In the Matter of the Complaint Against

KENNETH D. SINKS, JR.
d/b/a ROCKY MOUNTAIN TRADERS
and ROCKY MOUNTAIN TRADERS
FUTURE MILLIONAIRES SOCIETY
125 East 32nd Street,
Suite 810 Durango, CO 81301-4232

P.S. Docket No. 22/124

APPEARANCE FOR RESPONDENT:
Kenneth D. Sinks, Jr., Pro Se
1606 Kenwood Circle
Farmington, NM 87401-7349

BEFORE: Judge Edwin S. Bernstein

INITIAL DECISION

Complainant alleged and Respondent denied that Respondent was engaged in conducting a scheme for obtaining money through the mail by false representations and by a lottery in violation of 39 U.S.C. § 3005.

A hearing was held in Phoenix, Arizona, on December 18, l985. Postal Inspector Catherine A. Budig and John F. Brady testified for

Complainant while Kenneth D. Sinks, Jr. testified for Respondent. Both parties filed proposed findings of fact, proposed conclusions of law, and memoranda. All of these have been considered. To the extent indicated, they have been adopted. Otherwise, they have been rejected as irrelevant or not supported by the evidence.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Respondent, Kenneth D. Sinks, Jr., is the owner of Rocky Mountain Traders Future Millionaires Society ("the Society") and is the operator of Rocky Mountain Traders. Mr. Sinks is responsible for the advertising practices of both Rocky Mountain Traders Future Millionaires Society and Rocky Mountain Traders. He is also responsible for publications of these organizations. Mr. Sinks resides at 1606 Kenwood Circle, Farmington, NM 87401. Mr. Sinks admitted all of these facts in his Answer.

Respondent solicits remittances of money through the mail at 125 East 32nd Street, Suite 810, Durango, CO 81301 in connection with his sale of memberships in the Society. Complainant's Exhibits (CX) 1 and 1B support this finding. CX-1, Respondent's solicitation, states at the beginning of page 2, "Order your handbook from the Society Director by mailing them the yellow copy of your registra tion form, a $5.00 money order and a self-addressed stamped, large envelope." That paragraph also contains other mailing instructions. CX-1B is a postmarked envelope, containing Rocky Mountain Traders' return address and the printed words "IT'S HERE] Requested Member ship Material Inside."

Respondent sells memberships in the Society for $5.00. CX-1 contains the heading "START RECEIVING UP TO $98,415 IN AS LITTLE AS 12

WEEKS - GUARANTEED." The solicitation explains, "...as a member of our society you can start receiving up to $98,415 in as little as 12 weeks] All that you have to do is to assist us in our membership drive by introducing 3 of your friends and relatives to our unique society." The solicitation then explains:

What Is Rocky Mountain Traders

Future Millionaires Society?

We are a financial research and service organization. We supply our members with valuable and unique money making opportunities and investments that have all been proven through research and testing. Our most successful money making plan is our future millionaires society. This is a multi-level marketing plan that is so quick and powerful that we can almost guarantee our member's success]

How Our Plan Works

When you become a member and choose to participate in our plan, you will receive 3 membership brochures and 3 registration forms with your name in the #9 position as sponsor. When you sponsor 3 new members and assist them in doing the same, they will each receive 3 new registration forms with your name in the #8 position on 9 forms. Those 9 new members will each receive 3 forms with your name in the #7 position on 27 forms. The 27 new members receive 3 forms each for a total of 81 forms with your name in the #6 position. These 81 new members then receive 3 forms with your name on 243 forms in the #5 position. The 243 new members receive 3 forms with your name in the #4 position on 729 forms. From 729 forms it moves to 2,187 forms with your name in the #3 position. From 2,187 forms to 6,561 forms with your name in the #2 position. Finally, the 6,561 new members each receive 3 new registration forms and you move to the society director's position with your name on 19,683 forms. As you will soon see, each of these 19,683 new members could order from you a society handbook for $5.00 each (19,683 x 5 = $98,415.00). All of this can take place in as little as 12 weeks. However, the speed at which you rise up the membership line depends on your own efforts and that of the people that you sponsor.

The opening paragraph of the handbook that members receive (CX-2) begins, "This is your Future Millionaires Society Handbook. Please do not let its simple form or size disappoint you." The handbook is extremely small. The financial research and money making investment information referred to in the solicitation, other than the Future Millionaires Society multi-level marketing plan, consists of three special reports, which can be purchased for $5 for the first copy and 75c / per additional copy, and back issues of the Society's Newsletter, "On Guard" which can also be purchased.

Respondent's plan violates 39 U.S.C. § 3005. That statute prohibits "conducting a lottery, gift, enterprise, or scheme for the distribution of money or of real or personal property, by lottery, chance, or drawing of any kind..."

The necessary elements of a lottery are the furnishing of a consideration, the offering of a prize, and the distribution of the prize by chance. Horner v. United States, 147 U. S. 449 (l893); Brooklyn Daily Eagle v. Voorhies, 181 F. 579, 581 (E.D.N.Y. l910). Arrangements involving multi-level override commissions have been held to be lotteries. Public Clearing House v. Coyne, 194 U. S. 497 (l904). Zebelman v. United States, 339 F.2d 484 (10th Cir. l964); Tenpen Sales Corporation, P.O.D. Docket No. 2/35 (May 10, l961); Collegedale Diversified Enterprises, Inc., P.S. Docket No. 14/29 (I.D. December 10, l982); Middle Class American, Inc., P.S. Docket No. 16/65 (I.D. June 30, l983).

In Zebelman, the Court held that when one receives payments for a second step participant, "the procuring of this buyer is dependent, at least in part, upon chance..." P. 486.

Similarly, in Tenpen Sales, where commissions were paid within seven levels, the Judicial Officer found the plan to be a lottery. Quoting from Public Clearing House, the Judicial Officer stressed that since "the profits depend principally upon the exertions of others, ones whom he, the salesman, has no control and with whom he has no connection ... the amount realized is determinable by chance." P. 5.

The cases cited also hold the offering of something of value such as a payment based upon sales to others constitutes a prize. Typical is Tenpen Sales, which adopts the definition for "prize" as "anything of value offered as an inducement to participate in the scheme. P. 4.

Purchasers also furnish consideration to Respondent. The ele ment of consideration is considered to be present even though the purchaser receives merchandise or other property in addition to his chance to win a prize. Horner v. United States; Tenpen Sales Corporation.

I, therefore, find that Respondent's sales plan constitutes a lottery in violation of 39 U.S.C. § 3005. In view of this finding, it is unnecessary to decide the false representation issues. There fore, an order in the form attached should be issued against Respondent.