current stockpiles of silver dollars.

At the bottom of the advertisement the words "U.S. Coin Reserve" appear in large l/4 inch dark print, along with two addresses, one a Post Office Box in Houston and the other a Post Office Box in Denver. To the left of the addresses is the statement "All coins held in the UNITED STATES COIN RESERVE BUILDING."

It is established that Respondents' advertisement must be considered as a whole and its meaning determined in view of its impact on a person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178 (1948); Peak Laboratories, Inc. v. United States Postal Service, 556 F.2d 1387 (5th Cir. 1977). It is the net impression the advertising makes which is important, and even if an advertisement is so worded as not to make an express representation, if it is designed to mislead the reader, the false representation statute is applicable. Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976); G. J. Howard Co. v. Cassidy, 162 F. Supp. 568 (E.D. N.Y. 1958). Additionally, the impression of advertising on the ordinary mind may be determined solely on the basis of the advertising itself without the assistance of lay or expert testimony. Vibra-Brush Corp. v. Schaffer, 152 F. Supp. 46l, 468, rev'd on other grounds, 256 F.2d 681 (2d Cir. 1958); Standard Research Labs, P.S. Docket No. 7/78 (P.S.D. Oct. 27, 1980).

The advertisement clearly makes the representations alleged by paragraphs 4(a), (b), (p) and (r) of the Complaint, as found by the Administrative Law Judge. The references in the advertisement to "United States Government," the use of the term "United States Coin Reserve" (as compared with Respondents' usual name "U.S. Coin Reserve"), the reference to a non-existent (Cf. Tr. I, 59-60) "United States Coin Reserve Building" and the statement that all coins were held at such location, the statement that U.S. Coin Reserve is a distributor of Government currency, the statement that the "demand from the American Public" forces the release of the last stockpile of silver dollars, taken cumulatively, would lead the ordinary reader to reasonably conclude that the representations of paragraphs 4(a), (b), (p) and (r) were made.

Paragraph 4(c) of the Complaint alleges that Respondents represent the market price of Silver Dollars recently has risen dramatically. The Administrative Law Judge correctly held such representation was made by the banner headline of the advertisement "United States Government Silver Dollar Prices Soar" and the quoted language of the advertisement, supra, that " d ue to the market surge . . . U.S. Coin Reserve has been forced to authorize release of . . . silver dollars."

Paragraph 4(g) states that Respondents represent that there have been recent volatile fluctuations in the market price of silver. The Administrative Law Judge found such representation was made based upon the language of the advertisement that "orders received later may not be honored due to volatile fluctuations in precious metals market." The finding is affirmed.

Exception Two

"Representations in paragraphs 4(a), (b) and (p) found by the Administrative Law Judge to have been made by Respondents, are not material representations."

As previously discussed, paragraphs 4(a), (b) and (p) represent the existence of a connection between Respondents and the United States Government. The representation is material, as found by the Administrative Law Judge. As stated in Richard Verret, et al., P.S. Docket No. 20/l8, decided this same day, "The imprimatur of the United States Government on a coin offering provides great legitimacy to such offering and acts as a clear inducement to a prospective customer to contract with Respondents for the purchase of its coins."

Exception Three

"The Administrative Law Judge erred in finding the material representations made by Respondents to be false."

By this exception Respondents contend the Administrative Law Judge erred in finding that the representations alleged in paragraphs 4(c), (d), (e), (g), (h), (k), (n), (l), and (m) of the Complaint, supra, were materially false representations. Contrary to Respondents' contentions, the findings were correctly made and are supported by the evidence of record.

The falsity of the representation of paragraph 4(c), that the market price of silver dollars has recently risen dramatically, is proven by the rather consistent market prices for silver dollars during the five month period prior to the issuance of the advertisement in controversy (CX-190, The Coin Dealer Newsletter). The falsity of the representation stated in paragraph 4(d) of the Complaint, that " t he Silver Dollars sold by the U.S. Coin Reserve are in uncirculated condition", is proven by the same evidence which established the falsity of representation 4(c) in the companion decision, Richard W. Verret, et al., P.S. Docket No. 20/l8, issued this day. Briefly, that evidence consists of Respondents' advertisement, invoices which showed Respondents were purchasing mainly grade AU coins for resale, expert witness testimony and the testimony of Respondent Richard Verret. The companion decision fully considers this matter and is adopted here.

Paragraph 4(e) of the Complaint alleged that Respondents represent their silver dollars have a normal market value of $150 to $285. The Administrative Law Judge found the representation false, primarily based on market prices contained in The Coin Dealer Newsletter and Mr. Verret's testimony as to the prices at which he purchased and sold the coins. The finding is supported by the evidence.

Paragraph 4(g) of the Complaint alleged that Respondents represent there have been recent volatile fluctuations in the silver market price. The representation is false. The testimony of two witnesses proved the falsity and the Administrative Law Judge correctly decided the issue (Tr. I, 116-17, 124-25; CX-32, p. 47-48).

The representation alleged in paragraph 4(h) of the Complaint is that silver dollars in the condition sold by Respondents are almost impossible to find. This representation is false. The witnesses at the hearing so testified and the Administrative Law Judge so held (Tr. I, 115, 124; CX-32, p. 43). There is no basis for overturning such holding.

Paragraph 4(k) of the Complaint stated that Respondents represent their coins to be rare. The coins are not rare; they are common (CX-32, p. 43). The falsity of the representation was thus proven, as the Administrative Law Judge held.

Paragraph 4(n) of the Complaint alleged that Respondents represent its group of silver dollars to be the last group of its size in that condition. The representation clearly is false. It follows that if the coins are not rare, but are common, the group compiled by Respondents would not be the last of its size of coins in similar condition.

Respondents give no basis for the exception taken to the holding that the representation concerning congressional responsibility for silver shortage due to meltdowns, as set forth in paragraph 4(l) of the Complaint, is false.^1/ Regardless, a paragraph headline banner of the advertisement stating that "Congress Meltdowns Create Shortage" supports the finding. Accordingly, the finding is affirmed. In regard to the falsity of the representation alleged in paragraph 4(m) of the Complaint, the finding is likewise affirmed. The Complaint alleged that Respondents represent that "The American Numismatic Association was associated with U.S. Coin Reserve in an audit of the Silver Dollar supply in the United States." The Administrative Law Judge found the representation false based on the testimony of Mr. Verret that he had a low opinion of the Association's grading system and the testimony of a Director of the Association that he had never heard of Respondents (Tr. II, 125-40; CX-32, p. 93). The finding is supported by the evidence of record.

Exception Four

"The Administrative Law Judge erred in Conclusion of Law Numbers 3, 6, 7 and 10. "

Conclusion number 3 found that Respondents made the representa- tions alleged in paragraph 4 of the Complaint. Conclusion 6 found the representations were material. Conclusion 7 found them to be false with one exception. Conclusion 10 found Respondents engaged in a scheme for obtaining money through the mail by means of materially false representations within the meaning of 39 U.S.C. 3005. In support of these exceptions, Respondents, in effect, incorporate the discussions and argument which they presented under Exceptions One, Two and Three. Since returned conclusions of Law are based on findings which have been found to be supported by the evidence of record they are affirmed.

Complainant's Exception

Complainant takes exception to the finding of the Administrative Law Judge which concerns the falsity of the representation alleged in paragraph 4(q) of the Complaint. The Complaint alleged that it was falsely represented that Respondent U.S. Coin Reserve, "has each Silver Dollar listed in its advertisements in uncirculated condition at MS-63 to MS-65 grade available for sale at the price advertised." In his Initial Decision, the Administrative Law Judge found that the representation alleged in subparagraph 4(q) of the Complaint was made in Respondents' advertisement, but that there was insufficient proof to establish that Respondents did not have them available for sale at the price advertised. Complainant's appeal sets forth no reason in support of its position other than the statement "Complainant asserts that he did sustain his burden of proof on this issue."^2/ While the Administrative Law Judge was correct on the question of availability, the record is clear that Respondent U.S. Coin Reserve was not selling uncirculated condition MS-63 to MS-65 silver dollars. Thus, since Respondents represented they sold such coins in that condition the representation is false and the Administrative Law Judge erred on this issue. The Administrative Law Judge's finding in regard to paragraph 4(q) is reversed.

Conclusion

After 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, Respondents' appeal is denied. Complainant's limited appeal is sustained. Remedial orders authorized by 39 U.S.C. 3005 are issued with this decision.

___________________

1/ The "Rules of Practice in Proceedings relative to False Representation and Lottery Orders" (39 C.F.R. 952) provides in section 956.25 (e)(4) that briefs on appeal shall contain "A concise argument clearly setting forth points of fact and of law relied upon in support of . . . each exception taken . . . ."

2/ Complainant's brief thus likewise did not comply with the requirements of 39 C.F.R. 952.25 (e)(4). See n. 1, supra.