755 F.Supp. 1165 UNITED STATES of America, Plaintiff, v. WILLIAM SAVRAN & ASSOCIATES, INC., a New York Corporation, d/b/a "Successful Systems"; Dr. William Savran; "John Does Nos. 1-10"; and "Jane Does Nos. 1-10", Defendants. No. CV 90-4445 (ADS). United States District Court, E.D. New York. Jan. 29, 1991. Andrew J. Maloney, U.S. Atty., E.D.N.Y., Brooklyn, N.Y. by Stephen J. Riegel, Asst. U.S. Atty., for plaintiff. Newmark, Lamb, Dowling & Marchisio, Garden City, N.Y. (James W. Dowling, of counsel), for defendants. OPINION AND ORDER SPATT, District Judge. Seeking vulnerable consumers who, in the hopes of earning "exceptional money" in the comfort and safety of their own home, paid $27 for the "Successful Systems" product, William Savran & Associates, Inc. now finds itself the subject of a criminal indictment for mail fraud and the defendant in this related civil forfeiture proceeding. Before the Court at this time is the motion of the defendants to vacate the warrant that seized a bank account, and the cross-motion of the plaintiff to freeze the defendants' assets, among other relief sought. [Editor's note: for our purposes, the actual core of the decision is not that useful to us. It involves civil forfeiture procedure, which is fairly complicated and technical. Yes, chickenboners, you can have your bank accounts seized by the US Postal Service if you deposit money from a pyramid scheme into them.] The following is the evidence that was adduced at the hearing on the motions and the Court's findings of fact based thereon. a. The Plaintiff's Case. John McDermott, a United States Postal Inspector, testified that he investigated "Successful Systems", the defendants' business, since approximately September 1990 and reviewed the various documents mailed to potential consumers by the defendant William Savran & Associates, Inc. ("Associates"). McDermott explained the system used by Associates to effectuate the "Successful Systems" program, as follows: The potential consumer is contacted in one of two ways: either by an advertisement in a magazine or by direct mail. The direct mail ad (Plaintiff's Exhibit 1 in evidence) is the first document the consumer receives. It consists of eight separate pages and an envelope. Nowhere in these single- spaced pages is there any mention of the product to be sold. At the outset the Court finds that on its face the document is intentionally vague, ambiguous, confusing and difficult to read and comprehend. A repetitive reading of the paper did not substantially improve the Court's comprehension. Relevant portions of the initial document, which bear quotation, are as follows: " 'SUCCESSFUL SYSTEMS' Post Office Box 815 Horace Harding Station Flushing, New York 11362 HOMEWORKERS NEEDED NOW! 'Revolutionary' home-mailing program pays you up to $100 per single order. You never have to buy stamps, envelopes, circulars, or any supplies. Dear Friend (if not now--soon!), If you're anxious to earn exceptional money (up to $300.00, or more, each day) doing simple, pleasant work in the comfort and safety of your own home, you're going to love what my company has to offer you. My name is Lisa Michaels. As Vice President of 'Successful Systems', a reputable mail order firm, I am pleased to announce that we are looking for a limited number of 'home-workers' to help us mail our offers out to the MILLIONS of people, who we could NEVER possibly reach, even if we were to work around the clock! At present there are many ordinary people, from all walks of life, who have no special skills or previous experience, who are earning up to $300/day or more, working as 'INDEPENDENT HOMEWORKERS' under the expert guidance of our company! There people call our 'HOME-MAILING PROGRAM' ... 'The fastest, easiest, and best way to make money without ever leaving your house or apartment.' What makes our program 'UNIQUE' is the fact that with our system you will NEVER be required to purchase ANY postage stamps, envelopes, or circulars for as long as you stay in our program. We have the ONLY program available anywhere that pays you TWO WAYS! ... Not only will you receive $1 for every envelope that you secure for us and STUFF with our offers ... you will also receive 50% COMMISSION on every sale generated by your mailings! ... Up to $100/ORDER! Commission checks are mailed out weekly! I can assure you that as a participant in our program, you will NEVER mail out anything objectionable or pornographic. There are no quotas to meet, and no-one will be looking over your shoulder. You can work as much or as little as YOU want. You are your own boss! There are no contracts to sign, and we further GUARANTEE that your name will never appear on any of our circulars. And don't forget, commission checks are sent out from our home office ... EVERY WEEK! NO LONG WAIT ... to get all the money you have coming! It doesn't matter where you live! Whether you come from a big city, or live on a farm ... YOU can earn all of the extra money you need to catch up on those overdue bills, or simply to enjoy a BETTER LIFE with more spendable MONEY FOR YOU! THIS IS NOT A 'GET RICH QUICK' SCHEME ... It makes me so mad to know that several men and women who could greatly benefit from this outstanding opportunity will not do so because they are skeptical. Some questionable hit- and-run operations have given 'home-work' a black eye. Some have promised millions of dollars to their homeworkers! Believe me, you'll never become a multi-millionaire working for my company, or any other firm. But, if you want to earn some very good money quickly, for easy to do pleasant work, we can help you! You're going to love this program ... it works! 'SUCCESSFUL SYSTEMS' OFFERS YOU IMMEDIATE PROFITS! We provide simple step- by-step instructions with your complete HOME MAILING KIT, easy enough for a child to understand. It doesn't matter where you live, big city or small town, in all 50 states. Little space is required ... a spare bedroom is great, but the kitchen table will also do just fine. Some people perform our homework tasks while watching TV. Just 1 or 2 hours a day (or evenings) will allow you to accomplish the simple at-home tasks required. I'm proud of the fact that many of our valuable homeworkers have called our program 'The easiest and best way to make money at home.' No contracts ... nothing to sign. Your name will never appear on any advertising, but you can soon be receiving good money ... paid weekly ... for doing simple homework. If you're eager to make fast profits with this exceptional homework program, take action NOW! We require a one-time only, small registration fee of $25 to register you as one of our Preferred Independent Homeworkers. NO RISK MONEY-BACK GUARANTEE ... You are the judge! You must be 100% pleased ... absolutely delighted ... or you may return all materials within 30 days, and we'll cheerfully refund your one-time registration fee. Yours Truly, Lisa Michaels (Vice-President) 'Successful Systems' P.S. It is important that you do act NOW! We seek only a limited number of new homeworkers. Avoid disappointment ... take action right away! You'll be glad you did." An additional sheet in the enclosure headed by the large darkened letters "Revolutionary Home-Mailing Program" reiterates that the consumer will be paid $1.00 for every envelope you stuff plus 50% commission on every sale (up to $100/order). Again, this page clearly states that the plan "NEVER requires you to purchase ANY envelopes, postage stamps or circulars for as long as you stay in the program." What program? What product? The Court finds that by reading the initial eight-page inducement ad, a reasonably prudent person could not ascertain such information. Also enclosed in the package is the "No-risk Homeworkers Application". For $25 plus $2.00 for "S & H", or a total of $27, "Rush me my complete Home- mailing Kit", with the right to an "immediate refund". The Court finds that there are a number of false and/or misleading and/or deceptive statements in the ad. First, the Court agrees with Inspector McDermott that any consumer who reads this ad would believe that he or she would be stuffing envelopes and get paid a commission based on such envelopes. In actuality, the "program" apparently has nothing to do with stuffing envelopes. Second, nowhere in the ad is there any mention of any product whatsoever. Third, and, significantly, nowhere in the ad does it say that the consumer will have to spend his or her own money to place ads in newspapers and periodicals. In fact, the ad implies that there will be no expense to the consumer ("You never have to buy stamps, envelopes, circulars or any supplies"). After reading the "come-on" ad (Plaintiff's Exhibit 1), the unwary consumer sends $27 to Associates and then receives Plaintiff's Exhibit 2, a brochure entitled, " 'Successful Systems' Home-Mailing Program Procedure Manual, by Lisa Michaels". Now the consumer is advised that he or she will be a "registered distributor of our HOTTEST MONEY-MAKERS, specifically we offer a No-Nonsense way to $550 a day". Still no mention of the product or the program. On page two of the manual the consumer is again assured that he or she "never have to spend one cent on any circulars, envelopes or stamps". On page two, the consumer is finally advised what to do--"Your only expense in this program will be for placing one or more inexpensive classified ads". The consumer is advised to place a classified advertisement, as follows: " 'A NO-NONSENSE WAY TO $500 A DAY!' ... $1 + Self Addressed Stamped Envelope (SASE) ... Your name and address." When the consumer places the ad(s) he or she will then receive replies containing $1.00 in each reply and he or she will stuff the self-addressed stamped envelope. With what? With circulars (Plaintiff's Exhibit 3) that advertise "A No-Nonsense way to $500 a Day". Still no mention of the product to be sold. The second consumer fills out a coupon and sends $20 to the first consumer (with immediate refund rights). The coupon states, "Please rush me a copy of your 'ultimate' home business plan". Still no mention of any product or program; only double-talk and evasive, confusing language for an anonymous product. McDermott testified that this plan is in the nature of a chain letter because the first level of consumer pays $27 and advertises to the second level of consumer who pays $20. Of this $20, the first level consumer keeps $10 of the $20. The second line consumer gets the same manual (Plaintiff's Exhibit 2) and they, in turn, place ads and bring in a third level consumer. According to Inspector McDermott, "after approximately ten levels, you will run out of the number of people on earth that could qualify as purchasers ..." and such a plan is in the nature of a chain letter or pyramid scheme. The Court notes that chain letters violate the mail fraud statute (see, e.g., United States v. Armantrout, 411 F.2d 60, 61-62 [2d Cir.1969], citing Blachly v. United States, 380 F.2d 665, 672 [5th Cir.1967] [other citations omitted] ). Plaintiff's Exhibit 3 is a document sent to the first consumer with the manual. In this document there are similar vague and misleading representations such as: "NO INVESTMENT." "My ingenious, 'FAST-PROFIT' income discovery is a 'UNIQUE', and perfectly legal method of making HUGE AMOUNTS OF MONEY from home that has NEVER been advertised before! My method is 100% LEGITIMATE and has absolutely NOTHING to do with Multi-level Marketing, Envelope-Stuffing, Gambling, Chain Letter Schemes, or any other GIMMICK! ALL NEW! In fact, what I am referring to is an ENTIRELY NEW METHOD that makes use of a 'little-known' professional secret developed by MILLIONAIRES to amass HUGE amounts of money FAST!; ... It is very unusual and uniquely designed for each person that uses it! ... In fact it is a 'fool-proof' NEW WAY to earn up to $15,000 monthly WITHOUT having to work for it! ... Believe me, ANYONE can do it! ... EVEN YOU! ... Because your age, prior experience, or place of residence simply DO NOT MATTER! ... And the best part is you can work my plan from the comfort and privacy of your home, WITHOUT leaving your present job! WORK FROM HOME! * * * * * * ... If you OWE MONEY, my program will have you 'DEBT-FREE' in NO TIME FLAT!! * * * * * * ... Just imagine opening your mailbox every week to find $3,000 worth of CASH, CHECKS, and MONEY-ORDERS all made out to YOU!! ... With my program it WILL HAPPEN! * * * * * * NO COMPETITION! The one thing you'll NEVER have to worry about using my system is COMPETITION! There are over 45,000,000 'NEW' prospects each and every year, throughout the United States and Canada, who DESPERATELY NEED what you will have to offer! ... You'll be doing people a Real Favor! ... You'll be a HERO! ... Showing people how to obtain something that they DESPERATELY WANT and NEED, something that they are now GLADLY paying 100's of dollars OR MORE for ... PRACTICALLY FREE!!!!! * * * * * * COPY MY SUCCESS! If you can read English and follow simple, step-by-step instructions you can easily duplicate my success! ... Everything has been CAREFULLY worked out for you! ... You will be provided with EVERYTHING you'll need ... NOTHING is left to CHANCE! ... And the best part is, there is NEVER anything else to buy for this business from me or ANYONE ELSE!" This flyer again emphasizes the "complete refund" available, which is the apparent "fail-safe" feature of this operation. As to the "money" portion of the flyer (Plaintiff's Exhibit 3), it continues, as follows: "Simply PRINT your name and address CLEARLY on the NO-RISK COUPON below. Clip it and mail it to me along with ONLY $20 in cash, check, or money-order and I'll RUSH you my business plan and FREE BONUS REPORT via FAST FIRST CLASS MAIL!! ... Shipping is FREE! ... Don't MISS OUT! ... Do it NOW! ACT TODAY ... I don't care if you are a professional person, a housewife, a high school student, or a RETIRED senior citizen! ... You owe it to yourself and your loved ones to CHECK ME OUT! ... Completely at MY RISK! ... I GUARANTEE THAT YOU HAVE NEVER SEEN SUCH AN 'HONEST' plan, with absolutely NO CATCHES, that can produce income as quickly and effortlessly offered anywhere! ... FOR ANY PRICE! ... I PERSONALLY GUARANTEE IT! 30 DAY, NO-RISK COUPON! 'SUCCESSFUL SYSTEMS' P.O. Box 815 Dept. ( ) Horace Harding Station Flushing, New York 11362 Please RUSH me a copy of your 'ULTIMATE' Home Business Plan and FREE BONUS REPORT via FAST FIRST CLASS MAIL! I understand that if after trying your system for 30 days I am not ABSOLUTELY DELIGHTED for ANY REASON that I may return it for an IMMEDIATE REFUND! ... On that basis here is my $20 in: Cash [ ] Check [ ] Money-Order [ ] Name_________________________________________________________________________ Address______________________________________________________________________ City_________________________________________________________________________ State__________Zip________" All this verbiage and still no product named nor any explanation of any program or system. Nowhere in Plaintiff's Exhibit 3 does it say that the consumer will have to place and pay for ads. In fact, as quoted above, the ad specifically states that "... the best part is, there is NEVER anything else to buy for this business from me or ANYONE ELSE!" (Exhibit 3). So now we have the first consumer sending $27 to Associates and advertising, and the second consumer sending $20 to the first consumer, who keeps $10 and forwards the other $10 to Associates. All of this transpires without even the mention of a product, and with only an intentionally vague and unclear mention of the type of program involved. All of this is initiated by an implicit no- expense representation, which the Court finds to be intentionally false. Plaintiff's Exhibit 3 is headed in large letters with the proclamation "A NO-NONSENSE WAY TO $500 A DAY". According to Inspector McDermott the only way a consumer could earn $500 a day under this plan would be to obtain 40 additional customers per day ( 1/2 of $20 is $10 times 50 people is $500 per day) and "arithmetically you would just run out of people as you get further down the line from the chain" (Tr. p. 39). McDermott further testified that he had two boxes of consumers' complaints mailed to postal authorities with regard to "Successful Systems". There were "over 650 (complaints) with more arriving every day". He reviewed approximately two hundred complaint letters. There were two major types of complaints. First, the consumers thought they would be stuffing envelopes provided by "Successful Systems" and they (the consumers) would bear no expense. The second major source of complaint was that the promised refunds were never made. Some of the consumers wrote to Associates two or three times and did not receive a refund, as repeatedly and expressly promised in every circular. When a consumer received the manual he or she discovered that there was actually no product involved and that further involvement on their part required the expenditure of money for ads. Commenting further on the complaint letters, McDermott testified as follows: "People who responded to this, your Honor, are retired, single mothers, people on limited income. And on face value it seems that these people would be able to earn a legitimate income from their home. Unfortunately, when they received the booklet, the Home Mailing Program from Successful Systems, a large number of them were able to see that there was no product involved and requested their money back, and were unable to do so, were unable to get it back. * * * * * * A large number of these letters were very emotional. They said sometimes their last 25 dollars that they received a month from the VA or Social Security check was sent. And they were quite upset when they found out that it doesn't have a job; they didn't have any employment; and in fact the only way to make money was to deceive others and in fact to layout additional expense." (Tr. 43, 44; emphasis supplied). Two of the letters in evidence are from Clara Dillinger (Plaintiff's Exhibit 4A) and George Ellis (Plaintiff's Exhibit 4B). The Dillinger letter, which is handwritten, reads as follows: "On July 29 I sent 'Successful Systems' $27.00. I thought I was entering a program to mail their advertizing [sic] for a product. They stipulated that if I wasn't satisfied with their program I would return their material and they would refund my money. They don't sell anything. They just want people to send the same information they sent me to other people. To me that is cheating the public, so I returned their material. They have not returned my money. I have written them twice. Sincerely, /s/ Clara Dillinger" The Ellis complaint, also handwritten, reads, in part, as follows: "I received this kit on Monday 11/13/89; I was not impressed with it, as I saw that the 'Successful Systems' program involved a lot of newspaper advertising expense on my part which their sales letter made no mention of. I then promptly returned their starting kit materials to them ... and requested my $27.00 back ... To date, I have heard or received nothing. Please help me get my money back from this rip-off. /s/ George W. Ellis 12/4/89" Based upon his experience as a postal inspector, in the opinion of Inspector McDermott, the "Successful Systems" program "is nothing more than a chain letter pyramid scheme in which no product is involved, and is only sustained by recruiting other members to sell in essence the same nothing program" (Tr. p. 54). Further, in his opinion as a postal inspector, the initial solicitation sent out by "Successful Systems", Plaintiff's Exhibit 1, "is filled with deceptions and misrepresentations" in that: (1) it mentions nothing about advertising costs; (2) it mentions nothing about the major thrust--to recruit others to join and sell similar programs; (3) it says nothing about the product involved; and (4) it promises a refund within thirty days. On cross-examination, Inspector McDermott testified that he did not know how much of the $410,000 in the seized bank account constituted monies derived from the "Successful Systems" program. While on cross-examination he summed up his analysis of the defendants' program as follows: "Q: Tell me, how did this scheme work? A: Again, when somebody answers an advertisement in the hopes that they would be employed stuffing envelopes, they receive a program, a booklet. After paying $27 they receive this booklet which tells them to spend additional money advertising essentially the same program in which you can make up to $500 a day." Although counsel for the defendants vigorously tried to bring out that the Association was selling two products, namely, (1) a pamphlet entitled "How to 'erase bad credit' and reprint rights", and (2) mailing lists, McDermott stated: "A: In answering an ad in a way to make $500 a day. That's what they are answering. They are not answering to buy mail order lists. Nowhere in that ad does it say send a dollar to buy a coupon to buy mail order lists, no one would buy it then." (Tr. p. 96). * * * * * * "A: Sir, when they paid the $27 they were not aware that they would have to spend additional money for advertising, period." (Tr. p. 101). It is significant that while the defendants' fliers state that they have a way consumers could make $500 per day, they never mention the report on "How to erase bad credit" as the product. In sum, for $27, the customer received a brochure telling them to pay to advertise a nebulous and concealed product. b. The Defendants' Case. The sole witness for the defendants was the defendant William J. Savran, a duly licensed dentist who was in practice from 1971 to 1986, at which time he left dentistry to enter the "Medicard ID" business. In November 1987, he incorporated his business as William Savran & Associates, Inc. Dr. Savran (and, apparently, Associates) presently have only one commercial bank account in which he deposits all income received by him from whatever source derived. Included in the deposits is income from his Medicard ID business and the "Successful Systems" business, among other ventures. Also, from this account he pays all of his business expenses, including rent, salaries, advertising and postage expenses. In addition, he pays income taxes, withholding taxes and even his child support from this single account. Material to this discussion, he also pays refunds on the Successful Systems "product" from this account. The payments of these expenses by Associates and Dr. Savran have been severely disrupted by the seizure and freezing of the account by the plaintiff. Dr. Savran admitted that he previously was involved with a chain letter scheme, when, after a complaint was issued by the postal inspector, he discontinued the prior plan. In November 1987 he entered into an oral agreement with Julia Picard, doing business as Mail Depot, Ltd., to perform "mail order" work for him, including the mailing of refunds. He received the consumers' complaints and referred them to Ms. Picard. On November 1, 1990, Associates purchased Mail Depot Ltd. from Julia Picard for $35,000. Dr. Savran blames Julia Picard for the failure to make timely refunds as to the Successful Systems plan. As to the "Successful Systems" phase of his business, Dr. Savran developed the idea in "probably 1988, around the beginning of 1989". He was looking for distributors "to help me sell my mailing lists and my other offer of $500 a day" (the brochure to erase bad debts). Dr. Savran personally prepared the brochure "How to erase bad credit" over a six week period, and had obtained a registered copyright. Dr. Savran explained the purpose of his original letter (Plaintiff's Exhibit 1), as follows: "Q: And in that letter could you explain, what was the purpose of that letter? A: To get distributors who would be salesmen for me selling my products. Q: And what product did you have to sell? A: Well, I had two products. Q: What were the products? A: One was the reports on How to Erase Bad Credit and the other was mailing lists. I had been selling that report on credit for several years very successfully. I figured if I get distributors to do the same thing I would duplicate my efforts. Q: When you did them and you sent them, and they answered your ads, they contacted you. And what did you send them then? This particular letter? A: The letter, yes, sir. Q: Was there a fee for them to do something further afterward? A: Yes. If they have [sic] wanted to participate they would have to send a $27 fee and they would receive the home mailing kit. Q: Now, when they became a distributor how were they to earn any money on this? A: They would earn money by making sales and getting a commission on each and every sale. Q: What kinds of sales did they make? A: They made two types of sales. One was for the erase bad credit program, which is a program that somebody can actually sell and make money each time they do it. That was one. And the other thing they could sell if they wish, was the mailing list. Q: Now, in the literature you send to them did you explain to them anything that they would have to outlay any money for themselves in order to take part in the program? A: No. * * * * * * Q: Now, when they sent out the particular letter in here was there anything in your original ad that said anything about advertising? A: No, there wasn't." Although they were not previously advised, in order to continue in the plan, the consumers were required to place ads at a cost of from $6 to $100 per week. In early 1990, Dr. Savran began having problems with Julia Picard, with regard to consumers who were not getting requested refunds. According to Dr. Savran, he had no control over the activities of Julia Picard and she allegedly embezzled his postage money. When he discovered this problem, he immediately fired her, wrote out the refunds and eventually purchased her business. Oddly, even though Ms. Picard failed to make refunds and stole monies from him, Dr. Savran purchased her business for $35,000. Dr. Savran testified that he never received a "cease and desist" order from the Postal Service and that he first became aware of any complaints when he was arrested (Tr. p. 154). He testified that Associates made refunds to all of the people named in the Government's papers. He further stated he had no intent to defraud anyone or to misrepresent anything to anyone. He stated that today, people are still ordering and reordering from him; that "hundreds and hundreds" of people are satisfied with his products and "several" make good livings from his mailings (Tr. p. 158). On cross-examination, Dr. Savran testified that "probably 25 percent" of the proceeds in the seized bank account is attributable to Successful Systems (Tr. p. 163). He is the only person who works for Successful Systems although his wife Lisa Savran helps him once in a while. The "Lisa Michaels" mentioned in the fliers (Plaintiff's Exhibit 1) and manual is his wife, who is Vice President of Associates (Tr. pp. 168-69). Dr. Savran had another bank account at the Roosevelt Savings Bank which he closed in July 1990 because the bank officials were concerned about the number of complaints from consumers who had not received refunds. As to the initial letter to the consumers (Plaintiff's Exhibit 1), the following testimony of Dr. Savran may help explain the mysteries of the "Successful Systems" program, and is significant evidence: "Q: Dr. Savran, I would like you to take a look now at a document marked yesterday as Government Exhibit 1. (Handed to the witness.) Q: Now, I believe you testified yesterday that this was an initial letter that Successful Systems sent out to consumers? A: Yes. Q: And I believe you also testified that once the persons paid $27 to Successful Systems the person would then receive a document marked Government Exhibit 2 which is entitled, Successful Systems Home Mailing Program Procedure and Manual? A: Yes. Q: You further testified that enclosed in Government Exhibit 2, which is the manual, there was an instruction book instructing the persons how to sell a circular which has been marked as Government Exhibit 3, which says a No Nonsense Way to $500 a Day, to other consumers. A: Yes. Q: And that's accurate? A: Yes. Q: And you further testified that Government Exhibit 3, a No Nonsense Way to $500 a Day, was advertising to sell either mailing lists or a booklet regarding how to prepare your bad credit rating? A: Yes. Q: And that's all accurate? A: That is correct. Q: Now, addressing your attention again to Government Exhibit 1, show me where in that letter it says that what is being offered to the first level of customers is an opportunity to be a distributor to sell mailing lists or booklets regarding repairs to credit damage. A: It doesn't say that. Q: It doesn't say that anywhere? A: No. * * * * * * Q: You testified yesterday that you spent a month or a significant period of time carefully writing out Government Exhibit 1, which is the initial letter from Successful Systems. If what you are selling is a distributorship to sell mailing lists and booklets for credit repair why isn't that stated in your initial letter? MR. LAMB: Objection, Your Honor. THE COURT: Overruled. A: Because it wasn't mentioned. Q: Why wasn't it if that's what you were selling? A: Is there a reason it should be? Q: Well, normally isn't it normal when somebody advertising something to sell, that they describe what is being sold? A: Not all the time. Q: Not all the time. Did you intentionally draft Government Exhibit 1 so that it was not clear that what was being sold was a distributorship for mailing lists or bad credit booklets? A: You have to repeat the question. MR. RIEGEL: Can I have it read back, please? THE COURT: Yes. (Whereupon, the court reporter reads the requested material.) A: Yes. Q: You did? A: Yes. Q: Why did you do that? A: It is a technique used in the mail order business. * * * * * * Q: Now you testified that you intentionally drafted this so that it didn't state what was being sold. A: That is correct " (Tr. pp. 191-94; emphasis supplied). * * * * * * "Q: You did say that you intentionally omitted information from Government Exhibit 1 as to the very nature of what you were offering and selling? MR. LAMB: Objected to, your Honor. THE COURT: Overruled. A: I left out what the product is, yes" (Tr. p. 218). "THE COURT: Why did you do it? THE WITNESS: It is a technique used in selling business opportunities where people list the advantage of it. THE COURT: It is a technique not to tell the potential distributors the product they were supposed to distribute? THE WITNESS: Correct. And they are free not to buy it. Q: But they don't even know what they are buying; isn't that true? A: Specifically? Q: Let me ask you, would you think a consumer reading this letter would get from it that what was being sold was a right to a distributorship to sell mailing lists and credit report? A: Not specifically, no. Q: They would not? A: Correct " (Tr. p. 195; emphasis supplied). * * * * * * "Q: Looking again at Government Exhibit 1, does it state anywhere in there, directly or indirectly, that a consumer paying $27 will receive a kit which instructs the consumer to spend additional money to place ads, or to send out direct mail in order to sell your products? A: Does it say that anywhere? Q: Yes. A: That they have to place an ad, no. But there is always advertising and promotions for anything you do. It doesn't say everything in the world would be free. It says the supplies would be free. There is no intimation that there would be no other expense for ads or anything else" (Tr. p. 197; emphasis supplied). (Tr. pp. 191-197; emphasis supplied). As to the amount Associates was receiving from consumers in the "Successful Systems" program, Dr. Savran testified that "[i]t could be as much as $50,000" per month (Tr. p. 203). Dr. Savran was further questioned about Plaintiff's Exhibit 1 which in the third paragraph states "This is not a get rich scheme". Yet on page 7 of the Successful Systems Manual, sent out to consumers who respond to Exhibit 1, it says "Strike it rich!". Dr. Savran further conceded that even in Defendants' Exhibit A, which is sent in response to the manual, there is no mention of the "improve your bad credit" pamphlet. It says it is "a no-nonsense way to $500 a day". "Q: Does it say anywhere to make--the way to make $500 a day, a No Nonsense Way, was to market Defendant's Exhibit A, How to Erase Bad Credit and Reprint Rights? A: No. * * * * * * Q: Why didn't you say simply in Government Exhibit 3, the way to make $500 a Day is to try to market a report regarding erasing bad credit? A: I didn't mention it. Q: Isn't the reason because if you had said it accurately the amount of response you would have gotten, it would be negligible compared to what you have gotten? A: I don't know that to be true. * * * * * * Q: With respect to Government Exhibit 1, the initial Successful Systems letter, isn't it accurate to say that if you had stated in there the truth of the matter what you were selling would be the distributorship to sell a bad credit report and mailing lists, and the amount of mailing you got which you said before as much as 50,000 a month would be much less than that figure? MR. LAMB: Objection, your Honor. Asked and answered. The question was asked before and responded to. THE COURT: Overruled. A :I don't know if it would or wouldn't I never did it the other way, so I don't know" (Tr. pp. 214, 216-17). Dr. Savran could not estimate the amount of income he received from Successful Systems in 1989, although he guesses that it would be "[m]aybe 25 percent" of his total income (Tr. pp. 224-25). He doesn't think he has any business records that itemize his income or separately delineate the Successful Systems income. With regard to the probability of anyone making $300 or $500 a day by using the "Successful Systems" program, Dr. Savran stated the following: "Q: So your statement that they can receive up to $500 a day has no basis in fact? A: Yes, it does. I was marketing the report and making about $500 a day or more when I first started marketing it myself. Q: Do you know anyone who is making 300 or $500 a Day [sic] every day they work on this? A: Personally, no. Myself, yes, sir. I have done it myself. Q: Just yourself? A: Yes" (Tr. p. 230). III. ADDITIONAL FINDINGS OF FACT In addition to the findings of fact set forth above, the Court makes the following further findings: 1. Upon a review of all the fliers, manuals and enclosures mailed by the defendants in the "Successful Systems" program, this Court finds that the central thrust of these documents was to present a vague, confusing and incomprehensible sales promotion without mentioning the product to be sold or the real method of distribution. The Court further finds that these documents were intentionally designed to mislead and to induce innocent and unwary consumers to part with money--and so, the documents contain fraudulent misrepresentations. The flyer and manual solicit people to send in $27--for what, they could not know. 2. The defendant intended to create confusion and to misrepresent the truth in the solicitations, and thereby obtain a greater number of initial $27 responses from the consuming public. 3. The solicitation (Plaintiff's Exhibit 3), expressly states that "there is NEVER anything else to buy for this business from me or ANYONE ELSE!". This is not only misleading but the Court finds it expressly false. 4. The unconditional refund offer does not ameliorate this situation. First, there were a substantial number of unhappy customers who never received refunds. Second, it is reasonable to infer that only a small percentage of unsatisfied consumers even request a refund, so that the defendant is able to retain many of the $27 payments sent by customers who, after receiving the manual, do not go to the next step. 5. The use of the mails and United States Postal Service was and is an integral part of the defendants' business, and the defendant therefore used the mails in furtherance of the fraudulent "Successful Systems" plan. 6. The intentional nondisclosures and affirmative misrepresentations made by the defendants in the "Successful Systems" solicitations were material. [[ Editor's Note: Note the testimony above as the scammer dentist twists in the breeze, unable to be aided even by his attorney as the prosecution kicks his sad little excuse for a scheme again and again. This is your fate, oh, ye spamscammers. Society pays people to put people like you out of business. ]]