In the Matter of the Complaint Against:

UNITED SAVERS OF AMERICA, INC.,
4175 East Bay Drive, Suite 240,
Clearwater, FL 34624-6961;

CHARLES ROBERT DARST,
643 U.S. 19 North,
Clearwater, FL 34625-2344;

GENE NEBRASKY,
4175 East Bay Drive, Suite 240,
Clearwater, FL 34624-6961

P.S. Docket No. 33/98

06/07/91

Cohen, James A., Judicial Officer

APPEARANCES FOR COMPLAINANT: Geoffrey A. Drucker, Esq.,
Consumer Protection Division, Law Department,
United States Postal Service, Washington, DC 20260-1144

APPEARANCE FOR RESPONDENTS: Thomas R. Cushman, Esq.,
Dickson, Lefter & Cushman, Suite 201, 696 First Avenue North,
St. Petersburg, FL 33701-3649

POSTAL SERVICE DECISION

Respondents have filed an appeal from the Initial Decision of an Administrative Law Judge in which it was concluded that Respondents had conducted a lottery and made false representations in furtherance of a scheme to obtain money or property through the mail in violation of 39 U.S.C. § 3005. Respondents do not contest the finding that United Savers of America, Inc. (United Savers) and Gene Nebrasky conducted an unlawful scheme, but argue that Charles Robert Darst should not be named in the cease and desist order recommended by the Administrative Law Judge. Complainant contends that Mr. Darst should be included in the cease and desist order and that the Initial Decision should be affirmed.

Background

The promotion which is the subject of this proceeding consists of unsolicited mailings which represent that the recipient has won a valuable award, when in fact the recipient is required to purchase a membership in a buyers club in order to obtain the award. The Administrative Law Judge concluded that this promotion was a lottery and that Respondents falsely represented that participating consumers might win any one of several valuable awards even though a necklace with a pendant was the only prize ever awarded. The Administrative Law Judge also found that Charles Robert Darst was a director of United Savers, was one of several investors who provided financial backing for the corporation, and was sufficiently involved in the operation of the corporation to justify including him in the cease and desist order.

Discussion

In their appeal, Respondents contend, as they did before the Administrative Law Judge, that Mr. Darst should not be named in the proposed cease and desist order because he did not have sufficient knowledge or control of the corporation to be held responsible for its operation. In support of this contention, Respondents assert that the Administrative Law Judge overstated the amount and percentage of Mr. Darst's investment in United Savers; incorrectly found that Mr. Darst, rather than the corporation of which he was president, transferred a mail credit to United Savers; improperly relied on Mr. Darst's contact with a bank on behalf of United Savers; and misinterpreted Respondents' reasons for requesting a hearing. Respondents further contend that the Administrative Law Judge applied an incorrect legal standard to find that Mr. Darst was in a position to control United Savers' activities, and improperly concluded that the testimony of Mr. Darst and Mr. Nebrasky was not credible.

With the exception of the Administrative Law Judge's statement that Mr. Darst had increased his interest in the corporation to forty percent (Initial Decision (I.D.) at p. 7), all of the findings of fact and conclusions of law disputed by Respondents are supported by the record. Moreover, even if the amount and percentage of Mr. Darst's investment are as Respondents contend, rather than as found by the Administrative Law Judge; the mail credit was transferred by a corporation of which Mr. Darst was president and not by him personally; and his contact with the bank occurred as Respondents allege, Mr. Darst's involvement in the operation of United Savers would still be sufficient to justify his inclusion in the order to cease and desist issued in this proceeding. Further, Respondents' reason for requesting a hearing is immaterial to the outcome of this proceeding.

Both W.G. Charles Company, P.S. Docket Nos. 19/105, 19/161, 20/32 (P.S.D. Sept. 30, 1985), and The National Gold Mint, P.S. Docket No. 22/165 (P.S.D. May 1, 1987), which discuss the standard for including individuals in a cease and desist order, support the Administrative Law Judge's conclusion that Mr. Darst should be included in the cease and desist order issued in this proceeding. Both cases recognize that individuals need not have been responsible for the false advertising itself if they played some other significant role in the scheme. See P.S. Docket Nos. 19/105, 19/161, 20/32 at 43; P.S. Docket No. 22/165 at 25. As an investor and director of the corporation, Mr. Darst knew of the elements which made the scheme illegal, provided and controlled the financial means by which the scheme was operated, and had sufficient continuing involvement with the day to day financial transactions of the corporation to be held liable for the corporation's activities. (I.D. at pp. 7-8, Findings of Fact (FOF) 3, 12, 15.) Cf. Health Care Products, Inc., P.S. Docket No. 28/90 at 10 (P.S.D. Mar. 3, 1989). Mr. Darst's resignation from the corporation and his dissatisfaction with the degree of his control does not establish that he lacked sufficient control to be included as a party to this proceeding and to be named in the cease and desist order recommended by the Administrative Law Judge.

Finally, the Administrative Law Judge's refusal to accept the conclusory testimony of both of Respondents' witnesses is based on his observation of the witness' demeanor, and is consistent with the other evidence of record. No basis exists for disturbing the Administrative Law Judge's findings in this regard. Cosvetic Laboratories, P.S. Docket Nos. 9/173-85 at 9 (P.S.D. Dec. 11, 1981).

Conclusion

Respondents have shown no material error of fact or law in the Initial Decision. Mr. Darst's actions on behalf of United Savers, coupled with his monetary interest therein, warrant the inclusion of his name on an order to cease and desist. Therefore, the Order authorized by 39 U.S.C. § 3005 and proposed in the Initial Decision is issued herewith.