In the Matter of the Complaint Against

THE NATIONAL GOLD MINT,
3222 "M" Street, N.W.,
Washington, DC 20007-3621,
NATIONAL COMMEMORATIVE MINT, INC.,
150 Central Park South,
New York, NY 100l9-1566
FULFILLMENT CENTER, INC.,
17 Mifflin Avenue,
Havertown, PA 19083-4617,
DAVID MARGULIES,
150 Central Park South,
New York, NY 10019-156 6,
FRANCIS MARGULIES,
17 Mifflin Avenue,
Havertown, PA 19083-4617,
TOM BRUSH,
14 Fordham Road,
Alston, MA 02134-3006

P.S. Docket No. 22/165

James D. Finn, Jr. Acting Judicial Officer

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

APPEARANCES FOR RESPONDENTS:
Basil J. Mezines, Esq.
John A. Pirko, Esq.
Stein, Mitchell & Mezines
1800 M Street, NW, Suite #1060N
Washington, DC 20036-5834

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.

Background

The Consumer Protection Division, Law Department, United States Postal Service (Complainant) initiated this proceeding by filing a Complaint which, as amended, specifically alleged in paragraph ll thereof that Respondents, by means of advertisements placed in publications of general circulation, make the following materially false representations relating to their sale of gold pieces:

(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.

Paragraph 12 of the Amended Complaint alleged that these representations are materially false. In their Answers Respondents denied making the representations alleged in paragraph ll of the Amended Complaint and denied that such representations are materially false, as alleged by paragraph 12.^1/

At a hearing before an Administrative Law Judge both sides presented evidence. Complainant presented exhibits and the testimony of two witnesses: Mr. Thomas Krautheim, a Postal Inspector, who investigated Respondents' business operations; and Mr. Francis B. Frere, Assistant Director for Marketing, United States Mint, and an expert in medals, coins and consumer perceptions relating to the advertisements of medals and coins to the general public. Respondents presented the testimony of Mr. Frank Greenberg, the president of a retail coin and stamp company, and an expert in the retail coin business and numismatic matters; and the testimony of Mr. Henry Broido, Jr., the president of a marketing company and an expert in the marketing of numismatic articles, such as medallions, medals and coins.

Following the hearing and after the filing of proposed findings of fact and conclusions of law by both parties, the Administrative Law Judge issued his Initial Decision in which he concluded that Respondents make the representations alleged by paragraph ll of the

Amended Complaint and that such representations are material and false in violation of 39 U.S.C. 3005. Based on these findings and conclusions he recommended the issuance of a False Representation Order and a Cease and Desist Order against all Respondents except Tom Brush. The Administrative Law Judge found Mr. Brush's role in Respondents' scheme was minor, and thus the inclusion of Mr. Brush in the Orders would not be necessary to prevent the recurrence of the scheme.

Respondents' Exceptions

Respondents have filed six exceptions to the Initial Decision. Four pertain to certain findings of the Administrative Law Judge. One addresses the conclusions of law made by the Administrative Law Judge, while the remaining exception deals with the provisions of the recommended Cease and Desist Order.

Exception One

"Respondents' Motion To Dismiss Is Valid And Should Be Granted."

Respondents filed a Motion to Dismiss this matter on March 12, 1986, prior to the hearing. The Administrative Law Judge reserved ruling on the motion at that time, and instead considered and denied the motion in his Initial Decision. In this exception Respondents, in effect, renew their Motion to Dismiss for the same reasons previously asserted.

First, Respondents contend that certain actions of the Assistant Postmaster General, Government Relations Department, led to a public pronouncement of Respondents' guilt without the benefit of a hearing, thus denying due process to Respondents. Next, Respondents allege acts of prosecutorial vindictiveness by Complainant's counsel, with resultant infringement of Respondents' constitutional rights. Finally, Respondents question the constitutionality of the Postal Service undertaking law enforcement functions of the Executive Branch.

The issue pertaining to the Assistant Postmaster General evolves from two letters he wrote to a Congressman. The first letter inaccurately described the status of the proceedings and characterized Respondents' advertisements as misleading, and the second, while correcting the information on the status of the proceeding, continued to characterize the advertisements as misleading. The erroneous information contained in the first letter appeared in an article in Coin World , January 1, 1986 issue, apparently as a result of a news release from the Congressman's office. Respondents contend the erroneous information in these letters and the publication of the Coin World article constituted a public pronouncement of guilt prior to hearing, thus depriving them of due process.

The Administrative Law Judge found the situation regrettable, but that the error was inadvertent and that the prompt corrective action taken in the second letter to the Congressman remedied the problem with no resulting prejudice suffered by Respondents. He therefore denied Respondents' Motion to Dismiss.

The record is clear that neither the Administrative Law Judge nor anyone associated with the Judicial Officer Department provided any of the information contained in either letter, had any contact with the Assistant Postmaster General or the Congressman on any matter associated with this proceeding, or was influenced by anything contained in the letters or the Coin World article. The Administrative Law Judges and the Judicial Officer are independent and impartial and are not responsible for or persuaded by statements of other Postal Service officials unless such statements are part of the evidentiary record. Thus, there was no prejudgment of the merits of the case by the Administrative Law Judge or the Judicial Officer. Respondents received a fair and impartial hearing and decision based on the record established by the pleadings and evidence. Accordingly, Respondents' contention on this issue lacks merit.

In regard to the allegation of prosecutorial vindictiveness Respondents rely on North Carolina v. Pearce , 395 U.S. 711 (1969); Blackledge v. Perry , 4l7 U.S. 21 (1974); Bordenkircher v. Hayes , 434 U.S. 357 (1978); United States v. Goodwin , 457 U.S. 368 (1982); and Harman v. Mohn , 683 F.2d 834 (4th Cir. 1982). These cases condemn, as contrary to due process, acts of "vindictiveness" on the part of judges or prosecutors against those defendants who exercise certain constitutional rights. Respondents allege two instances of prosecutorial vindictiveness on the part of Complainant's counsel. First, it is alleged that counsel sought to coerce the original Respondents into signing a consent agreement by threatening to amend the Complaint to include Respondent David Margulies' brother, Francis, and subsequently Francis' son-in-law, Tom Brush, in the proceedings, and then doing so after consent agreement negotiations collapsed. The other instance of alleged vindictiveness was Complainant's filing a Motion for Default against Respondent Fulfillment Center, Inc. for failing to file an Answer to the Complaint.

Initially, it is noted that those cases cited in support of the prosecutorial vindictiveness argument arose from criminal proceedings. The present proceeding is a civil one. Further, Respondents have failed to provide citations to any civil court proceeding or administrative proceeding in which the doctrine of prosecutorial vindictiveness was invoked.^2/

In any event, the actions complained of demonstrate neither vindictiveness nor bad faith of any nature. As found by the Administrative Law Judge, the evidence of record indicates that on January 9, 1986, Complainant uncovered additional evidence in this matter which indicated that both Francis Margulies and Tom Brush were participants in Respondents' mail order sales program

(Complainant's Exhibit (CX)-3). It was on the very next day that Complainant's counsel notified Respondents' counsel that a good possibility existed that Francis Margulies, at least, would be included as a party Respondent to these proceedings (Transcript (Tr.) 6). The close proximity between the day that the identities of the additional participants were known to counsel and counsel imparting Complainant's intention to add such participants, or at least one of them, to these proceedings strongly supports Complainant's position that the subject of amending the Complaint was broached in good faith for informational purposes, and not as a coercive measure as contended by Respondents. There is no other information or evidence in the record, other than divergent recollections by respective counsel, on this issue. Accordingly, no coercive action or bad faith is found on the part of Complainant.

Likewise there was no prosecutorial vindictiveness, depriving Respondents of due process, in Complainant's counsel's action of filing a Motion for Default. Under 39 C.F.R. 952.7, .l0, and .ll each Respondent in a false representation proceeding desiring to defend against the allegations of the Complaint is required to file an Answer. The original Complaint in this proceeding was filed against the National Gold Mint, National Commemorative Mint, Inc., Fulfillment Center, Inc., and David Margulies. The Answer was signed by David Margulies, President, National Commemorative Mint, Inc. Since the National Gold Mint is only a trade name employed by National Commemorative Mint, Inc., no separate Answer on behalf of the former was necessary. However, the record clearly shows that Fulfillment Center, Inc. did not file an Answer. Fulfillment Center, Inc. is a separate entity; thus it could reasonably be concluded that the Answer filed by the other Respondents did not encompass Fulfillment Center, Inc., contrary to Respondents' contention.

Accordingly, a Motion for Default was filed approximately three months after the Answer was due to have been filed. The Motion was not granted, as the Administrative Law Judge gave Fulfillment Center, Inc. an opportunity to file an Answer, which it did. While Complainant's Motion could have been more timely filed, no showing of bad faith on the part of Complainant has been made and no prejudice as the result of the delay was suffered.

Additionally, it cannot be said it was improper to file the Motion, as Respondents suggest. The rules of practice, 39 C.F.R. 952.ll(a), specifically provide that when a Respondent fails to file an Answer within the time specified, he shall be deemed in default. Since the Answer filed by Respondents did not purport to be on behalf of Fulfillment Center, Inc., it was not unreasonable for Complainant to conclude that Fulfillment Center, Inc. did not intend to defend against the allegations of the Complaint.

Respondents' constitutionality argument was addressed correctly by the Administrative Law Judge. He held in his Initial Decision that Administrative Law Judges are prohibited from determining the constitutionality of statutes or the validity of Postal Service regulations. 39 C.F.R. 224.l(c)(4)(iv)(B). The Judicial Officer is likewise prohibited from making such constitutional determinations. 39 C.F.R. 224.l(c)(4)(iii). Leo Daboub , P.S. Docket No. l9/l85 (P.S.D. July 10, 1986). The Administrative Law Judge correctly concluded that Respondents' Motion to Dismiss the Amended Complaint should be denied.

Footnote l of Respondents' Brief on Appeal alleges, as a separate ground for dismissal of the action, a prejudicial attitude on the part of the Administrative Law Judge. The alleged prejudice was evidenced, according to Respondents, by the fact that the Administrative Law Judge included an erroneous statement in a March 11, 1986, Order, which statement might be construed to indicate that he had prejudged a discovery request by Complainant without considering Respondents' opposition. The Order was subsequently corrected by deletion of the statement. Examination of the complete text of the March ll, l986, Order indicates that the Administrative Law Judge in fact discussed all aspects of the discovery motion with counsel for both sides. It is thus evident that Respondents were afforded an opportunity to present whatever opposition they had and that the Administrative Law Judge did not rule on Complainant's Motion without considering Respondents' position. The allegation of prejudice on the part of the Administrative Law Judge lacks merit.

Exception Two

"Evidence And Findings On Business Entities Not Involved In These Proceedings Should Be Excluded."

By this exception Respondents contend the Administrative Law Judge should not have considered evidence or made findings and conclusions pertaining to entities not subject to this proceeding. The entities referred to are controlled by one or more Respondents and in the past have engaged in business enterprises similar to the one at issue here and have signed consent agreements with the Postal Service involving advertising of gold and silver medals. These matters are set forth in Additional Findings of Fact Nos. 3, 5, 7, 8, 13 and 14, and Conclusions of Law Nos. 12, 13, 14, 15 and 16. Respondents argue that the inclusion of the challenged evidence influenced the ultimate decision of the Administrative Law Judge to the prejudice of Respondents. Complainant contends that the underlying evidence and the findings and conclusions were necessary for assistance in framing the contents of a Cease and Desist Order which would protect the public adequately.

Curiously, considering the position taken on this issue, Complainant's requested Cease and Desist Order did not seek the kind of broad relief which it sought in Leo Daboub, supra . In Leo Deboub, the cease and desist order sought by Complainant and issued by the Judicial Officer covered not only the precise violation committed, but also future violations of a related nature (known as "fencing-in" provisions). It therefore appears that in this matter the evidence of other business dealings by some of these Respondents was not relevant to the false representation allegations contained in the Complaint, as amended.

However, it cannot be said that the Administrative Law Judge erred in admitting such evidence since the admission of such evidence was not prejudicial to Respondents and under the rules of procedure applicable to these proceedings the Federal Rules of Evidence may be relaxed to assure a fair hearing. Richard W. Verret , P.S. Docket No. 20/18 (P.S.D. Dec. 3l, l986). Thus, the Administrative Law Judge had discretion in this area, which considering the record as a whole, was not abused. In any event, as will be thoroughly discussed in detail, infra , under Respondents' Exception Four, there exists, separate from and independent of the contested evidence, a preponderance of other evidence which proves that Respondents make the representations alleged in the Amended Complaint and that such representations are false. Respondents' Exception Two therefore is found to be lacking in substantive merit.

Exception Three

"Complainant's Expert Witness Was Not Shown To Be An Expert On Consumer Perceptions."

In this exception Respondents take issue with certain findings made by the Administrative Law Judge pertaining to the degree of expertise of certain witnesses who testified at the hearing and the weight that the Administrative Law Judge gave to the experts' testimony. Respondents express disagreement with the Administrative Law Judge's finding that Mr. Frere, Complainant's expert, is "a highly qualified expert . . . in consumer perceptions relating to the sale of coins and medals." (Initial Decision (I.D.) p. ll). In this regard Respondents submit that Mr. Frere's qualifications as an expert in consumer perceptions were minimal and contend that his testimony was suspect since he provided no evidence of examples of consumer confusion over the representations made in Respondents' advertisements. Respondents additionally posit that the Administrative Law Judge undervalued the testimony of one of its experts, Mr. Greenberg, and apparently took a personal dislike to its other expert, Mr. Broido.

The evidence cited by the Administrative Law Judge in support of Mr. Frere's qualifications and degree of expertise in the area of consumer perceptions is impressive and persuasive. Mr. Frere has had 30 years experience with the U. S. Mint, during ten of which he was Assistant Director of Marketing. He oversees the Mint's public relations, consumer relations and advertising activities. His staff handles hundreds of responses to public inquiries daily. He and his staff attend the 8 to 10 major national coin conventions or shows held annually with resultant information interchange between the Mint representatives and coin dealers or the general public (Tr. 70-79). His qualification as an expert in consumer perceptions in the area of coin marketing was established by a preponderance of the evidence. The fact that Mr. Frere did not testify about specific examples of inquiries from consumers to the Mint as to confusion over the representations in Respondents' advertisements does not detract from Mr. Frere's degree of expertise or his credibility as an expert in expressing his opinions on the issues involved in this matter.

The Administrative Law Judge accorded less weight to Mr. Greenberg's testimony since Mr. Greenberg lacked the expertise possessed by Mr. Frere in the type of advertisements engaged in by Respondents or the perceptions of the audience reached by such advertisements. The evidence of record supports this conclusion (Tr. l53-54, l56, l73). Thus, the Administrative Law Judge properly found that comparatively Mr. Frere's expertise was superior to Mr. Greenberg's for purposes of considering the issues involved in this matter.

The Administrative Law Judge found that Respondents' other expert witness, Mr. Broido, was not a credible witness and that his testimony was not persuasive. Respondents have identified nothing specific in the record to support their allegation that the Administrative Law Judge personally disliked Mr. Broido, or that his perception of the witness's demeanor was erroneous or biased. A review of the record does not establish that the Administrative Law Judge erred in his evaluation of the testimony of Mr. Broido. See Cosvetic Laboratories , P.S. Docket Nos. 9/l73 -9/l85 (P.S.D. Dec. ll, l98l). Accordingly, the Administrative Law Judge's finding in this regard is affirmed.

Exception Four

"Considering The Record As A Whole There Is No Preponderance Of Evidence To Support A Finding That The Alleged Misrepresentations Were Made."

In this exception Respondents contend that Complainant failed to establish by a preponderance of evidence that the representations alleged to have been made by Respondents in paragraph ll of the Amended Complaint, supra , are made and are materially false. Paragraph ll(a) alleged that Respondent National Gold Mint is an agency of or is affiliated with the United States Government. The Administrative Law Judge found that Respondents' advertisements contain that representation and that it is false since National Gold Mint is a private entity. In so holding the Administrative Law Judge considered the language of the advertisement itself and the testimony of Complainant's expert, Mr. Frere.

The Administrative Law Judge properly found that the use of certain key words in the advertisement, such as "National" and "Mint," as well as the word "Official" at the top of the order form, coupled with the use of a Washington, DC, mailing address would convey the impression of an advertisement by a Government entity. Such a conception is reinforced by a replica of each side of the gold piece contained in the advertisements which pictures the piece very similar to United States coins. Reliance by the Administrative Law Judge on the expert's opinion as to the perceptions of the general public on the ultimate issue of paragraph ll(a) of the Amended Complaint was likewise proper. Fed. R. Evid. 704; Standard Research Labs , P.S. Docket Nos. 9/63 and 9/64 (P.S.D. Aug. 3l, l98l). However, the contents of the advertisement standing alone support the Administrative Law Judge's findings that the allegation of paragraph ll(a) is made and is false.

Respondents contend that the disclaimer language in its advertisement which states in very small print "Minted by National Gold Mint, one of America's private mints," absolves it of any misrepresentation. The disclaimer, however, is so inconspicuous that it would not dispel the effect of the false representation on the ordinary mind. Leo Daboub , supra .^3/

Respondents further contend that the representation is not material since there was no evidence that anyone's decision to purchase Respondents' gold pieces was based on a belief that the National Gold Mint was an agency of or affiliated with the United States Government.^4/ Respondents' position is not well taken. As previously stated in Richard W. Verret , P.S. Docket No. 20/18 (P.S.D. Dec. 3l, 1986), "[t]he 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." Respondents' representation is material because it has the effect of inducing individuals to remit money through the mail to purchase the coins. Chaachou v. American Central Ins. Co ., 24l F.2d 889, 893 (5th Cir. l957).

Paragraph ll(b) of the Amended Complaint alleged that Respondents represented that the National Gold Mint is a place in Washington, DC, where coins or medals are made. The Administrative Law Judge found the representation is made and found it to be false.

Respondents take issue with these findings, contending primarily that there is no evidence in the record or specific language in its advertisements that National Gold Mint manufactures the gold pieces sold, or that such pieces were manufactured in Washington, DC. Respondents further question the materiality of such representa- tions, if made.

Respondents' initial argument fails to consider the established principle that express representations are not required in applying the false representation statute. It is the net impression which the advertisement makes that must also be considered. Even if an advertisement is so worded as not to make an express representation, if it is artfully designed to mislead, then the statute is applicable. G. J. Howard Co. v. Cassidy , 162 F. Supp. 568 (E.D. N.Y. 1958); Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council , 425 U.S. 748 (1976).

Here the evidence is persuasive that a large segment of the public believes that coins are minted in Washington, DC, (Tr. 85) and that the only address utilized in Respondents' advertisement is a bogus Washington, DC, address (CX-2, 11). It is logical to conclude from these facts that consumers will believe the National Gold Mint manufactures its coins in Washington, DC, the representation alleged in the Amended Complaint. Further, the representation is material. It is intertwined with the prior representation that Respondents are affiliated with the United States Government, and as such it acts as an inducement to the public to purchase the gold pieces.

Respondents again raise the disclaimer defense, previously considered in the discussion of the paragraph ll(a) allegation. Respondents additionally point to very minute language in one of its advertisements which contains a second disclaimer. On initial reading that language would appear to the ordinary reader to be no more than part of National Gold Mint's copyright information. Further, it is of such small size as to be almost illegible. Its existence does not serve Respondents' contention.

In paragraph ll(c) of the Amended Complaint it was alleged that Respondents represented that its Statue of Liberty-American Eagle Gold Pieces had been limited in number by the United States Government or one of its agencies. The Administrative Law Judge found the representation is made and is false. His finding is sustained. The advertisement specifically states in regard to the gold pieces, "the number is limited to the total authorized minting of only 10,000 pieces," and "Limited Edition - l0,000 to be minted." Thus, the language specifically states that the number to be minted has been limited. Since, as previously held, the Respondents have represented the National Gold Mint to be an agency or affiliate of the United States Government it follows that the action limiting the authorization of gold pieces to 10,000 was taken by the United States Government or one of its agencies.

The representation likewise is material, as the Administrative Law Judge found. News of a limited available quantity of a valuable commodity, such as a gold piece, quite likely would influence the public to purchase quickly, before the supply was exhausted. The advertisement in issue clearly conveys this message in the following paragraph:

By acting promptly, you can obtain a one ounce Statue of Liberty-American Eagle Gold Piece at this guaranteed price...but you must act now - the number is limited to the total authorized minting of only l0,000 pieces.

The Administrative Law Judge's findings that the representation alleged by paragraph 11(d) of the Amended Complaint is made and is false likewise are sustained. That paragraph alleged that Respondents represent their gold piece to be the same Statue of Liberty coin issued by the United States Mint.

The similarities between the Government coins and Respondents' piece are striking. The Statue of Liberty Dollar and Respondents' piece have the figure of the Statue of Liberty on the obverse side (Tr. 96). The Government's silver dollar and Respondents' piece have the same long quote contained on them (Tr. 96). The reverse of the United States gold coins has an eagle and stars, as does Respondents' piece (Tr. 96).

The advertisement itself is headlined "The Liberty l oz. Gold Piece." The Statue of Liberty is plainly shown on the medal at the top of the advertisement. The medal is described in the text of the advertisement as "Statue of Liberty-American Eagle Gold Piece," a name similar to the Statue of Liberty-Ellis Island Government issue. Additionally, the public at large understands the use of the term "piece" to mean "coin," which of course is legal tender (Tr. 88). The totality of the above facts, coupled with the timing of the release of Respondents' advertisements at approximately the same time the United States Mint opened its Statue of Liberty-Ellis Island coin advertising campaign, leads to the conclusion that the representation alleged is made.

Respondents' arguments place great emphasis on the differences between its piece and the United States Mint's coins. But in this regard the Administrative Law Judge did not find the offerings identical, and in fact states, "Although some differences exist [between the two offerings] . . . ." (I.D. p. 19) It is not the differences between the offerings which are critical to the false representation question, but the similarities. For it is the similarities which create the impression conveyed to the reader of ordinary mind that Respondents' piece and the United States Mint issue are the same.

The finding that the false representation is material likewise is sustained. The Administrative Law Judge correctly held on this issue that "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." (I.D. p. 21)

Paragraph ll(e) of the Amended Complaint alleged that Respondents represent that their gold piece is issued by the United States Government. The Administrative Law Judge's findings that the representation is made, is false, and is material are affirmed. This representation is almost identical to that of paragraph ll(d), supra .

It logically follows that if Respondents represent themselves to be a United States Government affiliate (paragraph ll(a), Amended Complaint) and that its gold piece is the same Statue of Liberty coin issued by the United States Mint (paragraph ll(d), Amended Complaint) then it also represents that its gold piece is issued by the United States Government.

Finally, Respondents take exception to the Administrative Law Judge's findings and conclusions pertaining to paragraph ll(f) of the Amended Complaint. That paragraph alleged that Respondents represented its gold pieces to be solid gold. The Administrative Law Judge found the representation is made as alleged and that it is both false and material. The language in one of Respondents' advertisements in issue described the offered gold pieces as "solid one ounce 500 Fine" and "Solid 500 Fine." Each piece was further described as "meticulously minted . . . inscribed with its Gold purity and weight of 480 grains (l troy ounce)." (CX-l, 2) Another advertisement described the pieces as "weighing l troy ounce, containing 240 grains of 24KT gold," "meticulously minted, . . . inscribed with its Gold purity and weight," and "contains 240 grains of pure 24KT gold." (CX-ll) The price of each coin in the advertisements ($328 or $330) was in close proximity to the world gold price for a troy ounce. (CX-1, 2, 11) For instance, one of Respondents' advertisements appearing in U.S.A. Today listed a selling price for each gold piece as $328 with the asterisked notation "This price is valid until ll-l8-85 and is based on the World Gold Price as determined by the ll-5-85 London afternoon fixing of $324.60 per troy ounce." (CX-ll)

Respondents contend generally that nothing on the face of their advertisements represents the offered pieces are solid gold, maintaining that the advertisements represent the item is 500 Fine or 50% gold. At most, they contend, Complainant may have established that the public may be confused as to the meaning of the term "500 Fine."

As previously discussed, Complainant's expert, Mr. Frere, possessed a high degree of expertise in the area of consumer perceptions, and thus was more persuasive than Respondents' witnesses. Thus, the Administrative Law Judge relied to a considerable extent on Mr. Frere's testimony in making his findings on the issue herein. The evidence of record established that, while those in the coin business would understand "500 Fine" to mean a coin containing fifty percent of the particular precious metal, the general public has no conception of the term (Tr. 86-87, l00). Such phrases as "solid one ounce 500 Fine" and "Solid 500 Fine" could well be interpreted by the general public to mean that the offered pieces were comprised of solid gold. In this regard, where an advertisement is ambiguous or capable of more than one meaning, and one of the meanings is false, the advertisement will be held to be misleading. Rhodes Pharmacal Co. v. F.T.C ., 208 F.2d 382, 387 (7th Cir. l953); Ralph J. Galliano , P.S. Docket No. 19/15 (P.S.D. May 2, 1985). This is the case here.

The references to weight such as "weighing l troy ounce, containing 240 grains of 24KT gold," "contains 240 grains of pure 24KT gold," "weight of 480 grains (l troy ounce)" likewise are confusing and misleading. The record establishes that the general public is not knowledgeable in gold weight and would not realize that 240 grains is l/2 ounce, not a whole one (Tr. 100-01). This perception is compounded by the similarity of the offered sale price to the world price for an ounce of gold. A person of ordinary mind, seeing such similarity, would reasonably believe the offered piece contained a solid ounce of gold. The representation alleged by paragraph ll(f) of the Amended Complaint is made, is false, and is material. The perceived gold content of l00% most probably would induce the public to purchase the pieces at the offered prices. The Administrative Law Judge's findings and conclusions are affirmed.

Exception Five

"The Preponderance Of The Evidence Standard Applied To Administrative Hearings Mandates Reversal Of The ALJ's Findings."

By this exception Respondents take issue with the conclusion of the Administrative Law Judge that Complainant established its case by a preponderance of the reliable and probative evidence of record. S.E.C. v. Savoy Industries, Inc ., 587 F.2d ll49, ll68 (D.C. Cir. 1978). Respondents primarily argue that in this case where most, if not all, of Complainant's allegations are based on implications and assertions by omission, actual testimony by members of the public as to the advertisements' meanings and their perceptions thereof was necessary for Complainant to prove its case. As an adjunct to this argument Respondents posit that testimony or evidence as to materiality was also necessary, and instead was nonexistent.

Respondents' position overlooks certain basic principles. First, it is not necessary in order to establish the existence of a false representation that evidence be presented that any of the members of the public were deceived by the advertisements. Farley v. Heininger , l05 F.2d 79 (D.C. Cir. l939), cert . denied , 308 U.S. 587 (l939). It is the likelihood of deception or the advertisement's capacity to deceive which must be judged. Montgomery Ward & Co. v. F.T.C ., 379 F.2d 666 (7th Cir. 1967). Second, it is established that the Administrative Law Judge and Judicial Officer 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 Co ., P.S. Docket Nos. 16/98-102, 16/120-12l (P.S.D. March 3l, 1986); Vibra Brush v. Schaffer , l52 F. Supp. 46l (S.D. N.Y. 1957), rev'd on other grounds , 256 F.2d 68l (2d Cir. 1958). Since the conclusion that Complainant established its case by a preponderance of evidence is based on findings which have been found to be supported by the evidence of record it is affirmed.

Exception Six

"The Cease And Desist Order Sought Is Overly Broad, So Ambiguous As To Be Indecipherable, And Goes Beyond The Postal Service's Authority."

In regard to the contention that the proposed Order is overly broad Respondents contend that neither Fulfillment Center, Inc. nor Francis Margulies had any part in formulating, directing or controlling the National Gold Mint's advertising, and therefore should not be bound by the Order. The contention is without merit. Both Fulfillment Center, Inc. and Francis Margulies were active participants with significant involvement in the mail order scheme. Fulfillment Center is engaged almost exclusively in fulfilling mail orders for businesses operated by David and Francis Margulies. Francis Margulies is the manager of Fulfillment Center (Stipulation No. 2). Their participation in the scheme makes it necessary that they be included in the Cease and Desist Order. The Administrative Law Judge correctly discussed the law on this issue as follows:

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. l9/l04, l9/l62 (P.S.D. Sept. 10, l985) and W.G. Charles Company , P.S. Docket Nos. l9/l05, l9/l6l, 20/32 (P.S.D. Sept. 30, l985 at pp. l0-13) (affirming W.G. Charles Company , Docket Nos. l9/l03-l05, l6l-l62, l79, l82-84; 20/l6, 20/32, Decision & Order on Motion to Dismiss, January 28, l985 at page l0); Barrett Carpet Mills, Inc., v. Consumer Product Safety Comm ., 635 F.2d 299 (4th Cir. l980). 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. l963).

(I.D. p. 28).

Respondents' argument that the proposed Order is incompre- hensible and beyond the Postal Service's authority stems primarily from the language of subparagraph (b). That subparagraph prohibits Respondents from representing that:

Any 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....

According to Respondents "[t]his paragraph defies clear explanation" since it appears to dictate that unless Respondents purchase a manufacturing facility they may not engage in a mail order sales business.

Respondents misread the proposed subparagraph (b). The subparagraph does not require Respondents to purchase or own a manufacturing facility. It merely prohibits them from representing that they possess or control a place where goods are made, if in fact they do not have such possession or control. The proposed Order is neither ambiguous, incomprehensible, nor beyond the authority of the Postal Service to issue.

There is one modification which should be made to the proposed Order, however. The Order includes the name of an organization "National Commemorative Mint, Ltd." There is no evidence in the record identifying such organization or proving its participation in the mail order scheme. Accordingly, the reference to it will be deleted.

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. The orders authorized by 39 U.S.C. 3005 are issued with this decision.

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1/ The Answers of Respondents, National Gold Mint, National Commemorative Mint, Inc., and David Margulies, were filed in answer to the original Complaint which was numbered differently by paragraph from the Amended Complaint. Thus, those Respondents denied paragraphs 9 and 10 of the original Complaint, which were identical in content to paragraphs ll and 12 of the Amended Complaint.

2/ A Supreme Court decision has held that agency decisions not to institute proceedings are not reviewable, as such decisions are entirely discretionary. Heckler v. Chaney, et al ., 470 U.S. 82l (l985).

3/ It is established that Respondents' advertisements must be considered as a whole and their 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 (l948); Peak Laboratories, Inc. v. United States Postal Service , 556 F.2d 1387 (5th Cir. 1977).

4/ Respondents make this argument several times throughout Exception Four. The lack of testimony by members of the general public is also a basis for Exception Five and is fully discussed therein, infra.