In the Matter of the Complaint Against

THE NATIONAL GOLD MINT
3222 "M" Street N.W.
Washington, D.C. 20007-3621

NATIONAL COMMEMORATIVE MINT, INC.
150 Central Park South
New York, NY 10019-1566

FULFILLMENT CENTER, INC.
17 Mifflin Avenue
Havertown, PA. 19083-4617

DAVID MARGULIES
150 Central Park South
New York, NY 10019-1566

FRANCIS MARGULIES
17 Mifflin Avenue
Havertown, PA 19083-4617

TOM BRUSH
14 Fordham Road
Alston, MA 02134-3006

P.S. Docket No. 22/165

Mason, Randolph D.

APPEARANCES FOR COMPLAINANT:
Sandra C. McFeeley, Esq.;
Timothy J. Mahoney, Esq.;
Consumer Protection Division,
Law Department,
United States Postal Service,
Washington, D.C. 20260-1112

APPEARANCES FOR RESPONDENTS:
Basil J. Mezines, Esq.;
John A. Pirko, Esq.;
Stein, Mitchell & Mezines,
1800 M Street, NW Suite #1060N,
Washington, D.C. 20036

INITIAL DECISION

This proceeding was initiated on November 27, 1985, when the Postal Service filed a Complaint alleging that Respondents National Gold Mint, National Commemorative Mint, Inc., Fulfillment Center, Inc., and David Margulies, are engaged in conducting 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. On January 29, 1986, Complainant filed an Amended Complaint adding Respondents Francis Margulies and Tom Brush, and drew attention to an additional enforcement proceeding by the Postal Service involving David Margulies. Specifically, the Amended Complaint alleges in paragraph 11 that Respondents falsely represent, directly or indirectly, in substance and effect, whether by affirmative statement, implication or omission, that:

(a) The National Gold Mint is an agency of or is affiliated with the United States Government;

(b) The National Gold Mint is a place where coins or medals are made located in Washington, D.C.;

(c) The number of Statue of Liberty-American Eagle Gold Pieces to be made has been limited to a certain number by the United States Government or an agency thereof;

(d) The Statue of Liberty-American Eagle Gold Piece offered for sale by Respondents is the same Statue of Liberty coin to be issued by the United States Mint pursuant to P.L. 99-61 (1985);

(e) The Statue of Liberty-American Eagle Gold Piece offered for sale by Respondents is issued by the United States Government; and

(f) The Statue of Liberty-American Eagle Gold Piece offered for sale by Respondents is solid gold.

In their Answers, Respondents have denied that they have made the above false representations or that they have otherwise violated the statute.

A hearing was held by the undersigned Administrative Law Judge on March 18, 1986, in Washington, D.C. All parties were represented by counsel and afforded full opportunity to be heard, adduce relevant evidence, and examine and cross-examine witnesses. Complainant presented the testimony of Postal Inspector Thomas P. Krautheim and Francis B. Frere, Assistant Director of the United States Mint for Marketing; Respondents presented the testimony of Frank Greenburg and Henry W. Broido, Jr. For good cause shown, Complainant's unopposed motion to correct the transcript is hereby granted. On May 5, 1986, the parties filed proposed findings of fact and conclusions of law which have been duly considered. To the extent indicated below, proposed findings and conclusions have been adopted; otherwise, they have been rejected as irrelevant or contrary to the evidence. Based on the entire record herein, including my observation of the witnesses and their demeanor, the exhibits, stipulations, and other relevant evidence adduced at the hearing, I make the following findings of fact and conclusions of law:

Findings and Conclusions on Respondents' Motion to Dismiss

1. Respondents, with the exception of Francis Margulies and Tom Brush, argue that they have been victims of vindictive prosecution which denied them their right to due process. First, Respondents argue that Complainant's counsel "upped the ante" by seeking to add Francis Margulies as a Respondent in response to Respondents' exercise of their right to demand a hearing on the merits rather than execute a Consent Agreement proposed by Complainant. Respondents argue that this had the effect of denying due process by attempting to coerce them into signing a Consent Agreement and thereby denying them the right to a fair hearing.

2. Respondents' argument is based upon a line of criminal cases. In Bordenkircher v. Hayes, 434 U.S. 357 (1978), a prosecutor's threat during plea negotiations to "up the ante" by having the accused reindicted on more serious charges if he did not plead guilty to the original charges was considered constitutionally permissible. However, the Supreme Court noted that a prosecutor's offer of adverse treatment for some person other than the accused might create a problem (Id. f.n. 8). Subsequently, it was held that a threat of adverse treatment against a third person to obtain leverage in plea bargaining was permissible if the prosecutor had probable cause and acted in good faith with respect to the action against the third person. Harmon v. Mohn, 683 F.2d 834 (4th Cir. 1982).

3. In the first place, it is doubtful that these criminal cases are applicable to civil administrative proceedings. However, one court dismissed a vindictive prosecution claim in an OSHA proceeding on factual grounds, and found it unnecessary to reach the question of whether such a claim could ever be brought in such a proceeding. Donovan v. A. A. Beiro Constr. Co., 746 F.2d 894 (D.C. Cir. 1984).

4. In any event, Respondent have failed to establish a case of vindictive prosecution by Complainant in the instant case. Complainant did not "threaten" to add Francis as a Respondent, but merely gave notice that he was considering such action based upon new information (Tr. 6). On January 9, 1986, Complainant uncovered additional evidence that Francis was the operator of Respondent Fulfillment Center, Inc. n1 (CX-3). Thus, there was a legitimate factual basis for the addition of Francis and Complainant notified Respondents of the possibility of amending the Complaint in order to avoid any claim of surprise that might delay the proceeding (Tr. 13-14). Moreover, Respondents would not have been "coerced" by this notice regarding Francis because they were also aware that the signing of a Consent Agreement by one Respondent would not relieve the remaining Respondents of liability (Tr. 5-6). Accordingly, Complainant's actions with respect to the addition of Francis were the result of legitimate investigation and were not related to Respondents' failure to execute a Consent Agreement. Moreover, this independent action would not have had a significant, coercive effect on the remaining Respondents.

n1 It was subsequently stipulated that Francis is the manager of the Fulfillment Center, Inc. and makes the business decisions of that enterprise (Stip. 2 P1).

5. Respondents also point to Complainant's Motion for Default filed March 5, 1986, as evidence of Complainant's alleged vindictive attitude and lack of good faith. This argument has no merit. Respondent Fulfillment Center, Inc., clearly failed to file an Answer in accordance with 39 C.F.R. § 952.10 in December, 1985, when it was required to do so. Complainant's counsel apparently failed to notice this deficiency until March, 1986. Notwithstanding this oversight, the Motion for Default filed on March 6 was an appropriate and necessary action by Complainant to cure an obvious defect in the record.

6. Respondents also contend that the Postal Service's response to a Congressional inquiry led to a denial of due process. The December 11, 1985, letter from the Assistant Postmaster General for Government Relations erroneously indicates that the Postal Service had "found" the Respondents to be using the mail to misrepresent their product; in fact, only an administrative complaint had been filed. The letter also erroneously indicated that a mail stop order had been issued, whereas issuance of such an order had only been requested in the administrative Complaint herein. These errors were unfortunately compounded when the letter was quoted in the January 1, 1986, issue of "Coin World."

7. It appears that the errors were based upon an erroneous status report obtained by telephone from the Washington division of the Postal Inspection Service (Complainant's Opposition to Respondents' Request to Produce William Johnstone for Testimony, filed January 22, 1986). While the situation is regretable, prompt corrective action was taken in a follow-up letter by USPS that made it clear that no decision had been made by the Postal Service with respect to the instant case. This correction was also printed in a subsequent issue of "Coin World."

8. There is no hint that the above error was due to anything other than inadvertence. The problem was corrected and there is no evidence of any "vindictive" prosecution. Respondents have failed to demonstrate how due process has been denied by virtue of the above mistake. Accordingly, this argument is also rejected.

9. Finally, Respondents argue that the Complaint should be dismissed because the false representation statute is allegedly unconstitutional. However, this argument is rejected because Administrative Law Judges are prohibited from determining the constitutionality of statutes or the validity of Postal Service regulations. 39 C.F.R. § 224.1(c)(4)(iv)(B).

10. In conclusion, Respondents' Motion to Dismiss the Amended Complaint has no merit and is denied.

ADDITIONAL FINDINGS OF FACT

1. The National Commemorative Mint, Inc. ("NCMI") is a Delaware corporation organized in 1984. One of its unincorporated divisions is Respondent The National Gold Mint ("NGM"). NGM is a private concern that has no affiliation with the United States Mint or any other body of the United States Government. CX-1, P1, 3. During October and November of 1985, NGM advertised for sale a medal it called the "Statute of Liberty-American Eagle Gold Piece" ("Statue of Liberty Medal") in newspapers, magazines, and direct mail advertisements. CX-1 P2.

2. Fulfillment Center, Inc. ("FCI") is a Delaware corporation engaged primarily in fulfilling mail orders for businesses operated by David and Francis Margulies. FCI was retained by NGM to fulfill mail orders for Statue of Liberty medals. CX-1 P6; Stipulation 2 P4, Tr. 15.

3. NCMI and FCI are a part of a web of corporations, including Donovan, Martin & Cole, Inc. ("DMCI"), owned and operated by David and Francis Margulies and Elaine E. Gettes. FCI purchased some of the property of DMCI. Furthermore, FCI occupies its premises at 17 Mifflin Avenue, Havertown, Pennsylvania, under a lease assigned to it from DMCI without consideration. Elaine E. Gettes, FCI's president, secretary, treasurer, and 100% stockholder, was the Secretary of DMCI in 1982. Complainant's Request for Admissions by Fulfillment Center, Inc. P3, 8, 12, and FCI's response ("FCI's admissions," Tr. 21-23); CX-1 P4; Stipulation 2 P6. Francis was president and an owner of DMCI, which filled mail orders for "silverpieces" sold by another Margulies Corporation, The Columbia Mint. (Francis Margulies's Admissions PP3, 4, 9; Tr. 17-19).

4. David Margulies is the president and treasurer of NCMI and owns all outstanding shares of its stock. CX-1 P3. He procured and approved the advertisements at issue in this proceeding and is solely responsible for the content and design of NCMI's advertisements. Stipulation 2 P2.

5. David Margulies was president of The Columbia Mint from 1975 to 1977 and chairman from 1977 to 1983. In 1976 he signed a consent agreement between The Columbia Mint and the United States Postal Service in settlement of a matter involving the advertising of gold medals commemorating the American bicentennial. Stipulation 2 P3; CX-8. He is not an owner of officer of FCI and receives no compensation from that company. Stip. 2 P10.

6. Francis Margulies, David's brother, is the manager of FCI. Although he is not an owner, officer, or board member of FCI, as manager he makes the business decisions of that enterprise. Stip. 2 P1; Answer of Respondent Francis D. Margulies P5.

7. From 1977 to 1983, Francis Margulies was president of The Columbia Mint. Stip. 2 P3. In that capacity he signed a consent agreement with the United States Postal Service in 1983 to settle a matter involving the advertising of medals identified as "Washington Silverpieces" commemorating George Washington's 250th birthday. Id.; CX-10; Complainant's Request for Admissions by Francis Margulies P1, 13 and Francis's response ("Francis's Admissions") Tr. 16-17, 20; FCI's admissions P13, Tr. 24.

8. As of March 18, 1982, Francis Margulies was president of and held an ownership interest in DMCI. DMCI accepted orders and shipped merchandise in connection with the "Washington Silverpieces" offered for sale by The Columbia Mint during 1982. Francis's Admissions P3, 4, 9; Tr. 17-19.

9. On behalf of FCI, Francis Margulies arranged to have his son-in-law, Tom Brush, instruct employees of Brush's Pavo Real store at 3222 M Street, N.W., Washington, D.C. 20007, to forward mail addressed to NCMI to FCI at 17 Mifflin Avenue in Havertown, Pennsylvania via United Parcel Service. Stipulation 2 P5.

10. The only money Francis Margulies has received from NCMI has been in the form of recent loans of more than $10,000. As of March 18, 1986, these loans were still outstanding. Id. P9. Francis has no financial interest in NCMI and does not occupy any office with that company. Id. P8.

11. Tom Brush is a principal of and has an ownership interest in T.J. Brush, Ltd., a Massachusetts corporation that operates stores called Pavo Real in Washington, D.C. and Boston, Massachusetts. Complainant's Request for Admissions by Tom Brush P1-3, and Tom Brush's response, Tr. 27-30. The Pavo Real Store in Washington, D.C. is located at 3222 M Street, Northwest. Tr. 52.

12. As a favor to his father-in-law, Francis Margulies, Tom Brush arranged for Pavo Real in Washington to receive mail addressed to NGM and forward it to FCI in Havertown, Pennsylvania via United Parcel Service. FCI reimburses Pavo Real for its shipping expenses by means of checks signed by Elaine Gettes, president of FCI, and made payable to T. J. Brush, Ltd. CX-3; Stip. 2 P5; CX-6, Tr. 53.

13. Also, at the suggestion of Francis Margulies, the Pavo Real store in Boston receives mail addressed to The Boston Mint and forwards it to FCI in Pennsylvania via United Parcel Service. FCI reimburses Pavo Real for its shipping charges. CX-3; Tr. 138.

14. Tom Brush knows that NCMI uses the address of his Washington, D.C. store because it wants the public to believe that NGM is located in Washington, D.C. He knows that The Boston Mint uses the address of his Boston store for the same reason. Furthermore, Tom Brush expects that most people who read the advertisement for the Statue of Liberty medal would mistakenly believe that NCMI is located in Washington, D.C. CX-3.

15. Complainant's expert, Francis G. Frere, has been Assistant Director of the United States Mint ("Mint") for Marketing for ten years, and for the preceding twenty years he held numerous other managerial and executive positions at the Mint. Tr. 70-73. This included experience in the manufacturing of coins at the Mint as Assistant Chief of Production. Tr. 72. As Assistant Director for Marketing, Mr. Frere oversees the Mint's public relations, customer relations, and advertising activities. Tr. 73-74. These activities include responding to 500 to 1000 letters and 10-30 telephone inquiries from the public each day. Tr. 70-73, 78-79. The Statue of Liberty Commemoratives have generated thousands of inquiries. Tr. 79.

16. Mr. Frere personally attends two or three major coin shows or conventions per year, and his staff reports to him on their attendance at six or seven other shows. One of Mr. Frere's purposes in attending or sending a staff member to attend coin shows is to allow for interaction between the Mint and the general public. Tr. 75-76. Thus, Mr. Frere understands the public's general level of knowledge about the minting and sale of coins and medals. He was a forthright and credible witness. He is a highly qualified expert in numismatics and in consumer perceptions relating to the sale of coins and medals. I accepted his conclusions, and it was not necessary for him to elaborate by testifying about any more specific examples of consumer perception.

17. On the other hand, Respondents' experts are not as persuasive or as well-qualified to testify in this proceeding. Frank Greenburg is president of the Delaware Valley Coin and Stamp Company and holds memberships in many numismatic societies. His company conducts wholesale and retail trade in coins, stamps, and related numismatic and philatelic items. Members of the general public come into his store. Tr. 152-53, 158. He is an expert on over-the-counter retail coin sales and numismatic matters. Tr. 154.

18. However, Mr. Greenburg has not had much experience in dealing with the general public. Tr. 167. His company advertises only in trade publications that reach a small portion of the general public. The company has not advertised in publications of general circulation for some time. Tr. 154-56, 165, 169. Moreover, the company's advertisements contain little text and usually only state the store's name and address and list the prices of coins for sale. Tr. 173.

19. The instant case involves advertisements that contain a substantial amount of text and that have appeared in publications of vast general circulation such as the New York Times, the Chicago Sun-Times, the Christian Science Monitor, and USA Today. CX-1 Exhibits A, B; CX-2, CX-11. Mr. Greenburg has no expertise in this type of advertisement and the perceptions of the audience it reaches. Accordingly, his testimony has been accorded little weight in this case.

20. Respondents' other witness, Henry W. Broido, Jr., is a marketing counselor to businesses. He advises them on the marketing of products to middle-income and "upscale" consumers. Between 1972-1979, he helped develop some new programs and products for the Franklin Mint, which regularly advertised in newspapers of general circulation. Tr. 175-179.

21. However, Mr. Broido's testimony was not persuasive. He tended to exaggerate his claims and appeared more like an advocate than an objective expert. He also appeared out of touch with the coin and medal market. After viewing his demeanor on the witness stand, I have concluded that he is not a credible witness and that his testimony should be accorded little weight.

Use of the Mail

22. Respondents' newspaper and direct mail advertisements that are the subject of this matter contain order forms that list the mailing address and toll free telephone number of The National Gold Mint. CX-1 P2 and Exhibits A, B. The ordinary reader would interpret the order forms as inviting him to obtain the Statue of Liberty medal by either sending money through the mail or calling the toll free number. One who calls the toll free number and expresses an interest in ordering the medal through the mail is directed to write to 3222 M Street, N.W., Washington, D.C. Tr. 54.

The False Representations

23. The advertisements at issue here appeared in newspapers and direct mail solicitations during October and November of 1985. CX-1 P2 and Exhibits A, B. The advertisements make the representations alleged in subparagraphs a-f of Paragraph 11 of the Amended Complaint, and the representations are both false and material. The reasons for these conclusions are set forth below under each of the quoted representations.

Representation a

"The National Gold Mint is an agency of or is affiliated with the United States Government."

24. The advertisements convey the impression to the ordinary reader that The National Gold Mint is an agency or affiliate of the United States Government. First, they contain a trade name, The National Gold Mint, which, through the use of the words "National" and "Mint", sounds like the name of an agency of the United States Government. Second, they convey the impression that The National Gold Mint is located in Washington, D.C. by listing a Washington, D.C. street address. CX-3 P2.

25. Third, the word "OFFICIAL" appears at the top of the order forms in large, capital letters. This adjective is commonly used to mean "authorized by the government." Fourth, as is discussed below in relation to Representation d, the advertisements offer for sale a medal that would appear to the ordinary reader to have been minted by the United States Government. The false impression that the Statue of Liberty medal is a product of the United States Government adds to the false impression that The National Gold Mint is a United States Government agency or affiliate, and vice versa.

26. Many ordinary members of the public mistakenly believe that coins are minted in Washington, D.C. Tr. 85, 97. The United States Mint often receives phone calls from individual travelers and group leaders who wish to tour minting facilities while visiting Washington, D.C. Tr. 85.

27. To members of the public who believe coins are minted in Washington, D.C., advertisements from "The National Gold Mint" in "Washington, D.C." that contain an "OFFICIAL" order form for a "Statute of Liberty-American Eagle Proof Gold Piece" will convey the impression that The National Gold Mint is an agency or affiliate of the United States Government. Tr. 99.

28. The disclaimers in the advertisements -- that The National Gold Mint is "one of America's private mints" and that it is "not affiliated with The United States Mint" -- are in such small print and appear at such inconspicuous locations on the advertisements that one cannot expect the ordinary, unsuspecting reader to notice them. CX-1 Exhibits A, B; CX-2; CX-11.

29. Representation a is false. The National Gold Mint is a private concern that has no affiliation with the United States Mint or any other agency of the United States Government. CX-1 P1.

30. Representation a is material. Respondents represent that they are an agency or affiliate of the United States Mint to make their product appear authentic and to capitalize on the Mint's campaign to sell Statue of Liberty-Ellis Island commemoratives. This false connection between the medal respondents sell and the Statute of Liberty-Ellis Island commemorative coins is a material inducement to members of the public to purchase the medal.

Representation b

"The National Gold Mint is a place where coins or medals are made located in Washington, D.C."

31. Respondents make this representation. The "OFFICIAL ORDER FORM" accompanying the advertisements directs consumers to send their orders to: "THE NATIONAL GOLD MINT, 3222 "M" Street N.W.-355, Washington, D.C. 20007." CX-1 P2, Exhibits A, B. One need look no further than this plain language to see that the advertisements would lead the ordinary reader to believe The National Gold Mint is located in Washington, D.C. CX-3. The ordinary, unsuspecting reader is not going to inquire whether The National Gold Mint uses a mail forwarding agent.

32. Moreover, the ordinary reader is not going to suspect that The National Gold Mint fulfills orders at one location and makes coins at another. As is shown above in reference to Representation a, the advertisements will lead the ordinary reader to believe The National Gold Mint is an agency or affiliate of the United States Government, and many members of the public believe that coins are minted in Washington, D.C. Tr. 85. Believing that The National Gold Mint is an official body, and believing that coins are minted in Washington, D.C., consumers naturally will believe that The National Gold Mint makes coins in the nation's capital.

33. The testimony of Respondent's witnesses does nothing to alter this conclusion. Mr. Broido testified that mail order businesses commonly list an address different from the location where the merchandise is stored. Tr. 191. Mr. Greenburg testified that many manufacturers and distributors of coins use the term "mint" in their trade name, although few, if any, strike medallions at their own facilities. Tr. 160-61.

34. This testimony has no bearing on what the advertisements represent to the ordinary reader. The commonly accepted meaning of "mint" is "a place where coins, medals, or tokens are made," and "a place where money is produced under government authority." Webster's Ninth New Collegiate Dictionary, 757 (1984); Random House College Dictionary, 851 (1980). There is no credible evidence that the ordinary reader is familiar with the practices of coin manufacturers and distributors that identify themselves as mints, and it is clear that the advertisements cause ordinary readers to believe that The National Gold Mint makes coins and medals in Washington, D.C.

35. Representation b is false. The National Gold Mint is the trade name of a Delaware corporation that does not mint coins or medals in Washington, D.C. CX-1 P1, 3; Tr. 86; Tr. 43-44.

36. Representation b is material. To the ordinary reader, a medal will seem official and authentic if it comes from The Mint in the nation's capital. This representation is particularly material when considered with the other representations in issue because it lends support to their veracity. N. Stimpson, P.S. Docket No. 11/80 (P.S.D. Apr. 30, 1982).

Representation c

"The number of Statute of Liberty-American Eagle Gold Pieces to be made has been limited to a certain number by the United States Government or an agency thereof.

37. Respondents make Representation c. The advertisements state: "By acting promptly you can obtain a one ounce Statute of Liberty-American Eagle Gold Piece at this guaranteed price [$328] . . . [ellipsis in original] but you must act now-the number is limited to the total authorized minting of only 10,000 pieces." CX-1 Exhibits A, B. The United States Government and private mints often limit the size of their commemorative mintings. Tr. 83, 161-162; CX-2, second Exhibit A (Frere affidavit) P2; Tr. 69-70.

38. Standing alone, a statement that the number of commemorative medals issued by a mint is limited probably would not represent to the ordinary reader that the limitation is Government-imposed. Here, however, the advertisements refer not to a "limited" minting but to the "total authorized minting."

39. "Authorized" carries a different connotation from "limited." It is common for private businesses to limit the availability of their products; the phrase "Limit: One per customer" appears on numerous advertisements. "Authorized," in contrast, usually connotes an act of government. The two modern definitions of "authorize" are "to establish by or as if by authority," and "to invest esp. with legal authority." Webster's Ninth New Collegiate Dictionary, 117 (1984). It is uncommon for anyone to state that he has authorized himself to act only in a certain way.

40. Furthermore, the phrase "the number is limited to the total authorized minting of only 10,000 pieces," must be read in the context of the whole of the advertisements. As previously discussed under Representation a, the advertisements cause the ordinary reader to believe that The National Gold Mint is an agency or affiliate of the United States Government. That representation also helps make Representation c.

41. Representation c is false. There is no apposite federal statute or regulation limiting the number of Statute of Liberty medals that respondents may issue.

42. Representation c is material. The representation that the United States Government has limited the number of Statue of Liberty medals to be issued is material because it enhances the overall message of the advertisements -- that the Statue of Liberty medal is one of the Congressionally-authorized Statute of Liberty-Ellis Island commemorative coins. Furthermore, this representation induces the ordinary reader to purchase the medal under the false assumption that the United States Government will ensure that the Statute of Liberty medal remains a limited edition item.

Representation d

"The Statue of Liberty-American Eagle Gold Piece offered for sale by Respondents is the same Statue of Liberty coin to be issued by the United States Mint pursuant to P.L. 99-61 (1985)."

43. Respondents make Representation d. Three factors contribute to the impression that the Statue of Liberty-American Eagle Gold Piece is the same Statue of Liberty commemorative coin issued by the United States Mint: (1) the picture of the Statue of Liberty medal at the top of the advertisements; (2) the text of the advertisements; and (3) the time at which the advertisements were mailed or published.

44. Although some differences exist (Tr. 112-113), the picture reveals a number of similarities between the Statue of Liberty medal and two of the Statue of Liberty-Ellis Island commemorative coins authorized by P.L. 99-61 (1985). Like the Statue of Liberty Dollar, the medal has a standing figure of the Statue of Liberty on its obverse side. Tr. 97. The medal's obverse also bears the phrase "give me your tired, your poor, your huddled masses yearning to breathe free"; this phrase also appears on the reverse side of the Statue of Liberty Silver Dollar. Tr. 96-97; CX-1 Exhibits A, B. The medal's reverse side features an eagle and stars, as does the reverse of the $5 Statue of Liberty commemorative coin. Tr. 96. n2.

n2 It is irrelevant whether Complainant's expert has actually seen one of Respondents' medals or compared its size to that of one of the Mint's commemoratives. At issue here is what representations are made by the picture of the medal in the advertisements.

45. The text of the advertisements refers to the medal as the Statue of Liberty-American Eagle Gold Piece, a name that the ordinary reader is likely to associate with the Mint's Statue of Liberty-Ellis Island commemorative coins. The public typically refers to gold coins as "gold pieces." Tr. 88, 91-94. Furthermore, the advertisements promise to furnish a "Certificate of Authenticity" for the medal; the U.S. Mint also furnishes a certificate of authenticity to purchasers of Statue of Liberty commemorative coins. Tr. 95; CX-1 Exhibits A, B. Although such a certificate, by itself, is a fairly standard practice (Tr. 117), in the context of the advertisement, it reinforces the impression that the medal is a coin offered by the U.S. Mint.

46. Contributing to the representation that the advertisements offer one of the Mint's commemorative coins is the time at which the advertisements reached the public. The Mint opened its advertising campaign for the commemoratives with a widely-publicized ceremony on October 18, 1985. Tr. 110. Since that date the commemoratives have received heavy coverage in the national media. Tr. 91, 110. Also, the legislation detailing the design of the coins was passed on July 9, 1985. Tr. 110; CX-1A1. Respondents disseminated the advertisements at issue here during October and November of 1985. CX-1 P2.

47. In light of the timing of the advertisements and the resemblance of the medal to the Mint's Statue of Liberty commemoratives, the advertisements appeared to the ordinary reader to be offering Statue of Liberty commemorative coins. Tr. 99.

48. Representation d is false. Respondents do not offer for sale one of the Statue of Liberty commemorative coins issued by the United States Mint. Frere affidavit P7.

49. Representation d is material. Many people would be more interested in obtaining an official U.S. coin commemorating The Statue of Liberty than one which has been privately minted.

Representation e

"The Statue of Liberty-American Eagle Gold Piece offered for sale by Respondents is issued by the United States Government."

50. Respondents make Representation e. The fact that Respondents make Representation a -- the use of the name The National Gold Mint, the Washington, D.C. address, the word "OFFICIAL," and the public's belief that coins are made in Washington -- also conveys the impression that the medal offered for sale by Respondents is a coin issued by the United States Government. See findings 24-30, supra.

51. Certain features of the Statue of Liberty medal depicted in the advertisements are similar to features that commonly appear on United States coins. Stars, which appear on the reverse of the Statue of Liberty medal (the undated side), are a common feature on the Mint's coins, especially its gold coins. Tr. 80, 90. An eagle, which also appears on the medal's reverse, is featured on almost all gold coins. Tr. 84, 90. United States gold coins have long been called "eagles." CX-1, 2nd Ex. A P6 (Frere affidavit); Tr. 84-85. Finally, the advertisements note that the medal has a "reeded edge." Currently, the quarter, half-dollar, dollar, and gold coinage have reeded (serrated) edges. Tr. 81.

52. Respondents argue that their advertisements do not represent that the medal is issued by the United States Government because they refer to it as a "Gold Piece" rather than a "coin." "Coin" is the proper legal term for United States metal currency, and it is the term normally used by the Mint. Tr. 88. According to Mr. Frere, however, the accepted term for a gold coin in the numismatic trade is "piece," and the general public refers to gold coins as "pieces." Tr. 88, 91-94.

53. Representation e is false. Respondents' medal is not a United States coin.

54. Representation e is material. United States gold coins are a rarity. Presently, the only gold coin offered by the United States Mint is the Statue of Liberty gold piece. The only other gold coin produced in recent years commemorated the 1984 Olympic Games. Tr. 118. Thus, by representing their product as a United States coin, Respondents seek to capitalize not only on the wide-spread publicity of the Statue of Liberty-Ellis Island commemorative coins and the interest in United States gold coins, but also on the high level interest in United States gold coins generated by their rarity. Both the Mint's publicity campaign (Tr. 91) and the rarity of United States gold coins are material inducements to the ordinary reader to make a purchase.

Representation f

"The Statue of Liberty-American Eagle Gold Piece offered for sale by Respondents is solid gold."

55. Respondents make Representation f. The advertisements describe the Statue of Liberty medal as "solid one ounce 500 Fine Gold," "inscribed with its Gold purity and weight of 480 grains (1 troy ounce)," and "Solid 500 Fine Gold." They also offer a Certificate of Authenticity attesting to the "purity" of the Gold Pieces. CX-1 Exhibits A, B. These phrases are ambiguous and represent to many ordinary readers that the medal is solid, nearly 100%, gold.

56. When modifying the noun "gold," the adjective "solid" may mean "whole" or "firm." Whole or firm gold could contain a significant amount of another alloy. But "solid" may also mean "entirely of one metal or containing the minimum of alloy necessary to impart hardness." n3 The dictionary illustration for this usage of "solid" is the phrase "solid gold." Webster's Ninth New Collegiate Dictionary, 1122 (1984); Random House College Dictionary, 1251 (1980): ("consisting entirely of one substance or material: solid gold.")

n3 Respondents' argument that "solid" merely shows the reader that the medal is not hollow is rejected. Mr. Frere was not aware of any mint having made a hollow coin or medal, Tr. 82, and there is no reason to believe that an ordinary reader would consider that possibility.

57. The only definition of "pure" that logically would modify "gold" is "unmixed with any other matter." The dictionary illustration for this usage is the phrase "pure gold." Webster's, supra at 956.

58. The fineness of a metal is the "proportion of pure metal in the composition expressed in parts per thousand." Id. at at 464; CX-1 P1; Tr. 86. Thus someone familiar with this technical meaning of "fine" would expect the Statue of Liberty medal to be one-half gold. However, ordinary members of the public do not understand the meaning of "fineness." Tr. 86; Tr. 101.

59. A non-technical meaning of "fine" is superior in quality, conception, or appearance." Webster's Ninth New Collegiate Dictionary, 464 (1984). Mr. Frere has found that some members of the public attribute this meaning to "fine" when the term is used to describe a coin. Tr. 101. In other words, the ordinary person would interpret "500 Fine Gold" to refer to the quality of the gold rather than to its quantity (parts per thousand).

60. Also, ordinary consumers would be misled by the phrase "inscribed with its Gold purity and weight of 480 grains (1 troy ounce)." Members of the ordinary public will not understand that, while the medal's total weight is 480 grains, it contains only 240 grains of gold. Tr. 100. Consumers will also be misled by the price of the Statue of Liberty medal, $328, which approximates the current market price for an ounce of gold. Tr. 172.

61. In summary, to the ordinary reader, "solid" and "500 Fine," when modifying "gold," are susceptible to more than one meaning. "Solid" may mean 100%, or almost 100%, gold. "500 Fine" may mean high-quality gold. Tr. 101. Thus "solid 500 Fine gold" will reasonably be interpreted by many readers as "solid, 100%, high-quality gold."

62. Representation f is false. The parties have stipulated that the Statue of Liberty medal is one-half gold. CX-1 P1.

63. Representation f is material because the amount of gold tends to induce the purchase of the product.

CONCLUSIONS OF LAW

1. (a) Each of Respondents' advertisements must be considered as a whole and the meaning is to be determined in light of the probable impact of this material on a person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948); Peak Laboratories, Inc. v. U.S. Postal Serv., 556 F.2d 1387, 1389 (5th Cir. 1977). The statute is intended to protect the gullible, naive, and less critical reader, as well as the more sophisticated, wary reader. Fields v. Hannegan, 162 F.2d 17 (D.C. Cir. 1947), cert. denied, 332 U.S. 773 (1947); M.K.S. Enterprises, Inc. v. United States Postal Service, 459 F. Supp. 1180, 1184 (E.D.N.Y. 1978); Gottlieb v. Schaffer, 141 F. Supp. 7 (S.D.N.Y. 1956); Leo Daboub, P.S. Docket No. 19/185 (P.S.D. July 10, 1986). Express misrepresentations are not required. It is the net impression which the advertisement is likely to make upon individuals to whom it is directed which is important, and even if an advertisement is so worded as not to make an express representation, if it is artfully designed to mislead those responding to it, the false representation statute is applicable. G.J. Howard Co. v. Cassidy, 162 F. Supp. 568 (E.D.N.Y. 1958); See also, Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976).

(b) Where an advertisement is ambiguous or capable of more than one meaning, if one of those meanings in false, the advertisement will be held to be misleading. Rhodes Pharmacal Co. v. F.T.C., 208 F.2d 382, 387 (7th Cir. 1953); Ralph J. Galliano, P.S. Docket No. 19/15 (P.S.D. May 2, 1985 at p. 9).

(c) An inconspicuous disclaimer is not sufficient to dispel the effect of false representations. Leo Daboub, supra; Gottlieb v. Schaffer, supra.

(d) The Administrative Law Judge can determine whether the representations are made, their effect on the ordinary mind, and materiality without the assistance of lay or expert testimony. Standard Research Labs, P.S. Docket No. 7/78 (P.S.D. Oct. 27, 1980); The Robertson-Taylor Company, P.S. Docket Nos. 16/98-102, 16/120-121, (P.S.D. March 31, 1986 at page 29); Vibra-Brush v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2nd Cir. 1958).

2. Applying the foregoing standards, I find that Respondents' advertisements make the representations alleged in P11(a)-(f) of the Amended Complaint. The language contained in the advertisements, when read in context, which directly or impliedly makes these representations is set forth in the Findings of Fact.

3. As set forth in the Findings of Fact, the representations set forth in paragraph 11 of the Amended Complaint are materially false.

4. Complainant has established its case by a preponderance of the reliable and probative evidence of record. S.E.C. v. Savoy Industries, Inc., 587 F.2d 1149, 1168 (D.C. Cir. 1978).

5. The representations made by Respondent are material because they have a tendency to persuade readers to order and pay for Respondent's product.

6. Respondents are engaged in the conduct of a scheme for obtaining remittances of money or property through the mail by means of false representations in violation of 39 U.S.C. § 3005.

The Cease and Desist Order

7. Respondents argue that any Cease and Desist order issued in this case should not include FCI, Francis Margulies, or Tom Brush. Complainant argues that Francis Margulies should be subjected to the cease and desist order because he operates FCI, which receives the money and fills the orders, and because he induced Tom Brush to use the latter's Washington store as a mail forwarding agent for FCI and NGM. Similarly, Complainant argues that Tom Brush should be subjected to the cease and desist order because the scheme requires his services for its successful operation and because he understands that NGM's principal purpose in using his clothing store's address is to give the public the false impression that NGM is located in the nation's capital. For the reasons set forth below, the Cease and Desist Order should be issued against all Respondents except for Tom Brush.

8. Congress amended 39 U.S.C. P3005 in 1983 to provide in subsection (a)(3) that the Postal Service may order a "person" who is engaged in a scheme to obtain money through the mails through false representations to "cease and desist" from such conduct. Congress's purpose in granting the Postal Service this power over individuals was to strengthen the deterrent effect of the statute and reduce the possibility of evasion of Postal Service orders. W.G. Charles Company, P.S. Docket Nos. 19/103-105, 161-62, 179, 182-84; 20/16, 32 (Decision on Motion to Dismiss, January 28, 1985 at p. 10).

9. A cease and desist order will be issued against individuals who are responsible for the conduct of a corporation where the individuals might attempt to evade a cease and desist order issued only against the corporation. Federal Trade Commission v. Standard Education Society, 302 U.S. 112 (1937). The individuals need not have been responsible for the false advertising itself; it is sufficient if they played some other significant role in the scheme, such as receiving the money and filling customers' orders. W.G. Charles Company, P.S. Docket Nos. 19/104, 19/162 (P.S.D. Sep. 10, 1985) and W.G. Charles Company, P.S. Docket Nos. 19/105, 19/161, 20/32 (P.S.D. Sept. 30, 1985 at pp. 10-13) (affirming W.G. Charles Company, Docket Nos. 19/103-105, 161-162, 179, 182-84; 20/16, 20/32, Decision & Order on Motion to Dismiss, January 28, 1985 at page 10); Barrett Carpet Mills, Inc. v. Consumer Product Safety Comm., 635 F.2d 299 (4th Cir. 1980). Also, an agency may impose a cease and desist order not only on the prime mover of a scheme, but also on someone who "has made available resources whereby another may commit unfair acts." Carter Products, Inc. v. FTC, 323 F.2d 523, 534 (5th Cir. 1963).

10. An agency has imposed a cease and desist order on numerous parties where it has determined that unfair and deceptive, integrated practices were being carried out by a group of interrelated entities that operated as one. Such broad orders are necessary to prevent the entities involved from avoiding the terms of the order. Cotherman v. Federal Trade Comm., 417 F.2d 587, 594-95 (5th Cir. 1969); Delaware Watch Company v. Federal Trade Comm., 332 F.2d 745, 746-47 (2d Cir. 1964); Sunshine Art Studios, Inc. v. FTC, 481 F.2d 1171, 1175 (1st Cir. 1973).

11. David Margulies, NCMI and NGM admittedly played major roles in the scheme and should be subjected to the Cease and Desist Order.

12. Francis Margulies has played an integral and important part in the scheme. He manages FCI, which is engaged almost exclusively in fulfilling mail orders for NCMI and other businesses operated either by himself or David Margulies. He convinced his son-in-law, Tom Brush, to use the latter's Washington, D.C. clothing store as a mail forwarding agent for FCI and NGM. Thus, Francis Margulies "has made available resources whereby" NCMI has been able to commit prohibited acts. Carter Products, Inc. v. FTC, supra. He also told Brush that this arrangement would make it appear that the "mint" was located in Washington, D.C. CX-3.

13. As president of The Columbia Mint from 1977-1983, Francis Margulies participated in a business enterprise similar to the one at issue here. On June 27, 1983, he signed a consent agreement with the Postal Service stating, inter alia, that The Columbia Mint would no longer represent that it is "a place where coins or medals are made located in Washington, D.C."; that it "is affiliated with or is otherwise an authorized agent of the U.S. Mint or other unit of the U.S. Government"; or that the "Washington Silverpiece" it offered for sale was "issued by the United States Mint." Stip. II, P3; CX-10 P3; CX-9 P2, 3, 6. n4 He also participated in this prior business as president and partial owner of DMCI, which fulfilled orders for the "Washington Silverpieces." FOF 8, supra.

n4 Although Judge Duvall found that these false representations had been made (The Columbia Mint, P.S. Docket Nos. 15/98, 15/99 (I.D. May 27, 1983)), the decision did not become final and a consent agreement was executed. Accordingly, neither res judicata nor collateral estoppel apply; no determination need be made herein whether any prior violation occurred.

14. Finally, although Francis Margulies has no formal connection with NCMI, his informal connections are numerous. NCMI is part of a web of corporations including FCI, DMCI, and The Columbia Mint that are, or were, owned and managed by the same few people. For example, NCMI's president and owner, David Margulies, is Francis Margulies's brother. Furthermore, David Margulies was chairman of The Columbia Mint during Francis Margulies tenure as president of that corporation. To give another example, in 1982, when Francis Margulies was also president of DMCI, Elaine Gettes was DMCI's secretary. She is now president and owner of FCI and Francis Margulies is her manager.

15. The close relationship between these individuals is further demonstrated by DMCI's assignment of a lease to FCI without consideration. It is also shown by NCMI's loan to Francis Margulies of over $10,000.

16. Accordingly, Francis Margulies and FCI should also be subject to the cease and desist order. They are both major participants in the scheme to sell Statute of Liberty medals. Also, Francis and his associates have demonstrated a faculty for engaging in business enterprises that have drawn the attention of the Postal Service. If he were not subjected to the cease and desist order, his associates could use him to circumvent the order. Cotherman v. Federal Trade Com., supra at 594-95; W.G. Charles Company, supra.

17. Complainant also argues that Tom Brush should be subject to a Cease and Desist Order because he aided the sale of Statue of Liberty medals by instructing his employees to forward mail addressed to NGM at 3222 M Street to FCI in Pennsylvania. Although it is likely that Francis Margulies could have found other District of Columbia businessmen to forward mail for him, it is unlikely that he would have found anyone besides Tom Brush who would have done so as a favor with no compensation other than reimbursements for shipping costs. It is also unlikely that he would have found anyone he could trust as much as a son-in-law. In W.G. Charles Company, supra, (Dec. on Motion to Dismiss, Jan 28, 1985, at 15), it was noted that an individual's family relationship with the primary respondent in the case increased the likelihood that the primary respondent could circumvent a cease and desist order through new ventures established by the individual.

18. Tom Brush is not a naive participant in this scheme. He knows that NGM uses his District of Columbia address to deceive the public as to NGM's actual location. CX-3. He has also arranged for the forwarding to FCI of mail addressed to The Boston Mint at his Boston store's address. Id.

19. However, it appears that Brush was merely doing a favor for his father-in-law, that he receives no compensation for his efforts, and is not otherwise involved in or knowledgeable about the business of selling medals by mail. Although he was a participant in the illegal scheme, his role was minor. It does not appear that the issuance of a Cease and Desist Order against Brush would be necessary to prevent the recurrence of the instant scheme. Although the matter is not free from doubt, it appears that the penalizing effect of a cease and desist order outweighs its remedial value in this instance. Accordingly, the issuance of an order against Brush is not recommended.

20. Respondents argue that they should not be required to cease and desist from representing, as requested by Complainant in Pb of the proposed order, that "[a]ny of them or any other entity is or has possession or control of a place where coins or medals or any other goods are made, whether or not in a specified location, unless such representation is true as made." They contend that this would preclude them from using the word "mint" in their name. The attached order does not necessarily prohibit the use of that word. However, since a "mint" is commonly understood as a place where coins are made under government authority, any advertising would have to make it very clear to the ordinary reader, for example, that Respondent is a private company which does not produce the coins or medals.

21. The attached False Representation Order and Cease and Desist Order should be issued.