In the Matter of the Complaint Against DELTA ENTERPRISES P. O. Box 2902 at Rock Hill, SC 29730 and FUTURE PUBLICATIONS and B.N.S. ENTERPRISES P. O. Box 63-5087 at Margate, FL 33063 and ALLTIME ENTERPRISES P. O. Box 26353 at Tamarac, FL 33320 etc. P.S. Docket No. 14/72; P.S. Docket No. 14/73; P.S. Docket No. 14/74; P.S. Docket No. 14/75; 04/26/83 Mason, Randolph D. APPEARANCE FOR COMPLAINANT: Clark C. Evans, Esq. Regional Inspector/Attorney Southern Region Postal Inspection Service Memphis, TN 38161-0002 H. Richard Hefner, Esq. Consumer Protection Division Law Department U.S. Postal Service Washington, DC 20260-1100 APPEARANCE FOR RESPONDENT DELTA ENTERPRISES: Cade L. Austin, Esq. 711 Law Building 730 E. Trade Street Charlotte, NC 28202 COUNSEL FOR RESPONDENTS FUTURE PUBLICATIONS, B.N.S. ENTERPRISES and ALLTIME ENTERPRISES: Robert A. Shupack, Esq. Suite 301 1550 N.E. Miami Gardens Drive N. Miami Beach, FL 33179
These consolidated proceedings were initiated on September 20, 1982, when the General Counsel filed complaints against the respondents named in the caption herein. Each of the complaints alleges that respondents are engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations concerning various envelope stuffing schemes in violation of 39 U.S.C. § 3005. With the exception of Docket Number 14/74, the General Counsel also alleges in each case that the respondents are engaged in conducting a lottery or scheme for the distribution of money by chance. Respondents deny that any violation of the statute has occurred. The allegations contained in each of the complaints are set forth below:
The Complaint alleges in paragraph 4 that Respondent Delta Enterprises ("Delta") makes the following false representations in a circular entitled "Your Key to Extra Income":
4. . .
(a) Payment of the initial membership fee will allow immediate participation in the Delta Enterprises promotion without further substantial financial investment by the homeworker.
(b) Many ordinary participants will make sizeable earnings.
(c) Names and addresses of sales prospects will be available without further monetary expenditure.
(d) Amounts of earnings are primarily determined by whatever time participants devote to the routine tasks of addressing envelopes and stuffing them with sales circulars.
(e) Advertising circulars to be furnished will promote the sale of items other than the kind of program being purchased by the homeworker.
Count II charges that Future Publications and Delta knowingly seek the remittance of money through the mails by means of false representations made by their mailer/dealers at their express direction. These mailer/dealers allegedly make the following false representation set forth in paragraph 8 of the Complaint in a circular entitled "Opportunity is Knocking":
8. . .
(a) Persons remitting $25 will receive envelopes, circulars, prospect names and postage stamps having a commensurate value.
(b) Attractive compensation will be made by homeworkers by addressing envelopes and stuffing them with sales circulars.
(c) Advertising circulars to be furnished will promote the sale of items other than the kind of program being purchased by the homeworker.
Count III of the Complaint also alleges that Future Publications and B.N.S. Enterprises knowingly seek the remittance of money through the mails by means of false representations made by their mailer/dealers at their express direction. These mailer/ dealers are persons who had previously become homeworkers after responding to the "Opportunity is Knocking" circular. It is alleged in paragraph 13 that they made the following false representations in a circular entitled "Making Money is Easy":
13. . .
(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sale circulars.
(b) Earnings will be made by homeworkers by addressing envelopes and stuffing them with sales circulars.
Count I of the Complaint charges Delta with the sale false representations set forth in subparagraphs 4(a) through (e) of the Complaint in Docket No. 14/72.
Count II of the Complaint charges that Delta Enterprises and Future Publications knowingly seek the remittance of money through the mails by means of false representations made by their mailer/ dealers at their express direction. In this regard, the mailer/ dealers had previously responded to a circular entitled "Your Key to Extra Income" and had become homeworkers in the Cooperative Mailing and Income Program ("CMIP"). These CMIP homeworkers subsequently mailed the "Your Key" circular to others and thereby allegedly made the following false representations set forth in paragraph 8 of the Complaint:
8. . .
(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars.
(b) Attractive compensation will be made by homeworkers by addressing envelopes and stuffing them with sales circulars.
Count III of the Complaint alleges that Future Publications makes the same false representations contained in paragraphs 8(a) and (b), above, by means of the CMIP homeworker booklet.
In Count I of this Complaint, Delta Enterprises is charged with mailing a circular entitled "We'll Pay You 30 cents For Each Envelope You Stuff" and making the following false representations:
4. . .
(a) Payment of the initial membership fee will allow immediate participation in the Delta Enterprises promotion without further substantial financial investment by the homeworker.
(b) Amounts of earnings are primarily determined by whatever time participants devote to the routine tasks of addressing envelopes and stuffing them with sales circulars.
(c) Participants will promote the sale of a product or service substantially different from the program they are purchasing.
Count II alleges that Delta Enterprises and Alltime Enterprises knowingly seek the remittance of money through the mails by means of false representations made by their mailer/dealers at their express direction. The mailers/dealers referred to therein had previously responded to the circular entitled "We'll Pay You 30 cents " and had received the "30 cents" homeworker booklet. Following the instructions in that booklet, they stuffed envelopes with a circular entitled "Making Money is Easy." It is in the latter circular that Complainant alleges the following false representations, set forth in paragraph 8 of the Complaint, were made:
8. . .
(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars.
(b) Earnings will be made by homeworkers by addressing envelopes and stuffing them with sales circulars.
In Count I of the Complaint, Delta is charged with making the same false representations that were alleged in paragraph 4(a) through (e) of the Complaint in Docket No. 14/72.
In Count II of the Complaint, Delta Enterprises and Future Publications are charged with knowingly seeking the remittance of money through the mails by means of false representations by their mailer/dealers at their express direction. These mailer/dealers had previously responded to the "Your Key" circular and had become CMIP homeworkers. As such, they were instructed to mail the "We'll Pay You 30 cents " circular. Paragraph 8 of the Complaint alleges that they made the following false representations in that circular:
8. . .
(a) Payment of the initial membership fee will allow participation in the Delta Enterprises promotion without further substantial financial investment by the homeworker.
(b) Amounts of earnings will be primarily determined by whatever time participants devote to addressing envelopes and stuffing them with sales circulars.
(c) Participants will promote the sale of a product or service substantially different from the program they are purchasing.
Count III of the Complaint charges Future Publications and Alltime Enterprises with knowingly seeking the remittance of money through the mails by means of false representations made by their mailer/dealers at their express direction. The latter mailer/ dealers were homeworkers following the "30 cents" program in which they were asked to stuff envelopes with a circular entitled
"Making Money is Easy." Paragraph 13 of the Complaint alleges that they made the following false representations in that circular on behalf of Future and Alltime:
13. . .
(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars.
(b) Earnings will be made by homeworkers by addressing envelopes and stuffing them with sales circulars.
Count IV in each of the complaints in Docket Nos. 14/72, 14/73, and 14/75 alleges that the programs used by the Respondents contained the elements of prize, chance, and consideration. Accordingly, Complainant concluded that Respondents were conducting a lottery or scheme for the distribution of money by chance.
All parties were represented at the hearing by counsel and afforded full opportunity to be heard, adduce relevant evidence, and examine and cross-examine witnesses. All parties filed proposed findings of fact and conclusions of law which have been duly considered. To the extent indicated below, proposed findings and conclusions have been adopted; otherwise, they have been rejected as irrelevant or contrary to the evidence. Based on the entire record herein, including my observation of the witnesses and their demeanor, the exhibits and other relevant evidence adduced at the hearing, I make the following findings of fact and conclusions of law:
1. Respondent Delta Enterprises ("Delta") seeks the remittance of money through the mail for the Cooperative Mailing and Income Program ("CMIP") at P. O. Box 2902, Rock Hill, SC 29730 (Ans. § 3; Exhs. B-72, B-73, B-75; Tr. 32).
2. Delta first places the following typical classified advertisement in newspapers and magazines:
HUNDREDS WEEKLY mailing circulars.
Start immediately. Delta, Box 2902-CRS
Rockhill, SC 29730
(Ans. ??1, 2; Exhs. A-72, A-73, A-75). Persons responding to this advertisement are sent a circular entitled "Your Key to Extra Income." (Ans. § 3, Exhs. B-72, B-73, B-75; Tr. 32).
3. As alleged in paragraph 4(a) of the Complaint, Delta represents in its advertisements that payment of the initial membership fee will allow immediate participation in its envelope stuffing promotion without further substantial financial investment by the homeworker (Ans. 4(a)). In this regard, the "Your Key" circular gives the overall impression that homeworkers will primarily be engaged in stuffing, addressing, and mailing envelopes and that all of these materials will be supplied to homeworkers without further monetary outlay (Exh. B-72; Tr. 77). (Additional details are discussed below in Finding of Fact No. 9). In addition, the representations contained in paragraph 4(a) of the Complaint are found in the following quotations from the "Your Key" circular (Exhs. B-72, B-73, B-75):
To get started, just fill out the application form and mail it with your $12 application fee...Being a member means you will receive current ways of making money without any additional cost to you during the membership period. The fee pays for processing your application and sending your starting kit of instructions. Just follow the easy-to-read directions to start earning your extra income.
There is nothing else that you will be required to buy from us. You can obtain free circulars and free mailing lists.
...There's no better time than right now for you to start getting your share of the money.
4. The representation set forth in the preceding paragraph, which is contained in paragraph 4(a) of the Complaint, is materially false. Customers responding to Delta's advertisements by remitting $12 receive a booklet entitled "Cooperative Mailing and Income Program" (Exhs. C-72, D-73, C-75) (hereinafter "CMIP booklet"). As previously stated, the "Your Key" circular advertised simple work stuffing, addressing, and mailing envelopes. However, all of the so-called envelope stuffing programs offered in the CMIP booklet require the expenditure of substantial time and money before the participant can begin to earn money. In this regard, all of these plans require the homeworker to obtain or purchase some or all of the following:
(a) Names and addresses of opportunity seekers --The homeworker is first instructed to purchase mailing lists; the publisher offers 1,000 names for $25 (CMIP booklet, pp. 2, 28). He is also told to place classified advertisements in magazines and newspapers similar to the advertisement quoted in Finding of Fact No. 2, above (CMIP booklet, p. 4). The booklet also suggests in one plan that names can be obtained by posting notices on bulletin boards at laundromats, grocery stores, etc. (CMIP booklet, p. 21). Even the latter method requires transportation costs and an investment of substantial time.
(b) Circulars --Although the booklet contains sample circulars for each of three programs, these must be reproduced in bulk by the homeworker. The latter is instructed to have these printed with his company name (CMIP booklet, pp. 3, 5). The cost of an introductory set of 200 circulars and envelopes is $37.50 (CMIP booklet, p. 5). One of the plans purports to provide "free" circulars; however, the homeworker is actually required to remit $7 as a deposit for 50 circulars. The $7 will not be returned to the homeworker unless those circulars generate at least one order for the program (CMIP booklet, p. 21).
(c) Envelopes --The homeworker purchases envelopes to send the circulars to prospective customers, and is advised to enclose a smaller, self-addressed return envelope (CMIP booklet, pp. 2, 5).
(d) Shipping labels --These are sent to the publisher of the program so that the latter can drop-ship the order to the homeworker's customer.
(e) Postage --Unless the homeworker is able to obtain stamped, self-addressed envelopes from prospective customers, he must pay the postage when he mails out the circulars. Additional postage is also necessary under most plans when the orders are mailed to the publisher.
Finally, it is noted that the CMIP booklet itself generally instructs the homeworker that it is necessary to "spend more money to put these plans to work" (CMIP booklet, p. 7).
5. As alleged in paragraph 4(b) of the Complaint, Delta also represents in its advertisements that many ordinary participants will make sizeable earnings. In this regard, Delta's classified advertisement states "HUNDREDS WEEKLY mailing circulars" (Exhs. A-72, A-73, A-75). Moreover, the "Your Key" circular clearly states:
EARN $180 to $480 A WEEK
. . .
. . . Many ordinary people, just like yourself, are already participating in our program and earning extra dollars every week.
. . .
. . . Just follow the simple instructions for getting names and addresses. Then address envelopes and stuff them with the proper circulars. You can easily do 300 a week working a few hours a day. And for that, you earn $180.
. . .
. . . How would you like to be one of the happy people earning hundreds of dollars of extra money every week.
6. The record does not reveal whether the preceding representation is false. It is only clear that some ordinary purchasers would not attempt to implement the programs due to unexpected cost and time (Tr. 77-78); moreover, William Steve Thomas, the owner of Delta, has been very successful using two of the plans (Tr. 137). However, Thomas obviously has the financial ability to carry out the plans. There is no evidence indicating that many ordinary participants have no made, or will not make, sizeable earnings with the programs in the CMIP booklet.
7. As alleged in paragraph 4(c) of the Complaint, Delta represents in its advertisements that names and addresses of sales prospects will be available without further monetary expenditure (Ans. § 4(c)). See Finding of Fact No. 3, above.
8. The record does not reveal whether the preceding representation is false. As set forth in Finding of Fact No. 4(a), above, the primary methods for obtaining names and addresses require the expenditure of money. However, the CMIP booklet also mentions that free mailing lists of opportunity seekers are also available from 18 companies named on page 25 of the booklet. Complainant failed to adduce any evidence indicating that any of these companies would not provide fresh mailing lists without some form of compensation. The nominal cost of a self-addressed, stamped envelope (in which the company would return its free list) does not represent the kind of "monetary expenditure" contemplated in the Complaint and litigated at the hearing.
9. As alleged in paragraph 4(d) of the Complaint, Delta represents in its advertisements that amounts of earnings are primarily determined by whatever time participants devote to the routine tasks of addressing envelopes and stuffing them with sales circulars. In this regard, the "Your Key" circular states:
SIMPLE, PLEASANT WORK
The work you will be doing is simple and pleasant. You can do it right in your own home in your spare time. No previous experience is necessary. . . .
The work consists mainly of addressing envelopes and inserting circulars into them. You must also handle money and address shipping labels. If you do not type, you can write the addresses by hand. This can be done at your own speed in your spare time. You can even do it while watching television.
. . .
How much money you earn is up to you. We do not require that you mail a certain number of envelopes each week .... You can do what you have time for --and you can quit whenever you want. Some members are interested in making only about $100 extra money a week, while others spend more time at it and earn $480 or more.
$60 PER HUNDRED
. . . you can always take advantage of our $60 per hundred plan, which is money you can make from your sales. Just follow the simple instructions for getting names and addresses. Then address envelopes and stuff them with the proper circulars. You can easily do 300 a week working a few hours a day.
. . .
. . . We also guarantee that if you find you do not earn at least $60 for every 100 envelopes that you address and stuff according to directions, you can discontinue the work and receive a full refund of your application fee Exhs. B-72, B-73, B-75 .
10. The representation contained in the preceding Finding of Fact is materially false. As previously indicated in Finding of Fact No. 4, all of the envelope stuffing plans offered in the CMIP booklet require substantial work in addition to the mere addressing and stuffing of envelopes. All of the programs require finding purchasers for the publisher's programs in order to earn commissions. Such prospective purchasers must be found before there will be any envelopes to stuff; and finding these purchasers is the keystone of the programs offered. In addition, the homeworker must deal with newspapers for advertising, printers for circulars, and keep records. The money is made by finding purchasers, not by the mere addressing and stuffing envelopes (CMIP booklet, pp. 2, 27).
11. (a) Contrary to the allegation contained in paragraph 4(e) of the Complaint, Delta's advertisements do not represent that advertising circulars to be furnished will promote the sale of items other than the kind of program being purchased by the homeworker (Exhs. B-72, B-73, B-75). The "Your Key" circular first describes the work of addressing envelopes and stuffing circulars in them. The circular then states that " i f the addressees purchase the item advertised by us" the homeworker gets a commission, and also states that " w e ship the item directly to the purchaser" (emphasis supplied). This language does not indicate what sort of items will be advertised by the circulars that will be stuffed.
(b) Even if it could be assumed that the ordinary person would assume that he would be advertising some other "product", then the representation would be false but not material. As previously indicated, a person responding to the advertisement in "Your Key" would not be concerned with the type of product involved since he would have been under the mistaken impression that he would be earning money merely by addressing and stuffing envelopes. The fact that the prospective homeworker would send in his $12 application fee without knowing what kind of product he would be advertising also indicates that this was not a material consideration in making his decision to participate.
12. As previously stated, persons responding to the "Your Key" circular receive the CMIP booklet containing three different circulars that the CMIP homeworker is directed to mail to other opportunity seekers. These circulars advertise three separate programs supplied by the publisher of CMIP, Future Publications, ("Future"), P. O. Box 63-5087, Margate, FL 33063. One of the three circulars found in the CMIP booklet is entitled "Opportunity is Knocking" (CMIP booklet, p. 14). On page 27 of the booklet, Future Publications seeks remittances through the mail at the address set forth above for the "Opportunity is Knocking" program.
13. Contrary to the allegation contained in paragraph 8(a) of the Complaint, mailer/dealers using the "Opportunity is Knocking" circular do not represent that persons remitting $25 will receive envelopes, circulars, propsect names and postage stamps having a commensurate value (CMIP booklet, p. 14). The reader is told that the $25 represents a "one time registration fee" rather than compensation for the home mailing materials. Thus an ordinary reader would probably think that the $25 fee would be largely justified by participation in a home mailing program that would produce sizeable commissions in the future. Moreover, the circular promises not only the "initial supply of materials", but also additional supplies for every order that is sent to the publisher.
14. As alleged in paragraph 8(b) of the Complaint, mailer/ dealers sending out the "Opportunity is Knocking" circular represent that attractive compensation will be made by homeworkers by addressing envelopes and stuffing them with sales circulars (CMIP booklet, p. 14). The reader is invited to participate in a "home mailing" program in which he will be provided with an initial supply of circulars, envelopes, stamps, name lists and "simple instructions." The circular states:
YOU fold the circulars, insert them into the envelopes, stick the names onto the envelopes, affix the postage and mail them. Your name appears on the circulars you mail as being the mailer.
YOU get any orders that result from your mailings. YOU take out your BIG commission & send us our share and your shipping label made out to your customer. Emphasis supplied .
15. The preceding representation is materially false in fact. Persons remitting $25 in response to the "Opportunity is Knocking" circular receive only 23 names and addresses of opportunity seekers plus a corresponding number of stamps and envelopes (Tr. 34; Exhs. F-72, G-72). The instructions that are sent with the supplies make it clear to the homeworker that he will not be successful unless he obtains the names and addresses of additional opportunity seekers. In this regard, the homeworker is supplied with a larger quantity of circulars than other materials and is instructed to "try your own means of both advertising and circulating this product" (Exh. E-72). The homeworker is urged to place classified advertisements, distribute circulars in public places, and post them on bulletin boards. Securing additional names in this manner is clearly the key to success in this program, and constitutes an entirely different type of work than the simple stuffing and mailing of envelopes advertised in the circular.
16. (a) Contrary to the allegation contained in paragraph 8(c) of the Complaint, the "Opportunity is Knocking" circular does not represent that advertising circulars to be furnished will promote the sale of items other than the kind of program being purchased by the homeworker (CMIP booklet, p. 14). The language of the circular does not refer to the type of product that the homeworker would advertise by means of circulars, nor does it give one any impression in this regard.
(b) However, assuming arguendo that the ordinary person would assume that he would be advertising some other "product", the representation alleged in paragraph 8(c) of the Complaint would not be false. In this regard, homeworkers responding to the "Opportunity is Knocking" circular are asked to distribute another circular entitled "Making Money is Easy When You Know How." The latter circular seeks the remittance of $15 from people who wish to be listed as potential home mailers with 200 mail order firms (Exh. D-72). Thus the homeworker would be marketing a listing service which is different from the envelope stuffing program advertised in "Opportunity is Knocking."
17. Future Publications is a division of Gladstone, Inc., of which Burton Gladstone is the president (Tr. 125). Future publishes the CMIP booklet and sells it in bulk to distributors like Delta Enterprises; Future also sends out the "Your Key" circular advertising the CMIP program to prospective homeworkers (Tr. 128). Homeworkers who receive the CMIP booklet are directed by Future Publications to mail the "Opportunity is Knocking" circular advertising one of Future's envelope stuffing programs (Exh. C-72). After the homeworker secures an order from a customer for this particular program, he retains his $8 "commission" and sends the remaining $17 to Future. The latter then drop-ships the home mailing kit to the homeworker's customer (Exh. C-72, p. 27).
18. As alleged in paragraph 10 of the Complaint, Future Publications knowingly seeks the remittance of money through the mails by means of false representations (see Findings of Fact Nos. 14 & 15) made by its mailer/dealers at Future's express direction.
19. Delta Enterprises purchases programs and materials in bulk from Future, but has no other business relationship with Future (Tr. 164, 167). Although some of Delta's customers may choose to sell Future's "Opportunity is Knocking" program, Delta does not receive any money as a result of the sale of that program by its customers and Future. Thus Delta does not seek the remittance of money by means of false representations of its mailer/ dealers set forth in paragraph 8(b) of the Complaint (see Finding of Fact Nos. 14 & 15).
20. As previously indicated, Future's CMIP booklet directs its mailer/dealers to sell the "Opportunity is Knocking" program to a second level of new distributors. The second level distributors then sell a listing service by means of a circular entitled "Making Money is Easy When You Know How" (Exh. D-72; Tr. 34). The latter circular seeks the remittance of $15 and offers to list the names of its customers with 200 mail order firms. The circular indicates that the 200 firms can be expected to offer these customers various types of home mailing work. As alleged in paragraph 13 of the Complaint, the above second-level distributors make the following representations contained in the "Making Money is Easy" circular:
(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars.
(b) Earnings will be made by homeworkers by addressing envelopes and stuffing them with sales circulars.
These representations are found in the following language contained in the circular:
YOU CAN EARN GOOD MONEY WORKING WHEN YOU PLEASE IN THE COMFORT OF YOUR OWN HOME IN YOUR OWN MAIL ORDER BUSINESS, OR OTHER HOME BASED BUSINESS, OR AS A COMMISSION MAILER.
Many Mail Order firms . . . will show you how to get started and furnish you with catalogs, brochures, envelopes, etc., at reasonable cost.
. . .In some cases you may have to place ads, in others you may mail only to a mailing list. Emphasis supplied . Exh. D-72 .
21. Contrary to Complainant's assertion on brief, the falsity of these representations has not been admitted by Respondents. No evidence was adduced with respect to this alleged falsity. The mere fact that Respondents discontinued a similar, but different, circular offering a listing service for $18 (Exh. D-74; Tr. 141-2), has no bearing on the circular in issue which is still in use (Tr. 141; Exhs. E-75, D-72).
22. Persons responding to the "Making Money is Easy" circular (Exh. D-72) remit $15 to the mailer/dealer who sent them the circular. The latter then has the order drop-shipped by B.N.S. Enterprises, P. O. Box 63-5087, Margate, Florida 33063. B.N.S. Enterprises and the mailer/dealer each get 50% of the $15 that is paid (Exh. E-72). B.N.S. Enterprises and Future Publications are both divisions of Gladstone, Inc. (Tr. 125).
23. The representations that were found to be false in the above findings were material since they had the effect of inducing persons to purchase the programs in question.
24. Respondents are not conducting a lottery or scheme for the distribution of money by chance by means of the programs that are being offered for sale. In each program the participant pays a registration fee which constitutes consideration; and, the participant is told that he can make hundreds of dollars by securing envelopes or selling programs to others. However, the element of chance is missing. The money that is made by a participant depends upon his own efforts and is largely a matter under his own control. Once he secures the envelopes or sells a program to an individual, the participant receives his only commission or profit arising out of that sale; unlike other multilevel marketing schemes, the participant does not receive any money as a result of sales made, or envelopes secured, by his customers or other distant customers with whom he had no direct contact.
25. Findings of Fact Nos. 1 through 11, above, are incorporated herein by reference.
26. As previously stated, persons responding to Delta's "Your Key" circular (Exhs. B-72, B-73, B-75) receive the CMIP booklet containing three different circulars that the homeworker is directed to mail to other opportunity seekers. These circulars advertise three separate programs supplied by Future Publications, the publisher of the CMIP booklet. One of the circulars found in the CMIP booklet is identical to Delta's "Your Key" circular (CMIP booklet, pp. 11-12). On page 27 of the booklet, Future Publications seeks remittances through the mail at the address set forth in the caption, P. O. Box 63-5087, Margate, FL 33063, for the CMIP program advertised in "Your Key" (Tr. 37). Thus each homeworker is asked to sell the same program that he, himself, "purchased" from Delta. The CMIP homeworker obtains orders for the CMIP program and has Future send him the booklet or drop-ship the CMIP booklet to the homeworker's customer (CMIP, p. 27; Tr. 38).
27. As alleged in paragraph 8 of the Complaint, mailer/ dealers make the following representations by means of the "Your Key" circular:
(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars; and
(b) Attractive compensation will be made by homeworkers by addressing envelopes and stuffing them with sales circulars.
These representations are found in the quoted material set forth in Finding of Fact No. 9, above.
28. The representations set forth in Finding of Fact No. 27 are materially false. Persons responding to the "Your Key" circular receive the CMIP booklet (Tr. 37). All of the envelope stuffing programs offered to such persons in that booklet require substantial work in addition to the mere addressing and stuffing of envelopes. All of the programs require finding purchasers for the publisher's programs in order to earn commissions. Such prospective purchasers must be found before there will be any envelopes to stuff; finding these purchasers is the keystone of the programs offered. In addition, the homeworker must obtain advertisements in newspapers, get circulars printed, and keep records. Thus the money, if any, is made by finding purchasers, and not by merely addressing and stuffing envelopes (CMIP booklet, pp. 2, 27).
29. Future Publications sells the CMIP booklet by directing mailer/dealers to make the false representations set forth in paragraph 8 of the Complaint. Therefore, as alleged in paragraph 10 of the Complaint, Future knowingly seeks the remittance of money through the mails by means of false representations made by its mailer/dealers at its express direction (CMIP booklet, pp. 1, 2, 27).
30. Delta Enterprises purchases programs and materials in bulk from Future, but has no other business relationship with Future (Tr. 164, 167). Although some of Delta's customers may choose to sell Future's "Your Key" program, Delta does not receive any money as a result of the sale of that program by its customers and by Future. Thus, Delta does not seek the remittance of money by means of any action taken by its mailer/dealers.
31. The representations that were found to be false in the above findings were material since they had the effect of inducing persons to purchase the programs in question.
32. The marketing plan set forth in the CMIP booklet does not constitute a lottery or scheme for the distribution of money by chance. The same conclusion must also be reached with respect to the other marketing plans which are offered to customers of the mailer/dealers who are following the instructions of the CMIP booklet. In each case, the participant pays a registration fee which constitutes consideration; and, the participant is told that he can make hundreds of dollars by selling programs to others for securing envelopes. However, the money that is made by a participant is essentially under his own control and depends upon his own efforts. Once he sells a program to an individual or secures an envelope, he receives his only commission or profit resulting from that transaction; unlike other multilevel marketing schemes, the participant does not receive any commissions as a result of sales made by his customers or other distant customers with whom he had no direct contact. Thus, the commissions ("prizes") and other profits in the instant scheme are not distributed by chance.
33. Respondent Delta Enterprises ("Delta") seeks the remittance of money through the mail for an envelope stuffing program paying "30 cents for each envelope you stuff." Delta seeks such remittances at P. O. Box 2902, Rock Hill, S.C. 29730. (Exh. B-74; Tr. 41).
34. Delta first places the following typical classified advertisement in newspapers and magazines:
$300 WEEKLY] Home Mailing Program. Start immediately. Details: Delta, Dept. SA Box 2902-CRS. Rock Hill, South Carolina 29730
(Ans. ??1, 2; Tr. 39; Exh. A-74). Persons responding to this advertisement are sent a circular entitled "WE'LL PAY YOU 30 cents for EACH ENVELOPE YOU STUFF... " (Tr. 40; Exh. B-74).
35. As alleged in paragraph 4(a) of the Complaint, Delta represents in its advertisements that payment of the initial membership fee will allow immediate participation in its envelope stuffing promotion without further substantial financial investment by the homeworker (Ans. § 4(a)). In this regard, the "We'll Pay You 30 cents " circular gives the overall impression that homeworkers will primarily be engaged in stuffing and mailing envelopes and that all materials will be supplied to homeworkers without further monetary outlay (Exh. B-74; Tr. 96-97). (See also Finding of Fact No. 38, infra.) The representations contained in paragraph 4(a) of the Complaint are found in the following quotations from the circular (Exh. B-74):
WE'LL PAY YOU 30 cents for EACH ENVELOPE YOU STUFF and RETURN to us - according to our instructions.
The above sentence was in very large bold type and covered one-third of the page .
Now YOU can earn extra MONEY during your spare time in your own mailing-advertising business consisting mainly of the security of envelopes via classified ads, and DELIGHTFULLY EASY - PROFITABLE - STUFFINGENVELOPES at home.
After you get the envelopes, per our instructions, we will pay you 30 cents for each and every envelope you stuff and return to us. As you send in the envelopes, we'll rush your check to you... ellipsis in original .
. . . We'll also reimburse your cost of mailing the envelopes to us.
. . .
After receiving your kit of starting supplies, you will be on your way to INDEPENDENCE and FINANCIAL GROWTH.
. . .
Your starting supply of circulars and registration into this unique program is $15.00. After that we will gladly send all future mailing pieces without charge for as long as you wish to participate.
START NOW
By Filling out the order form and mailing it today...
You could be the person who receives our next check]
36. The above representation contained in paragraph 4(a) of the Complaint is materially false. Customers responding to Delta's advertisements by remitting $15 receive a booklet ("30 cents booklet") containing two programs relating to envelope stuffing. (Exh. C-74). As previously stated, the circular gives the overall impression that the homeworker will be doing simple work stuffing and mailing envelopes. However, the two programs offered in the above booklet require the expenditure of substantial time and money before the participant can begin to earn money. In both programs the homeworker's primary function is obtaining names of opportunity seekers. In the first program the homeworker is instructed to get these names by "posting notices on bulletin boards at laundromats, grocery stores, libraries, and other places...." (Exh. C-74, p. 4). The notices advertise that extra money can be made in home mailing, and state that details will be provided if a self-addressed, stamped envelope is sent to the homeworker. The latter then receives these self-addressed envelopes from responding opportunity seekers. He then stuffs each envelope with a circular (supplied by Alltime Enterprises) and mails the "stuffed," unsealed envelopes in a large manila envelope to Alltime Enterprises, P. O. Box 26353, Tamarac, FL 33320 (Exh. C-74, p. 4). Thus, the homeworker will not be able to start stuffing envelopes as soon as he receives his kit; he must spend substantial time and incur transportation costs while posting notices in order to receive any envelopes to stuff.
37. The second program in the "30 cents" booklet also reveals the falsity of the representation contained in paragraph 4(a) of the Complaint. There, the homeworker is instructed to place classified advertisements in newspapers and magazines soliciting self-addressed, stamped envelopes from opportunity seekers (Exh. C-74, pp. 5-6). As in the first program, these are the envelopes that must be stuffed. In addition to the advertising costs, the booklet indicates that the homeworker will have to buy supplies and materials such as paper, record keeping books, glue, tape, paper clips, and rubber bands (Exh. C-74, p. 7). Thus, substantial time and money must be spent in order to obtain any envelopes to stuff.
38. As alleged in paragraph 4(b) of the Complaint, Delta represents in its advertisements that amounts of earnings are primarily determined by whatever time participants devote to the routine tasks of addressing envelopes and stuffing them with sales circulars. In this regard, the "We'll Pay You 30 cents " circular (Exh. B-74) begins with the following statement in very large letters occupying about one-third of the one-page circular:
WE'LL PAY YOU 30 CENTS
for EACH ENVELOPE
YOU STUFF and RETURN to
us - according to our instructions.
Thereafter, the circular makes the following statements:
Now YOU can earn extra MONEY during your spare time in your own mailing-advertising business consisting mainly of the security of envelopes via classified ads, and DELIGHTFULLY EASY - PROFITABLE - STUFFING - ENVELOPES at home.
After you get the envelopes, per our instructions, we will pay you 30 cents for each and every envelope you stuff and return to us. As you send in the envelopes, we'll rush your check to you. . .
. . .
After receiving your kit of starting supplies, you will be on your way to INDEPENDENCE and FINANCIAL GROWTH.
Your starting supply of circulars and registration into this unique program is $15.00. After that we will gladly send all future mailing pieces without charge for as long as you wish to participate.
. . .
You could be the person who receives our next check]
Thus, the overall impression of the circular is that one will receive circulars and envelopes from Delta and that the homeworker would earn his money by stuffing the circulars into the envelopes and returning them to the company. These duties are emphasized in large, bold print. Many ordinary persons reading this advertisement would overlook the phrase "security of envelopes via classified ads" since it appears in small print; further, many readers would fail to understand the significance of that phrase in light of the clearly emphasized message that the homeworker would be engaged in simple envelope stuffing (Tr. 97-99).
39. The representation set forth in the preceding paragraph (and in paragraph 4(b) of the Complaint) is materially false. An individual who responds to Delta's advertisement (Exh. B-74) receives a booklet (Exh. C-74) containing two programs relating to envelope stuffing. In both programs the homeworker is required to spend most of his time obtaining self-addressed envelopes containing names of opportunity seekers for the benefit of Alltime Enterprises. In the first program these are obtained by posting notices on bulletin boards; the second program requires the homeworker to place classified advertisements in newspapers and magazines seeking the self-addressed envelopes from opportunity seekers. In both programs, after receiving these envelopes, the homeworker stuffs the envelopes with circulars and mails them in a large manila envelope to Alltime Enterprises. Thus, the time involved in stuffing and mailing is relatively small compared to the time spent obtaining the envelopes. Earnings are determined by the number of envelopes stuffed and mailed (30 cents or 75 cents per envelope), and the number of such envelopes is primarily determined by the time spent obtaining them (Exh. C-74).
40. Respondent Delta admits the allegation contained in paragraph 4(c) of the Complaint that Delta represents in its advertisements that participants will promote the sale of a product or service substantially different from the program they are purchasing (Delta's Ans. § 4(c)). However, the alleged representation is not false. In this regard, the "We'll Pay You 30 cents " circular (Exh. B-74) promotes a simple envelope stuffing program for homeworkers. On the other hand, the circular which is to be stuffed by those homeworkers promotes a different type of service (Exh. D-74). The latter circular offers to list the responding person's name as a prospective home-business opportunity seeker, and to provide his name to companies who are seeking home mailers. The participant is told to expect to receive offers of various types from these companies relating to home mailing. The listing service described above is substantially different from the envelope stuffing program advertised in the "We'll Pay" circular.
41. In addition, even assuming arguendo that the representation alleged in paragraph 4(c) is false, it is not materially false. In this regard, a person responding to the "We'll Pay" circular anticipates simply stuffing envelopes with circulars and receiving 30 cents for each envelope stuffed. As such, he is not selling anything. Since he is merely providing a service for another company, and will be paid even if his stuffed envelopes do not result in sales, he is not concerned with the nature of the product.
42. As previously indicated, persons responding to the "We'll Pay You 30 cents " circular receive the "30 Cents" booklet (Exh. C-74) containing two envelope stuffing programs. Participants in these programs are told how to obtain stamped, self-addressed envelopes from opportunity seekers. The participant is then directed to stuff these envelopes with the circular entitled "Making Money Is Easy" (Exh. D-74), and to send the stuffed, unsealed envelopes in a larger package to Alltime Enterprises, P. O. Box 26353, Tamarac, FL 33320. When Alltime receives each stuffed envelope, it adds a "finishing piece" and mails the envelope to the opportunity seeker (Exh. C-74, p. 5). Alltime Enterprises is a division of Gladstone, Inc., of which Burton Gladstone is the president (Tr. 125; 150-151).
43. Delta Enterprises purchases the booklet advertised in the "We'll Pay You 30 cents " circular from Future Publications (Tr. 158-159), which is also a division of Gladstone, Inc. (Tr. 125). Delta buys this booklet in bulk (Tr. 165) for $1 per copy (Tr. 167-168). Persons who remit $15 to Delta in response to the
"We'll Pay" circular receive a copy of the booklet. Thereafter, the homeworker deals directly with Alltime Enterprises to obtain money for stuffed envelopes. Delta does not seek money through the mails by means of the "Making Money Is Easy" circulars which (Exh. D-74) are stuffed by its customers.
44. The "Making Money is Easy" circular (Exh. D-74) which is the subject of Docket No. 14/74 is different from the circular of the same name (Exh. D-72) in Docket No. 14/72. The former document is no longer in use and has been replaced by the latter (Tr. 142).
45. As alleged in paragraph 8 of the Complaint in Docket No. 14/74, the older "Making Money is Easy" circular (Exh. D-74) represents as follows:
(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars; and,
(b) Earnings will be made by homeworkers by addressing envelopes and stuffing them with sales circulars.
The following language quoted from the circular makes the above representations:
MAKING MONEY IS EASY
. . . WHEN YOU KNOW HOW]
YOU CAN EARN GOOD MONEY WORKING
WHEN YOU PLEASE IN THE
COMFORT OF YOUR OWN HOME BUSINESS BY
COMMISSION ADDRESSING/MAILING]
Have you ever wondered how you could get into your own home business-mailing circulars, brochures or catalogs on a commission basis for profit? . . . Your work will consist of affixing labels to or addressing the mailing pieces, placing ads in some cases, and handling money and forwarding orders back to the company you are a dealer for.
The circular then asks the reader to remit $18 to Alltime in return for being listed with many firms which will subsequently offer that person the kind of work mentioned in the above quotation.
46. The record does not contain any evidence indicating that the representations set forth in the preceding Finding are false.
47. The representations in paragraphs 4(a) and 4(b) fo the Complaint, previously found to be false, are material because they tend to induce the reader to purchase the program advertised.
48. Findings of Fact Nos. 1 through 11, above, are incorporated herein by reference.
49. Persons responding to the "Your Key" circular (Exh. B-75) receive the CMIP booklet containing three different circulars that the CMIP homeworker is directed to reproduce and mail to other opportunity seekers. These circulars advertise three separate programs supplied by the publisher of the CMIP booklet, which is Future Publications, P. O. Box 63-5087, Margate, FL 33063. One of the three circulars found in the CMIP booklet is entitled "We'll Pay You 30 Cents For Each Envelope You Stuff and Return to Us" (CMIP booklet, p. 13; Exh. C-75). On page 27 of the booklet, Future Publications seeks remittances through the mail from CMIP homeworkers at the address set forth above for the "30 Cents" program.
50. The CMIP homeworker is directed by Future Publications to mail the "We'll Pay You 30 cents " circular to the prospective purchaser. The latter then remits $25 to the CMIP homeworker to "register" in the program. The CMIP homeworker then sends $10 (plus $2 for first-class return mail) to Future Publications and requests the latter to drop-ship the "30 Cents" booklet to the customer (Exh. C-75, p. 27).
51. The "We'll Pay You 30 cents " circular that the CMIP homeworker is directed to mail is identical in all material respects to the circular mailed by Delta Enterprises (Exh. B-74) in Docket No. 14/74, except that the CMIP homeworker's name and address are printed on the circular.
52. As alleged in paragraph 8(a) of the Complaint, CMIP homeworkers represent in the "We'll Pay You 30 Cents" circular that payment of the initial membership fee will allow participation in the envelope stuffing program without further substantial financial investment by the homeworker. This is the same representation found in Finding of Fact No. 35 to have been made by Delta (except that Docket No. 14/74 contemplated "immediate" participation). The "We'll Pay" circular gives the overall impression that homeworkers will primarily be engaged in stuffing and mailing envelopes and that all materials will be supplied to homeworkers without further monetary outlay (Exh. C-75, p. 13; Tr. 96-97). The representations contained in paragraph 8(a) of the Complaint are found in the quotations set forth in Finding of Fact No. 35, above.
53. The representation contained in paragraph 8(a) of the Complaint is materially false. Customers responding to the "We'll Pay" circular by sending $25 to the CMIP homeworker subsequently receive a booklet ("30 Cents booklet") containing two programs relating to envelope stuffing (Exh. D-75). As previously indicated in Finding of Fact Nos. 36-37, both programs require the expenditure of substantial time and money before the participant can begin to earn money.
54. As alleged in paragraph 8(b) of the Complaint, the CMIP homeworkers represent in the "We'll Pay" circular that amounts of earnings will be primarily determined by whatever time participants devote to addressing envelopes and stuffing them with sales circulars. This representation is materially false. The basis for this conclusion is the same as that which is set forth in Finding of Fact Nos. 38 and 39 when the identical representation was made by Delta.
55. Paragraph 8(c) of the Complaint alleges that the CMIP homeworkers represent in the "We'll Pay" circular that participants will promote the sale of a product or service substantially different from the program they are purchasing. Assuming that this representation was made, it is not materially false. The basis for this conclusion is set forth in Finding of Fact Nos. 40 and 41.
56. Future Publications is a division of Gladstone, Inc., of which Burton Gladstone is the president (Tr. 125). Future Publications publishes the CMIP booklet. The booklet (Exh. C-75) directs CMIP homeworkers to mail the "We'll Pay You 30 Cents" circular to opportunity seekers for the purpose of selling Future's "30 Cents" booklet. As previously stated, the CMIP homeworker finds the customers and then Future drop-ships the "30 Cents" booklet directly to those customers (Exh. C-75, p. 27).
57. As alleged in paragraph 10 of the Complaint, Future Publications knowingly seeks the remittance of money through the mails by means of the aforementioned false representations made by its mailer/dealers (the CMIP homeworkers) at Future's express direction.
58. Delta Enterprises purchases programs and materials in bulk from Future, but has no other business relationship with Future (Tr. 164, 167). Although some of Delta's customers (CMIP homeworkers) may choose to sell Future's "30 Cents" program, Delta does not receive any money as a result of the sale of that program by its customers and Future. Thus, Delta does not seek the remittance of money for the "30 Cents" program by means of CMIP homeworkers. However, as previously found in Docket No. 14/74, Delta makes the same materially false representations when it mails out the "We'll Pay" circular, and sells the "30 Cents" program directly to those who respond to the circular.
59. Future's CMIP booklet directs its mailer/dealers (CMIP homeworkers) to sell the "30 Cents" program to a second level of new distributors. These second-level distributors are instructed how to obtain stamped, self-addressed envelopes from a third-level of opportunity seekers. They are then told to stuff these envelopes with the circular entitled "Making Money is Easy When You Know How," and to send the stuffed, unsealed envelopes in a larger package to Alltime Enterprises, P. O. Box 26353, Tamarac, FL 33320. When Alltime receives each stuffed envelope, it adds a "finishing piece" and mails the envelope to the third level opportunity seeker (Exh. D-75, p. 2). Alltime then pays the second level person 30 cents (or 75 cents if classified ads were purchased) for securing the self-addressed envelope. This money is paid regardless of whether or not Alltime makes a sale. Alltime is a division of Gladstone, Inc. (Tr. 125; 150-151; Exhs. D-75, E-75).
60. The third-level opportunity seeker who responds to the "Making Money is Easy" circular remits $15 directly to Alltime Enterprises, P. O. Box 26353, Tamarac, FL 33320 (Exh. E-75).
61. As alleged in paragraph 13 of the Complaint, the "Making Money is Easy" circular represents that:
(a) Work-at-home employment is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars, and
(b) Earnings will be made by homeworkers by addressing envelopes and stuffing them with sales circulars.
These representations are found in the following language contained in the circular:
YOU CAN EARN GOOD MONEY WORKING WHEN YOU PLEASE IN THE COMFORT OF YOUR OWN HOME IN YOUR OWN MAIL ORDER BUSINESS, OR OTHER HOME BASED BUSINESS, OR AS A COMMISSION MAILER.
Many Mail Order firms . . . will show you how to get started and furnish you with catalogs, brochures, envelopes, etc., at reasonable cost. . . In some cases you may have to place ads, in others you may mail only to a mailing list. Emphasis supplied . Exh. E-75 .
62. No evidence was presented which would tend to indicate that the representations contained in paragraph 13 of the Complaint are false.
63. Contrary to the allegation contained in paragraphs 17 and 18 of the Complaint, respondents are not conducting a lottery or scheme for the distribution of money by chance by means of the programs that are being offered for sale. The basis for this conclusion is the same as that set forth in Finding of Fact No. 24.
64. The representations found to be false in the above Findings of Fact are material because they have the effect of inducing persons to purchase the programs in question.
1. All of the respondents contend that the complaints should be dismissed on the ground that the Complainant failed to establish that the respondents were "persons" within the meaning of 39 U.S.C. § 3005. Respondent Delta contends that it is not an "entity" and the remaining respondents argue that there is no evidence of record to establish their separate identity. These contentions are rejected. 39 U.S.C. § 3005 confers certain jurisdiction on the Postal Service over "any person" engaged in certain prohibited activities. However, the regulations define the term "person" to include any name, address, number or other designation under or by use of which the respondent seeks remittances of money or property through the mail. Therefore, the names and addresses listed on the complaints in these cases constitute proper respondents for the purposes of the statute.
2. Respondents B.N.S. Enterprises and Alltime Enterprises also contend that the Postal Service lacks jurisdiction because no evidence was adduced to establish that these respondents had actually received any money through the mail in response to their allegedly deceptive advertisements. This contention is also rejected. Jurisdiction of the Postal Service under 39 U.S.C. § 3005 is established if the respondent's advertisements give an address with a ZIP Code to which remittances are to be sent; actual use of the mails need not be shown. IAAIC (International American Arab Investment Corporation), P.S. Docket Number 13/173 (Dec. 29, 1982). Both of these respondents requested such readers to send remittances to them at the addresses set forth in the caption.
3. Each of the respondents' advertisements must be considered as a whole and the meaning must be determined in light of the probable impact of this material on a person of ordinary mind. Donaldson v. Read Magazine, 333 U.S. 178, 189 (1948); Peak Laboratories, Inc. v. U. S. Postal Serv., 556 F.2d 1387, 1389 (5th
Cir. 1977). The impression of advertising oon the ordinary mind is a question of law for the presiding officer to determine and testimony on interpretation is not required to make that determination. Vibra-Brush v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2nd Cir. 1958). Express misrepresentations are not required. It is the net impression which the advertisement is likely to make upon individuals to whom it is directed which is important, and even if an advertisement is so worded as not to make an express representation, if it is artfully designed to mislead those responding to it, the false representation statute is applicable. G. J. Howard Co. v. Cassidy, 162 F. Supp. 568 (E.D.N.Y. 1958); See also, Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976). I have been guided by the foregoing standards for the purpose of determining whether the respondents made the representations that have been alleged in the various complaints.
4. Respondents argue that they were unable to properly defend and prepare these cases for trial because the complaints lacked specificity. In this regard, they contend that they were not informed of the precise language contained in their advertisements which formed the basis for the individual representations alleged in the complaints. Respondents argue that this lack of specificity, together with the failure of the undersigned to afford respondents additional time for discovery, deprived them of due process of law. I disagree. It was not necessary for the Complainant to specify the precise language contained in the advertisement materials. With the exception of Count III of Docket No. 14/73 which is dismissed due to ambiguity, Complainant's allegations of alleged misrepresentations adequately notified respondents of the issues in question. In addition, it is noted that in each instance in which I have sustained Complainant's allegation that a representation was made, the language supporting the alleged representation was easily found. The specific representations which have been found are discussed below under the applicable docket number.
5. Delta mailed the "Your Key to Extra Income" circular as a means of selling the Cooperative Mailing and Income Program (CMIP). This circular and Delta's newspaper advertisements made the representations contained in subparagraphs (a), (b), (c), and (d) of paragraph 4 of the Complaint. Delta did not make the representation set forth in paragraph 4(e) of the Complaint. Complainant proved by a preponderance of the reliable and probative evidence of record that the representations contained in subparagraphs (a) and (d) of paragraph 4 are materially false in fact. Complainant failed to prove the falsity of the representations set forth in paragraphs 4(b) and (c) of the Complaint.
6. In its CMIP booklet, Future Publications directed CMIP homeworkers to mail the "Opportunity is Knocking" circular to opportunity seekers. That circular made the representation contained in subparagraph (b) of paragraph 8 of the Complaint. That representation is materially false in fact. Complainant failed to prove that the representations contained in subparagraphs (a) and (c) of paragraph 8 were made. In view of my finding with respect to paragraph 8(b), I hold that Future Publications knowingly sought the remittance of money through the mails by means of false representations made by its mailer/dealers at its express direction. United States v. International Term Papers, Inc., 477 F.2d 1277 (1st Cir. 1973).
7. Complainant also contends that Delta Enterprises knowingly seeks the remittance of money through the mails by means of the same false representations made by its mailer/dealers at its express direction. Complainant reaches this conclusion by pointing to the fact that Delta supplied the CMIP homeworkers with the CMIP booklet. The CMIP homeworkers were told to seek orders for the "Opportunity is Knocking" home mailing kit and to remit the money received to Future Publications. Complainant then argues that Future is the agent or representative of Delta for the receipt of remittances on behalf of Delta. To this end, Complainant relies upon 39 U.S.C. § 3005(b) which provides:
(b) The public advertisement by a person engaged in activities covered by subsection (a) of this section, that remittances made by mail to a person named in the advertisement, is prima facie evidence that the latter is the agent or representative of the advertiser for the receipt of remittances on behalf of the advertiser.
I must conclude that Delta does not seek remittances for the "Opportunity is Knocking" home mailing kit. Delta does not advertise the kit, but sells the CMIP program booklet. The latter booklet is published by Future, and it is Future that advertises the "Opportunity is Knocking" program. Moreover, even if it could be said that § 3005(b) creates a presumption that Future is Delta's agent, then I must also conclude that the evidence of record rebuts that presumption. In this regard, Delta purchases programs and materials in bulk from Future, but has no other business relationship with Future (Tr. 164, 167). Although some of Delta's customers may choose to sell Future's "Opportunity is Knocking" program, Delta does not receive any money as a result of the sale of that program by its customers and Future.
8. B.N.S. Enterprises sought the remittance of money through the mails by means of representations made by the "Opportunity is Knocking" homeworkers in the "Making Money is Easy" circular. Although the circular made the representations contained in subparagraphs (a) and (b) of paragraph 13 of the Complaint, Complainant failed to prove the falsity of those representations.
9. My conclusions with respect to the representations contained in subparagraphs (a) through (e) of paragraph 4 of the Complaint are identical to my conclusions in Docket No. 14/72 regarding paragraph 4 of that Complaint.
10. In its CMIP booklet, Future Publications directs the CMIP homeworkers to mail the "Your Key to Extra Income" circular to opportunity seekers. That circular makes the representations contained in subparagraphs (a) and (b) of paragraph 8 of the Complaint. Those representations are materially false in fact. Therefore, Future Publications knowingly seeks the remittance of money through the mails by means of false representations made by its mailer/dealers at its express direction. United States v. International Term Papers, Inc., supra.
11. For the reasons set forth in Conclusion of Law No. 7, above, Delta cannot be held responsible for the false representations of the CMIP homeworkers; however, Conclusion of Law No. 5 establishes that Delta makes certain false representations with respect to the sale of the CMIP booklet.
12. Count III of the Complaint points out that some persons purchase the CMIP booklet directly from Future Publications. Complainant alleges in paragraph 12 of the Complaint that Future falsely represents in the CMIP booklet that:
(a) Work-at-home employement is available which primarily involves the routine tasks of addressing envelopes and stuffing them with sales circulars.
(b) Attractive compensation will be made by homeworkers by addressing envelopes and stuffing them with sales circulars.
Complainant does not explain how the CMIP booklet makes these representations. Although these representations are found in the "Your Key to Extra Income" circular (see Conclusion of Law No. 10, above), persons responding to that circular become aware of the falsity of those representations when they receive the CMIP booklet. A person reading the CMIP booklet becomes aware of the fact that Future's program involves more than merely stuffing envelopes. Thus, it is not clear how Complainant would argue that the CMIP booklet itself represents that simple envelope stuffing work is available. Although this Count must be dismissed, it is noted that I have recommended mail stop orders in other sections of this decision against Future with respect to all programs advertised in the three circulars contained in the CMIP booklet; however, the latter violations were found by reason of the third party misrepresentation doctrine of United States v. International Term Papers, Inc., supra.
13. Delta mailed a circular entitled "We'll Pay You 30 cents " to opportunity seekers. Persons responding to that circular received the "30 cents" booklet. Delta made the representations contained in subparagraphs (a) and (b) of paragraph 4 of the Complaint by means of the above circular and a small classified advertisement. These representations are materially false in fact. Delta also admits that it made the representation contained in paragraph 4(c) of the Complaint; however, Complainant failed to prove that this alleged representation was either false or material.
14. Homeworkers following the program outlined in the "30 cents" booklet are told how to obtain stamped, self-addressed envelopes from opportunity seekers. The homeworkers are then told to stuff these envelopes with a circular entitled "Making Moneyis Easy" and to return the stuffed, unsealed envelopes to Alltime Enterprises. Respondent Alltime Enterprises then adds a "finishing piece" to the envelope, seals it, and mails it directly to its prospective customer. In return for the services rendered, Alltime pays the "30 cents" homeworker 30 cents (or 75 cents if the homeworker used classified advertisements) for each selfaddressed envelope submitted to Alltime regardless of whether the latter ultimately sold a program to the opportunity seeker.
15. Complainant alleges that both Delta and Alltime knowingly seek the remittance of money through the mails by means of false representations made by their mailer/dealers at their express direction. Although I have found that the "Making Money is Easy" circular contains the representations set forth in subparagraphs (a) and (b) of paragraph 8 of the Complaint, Complainant has failed to sustain its burden of proof on the issue of falsity. Furthermore, for the reasons set forth in Conclusion of Law No. 7, Delta is not the agent of Alltime and does not seek the remittance of money through the mails by means of the circular in question.
16. The false representations alleged in Count I of the Complaint are identical to those alleged in paragraph 4 of the Complaint in Docket No. 14/72. I make the same Findings and Conclusions with respect to the instant case.
17. Homeworkers following the programs outlined in Future's CMIP booklet are told to mail the circular entitled "We'll Pay You 30 cents ". Persons responding to this circular send money to the CMIP homeworker, who then arranges for Future to drop-ship the "30 cents" booklet to the customer. The circular in question makes the representations contained in subparagraphs (a) and (b) of paragraph 8 of the Complaint. I have found that those representations are materially false in fact. Complainant failed to prove that the alleged representation in paragraph 8(c) was materially false. Accordingly, I hold that Future Publications knowingly seeks the remittance of money through the mails by means of false representations (a) and (b) made by its mailer/dealers (CMIP homeworkers) at its express direction. United States v. International Term Papers, Inc., supra.
18. It has previously been held in this decision that Delta made certain false representations when it mailed the "We'll Pay You 30 cents " circular to prospective customers (see Conclusion of Law No. 13, above). However, Delta does not seek remittances for this program by means of representations specifically made by the CMIP homeworkers. As previously stated, Future is not an agent of Delta. As such, Delta cannot be charged with a third party misrepresentation based upon the actions of the CMIP homeworkers. See Conclusion of Law No. 7, above.
19. As set forth in Conclusion of Law No. 14 and 15, homeworkers following the program set forth in Future's "30 cents" booklet are told to obtain self-addressed envelopes from opportunity seekers. They are then told to stuff these envelopes with the "Making Money Is Easy" circular and to send them, unsealed, to Alltime Enterprises. Alltime adds a "finishing piece", seals the envelope and mails it to the customer. I have found that the circular makes the representations contained in subparagraphs (a) and (b) of paragraph 13 of the Complaint. However, Complainant has failed to prove that these representations are false. Therefore, I am unable to sustain Complainant's contention that Future and Alltime knowingly seek the remittance of money through the mails by means of the alleged false representations of the homeworkers following the "30 cents" program.
20. Complainant argues that the envelope stuffing programs discussed in Docket Nos. 14/72, 14/73, and 14/75 constitute lotteries or schemes for the distribution by chance in violation of 39 U.S.C. § 3005. That section provides for a mail stop order when it is found that:
. . . any person is engaged in conducting a lottery, gift enterprise or scheme for the distribution of money or of real or personal property, by lottery, chance, or drawing of any kind. . . .
The necessary elements of a lottery are the furnishing of a consideration, the offering of a prize, and the distribution of the prize by chance. Brooklyn Daily Eagle v. Voorhies, 181 F. 579, 581 (E.D.N.Y. 1910); Horner v. United States, 147 U.S. 449 (1893). This contention must be rejected because the element of chance is missing. In each of the programs the participant pays a registration fee which constitutes "consideration"; and he is told that he can make hundreds of dollars (the prize) by selling programs to others or by securing envelopes. However, the amount of money that is made by a participant is essentially under his own control and depends upon his own efforts. Once he sells a program to an individual or secures an envelope, he receives his only commission or profit resulting from that transaction. Unlike other multi-level marketing schemes, the participant does not receive any commissions as a result of sales by his customers or other distant customers with whom he had no direct contact. Thus the commissions ("prizes") and other profits in the instant schemes are not distributed by chance. I hold that the programs in question are not lotteries within the meaning of 39 U.S.C. § 3005.
21. In view of the foregoing violations in these consolidated cases, the attached order should be issued against Delta Enterprises and Future Publications. In this regard, Delta made false representations with respect to the sale of the following programs:
Docket No. CMIP booklet 14/72, 14/73, 14/75 "30 Cents" booklet 14/74
Future Publications made false representations with respect to the sale of the following programs:
Docket No.
"Opportunity is Knocking"
Mailing Kit 14/72
CMIP booklet 14/73
"30 cents" booklet 14/75