Editor's Note:
Vacated on June 9, 1995 by Order of the Judicial Officer in accordance with the agreement of the parties.

In the Matter of the Complaint Against           )
                                                                       )
GORDON O'ROURKE                                      )
5627 Sepulveda Boulevard                            )
Van Nuys, CA 91411-2920                            )
                                                                       )
CONTINENTAL COIN CORPORATION             )
5627 Sepulveda Boulevard                            )
Van Nuys, CA 91411-2920                            )
                                                                       )
              d/b/a                                                 )
                                                                       )
DESERT STORM                                             )
Old Los Angeles Federal Reserve Building   )
409 West Olympic Boulevard                        )
Los Angeles, CA 90015-1607                       )
                                                                       )
FOOTHILL COINS                                           )
5627 Sepulveda Boulevard                           )
Van Nuys, CA 91411-2920                           )
                                                                      )
DESERT STORM COINS                                 )
5627 Sepulveda Boulevard                           )
Van Nuys, CA 91411-2920                           )   P. S. Docket No. 40/135

APPEARANCE FOR RESPONDENT:              Marion Edwyn Harrison
                                                                     107 Park Washington Court
                                                                     Falls Church, Virginia 22046

APPEARANCE FOR COMPLAINANT:           Rodney Gould, Esq.
                                                                    United States Postal Service
                                                                    Law Department
                                                                    475 L'Enfant Plaza, SW
                                                                    Washington, DC 20260-1147

This proceeding was initiated on April 14, 1993, when the General Counsel for the United States Postal Service filed a Complaint alleging that Gordon O'Rourke and Continental Coin Corporation d/b/a Desert Storm, Foothill Coins and Desert Storm Coins ("Respondents") violated 39 U.S.C. §3005 by engaging in a scheme or device for obtaining money or property through the mail by means of false representations.⁽¹⁾ On August 13, 1993, Complainant filed a First Amended Complaint. The First Amended Complaint alleges in paragraph 8(a)-(c) that by means of direct mail circulars, as well as newspaper and magazine advertisements, Respondents make the following representations, and that these representations are false and material as a matter of fact:

(a) a Desert Storm commemorative coin is legal tender

of the Government of the Hutt River Province;

(b) the Hutt River Province is a sovereign nation with

its own currency; and

(c) a Desert Storm commemorative coin has a face

value as legal tender of five dollars.

In timely filed Answers to the Complaint and the First Amended Complaint Respondents denied any allegations of wrongdoing. A hearing on the issues was held in this matter on August 31,1993, in Los Angeles, California. Both parties were represented by counsel and were afforded full opportunity to be heard, to adduce relevant evidence, and to examine and cross-examine witnesses. Both parties offered documentary evidence. Complainant called as witnesses Postal Inspector Chris Gaines, Numismatic Consultant Kenneth Bressett, who testified as an expert witness, and Brian O'Callaghan, who testified as a representative of the Australian government. At the conclusion of Complainant's case Respondents moved to dismiss for lack of jurisdiction, alleging that Complainant had failed to establish use of the mails. The motion was denied and Respondents were given the opportunity to call witnesses. Respondents declined to call any witnesses at that time, choosing instead, to seek reconsideration of their motion to dismiss by filing a brief in support of the motion. The hearing was adjourned to permit the parties to fully brief the jurisdictional issue.

Subsequently, in addition to numerous related pleadings, Respondents filed a "Brief In Support Of Dismissal For Lack Of Jurisdiction" and Complainant filed a response. On November 25, 1994, the undersigned issued a "Ruling On Respondents' Motion To Dismiss And Order" ("Ruling and Order"). In the Ruling and Order, the undersigned determined that Complainant's Exhibit 4 (CX-4), which consists of copies of the advertisements that are the subject of the Complaint, had properly been admitted into evidence, that CX-4 was sufficient to establish use of the mails, and that this matter was ready for Initial Decision without further hearing. The parties were granted fifteen (15) days from the date of the Ruling and Order to submit proposed findings of fact, conclusions of law, orders and supporting reasons pursuant to 39 C.F.R. §952.23, if they chose to do so.

On or before March 7, 1995, both parties filed proposed findings of facts and conclusions of law which duly have been 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. The findings of fact and conclusions of law set forth below are based on the entire record herein, including the testimony adduced at the hearing, observation of the witnesses and their demeanor, and the documentary evidence.

I. FINDINGS OF FACT

A. The Marketing Campaign for Desert Storm
Coins; Respondents' Use of the Mails

1. Respondent Continental Coin Corporation is a California corporation with its principal place of business at 5627 Sepulveda Boulevard, Van Nuys, California 91411-2920 (First Amended Complaint, ¶ 3; Respondents' Answer To First Amended Complaint, ¶ 3).

2. Respondent Gordon O'Rourke was president of Continental Coin Corporation until December 31, 1992 ( Respondents' Answer to First Amended Complaint, ¶ 2).

3. Desert Storm, Foothill Coins, and Desert Storm Coins are names used by Continental Coin Corporation ("Continental") to receive money and property through the mail.⁽²⁾ Continental uses the following mailing addresses to receive money and property: Desert Storm, Old Los Angeles Federal Reserve Building, 409 West Olympic Boulevard, Los Angeles, CA 90015-1607 and Foothill Coins and Desert Storm Coins both at 5627 Sepulveda Boulevard, Van Nuys, CA 91411-2920. (First Amended Complaint, ¶ 4 ; Respondents' Answer To First Amended Complaint, ¶ 4, CX-1(a), 7(b)).

4. By means of direct mail solicitations, as well as advertisements placed in newspapers and magazines, Continental solicits money through the mail for its Desert Storm coins, using the above names and addresses (CX-4).

B. The Testimony of Complainant's Witnesses

5. Postal Inspector Chris Gaines testified that she has been assigned to investigate this case since January 1993. Ms. Gaines stated that in the course of her investigation she consulted several atlases and encyclopedia in an attempt to locate the Hutt River Province in Australia, but that she could find no reference to it. (Tr. 14.) Complainant introduced into evidence a copy of a map of Australia published in the National Geographic Atlas of the World, sixth edition, 1992 (Tr. 16-18). The map shows no such location as the Hutt River Province (Tr.16-18; CX-2).⁽³⁾

6. Kenneth Bressett, a numismatic consultant called by Complainant as an expert witness (Tr. 24), defined the term legal tender a follows: "It refers to an item or even a commodity that some sovereign state has designated to be their official money"(Tr. 37). Mr. Bressett added that legal tender "has to be issued by a sovereign state and acceptable as money[,]...that is to say, one can pay debts with it in more than a single place" (Tr. 45).

7. Mr. Bressett explained that coin collectors consider it to be important that the item actually is legal tender, "because they want to collect coins" and "[t]hings that are not legal tender are not considered coins" (Tr. 38). The expert witness went on to explain (Tr. 38-39):

[C]oins, by their very nature, are intended to be used[,] to be circulated, to be used up, in fact and worn out.

When a sovereign nation issues coins, it's customary for them to always document the number of coins made in any particular year. Collectors refer to that, so that they can understand how rare these coins might be or how prevalent they might be, and to make an assessment of how they want to collect them, perhaps with an eye for some of them being worn out, and then the ones they save become even more valuable. It's a mental state that most collectors have. They want to know where they stand with the coin that they've bought.

With medal and privately made issues, there's no such documentation, no accounting for how many were made or will be made or why they were made.⁽⁴⁾

8. Complainant called Brian O'Callaghan as a witness concerning the Hutt River Province. Mr. O'Callaghan stated that he is a diplomatic agent of the Australian government and that he was testifying on behalf of that government (Tr. 70-71). Mr. O'Callaghan testified that the so-called Hutt River Province "has no official status whatsoever in Australia", but is actually "a private farming community" that he believed to be owned by a Mr. L. G. Casley, who is also known as "[t]he self-styled Prince Leonard of Hutt" (Tr. 71). Mr. O'Callaghan asserted that the Australian "government does not recognize any self-styled provinces or kingdoms that may be set up" (Tr. 71). Mr. O'Callaghan testified that under the Australian Constitution new political entities can only be created by accession of new states or the acquisition of new territories, that neither has been applied to the "Hutt River Province, so called", and that secession is not recognized under the Australian Constitution (Tr. 73).

9. With respect to Australian coinage, Mr. O'Callaghan stated that "legal tender coins are only established under the Authority of the Act of 1965" and that such coins must be approved by the treasurer of the Australian government (Tr. 72). Mr. O'Callaghan further testified that "[n]one of the coins that are issued by, in the name of, or by the authority of the so-called Hutt River Province have legal tender status within Australia" (Tr. 72).

C. Representations in Continental's Desert Storm
Coin Advertisements are False and Material

10. Continental makes all of the representations alleged in paragraph 8 (a)-(c) of the Complaint and, as shown below, they are false and material as a matter of fact.

11. (a) a Desert Storm commemorative coin is legal tender of the government of the Hutt River Province

Continental refers to its Desert Storm Coins as legal tender throughout it's advertisements (CX-4). Continental also specifically represents, in some of its advertisements, that Desert Storm coins are legal tender of the Hutt River Province. Thus, in an advertisement for its "$5 Desert Storm Coin Collection", Continental states that "all of the coins in this collection are official, legal tender of the Government of the Hutt River Province--a principality located in Western Australia" (CX-4, p. 3). In another full-page advertisement, Continental claims above the main text: "The world's first legal tender $25 dollar coin honoring the brave soldier's (sic.) of Desert Storm!" (CX-4, p.10). In the text of this same advertisement Continental states: "Officially issued by the Hutt River Province, a principality located in Western Australia, it's the world's first legal tender Silver Proof coin honoring Operation Desert Storm". (Emphasis in original). (Id.) The almost identical sentence is also found in another advertisement for Continental's $25 silver coin (CX-4, p. 6). In advertisements for its "$5 Desert Storm Coin Collection", Continental repeatedly refers to the coins as "legal tender" and further describes the collection itself as "the world's first legal tender coin collection honoring Operation Desert Storm issued by the Hutt River Province, a principality located in Western Australia." (Emphasis in original) (CX-4, pp. 11-12) In an advertisement that Continental placed in both a newspaper and a magazine devoted to coin collecting, the headline reads in bold type: "World's first legal tender 'Desert Storm' $5.00 coins" (CX-4, pp. 20, 21). The text of the advertisement states, in pertinent part: "This Legal Tender coin is being Officially issued by the Hutt River Province in Australia..." (Id.). This same text was also used in an advertisement Continental printed in a newspaper of general circulation (CX-4, p. 3)

Relying upon the testimony of expert witness Kenneth Bressett and Australian government representative Brian O'Callaghan, I find that Desert Storm coins do not qualify as legal tender and that the so-called Hutt River Province government has no authority to issue legal tender. Accordingly, I find that Continental's representation that a Desert Storm commemorative coin is legal tender of the government of the Hutt River Province is false.

12. (b) the Hutt River Province is a sovereign nation with its own currency

Continental's advertisements claim that its Desert Storm coins are legal tender of the Hutt River Province in Australia, which it refers to as a "principality" (CX-4, pp. 3, 6, 10, 12) The dictionary defines principality as "the territory or jurisdiction of a prince: the country that gives title to a prince." Webster's Third New International Dictionary 1803 (1968).

As shown above, Brian O'Callaghan, as the representative of the Australian government, testified that the Hutt River Province is nothing more than a farming community owned by an individual who calls himself Prince Leonard. Mr. O'Callaghan further testified that the Australian government does not recognize any "self-styled provinces or kingdoms"(Tr. 71), that secession is not recognized under the Australian Constitution, and that none of the coins issued by the so-called Hutt River Province have any legal tender status in Australia.

By its repeated references to Desert Storm coins as legal tender of the Hutt River Province and its explicit statement that the Hutt River Province is a principality, Continental conveys the impression that the Hutt River Province is a sovereign nation with its own currency. This representation is false.

13. (c) a Desert Storm commemorative coin has a face value as legal tender of five dollars

In many of its advertisements for its Desert Storm $5 coin collections, Continental juxtaposes the term "legal tender" with $5. See, CX-4, pp. 3-4, 11-12, 13, 19, 20, 21, 22). In several advertisements, in particular, Continental leads into the text of the advertisement with the headline "world's first Legal tender 'Desert Storm' $5.00 Coins" (CX-4, pp. 20-21). In another advertisement, Continental specifically states: "The official issue price for each of these splendid Brilliant Uncirculated coins is only $5--exactly its denomination value" (CX-4, p. 3).

As noted above, the testimony of Brian O'Callaghan makes it clear that coins issued by the so-called Hutt River Province are not recognized by the Australian government as legal tender. It follows that these coins would not have to be accepted as payment for a debt in Australia. Even assuming, arguendo, that the $5 Desert Storm commemorative coin can be spent within the confines of the so-called Hutt River Province, expert witness Kenneth Bressett stated that by definition a legal tender coin must be acceptable for the payment of debts in more than one place (Tr. 45). Thus, legal tender is distinguishable from such items as "Disney dollars" and "Maui dollars" which are essentially promotional incentives that cannot be taken to any bank or store and exchanged for their face value. See, Tr. 55-56.

Through the representations cited, the average reader of Continental's advertisements is left with the impression that regardless of its artistic merits, or its value as a commemoration of Operation Desert Storm, the Desert Storm $5 coin is legal tender that will be accepted as being worth $5. Since Desert Storm coins are not legal tender, they have no established legal tender value of $5. Accordingly, Continental's representation that a Desert Storm commemorative coin has a $5 face value as legal tender is false.

14. Representations (a), (b), and (c) are material because they tend to induce a reader to purchase the Desert Storm coins.

D. Individual Respondent Gordon O'Rourke

15. Respondents have admitted that Gordon O'Rourke ("Respondent O'Rourke") was president of Continental until December 31, 1992 (Respondents' Answer to First Amended Complaint, ¶ 2). The legible dates and postmarks on Continental's Desert Storm coin advertisements are all prior to the date when Respondent O'Rourke left the office of president (CX-4). There is no evidence that Respondent O'Rourke has an ownership interest in Continental. The only evidence, other than his holding corporate office, which suggests that Respondent O'Rourke was involved in the dissemination of the Desert Storm coin false representations, is a copy of the form he filed as president of Continental seeking to register the name Foothill Coins with the state of California as a fictitious business name (CX-1(b)). This application is significant because some of Continental's advertisements promoting the sale of Desert Storm coins were issued in the name of Foothill Coins (CX-4, pp. 20-22).

16. None of the cases cited by Complainant in its Proposed Findings Of Fact And Conclusions Of Law, p.12, support the proposition that merely holding the office of president of a corporation is sufficient to render an individual subject to a cease and desist order. Moreover, there is some authority to the contrary, albeit that the cases were decided in the context of unfair trade practice proceedings. See, for example, Coro, Inc.v. F.T.C., 338 F.2d 149 (1st Cir. 1964). The cases upon which Complainant primarily bases its contention that Respondent O'Rourke should be included in any remedial order--American Handicapped Show Fund, P.S. Docket No. 34/40 (I.D. August 31, 1989) and U.S. Merchandising, P.S. Docket No. 28/120 (I.D. January 22, 1988)--are factually distinguishable from the instant case. In both of those cases the individual respondents who were included in remedial orders were shown to have played some significant role in the false representation scheme. In American Handicapped Show Fund, the individual respondent was found to have exercised personal oversight over the telemarketing employees who made the false representations. Similarly, in U.S. Merchandising, one of the individual respondents was responsible for the entire false representation scheme and the other was shown to have personally handled the money collected through the scheme.

In this matter, the evidence shows that Respondent O'Rourke signed an application as president of Continental, seeking authorization to use the name Foothill Coins as a fictitious business name. The evidence further shows that Foothill Coins was one of the names used in Continental's advertisements which solicited money for its Desert Storm coins by means of false representations. The mere fact that Respondent O'Rourke was instrumental in obtaining permission to use the name Foothill Coins is, however, insufficient, standing alone, to show that he had a significant role in making the false representations found herein. There is no showing on this record that Continental obtained authorization to use the name Foothill Coins as an integral part of a false representation scheme. Continental may have assumed the name Foothill Coins for legitimate business purposes over and above its use in the Desert Storm advertisements which contain false representations. There is also no showing that Respondent O'Rourke approved the Desert Storm coin advertisements or that he even knew about them. Finally, there is no showing that Continental is such a small enterprise that Respondent O'Rourke, as president of the company, must have known about and approved the use of false representations. See, Fred Meyer, Inc. v. F.T.C., 359 F.2d 351, 368 (9th Cir.1966) (knowledge of unfair trade practice inferred where individual respondent was chairman of the board of a small, family corporation.)

I find that there is insufficient evidence to support the conclusion that Respondent O'Rourke played some significant role with respect to the false representations found. I therefore conclude that Respondent O'Rourke is not properly includable in any Cease and Desist Order that may be issued against Continental.

1. The Postal Service has jurisdiction over this matter under 39 U.S.C. §3005 (1988 & Supp. IV 1992).

2. It is established that a respondent's solicitations must be considered as a whole, and their meaning determined in light of the probable impact of this material on a person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 188-89 (1948); Peak Laboratories, Inc. v. U.S. Postal Service, 556 F.2d 1387, 1389 (5th Cir. 1977); Charles Smith, P.S. Docket No. 36/129, slip op. at 7 (P.S.D. December 9, 1993), and cases cited.

3. Express misrepresentations are not required. It is the net impression which the solicitation is likely to make upon individuals to whom it is directed which is important. If it is artfully designed to mislead those responding to it, the false representation statute is applicable. The statute is intended to protect the gullible, naive, and less critical reader, as well as the more sophisticated, wary reader. 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).

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. Finderhood, Inc., P.S. Docket No.34/102, slip op. at 8-9 (P.S.D. March 20, 1992), and cases cited; The National Gold Mint, P.S. Docket No. 22/165, slip op. at 22 (P.S.D. May 1, 1987).

5. The Administrative Law Judge can determine from the solicitations themselves whether the representations alleged in the Complaint are made, their effect on the ordinary mind, and the materiality of the representations. A.C.L., P.S. Docket No. 36/90, slip op. at 12 (P.S.D. December 28, 1990); Health Care Products, Inc., P.S. Docket No. 28/90, slip op. at 4-5 (P.S.D. June 27, 1990); United States Testing Authority, P.S. Docket Nos. 14/77, 14/114, slip op. at 15-16 (P.S.D. October 2, 1985), and cases cited.

6. Whether anyone actually complains or has been deceived by the advertisements is irrelevant to the issue of false representation. Farley v. Heininger, 105 F.2d 79 (D.C. Cir.1939), cert. denied, 308 U.S. 587 (1939). It is the likelihood of deception or the solicitation's capacity to deceive which must be judged. Montgomery Ward & Co. v. F.T.C., 379 F.2d 666, 670 (7th Cir. 1967); Mid-Am Marketing, Inc., P.S. Docket No. 24/12, slip op. at 5 (P.S.D. on Recon., May 7, 1987).

7. Applying the foregoing standards, I find that Continental makes each of the representations alleged in ¶8(a)-(c) of the Amended Complaint. The language contained in Continental's advertisements, when read in context, which directly or impliedly makes these representations is set forth in the findings of fact.

8. The representations made by Continental are material because they have a tendency to persuade readers to order and pay for its Desert Storm coins.

9. With the exception of the allegations against Respondent Gordon O'Rourke, 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).

10. Complainant failed to show by a preponderance of the evidence that Respondent Gordon O'Rourke played some significant role with respect to the false representations found.

11. Respondents contend that this matter is moot and that a Cease and Desist Order should not be issued because there is no evidence that Continental has used the Desert Storm coin advertisements since 1991 and because it allegedly has been prohibited since April 1992, from using the term legal tender in any of its Desert Storm coin advertisements. (Respondents' Proposed Findings of Fact and Conclusion of Law, p. 30) First, it has consistently been that proceedings under 39 U.S.C. §3005 are not rendered moot because a scheme has voluntarily been discontinued. Professional Opportunity Magazine, Inc., P.S. Docket No. 33/55, slip op. at 6 (P.S.D. September 14, 1990), and cases cited. Second, the only reference to a prior prohibition in Respondents' pleadings is to an agreement with the Attorney General of the state of California. (Respondents' Answer To First Amended Complaint, ¶7). Even assuming, arguendo, as Respondents allege, that California has issued a prohibitory order, there is no showing that the terms of the order are sufficiently broad to guarantee that Continental will be foreclosed from making the false representations found herein. Moreover, any order issued by the state of California presumably would have no effect beyond that state. The evidence here shows, however, that Respondents' Desert Storm coin advertisements are distributed in locations outside of California. See, for example, CX-4, p.19.

12. Continental is conducting a scheme for obtaining money through the mail by means of false representations in violation of 39 U.S.C. §3005.

13. The attached Cease and Desist Order should be issued.

Judith A. Dowd
Administrative Law Judge

1. ¹ 39 U.S.C. §3005 provides, in pertinent part, as follows:

(a) Upon evidence satisfactory to the Postal Service that any person is engaged in conducting a scheme or device for obtaining money or property through the mail by means of false representations,... the Postal Service may issue an [appropriate] order....

2. ² All references to Continental, hereafter, should be read as including the other names under which it does business-- Desert Storm, Foothill Coins and Desert Storm Coins.

3. ³ Respondents introduced into evidence a "Street Smart Touring Map" of the Batavia Coast which maps the area and indicates many of the tourist attractions and accommodations. This map shows an area referred to as the "Hutt River Province" and describes it as follows:

³ cont'd.

HUTT RIVER PROVINCE--Seceded from the Commonwealth of Aust. on April 21,1970. Leonard G. Casley designated the 75 sq. kilometre area a principality and announced he was to be known as "Prince Leonard". This notable tourist attraction issues its own "postage stamps" and provides an excellent opportunity to meet with the local royalty.

4. ⁴ "A medal is something that looks like a coin but doesn't have official sanction as legal tender" (Tr. 39).