In The Matter of the Complaint Against

MICHAEL J. GRASSO, JR.,
1048 Welsh Road,
Ambler, PA 19002-2316

and

M. J. G. PUBLICATIONS,
P. O. Box 30,
Ambler, PA 19002-0030

and

M. J. G.,
Ambler, PA 19002-0030

and

SUCCESS and SUCCESS SYSTEMS,
P. O. Box 605,
Dresher, PA 19025-0705

P.S. Docket No. 26/8

Edwin S. Bernstein Administrative Law Judge

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

APPEARANCE FOR RESPONDENTS:
Daniel J. DiGiacomo, Esq.
DiGiacomo & Slomsky, Suite 1000
Eight Penn Center Plaza
17th Street & J.F.K. Boulevard
Philadelphia, PA 19103

BEFORE: Judge Edwin S. Bernstein

INITIAL DECISION

Complainant alleged and Respondent denied that Respondent is engaged in a scheme to obtain money through the mail by false repre- sentations in connection with a circular mailing venture.

Complainant's November 7, l986 Complaint alleged in Count I (Paragraph 6) that solicitations of Respondent Michael J. Grasso, Jr., under the names, "M.J.G." and "M.J.G. Publications" falsely represent:

a. He is providing at-home employment consisting principally of inserting circulars into envelopes and returning them to Respondent;

b. A participant may be reasonably expect [SIC] to earn Hundreds of Dollars per week for work consisting principally of inserting circulars into envelopes;

c. Earnings of participants in Respondent's program are limited only by the time and effort spent inserting circulars into envelopes;

d. A participant in Respondent's program is provided as many circulars and envelopes as the participant desires to assemble and return to Respondent;

e. The only cost to participants in Respondent's program is the initial payment of $20.00 to Respondent; and

f. A person purchasing Respondent's program will receive a gift certificate entitling the recipient to receive 100 rolls of color print film without further cost and an "absolutely free complimentary holiday for two."

In Count II (Paragraph 12) of the Complaint, Complainant alleges that Michael J. Grasso, Jr., under the names "Success" and "Success Systems" falsely represents:

a. He is providing work consisting principally of inserting circulars into envelopes and sending them for payment to companies affiliated with Respondent;

b. Payment of a one-time fee of $33.95 to Respondent enables the participant to begin at-home employment immediately;

c. Upon the payment of the one-time fee of $33.95 Respondent will show the participant what to do in order to earn $1,000.00 per week;

d. The payment of the one-time fee of $33.95 guarantees the participant that he or she can work with Respondent as long as desired;

e. Individuals who elect to participate in Respondent's program will not run advertisements in order to earn thousands weekly mailing letters; and

f. The only cost to participants in Respondent's program is the initial payment of $33.95 to Respondent.

A hearing was held in Washington, DC. Postal Inspector John A. Vicinsky testified for Complainant. Michael J. Grasso, Jr., testi- fied for Respondent. The 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

Respondent, Michael J. Grasso, Jr., resides at 1048 Welsh Road, Ambler, PA 19002-2136. "M.J.G.," "M.J.G. Publications," "Success" and "Success Systems" are names that Mr. Grasso uses to solicit money or property through the mail. (Respondent's Answer, Paragraphs 2, 3 and 9)

COUNT I

I. The Advertising Representations :

Respondent's advertising materials make the representations alleged in Count I of the Complaint for the following reasons:

a. He [Respondent] is providing at-home employment consisting principally of inserting circulars into envelopes and returning them to Respondent.

Respondent admits in his Answer with respect to this allegation that persons have been offered an opportunity to earn extra money at home. Respondent's promotional literature states in large bold print "We'll Pay You .60 for Each Envelope You Stuff and Return to Us..." In slightly smaller print is added "According to Our Instructions." In much smaller print, the circular states, "You will receive .60 for each and every envelope you secure, stuff and return to us." (CX-16, p. 3)

b. A participant may be reasonably expect to earn Hundreds of Dollars per week for work consisting principally of inserting circulars into envelopes.

The classified advertisements used by Respondent state "HUNDRED$ WEEKLY] Processing stamped Envelopes] Start immediately] Write - MJG-MW, Ambler, PA 19002." (CX-1) "'EARN THOUSANDS'] curing

Stuffing envelopes Proven successful Free details Write MJG-MMOE, Ambler, PA 19002." (CX-3) "'HUNDRED$ WEEKLY'] GUARANTEED PROCESSING AMPED ENVELOPES] START IMMEDIATELY] FREE DETAILS] WRITE MJG-DPG, Ambler, PA 19002." (CX-15) Respondent's direct mail circular states "Send us 500 - we'll send a check for $300.00 and on and on]" (CX-16, p. 3) Another insert with the circular states "Send us 1000... Your check will be $600.00." (CX-16, p. 5) The impression given by these statements is that a participant can reasonably expect to earn hundreds of dollars per week stuffing envelopes.

c. Earnings of participants in Respondent's program are limited only by the time and effort spent inserting circulars into envelopes.

The direct mail circular used by Respondent emphasizes stuffing and returning envelopes in large bold print. The circular contains a block under the bold print which states "You will receive .60 for each and every envelope you secure, stuff and return to us. As you send in the envelopes, per our instructions, we'll rush you your check] *Send us 25 - we'll send you a check for $15.00; Send us 150 - we'll send a check for $90.00; Send us 500 - we'll send you a check for $300.00 and on and on] Never before anything like this." (CX-16, p. 3) An insert with the circular states "The number of envelopes you mail us will depend upon your own ability and ambition. We put no limit on the number of envelopes you mail." (CX-16, p. 5) The obvious implication is that a participant's earnings are limited only by the time and effort spent inserting circulars into envelopes. The addition of the fine print "consist- ing of the securing of envelopes through classified ads & simple- pleasant-profitable-stuffing-envelopes at home, on your own" is not sufficient to put the ordinary reader on notice that Respondent is really offering the opportunity to obtain sales leads for him by having participants pay for classified advertisements. (CX-16, p. 3; Tr. 72-73)

d. A participant in Respondent's program is provided as many circulars and envelopes as the participant desires to assemble and return to Respondent.

The direct mail circular used by Respondent states "We will teach you-in simple language-how you can start your program and continue day after day, week after week, year after year ... Your starting supply of circulars and registration into the program is $20.00. After that all future mailing pieces will be sent free as long as you are active $$$." (CX-16, p. 3) According to an insert provided with the circular, "The number of envelopes you mail us will depend upon your own ability and ambition. We put no limit on the number of envelopes you mail." (CX-16 p. 5) The overall impression given to the reader is that a participant can stuff and return as many envelopes as the participant desires and that the envelopes will be provided by Respondent.

e. The only cost to participants in Respondent's program is the initial payment of $20.00 to Respondent.

Respondent admits this allegation in Paragraph 6(e) of his Answer.

f. A person purchasing Respondent's program will receive a gift certificate entitling the recipi- ent to receive 100 rolls of color print film without further cost and an "absolutely free complimentary holiday for two."

An insert included with the direct mail circular states, " FREE GIFT CERTIFICATE ]] Act now, and receive, ABSOLUTELY FREE; 100 Film Certificate coupons EACH good for a roll of replacement color print film] The film sizes are 100, 126, 35mm and Disc-15, 12 to 36 exposures] Return this certificate along with your order within 10 days to take advantage of this special offer] Don't Delay-Order Today]" (CX-16, p. 5) An additional circular provides "FREE BONUS HOLIDAY FOR TWO] (Complimentary Holiday for Two) Through special arrangements with HOLIDAY AMERICA (Travel Agency) and outstanding resorts, we can now offer you a complimentary 'Holiday for Two' ABSOLUTELY FREE by placing your order within the next 14 business days." (CX-16, p. 4) The repeated use of the word "free" overcomes any ambiguous disclaimer regarding "replacement" film. To the same effect, the Federal Trade Commission's regulations provide that when making "free" or similar offers, all the terms, conditions and obligations upon which receipt and retention of the "free" item are contingent should be set forth clearly and conspicuously at the outset of the offer. 16 C.F.R. 251.1 and 242.1

II. The Truth or Falsity of the Representations in Count I :

I find that all of the foregoing representations are false for the following reasons:

a. He [Respondent] is providing at-home employment consisting principally of inserting circulars into envelopes and returning them to Respondent.

Respondent is not providing at-home employment consisting principally of inserting circulars into envelopes and returning them to Respondent. He is in the business of selling participants opportunities to obtain and be paid for sales leads. (CX-19, p. 6) Mr. Grasso testified, "what I do in my business, basically, is I recruit people that I pay on a commission business for obtaining leads through their own classified advertisements..." (Tr. 72)

b. A participant may reasonably expect to earn Hundreds of Dollars per week for work consisting principally of inserting circulars into envelopes.

Respondent stated in his Answer that there are persons who have earned $100 per week following his program's instructions. (Answer 6(b) However, in his answer to Complainant's interrogatories, Respondent stated that although in 1985, 3,780 persons paid the registration fee to become independent mailers and in 1986, 4,366 persons paid the fee, to date only 13 persons have earned more than $100 per week. (CX-54, A & B #4, #5 and #11) Respondent's answers to the interrogatories further show that only 119 people have submitted in excess of 166 envelopes for payment. (CX-54 A & B #6 and #7; Tr. 91) Mr. Grasso at first testified that countless people earned more than $100 per week consistently (Tr. 96), but when pressed for specifics, he stated that only two people consistently earned hundreds of dollars per week in his program. (Tr. 105-106) Moreover, Respondent's program does not consist principally of inserting circulars into envelopes but rather of placing classified advertisements. (CX-19, p. 2-3; Tr. 72-73)

c. Earnings of participants in Respondent's program are limited only by the time and effort spent inserting circulars into envelopes.

Respondent stated in his Answer that earnings are limited by the cost of classified advertisements: "The more ads they run as per instructions, the more expenses they should have; consequently the more money they will make." (Answer 6(c)) Participants in Respon- dent's program are instructed to run classified advertisements. (CX-19, p. 2). Respondent's instructions state that classified advertisements can cost as much as $.50 per word. (CX-19, p. 3) Mr. Grasso testified that his own advertising costs are approxi- mately $20,000 to $22,000 per year. (Tr. 112-113) Respondent's testimony regarding the earnings of his participants shows a pattern of decreasing earnings which indicates that not only are a participant's earnings limited by the cost of advertising but that they also may be limited by such factors as saturation of the market and choice of publications in which to advertise. (Tr. 103-110)

d. A participant in Respondent's program is provided as many circulars and envelopes as the participant desires to assemble and return to Respondent.

The falsity of this representation is based upon the fact that a participant can only obtain envelopes to be stuffed by purchasing classified advertisements. (CX-19, p. 2; CX-20 B) Respondent provides an initial supply of 20 circulars. However, after that no further circulars are provided and the envelopes obtained by parti- cipants through classified advertisements are to be sent to Respondent empty for payment. (CX-20 C) Thus, Respondent's program is not the assembling of circulars into envelopes but rather the obtaining of sales leads. (Tr. 72-73)

e. The only cost to participants in Respondent's program is the initial payment of $20.00 to Respondent.

This representation is false because participants in Respondent's program are required to run classified advertisements at their own expense. (CX-19, pp. 2-3; CX-20 B; Answer 6(c))

f. A person purchasing Respondent's program will receive a gift certificate entitling the recipient to receive 100 rolls of color print film without further cost and an "absolutely free complimentary holiday for two."

20. Persons responding to the advertisement and sending in the coupon for the free film certificates receive a coupon book for 100 rolls of film good only when a roll of film is sent for processing and the processing fee is paid. (CX-20 D; Answer 6f; Tr. 20-21) Persons responding to the advertisement and sending the coupon for the free vacation are sent an official registration/vacation certi- ficate requiring remittance of an additional $3.00 to Respondent. (CX-21, p. 2; Tr. 21-22)

All of the foregoing representations are material in that the representations that the reader can earn substantial sum of money with little effort, time and cost induce him to send money to Respondent and to participate in his program. The offers of free film and free vacations tend to induce some undecided readers to participate in the program.

COUNT II

I. The Advertising Representations :

Respondent's advertising materials also make the representations alleged in Count II of the Complaint for the following reasons:

a. He [Respondent] is providing work consisting principally of inserting circulars into envelopes and sending them for payment to companies affiliated with Respondent.

A classified advertisement used by Respondent states "$1,000's WEEKLY] MAILING LETTERS] FANTASTIC OPPORTUNITY] EXCITING FREE DETAILS]

ART IMMEDIATELY] WRITE: SUCCESS, #605-DPG, DRESHER, PA 19025." (CX-23) The direct mail circular used by the Respondent states "NOW YOU CAN EARN EXTRA MONEY IN YOUR SPARE TIME doing simple, pleasant work mainly consisting of stuffing envelopes at home]", "As you can see, the biggest part of your work will be stuffing envelopes with circulars and sending them back for payment.", "Since we'll make money through your efforts, firms are only too glad to pay you $1.00 per envelope stuffed". (CX-35, p. 1) The reverse side of the circular contains a full page application. (CX-35, p. 2) The overall impression given is that Respondent is providing work consisting principally of inserting circulars into envelopes and sending them for payment to companies affiliated with Respondent.

b. Payment of a one-time fee of $33.95 to Respondent enables the participant to begin at-home employment immediately.

The direct mail circular used by Respondent states, "IN ORDER TO GET STARTED IMMEDIATELY, we must require a one-time fee of only $33.95. This covers our expense in showing you what to do and guarantees you can work with us as long as desired". (CX-35, p. 1) A reading of the entire circular leaves one with the impression that payment of the one-time fee enables a participant to begin at-home employment envelope-stuffing immediately.

c. Upon the payment of the one-time fee of $33.95 Respondent will show the participant what to do in order to earn $1,000.00 per week.

The direct mail circular used by Respondent states "$1,000 WEEKLY Mailing letters... ... and that's just the beginning... read on ..." "NEVER BEFORE ANYTHING QUITE LIKE THIS] Be self-employed, yet have our guidance and instruction] No experience needed] We'll show you how to start and continue day after day." (CX-35, p. 1)

d. The payment of the one-time fee of $33.95 guarantees the participant that he or she can work with Respondent as long as desired.

The plain language of Respondent's direct mail circular makes the representation: "IN ORDER TO GET YOU STARTED IMMEDIATELY, we must require a one-time fee of only $33.95. This covers our expense in showing you what to do and guarantees you can work with us as long as desired." (CX-35, p. 1)

e. Individuals who elect to participate in Respondent's program will not run advertisements in order to earn thousands weekly mailing letters.

The direct mail circular used by Respondent emphasizes "You will not run any advertisements or buy mailing lists". (CX-35, p. 1)

f. The only cost to participants in Respondent's program is the initial payment of $33.95 to Respondent.

The direct mail circular used by Respondent states "[W]e must require a one-time fee of only $33.95 ... You will not be required or asked to pay for any additional information, manuals, or instructions" and further states "Firms also reimburse your cost of mailing the completed work to them.", "You will not run any adver- tisements...", "All circulars, postage, and envelopes are provided by the companies." (CX-35, p. 1) The overall impression given to the reader is that the initial cost is the only cost. This impression is not nullified, as alleged by Respondent's Answer, by the statement on the reverse of the circular which states "ENCLOSED is $33.95... PLEASE PLACE THE FOLLOWING INFORMATION INTO YOUR DATA-BANK SYSTEM AND SEND ME YOUR LISTING OF COMPANIES IN NEED". (CX-35, p. 2)

II. The Truth or Falsity of the Representations in Count II :

I find that all of the foregoing representations in Count II are false for the following reasons:

a. He [Respondent] is providing work consisting principally of inserting circulars into envelopes and sending them for payment to companies affiliated with Respondent.

Respondent is not offering any type of envelope-stuffing oppor- tunity in exchange for an applicant's $33.95 but instead is providing a list of companies to which the participant can write. (CX-37 B) Respondent is not affiliated with any of the companies listed in The Success Report. (CX-37 B, p. 2; Tr. 96) Respondent does not provide any service to the applicant beyond shipping him a copy of The Success Report. (CX-37 B, p. 13)

b. Payment of a one-time fee of $33.95 to Respondent enables the participant to begin at- home employment immediately.

The falsity of this representation is demonstrated by Respon- dent's instructions which direct the applicant to write to all companies listed to obtain further information. (CX-37 B, p. 11- 13) Thus a participant is not able to begin at home employment immediately. All of the companies listed by Respondent which responded to inquiries required the payment of additional fees. (Tr. 30)

c. Upon the payment of the one-time fee of $33.95 Respondent will show the participant what to do in order to earn $1,000.00 per week.

Respondent does not show participants what to do but merely provides a list of companies to whom a participant can write for further information. (CX-37 B) The instructions provide that it is possible to earn up to $1,000.00 per week by writing to some of the companies listed. (CX-37 B, p. 6) Respondent has no knowledge of anyone who has earned $1,000.00 per week using the Success System Program. (CX-54 A & B, #10) In fact, Respondent has had no contact with any of the companies listed in the report. Respondent's testi- mony showed that while he may have checked with the companies initially, he has not updated the information that he provides for accuracy. (Tr. 95-96)

d. The payment of the one-time fee of $33.95 guarantees the participant that he or she can work with Respondent as long as desired.

The representation is false because it implies a continuing relationship. Respondent provides no work, makes no guarantees and simply provides a list of companies that require additional fees. (CX-37 B, pp. 2, 3 and 6; Tr. 30) The booklet is the entire ship- ment provided by Respondent. (CX-37 B, p. 13)

e. Individuals who elect to participate in Respondent's program will not run advertisements in order to earn thousands weekly mailing letters.

The booklet provided by Respondent states, "The following is our exclusive listing of companies that we have found to be 100% legi- timate, and do pay up to $1.00 or more, for securing envelopes through your own classified ad insertion. Please get this clearly in your mind before you purchase their programs." (CX-37 B, p. 7) The instructions further provide, "So you see, the fact that you have to advertise is relatively insignificant in comparison to how much money you could really make participating in some of these deals. This bothers people because they think they are going to receive a box of envelopes along with a box of circulars to be stuffed into them, and returned for payment. If that were true, why would they need you to do that for $1.00 each; when they could pay someone minimum wage to stuff envelopes all day long?" (CX-37 B, p. 8) Clearly, the statement in the advertising circular is in direct contradiction to these statements in the booklet that an applicant receives after he has paid Respondent's fee.

f. The only cost to participants in Respondent's program is the initial payment of $33.95 to Respondent.

All of the companies listed in Respondent's booklet which responded to inquiries required the payment of additional fees. (Tr. 30, CX-38 B through CX-44 B)

All of the foregoing representations are material. The emphasis upon large earnings with little effort and no additional cost induces readers to remit payments to Respondent.

CONCLUSIONS OF LAW

1. Postal Service False Representation Orders to not violate the First Amendment of the Constitution. Donaldson v. Read Magazine, Inc. , 333 U. S. 178 (1948); Lynch v. Blount , 330 F. Supp. 689 (S.D.N.Y. l971); Hollywood House International, Inc. v. Klassen , 508 F.2d 1276 (9th Cir. l974); and United States Postal Service v. Beamish , 466 F.2d 804 (3d Cir. l972). In the latter case, the Court held, "Advertisers possess no constitutional right to disseminate false or misleading materials. Therefore, Congress has the power to prohibit such deceptions through appropriate legislation." p. 807. See also ; Bolger v. Young's Drug Products Corp. , 463 U. S. 60 (1983).

2. An advertisement must be considered as a whole and its meaning will be determined in the light of its probable effect on persons of ordinary minds. Donaldson v. Read Magazine, Inc. , supra ; Vibra-Brush Corp. v. Schaffer , 152 F. Supp. 461 (S.D.N.Y. 1957). Rev.d on other grounds , 256 F.2d 681 (2nd Cir. 1958).

3. Express misrepresentations are not required. It is the net impression that the advertisement as a whole is likely to make upon individuals to whom it is directed that is important. Even if a solicitation is so worded as to not make an express representation, but 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), quoting United States v. 95 Barrels of Vinegar , 265 U. S. 438, 443 (1924): "It is not difficult to choose statements, designs and devices which will not deceive." In Vibra-Brush Corp. v. Schaffer , supra , the Court stated:

It is not each separate word or clause here and there of an advertisement which determines its force, but the totality of its contents and the impression of the entire advertisement upon the general populace. p. 465.

Similarly, in American Image Corp. v. United States Postal Service , 370 F. Supp. 964 (S.D.N.Y. 1974) the Court held: "The cases are clear that such advertisements are to be viewed not with a lawyer's eye to 'fine spun distinctions' but with an eye to their over-all effect on the average reader."

4. Where an advertisement is ambiguous or capable of more than one meaning, if one of those meanings is false, the advertisement will be held to be misleading. Rhodes Pharmacal Co., Inc. v. F.T.C. , 209 F.2d 382, 387 (7th Cir. l953); Ralph J. Galliano , P.S. Docket No. 19/15 (P.S.D. May 2, l985); Bruce Roberts Co. , P.O.D. Docket No. 3/78 (I.D., August 16, l971); Moneymakers, et al. , P.S. Docket No. 16/1 (I.D., June 20, l983).

5. Although an astute person might not be deceived by an advertisement, this does not detract from the solicitation's tendency to "deceive the ignorant, gullible and less experienced." Gottlieb v. Schaffer , 141 F. Supp. 7, 16 (S.D.N.Y. 1956). The false representation statute was intended to protect such persons as well. Donaldson v. Read Magazine, Inc. , supra .

6. Applying the foregoing standards, the average person who reads Respondent's advertisements would interpret them substantially as characterized in Paragraphs 6 and 12 of the Complaint. These representations are false.

7. As expressed in Chaachou v. American Central Insurance Co. , 241 F.2d 889, 893 (5th Cir. l957), a representation is material if it would ". . .cause the [other party] to do other than that which would have been done had the truth been told." Applying the Chaachou test, Respondent's representations are material because they have the effect of inducing individuals to remit money through the mail to enroll in his programs.

8. A promise to refund if a customer is dissatisfied will not dispel the effect of false advertisements. Farley v. Heininger , 105 F.2d 79, 84 (D.C. Cir. l939); Borg-Johnson Electronics, Inc. v. Christenberry , 169 F. Supp. 746, 751 (S.D.N.Y. 1959). Similarly, a small inconspicuous disclaimer will not cure the falsity of a representation Vibra-Brush Corp. v. Schaffer , supra .

9. Therefore, Respondent is engaged in the conduct of a scheme for obtaining the remittance of money through the mail by means of false representations in violation of 39 U.S.C. 3005. Accordingly, a False Representation Order and a Cease and Desist Order in the form attached should be issued against Respondent.