CASE | DECISION | JUDGE | FOOTNOTES

Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
IN THE CASE OF  


SUBJECT:

Social Security Administration,

Petitioner,

DATE: October 28, 2002

             - v -

 

National Federation of Retired Persons.

 

Docket No.C-01-989
Decision No. CR968
DECISION
...TO TOP

DECISION

I. Introduction

Mr. Elmer Gibson, a former insurance agent (Transcript (Tr.) 188), is president of Respondent, the National Federation of Retired Persons (NFRP). He has held the post for the past 10 years. Tr. 35, 158. Mr. Gibson is married to Deborah Gibson, who is the president and sole owner of Nacogdoches Business Center, Inc. (Nacogdoches), (1) a company that "generates revenues and profits from its commercial business dealings with the NFRP." Financial Stipulations, ALJ Ex. 1; Tr. 390, 468-469. Together, these Gibson organizations provide, for a fee, direct mail services for insurance agents, brokers, and companies. Financial Stipulations, ALJ Ex. 1; Tr. 390. Insurance agents select from among an assortment of bulk mail solicitations developed by the Gibsons, and, at the agent's direction, NFRP/Nacogdoches mails out the solicitations. The insurance agents target the recipients by zip code, recipient age, or other factors available on NFRP/Nacogdoches' data base. Tr. 59-60, 88, 166-169, 480.

At issue here are 83,569 solicitations that NFRP mailed on behalf of insurance agents, brokers, and companies between April 1 and June 15, 2001. Petitioner, the Inspector General (I.G.) for the Social Security Administration (SSA), determined that those mailings violate § 1140 of the Social Security Act (Act), and proposed against NFRP a civil money penalty (CMP) of $83,659, subsequently amended to $83,569. Tr. 5; ALJ Ex. 2. For the reasons discussed below, I find that NFRP has violated § 1140, and, based on the totality of the evidence before me (some of which may not have been available to the I.G.), impose upon NFRP a $2.00 per violation CMP. Therefore, under the authority specifically granted me in 20 C.F.R. § 498.220, I increase the proposed penalty to $167,138.

II. Procedural Background

By letter dated August 1, 2000, the I.G. advised NFRP that it was violating § 1140 of the Act and its implementing regulations. The letter enclosed a copy of the statutory provision and explained that the statute authorizes penalties against those who misuse SSA's program words, letters, symbols, or emblems in connection with any item constituting an advertisement, solicitation, book, pamphlet, or other communication, and warned of significant fines (up to $5,000 for each violation). Also enclosed was a photocopy of one of NFRP's bulk solicitations, which NFRP/Nacogdoches labeled the SNAP-5. Tr. 66-67, 127-128, 294; Petitioner's Exhibit (P. Ex.) 6.

The I.G. expressed its hope that the matter be resolved through NFRP's voluntary compliance, and asked that NFRP

immediately cease and desist from all direct mailings in a facsimile Government document and use of the words "Social Security," "Social Security System," "Supplemental Security Income[,]" "Social Security Benefits" in a manner which reasonably can be construed as conveying the false impression that the mailings are authorized, approved or endorsed by SSA.

The I.G. asked NFRP to provide evidence of compliance within 30 days. P. Ex. 6.

There ensued some back-and-forth exchanges between Mr. Gibson and the I.G. staff. See, e.g., Tr. 525.

Mr. Gibson asked that the case be transferred to the Texas Attorney General's Office in San Antonio. In a letter dated January 17, 2001, the I.G. denied that request, explaining that jurisdiction lay with the federal agency, not with the Texas Attorney General's Office. The I.G. again instructed NFRP to provide evidence of its compliance with the August 1, 2000 cease and desist letter, explaining that evidence of compliance should include copies of NFRP's current solicitations as well as information regarding when it stopped mailing the violative documents. P. Ex. 7

The parties were unable to resolve the matter informally, and on March 15, 2001, the I.G. issued a subpoena to NFRP directing the production of documents it had mailed since August 1, 2000, that used the words "Social Security" or other protected words listed in § 1140. P. Ex. 8. NFRP responded to the subpoena, and the I.G. thus learned about NFRP's other solicitations containing language similar to that in the SNAP-5. NFRP labeled these documents the LT-1, LT-2, SNAP-C-6, and M&B-4. Tr. 296.

Throughout this time NFRP continued to mail out the challenged solicitations. Tr. 37, 94-95, 118, 131, 133-134.

Finally, in a letter dated July 6, 2001, the I.G. proposed, jointly and severally, against NFRP and Mr. Elmer Gibson, a CMP in the amount of $83,659, based on its determination that NFRP mailed at least that number of advertisements and/or solicitations misusing SSA's program words and/or letters in violation of § 1140 of the Act. The letter noted:

Although you have been on notice, since August 2000, that your solicitations violated the Act, I have confined your exposure to the period of April 1, 2001 through June 15, 2001 (a full nine months after you were first notified). In fact, you have mailed out thousands of these solicitations since the Office of the Inspector General served you with a subpoena.

P. Ex. 9, at 2. The letter pointed out the specific factors contained in the solicitations that the I.G. considered violative of the statute, and explained the I.G.'s reasoning for limiting the penalty to $1.00 per violation, even though the statute authorizes penalties of up to $5,000 per each violative solicitation mailed. The letter advised the parties of their right to appeal. I.G. Ex. 9

By stipulation, the parties subsequently altered the number of violative mailings alleged from 83,659 to 83,569. Tr. 5; ALJ Ex. 2.

NFRP and Mr. Gibson timely requested hearings. While the matters were pending, the I.G. withdrew the action against Mr. Gibson personally. A hearing on the remaining case was held before me in San Antonio, Texas, on April 30 and May 1, 2002. Mr. Glenn E. Sklar and Ms. Erin Justice appeared on behalf of the I.G., and Mr. Anthony H. Anikeeff appeared on behalf of Respondent, NFRP.

During a prehearing conference, I admitted into evidence P. Exs. 1-33 and Respondent's Exhibits (R. Exs). 1-34 and R. Exs. 36-67. Rulings and Summary of Telephone Conference (April 16, 2002); Tr. 6. During the hearing, I admitted the following additional documents: R. Exs. 5A and 38A (Tr. 385), R. Exs. 63A-63Z (Tr. 392), R. Exs. 68 and 69 (Tr. 17-20), R. Exs. 70 and 71 (Tr. 386-387), and R. Exs. 73 and 75 (Tr. 455). Following the hearing, I admitted ALJ Ex. 2, which confirms the parties' agreement as to the number of solicitations in dispute. Both parties submitted posthearing briefs (P. Br. and R. Br.) and reply briefs (P. Reply Br. and R. Reply Br.).

III. Statutory and Regulatory Background

Section 1140 of the Act prohibits misuse of symbols, emblems, or names "in reference to Social Security or Medicare."

(a)(1) No person may use, in connection with any item constituting an advertisement, solicitation, circular, book, pamphlet, or other communication . . . alone or with other words, letters, symbols or emblems-

(A) the words "Social Security", "Social Security Account", "Social Security System", "Social Security Administration", "Medicare", "Health Care Financing Administration", "Department of Health and Human Services", "Health and Human Services", "Supplemental Security Income Program", or "Medicaid", the letters "SSA", "HCFA", "DHHS", "HHS", or "SSI", or any other combination or variation of such words or letters, or

(B) a symbol or emblem of the Social Security Administration, Health Care Financing Administration, or Department of Health and Human Services (including the design of, or a reasonable facsimile of the design of . . . envelopes or other stationery used by the Social Security Administration, Health Care Financing Administration, or Department of Health and Human Services) or any other combination or variation of such symbols or emblems,

in a manner which such person knows or should know would convey, or in a manner which reasonably could be interpreted or construed as conveying, the false impression that such item is approved, endorsed, or authorized by the Social Security Administration, the Health Care Financing Administration, or the Department of Health and Human Services or that such person has some connection with, or authorization from, the Social Security Administration, the Health Care Financing Administration, or the Department of Health and Human Services.

* * * *

(3) Any determination of whether the use of one or more words, letters, symbols, or emblems (or any combination or variation thereof) in connection with an item described in paragraph (1) . . . is a violation of this subsection shall be made without regard to any inclusion in such item (or any so reproduced, reprinted, or distributed copy thereof) of a disclaimer of affiliation with the United States Government or any particular agency or instrumentality thereof.

The Act provides for CMPs of up to $5,000 per violation. Act, § 1140(b). Each piece of mail containing "one or more words, letters, symbols, or emblems in violation of subsection (a)" constitutes a separate violation.

Implementing regulations are found at 20 C.F.R. Part 498. Echoing the broad statutory language, they authorize the I.G. to impose a penalty against any person who, it determines,

has made use of certain Social Security program words, letters, symbols, or emblems in such a manner that they knew or should have known would convey, or in a manner which reasonably could be interpreted or construed as conveying, the false impression that an advertisement or other item was authorized, approved, or endorsed by the Social Security Administration, or that such person has some connection with, or authorization from, the Social Security Administration.

20 C.F.R. § 498.102(b). Civil money penalties may be imposed for misuse of the statutorily protected words, letters, symbols, or emblems, "or any other combination or variation" of those words, letters, symbols or emblems. 20 C.F.R. § 498.102(b)(1). Again, the use of a disclaimer is not considered a defense in determining a § 1140 violation. 20 C.F.R. § 498.102(c).

With respect to the amount of the penalty, the regulations authorize the I.G. to impose a penalty of not more than $5,000 for each violation. In the case of a direct mailing solicitation, each separate piece of mail containing one or more program words, letters, symbols, or emblems constitutes a separate violation. 20 C.F.R. § 498.103. In determining the amount of the CMP, the I.G. takes into account: 1) the nature and objective of the advertisement, solicitation, or other communication, and the circumstances under which they were presented; 2) the frequency and scope of the violation and whether a specific segment of the population was targeted; 3) the prior history of the individual, organization, or entity in their willingness or refusal to comply with informal requests to correct violations; 4) the history of prior offenses of the individual, organization, or entity in their misuse of program words, letters, symbols, and emblems; 5) the financial condition of the individual or entity; and 6) such other matters as justice may require. The use of a disclaimer of affiliation with the U.S. government, SSA, or its programs is not a mitigating factor in determining the amount of penalty. 20 C.F.R. § 498.106.

If the I.G. seeks to impose a penalty, it serves the party with written notice of its intent. 20 C.F.R. § 498.109. The party is entitled to hearing before an administrative law judge (ALJ). 20 C.F.R. § 498.202. The hearing is not limited to specific items and information set forth in the notice letter; additional items or information may be introduced by either party, subject to the 15-day exchange requirements of 20 C.F.R. § 498.208. 20 C.F.R. § 498.215(e).

NFRP has the burden of going forward and the burden of persuasion with respect to affirmative defenses and any mitigating circumstances. The I.G. has the burden of going forward and the burden of persuasion with respect to all other issues. The burden of persuasion "will be judged by a preponderance of the evidence." 20 C.F.R. § 498.215(b) and (c).

The regulations require me to issue an initial decision based on the record, and specifically grants me the authority to affirm, deny, increase, or reduce the penalties proposed by the I.G. 20 C.F.R. § 498.220.

IV. Issues

I must determine whether, in its five solicitations, NFRP violated § 1140 of the Act.

Specifically, 1) Did NFRP know, or should it have known, that its solicitations conveyed the false impression that its mailings were approved, endorsed, or authorized by SSA or that NFRP had some connection with or authorization from the agency? In the alternative: 2) Could the solicitations reasonably be interpreted or construed as conveying the false impression that they were approved, endorsed, or authorized by SSA or that NFRP had some connection with or authorization from the agency? If I find in the affirmative on either of these questions, NFRP has violated the statute and is subject to the imposition of a CMP.

If I conclude that NFRP has violated § 1140, what, if any, CMP should be imposed?

V. Discussion

I make findings of fact and conclusions of law to support my decision in this case. I set forth each finding below, in italics and bold, as a separate lettered or numbered heading.

A. Section 1140 confers upon the I.G. broad authority to sanction a wide array of communications.

Congress enacted § 1140 as part of the Medicare Catastrophic Coverage Act of 1988, Pub. L. No. 100-360. That legislation prohibited the misuse of SSA and Medicare words, letters, symbols or emblems by those who "knew or should have known" that such use would convey the false impression of governmental connections with SSA or the Health Care Financing Administration (HCFA). (2) The legislation authorized the Secretary of HHS to impose penalties not to exceed $5,000 per mass mailing, with a penalty cap of $100,000 per year.

By the fall of 1991, the House Subcommittees on Social Security and Oversight recognized continuing problems with deceptive mailings and solicitations relating to Social Security and other programs within the jurisdiction of the House Committee on Ways and Means. Deceptive Solicitations, Including Findings and Recommendations of the Subcommittees, H. R. Rep. No. 9, 102d Cong. 2d Sess. 45 (1992) (1992 House Report). In May 1992, the subcommittees held a joint hearing to examine the effectiveness of laws designed to prevent fraud through deceptive advertising and solicitation practices. Deceptive Mailings and Solicitations to Senior Citizens and Other Consumers: Hearing before the Subcomm. On Social Security, and the Subcomm. on Oversight of the House Committee on Ways and Means, 102d Cong., 2d Sess. 124 (Comm. Print 1992) (1992 House Hearing). They were especially interested in the adequacy of § 1140. Following the hearing, the Subcommittees reported a "pattern of deceptive solicitation" in several areas, including lead-card mailings designed to identify elderly consumers likely to buy insurance, mailings that appear to be official government correspondence, and mailings that appear to be from tax-exempt organizations providing educational or charitable services. (3) The 1992 House Report describes a common practice:

To gain the attention of the elderly, organizations send mailings with the words, "Important Social Security Information Enclosed," or "Important Medicare Benefit Information Enclosed" on the front of the envelope. The contents of the mailing include a letter containing some general Social Security or Medicare information and a request that the recipient return a preprinted postcard for additional information. (4)

* * * *

Expecting to receive only additional Social Security or Medicare information, consumers usually receive a phone call or an unannounced personal visit from a sales representative or an insurance agent attempting to sell them a policy.

Lead-card mailings can be particularly confusing for the elderly. First, the mailings may include prominently displayed words such as Social Security and Medicare or Government symbols such as . . . the U.S. Capitol. . . . To compound the problem, the envelope may closely resemble a typical Government envelope.

In addition, solicitations sent by direct-mail companies usually do not use street addresses or include phone numbers for consumers to call. Most mailings contain only post office box numbers and do not inform consumers that they are likely to see or hear from an insurance salesman in the near future.

1992 House Report at 3-4.

The Subcommittees voiced additional concerns. The proliferation of mailings that falsely suggest official government business interferes with the government's ability to correspond with the public because it increases the likelihood that true government mailings will be destroyed without being opened. Id. at 5.

Petitioner suggests that the 1992 House Report should be disregarded. Certainly I do not find it necessary to look to that document nor any other legislative history in order to understand Congressional intent inasmuch as the statute is explicit and unambiguous. But, as Judge Kessel pointed out in a recent ruling, the legislative history is entirely consistent with the plain meaning of § 1140:

Congress was acutely aware that a principal aim of direct mailers was to entice recipients into reading the contents of a mailing by putting deceptive language or symbols on envelopes and it aimed directly at stopping that practice with section 1140(a).

Rulings on Legal Issues and Identification of Remaining Issues to be Heard and Decided, SSA v. United Seniors Association, Inc., DAB CR Docket No. C-02-061. Where the 1992 House Report identifies a specific problem and recommends a specific solution and the recommended solution finds its way into the legislation, I can reasonably infer that the legislation was put in place to address problems identified in the 1992 House Report. See also United States v. Federal Record Service Corporation, No. 99 Civ. 3290 (S.D.N.Y. May 21, 1999) (order granting preliminary injunction).

Ultimately dissatisfied with the effectiveness of § 1140, and prompted by the testimony of hearing witnesses, Congress determined to "provide a strong deterrent to organizations and individuals" who violate § 1140. Social Security Independence and Program Improvements Act of 1994, H. R. Rep. No. 506, 103rd Cong., 2d Sess., at 71-72 (1994) (1994 House Report). As part of the Social Security Independence and Program Improvements Act (Pub. L. No. 103-296), Congress amended § 1140. The new legislation eliminated the annual penalty cap, redefined the definition of violation to include each individual piece of mail in a mass mailing rather than each mass mailing, created an alternative standard of liability, independent of the actor's knowledge or intent, and specifically eliminated the use of disclaimers as a defense against liability.

B. NFRP knew or should have known that its solicitations conveyed or could reasonably have been interpreted as conveying the false impression that its mailings were approved, endorsed, or authorized by SSA, or that NFRP had some connection with or authorization from that agency.

      1. Through NFRP and Nacogdoches the Gibsons provide insurance agents, brokers, and companies with a direct mailing service that allowed them to solicit business without running afoul of the state's insurance disclosure rules.

Mr. Gibson explained that insurance companies are required to list themselves as underwriters on any solicitations they mail out directly. Tr. 543-544. By using NFRP as a middleman, the insurance company or agent circumvents that requirement.

Here is how NFRP's system works: NFRP purchases from the Texas Department of Motor Vehicles lists of names, which include ages, addresses, heights, weights, hair and eye color. It maintains this list on its data base. Tr. 59-60. It also maintains an assortment of bulk mail solicitations. A typical mailing is sent out when an insurance agent calls "who requests a specific area to be mailed." Tr. 480. Mrs. Gibson faxes to the agent copies of the different solicitations, and the agent orders specific pieces sent to a targeted audience. Tr. 483-484. The agent pays $300-$350 per thousand solicitations mailed. Tr. 169. Each solicitation contains a reply card, also called a lead-card. When lead-cards are returned, NFRP turns them over to the agent who paid for the mailing. The agent contacts the recipient, who, by filling in requested information, may even have provided a telephone number. Tr. 82. Nothing requires the agent to tell the consumer that s/he is working from a lead-card received from NFRP, so the individual may never know why the agent selected him/her. Tr. 504. (5) Mr. Gibson eventually admitted that he did not really know what happened after NFRP turns the cards over to the insurance agents. Tr. 85.

NFRP concedes that it uses birth dates to target senior citizens for its solicitations. Inasmuch as, for money, it solicits lead-cards without letting the recipients know their ultimate purpose, I find more than a little disingenuous NFRP's characterization of its lead-card business as a "service" to seniors:

As part of its service to seniors, the NFRP makes it possible for seniors to obtain information about various insurance benefits or policies or products that might be of interest to them. These opportunities are set forth in generic terms in the NFRP's bulk mailers. The NFRP does not charge and receives no remuneration from mailer recipients with respect to this service.

R. Br. at 13, ¶ 45, referencing R Exs. 20-34 and Tr. 540. Providing an individual's name and other identifying information to an insurance agent, without the individual's knowledge or consent, can hardly be considered providing that individual a service. The only one served is the insurance agent.

Although the solicitations were sent out under the auspices of NFRP, and NFRP is the sole respondent here, I find the lines between NFRP and Nacogdoches extremely murky. The evidence suggests that both organizations are part of a single enterprise orchestrated by the Gibsons. Sorting out the relationships and ultimate liabilities of the Gibsons and their organizations is well beyond the scope of this proceeding. I note, however, that NFRP itself appears to have no specific purpose beyond providing a vehicle through which insurance agents solicit business, while circumventing state insurance disclosure rules. Virtually all of NFRP's mailers - including those that are not the subject of this action - are obvious insurance lead-cards. (R. Exs. 27-34). Some evidence suggests that Mrs. Gibson - who is supposedly neither a member nor an employee of NFRP - has occasionally responded to a non-insurance related inquiry, but any function not related to insurance solicitation appears strictly incidental. R. Ex. 4, but see R. Ex. 4, at 63.

    2. The questioned solicitations all contain the statutorily protected language and indicia of SSA approval, endorsement or authorization.

Each of the mailers in question is printed on a Snap Pak form. A Snap Pak mailer is a mailer with perforations along the sides that can be torn away, allowing the recipient to remove the interior card. NFRP's mailers also used a privacy block on the outside which obscures the envelope's contents. Directly above the privacy block on the SNAP-5, in the upper left hand corner, is a picture of the capitol building, and next to it, in very small letters, is NFRP's return address, a post office box in San Antonio. P. Ex. 10; R. Ex. 20. The other mailers have different information above the privacy block. All contain the following on the back of the envelope in roughly the font sizes shown:

SOCIAL SECURITY PAMPHLETS.

Social Security Survivors Death Benefits

Right To Appeal Supplemental Security Income

Social Security And Your Right To Representation

SSI Supplemental Security Income

Social Security Benefits For Husbands And Widowers

How You Earn Social Security Credits

Social Security, How It Works For You

What You Have to Know About SSI

How Disability Is Determined

Your Right To Question Your Medical Insurance Payment

Immediately below this list, in significantly smaller letters, is the following:

These pamphlets have been reprinted by NFRP from brochures by the U.S. Department of Health and Human Services as a public service and are part of education programs conducted by NFRP and are available to all ages regardless of socioeconomic levels, race, sex, religion or national origin. To receive any of these pamphlets or information concerning our organization and the benefits of membership, please send a self-addressed stamped envelope to: NFRP, P.O. Box 17943, San Antonio, Texas 78217.

P. Exs. 10-14; R. Exs. 20-25. The lead-card within each mailer includes an image of a capitol building next to NFRP's address. The text on the backs of the lead cards varies from mailer to mailer. I now describe each mailer in some detail:

The SNAP-5

The SNAP-5 lead-card contains a couple of check-off boxes, and says:

PLEASE see that I receive full information about DEATH BENEFITS available to me under the Social Security System.

DETAILS & COST on how I can supplement it with a *cash funeral expense benefit. To find out how you may qualify, complete card and mail today! There is no obligation for your inquiry.

Please indicate the amount you anticipate needing for a funeral.

(Check one) $3,000 $5,000 $7,500 $10,000

In large, bold letters are the words: Completed Card Must be Returned Within 5 Days. Next to those bold letters is the recipient's name and address. At the bottom of the card are spaces for Date of Birth (self), Date of Birth (spouse), Phone, and Signature. At the very bottom of the page, in small but bold letters is written: *Life Ins. Proceeds Issued By A Company Licensed in Your State. Superimposed behind all of the text is another picture of the capitol. P. Ex. 10; R. Ex. 20.

The SNAP-C-6

The SNAP-C-6 lead card also has the capitol superimposed; it contains the same language in the same font about returning the card within 5 days, spaces for personal information, and the same small reference to "Life Ins. Proceeds" at the bottom of the card. The text at the top of the card is different:

In response to numerous requests we reviewed several Medicare Supplements, Long Term Care and Home Health Care policies being offered nationally: Medicare Supplement, Plan F (100%), Plan C (20%), at the lowest cost available nationwide with no waiting period and you can choose your own doctors and hospitals. Long Term Nursing Care covering all levels of care. Home Health Care so you can stay at home and receive the nursing care you may need with all levels of care: Custodial, Intermediate & Skilled Care in the comfort of your own home; lifetime benefits available. For full information, complete this card and mail today. Please indicate above the particular information you wish to receive by marking the appropriate box.

P. Ex. 11; R. Ex. 21.

The M&B-4

On the outside of the M&B-4, above the privacy block, are the words "MEDICARE SUPPLEMENT LOWER RATES." On the inside, the lead-card is titled MEDICARE SUPPLEMENT LOWER RATES. Below the title, is the following text:

AS OF JANUARY, A.A.R.P. AND OTHER MEDICARE SUPPLEMENT INSURERS HAVE INCREASED THEIR RATES UP TO 40% ON MEDICARE SUPPLEMENT COVERAGE.

POLICIES A THROUGH F ARE NOW AVAILABLE AT LOWER RATES IN THE STATE OF TEXAS TO SUPPLEMENT MEDICARE FOR TEXAS RESIDENTS THAT QUALIFY.

ALLSO (sic) YOU MAY QUALIFY FOR A FINAL EXPENSE PROGRAM THAT COULD PAY UP TO *$10,000 TO YOUR BENEFICIARY.

PLEASE INDICATE BELOW THE INFORMATION YOU WISH TO RECEIVE, AND MAIL COMPLETED CARD TODAY FOR FULL INFORMATION.

[ ] *$10,000 FINAL EXPENSE PROGRAM. [ ] MEDICARE SUPPLEMENT POLICIES

Below the text, on the left, is a signature line, with spaces to fill in age, spouse's age, and phone number. On the right is the recipient's name and address. Again, at the very bottom of the page, is the small reference to "Life Ins. Proceeds." Again, a capitol building is superimposed behind all of the text. P. Ex. 12; R. Ex. 25.

The SNAP LT-2

On the outside of the LT-2, above the privacy block, is written "ATT:" followed by the recipient's name. On the inside, the top of the lead-card has the same "ATT:" followed by the recipient's name. Below that is the following text:

MEDICARE DOES NOT PAY FOR EXTENDED LONG TERM CARE EVEN THOUGH 2 OUT OF 5 SENIORS WILL NEED THIS CARE.

INDIVIDUALS ARE RESPONSIBLE FOR THEIR OWN LONG TERM CARE NEEDS AND THE COST CAN RUN UPWARDS OF $50,000 PER YEAR!

CONGRESS RECENTLY PASSED TAX INCENTIVES THAT HIGHLIGHT THE IMPORTANCE OF LONG TERM CARE COVERAGE AND TO ENCOURAGE THE PURCHASE OF LONG TERM CARE INSURANCE.

TO FIND OUT IF YOU QUALIFY FOR THESE TAX ADVANTAGES, COMPLETE CARD AND MAIL TODAY! WE WILL SEE THAT YOU RECEIVE FULL INFORMATION.

The bottom of the card is similar to the bottom of the M&B-4. On the left is a signature line, with spaces to fill in age, spouse's age, and phone number. On the right is the recipient's name and address. Again, at the very bottom of the page, is the small reference to "Life Ins. Proceeds." Again, the capitol building is superimposed behind all of the text. P. Ex. 13; R. Exs. 24, 23. (6)

The SNAP LT-1

On the outside of the LT-1, above the privacy block, are the words "LONG TERM CARE." On the inside, the lead-card is titled LONG TERM CARE. Below the title, is the following text:

DELAYING THE PURCHASE OF LONG TERM CARE COVERAGE CAN LEAVE YOU SUSCEPTIBLE TO FINANCIAL LOSS. THE CENSUS BUREAU HAS ESTIMATED THAT THE NUMBER OF NURSING HOME RESIDENTS, ALREADY AT 1.5 MILLION, WILL INCREASE BY 22% BY THE YEAR 2000.

THIS TYPE OF CARE CAN COST $180 TO $250 A DAY AND MEDICARE DOES NOT COVER A PERIOD OF BROAD LONG TERM CARE.

ANY ALTERATION IN YOUR HEALTH CAN AFFECT YOUR FUTURE ABILITY TO BUY THE PROTECTION YOU NEED.

DO NOT DELAY! TO FIND OUT MORE ABOUT THIS NECESSARY PROGRAM, AS WELL AS NEW TAX ADVANTAGES COMPLETE THE POSTAGE-PAID CARD AND MAIL TODAY!

The bottom of the card is similar to the bottom of the M&B4 and the LT-2. On the left is a signature line, with spaces to fill in age, spouse's age, and phone number. On the right is the recipients name and address. Again, at the very bottom of the page, is the small reference to "Life Ins. Proceeds." Again, the capitol building is superimposed behind all of the text. P. Ex. 14; R. Ex. 22.

I discuss in more detail below why I conclude that the mailers could be construed as conveying the false impression that they were approved, endorsed, or authorized by SSA. Obviously, the statutorily protected words "Social Security" and its variations are used repeatedly on the outside of the envelope for all of the mailers. Except for the protected language, nothing on the outside of the envelope offers the recipient a clue as to its contents or purpose. So, from perusing the outside of the envelope, a reasonable person could easily surmise SSA's approval, endorsement, or authorization of its contents. A sophisticated consumer might be able to figure out, from the contents of a lead-card, that the mailing is a wholly private solicitation, but that is by no means assured. I find it more likely that, at best, the reasonable consumer would be confused. As discussed in more detail below, the only consumer witness who fully figured out that the mailers were lead- card solicitations was a retired insurance agent. The others - all of whom had legal training or connections - suspected that the sender was likely creating a mis-impression as to its relationship with SSA, but none really understood the enterprise.

    3. NFRP's promise of Social Security pamphlets was a ruse to justify its misuse of the statutorily protected words.

The presence on the outside of the envelope of the "SOCIAL SECURITY" words would logically suggest to the recipient that its contents had something to do with Social Security. In fact, any relationship was strictly coincidental. Some of the solicitations related to Social Security in a general way, but others, such as the SNAP-C-6 and the LT-1 and 2, did not. Mr. Gibson admitted that the LT-1 solicitation "doesn't have a thing to do with" Social Security pamphlets, and that the lead-card was not designed so that the recipient could return it to get any of the pamphlets listed on the outside. Tr. 120-123. To obtain a pamphlet, the recipient had to read the fine print on the outside of the envelope, and mail a request to NFRP, enclosing a self-addressed, stamped envelope. P. Ex. 14.

When asked to explain why he put the protected words on the outside of mailers having nothing to do with Social Security benefits, Mr. Gibson provided a number of explanations, but ultimately claimed, in convoluted fashion, that he did so as a service:

Q And you put in big words, "Social Security pamphlets," Right?

A Yes, sir.

Q Why?

A Like a menu, we're shouting it: Hey, come get your pamphlet.

Q Okay. Well, why did you place this menu of Social Security pamphlets on your snap mailers?

A I think it was appropriate, in other words, in this sense of the word. As an example, the second one on here, "Right to appeal supplemental income," I'm sure there's a lot of people today that really doesn't know what it is to begin with. And what it is - it's a name of a pamphlet at that time that is put out by Social Security or whoever printed it, sir, or whoever we originally got it from. There seems to be confusion, in other words, as to where we got the pamphlet (Tr. 160-161).

* * * *

- and I still feel that it's a service to people (Tr. 161).

Once again, I think its being a service to people to know - for a person to know that Social Security pamphlets are available. I'm 75 and I have never been advised by Social Security personally that they had any pamphlets.

Tr. 125-126. (7) Mr. Gibson's claim that SSA has never advised him that it has pamphlets is deceptive, if not plainly false. Obviously someone told him about the pamphlets at least a decade ago, because he was able to obtain them. Moreover, he made much of the fact that NFRP was "solicited" to distribute Spanish-language Social Security pamphlets, apparently back in 1997. R. Ex. 68. Since the solicitation came from the General Services Administration (GSA) rather than SSA, Mr. Gibson may consider his testimony technically accurate, but he well knew that SSA has pamphlets, has known it for many years, and his inference to the contrary does not enhance his credibility.

Although not specifically articulated in testimony from either of the Gibson's, NFRP argues that its true purpose was to provide important Social Security information to the elderly, and that it used the insurance lead-cards as a way of persuading insurance agents and companies to finance that mission. R. Br. at 60. The first problem with this claim is that the Gibsons failed to mention it. Presumably, if that were their primary motivation, one of them would have been aware of it and said so during his or her testimony. Second, and more important, the argument fails because the information NFRP provided was worse than useless. Mrs. Gibson admitted that NFRP makes no effort to verify the accuracy of the pamphlets it sends out (Tr. 499), and, in fact, the NFRP Social Security pamphlets were more than a decade old, their information hopelessly out of date. R. Exs. 8, 9. (8)

Mr. Gibson admitted that he was not aware that the pamphlets he distributed were out of date, and that he only learned of it during the course of this litigation. Tr. 48, 59, 196. I find it incredible that anyone who purportedly serves the interests of the elderly would not recognize that there have been significant changes in the Social Security program in the last decade, even if he did not know the specific details of those changes. NFRP's almost complete indifference to the accuracy of the Social Security information it sent out belies any claim that its promise of Social Security pamphlets served a legitimate purpose.

    4. NFRP deliberately prominently displayed the protected language on the outside of its mailings to induce recipients to open them, and continued its use of protected language on the inside to induce recipients to respond.

The evidence establishes not only that NFRP knew or should have known that its mailings created a false impression, but that they were specifically designed to create that impression.

Ms. Sally Hurme is an attorney in the Office of Consumer Protection for the American Association of Retired Persons (AARP) and an adjunct professor of elder law at George Washington University. (9) In that capacity, she develops policy, research materials, and educational programs in the area of consumer fraud. Tr. 348, 350; P. Ex. 28. In uncontradicted testimony, she explained that an "insurance lead card" is designed to develop the names and addresses of persons interested in a particular topic, primarily to identify vulnerable persons to whom insurance agents may attempt to sell insurance or some other product (living trust, estate plan). Tr. 349. Also uncontradicted, Ms. Hurme noted that those over age 65 are more vulnerable to fraud and persuasion than younger cohorts. Those over age 75 are even more vulnerable; the older the age cohort, the more vulnerable. Tr. 353-354.

In examining the outside of the mailer envelopes, Ms. Hurme immediately recognized that the solicitation's target audience "very clearly" would be people interested in Social Security matters, those over 65. Tr. 357. She noted that the words "SOCIAL SECURITY PAMPHLETS" were used as an attention-grabber to get the recipient to open the mail, a tactic that works because Social Security is so vitally important to those over age 65. (10) Tr. 358, 365. Mr. Gibson admitted as much. When asked about why the words were there, he testified:

Because it's -- if I may say, ma'am, there are some people that really don't like bulk mail and will never even open bulk mail. They'll throw it either straight in the garbage or -- but I'm taking a chance or we took a chance of them seeing a pamphlet of Social Security. Whether they send in a card has nothing to do with it.

Tr. 126. NFRP thus deliberately uses the "Social Security" words as a hook to reel people in, which is exactly the use that § 1140 proscribes.

I next consider the interior lead-cards. As an initial matter, finding out who was responsible for their composition, and who could explain the text of the solicitations, was not an easy task. The Gibsons were evasive and inconsistent, with each denying responsibility. Mr. Gibson initially blamed his wife:

[MR. GIBSON]: It's actually in conversation between myself and my wife - and other people, in other words, brought up the idea of a need, in other words. They felt, in other words, the need for long-term care in some cases.

[Q]: Okay. But who in fact wrote this?

THE WITNESS: Who in fact actually wrote it?

[Q]: Yes. Who wrote it?

THE WITNESS: If I'm not mistaken --

[Q]: Who composed it?

THE WITNESS: -- my wife did.

Tr. 124-125.

But Mrs. Gibson, who had heard her husband's testimony, denied responsibility, and claimed that her husband was responsible.

[Q]: Who wrote that text?

THE WITNESS: In some cases, in designing these mailing pieces, I do the research for him. He designs them and alters whatever text that he doesn't like or he may add it. He is ultimately the one that designs - -

******

[Q] Who did the writing? I mean, so you are saying that he did the writing and that he composed this?

THE WITNESS: Yes.

Tr. 510-511. Mr. Gibson, who was present and heard his wife's testimony, ultimately conceded, "In all likelihood, I did. I think I have composed 99 percent of the text, if not 100 percent of the text." Tr. 546.

Yet, when asked to explain why he put certain words or phrases in, and omitted others, Mr. Gibson pleaded ignorance, or offered answers that were confusing and disingenuous. Ms. Hurme observed, accurately, that even though the entire point of the lead-cards is to sell insurance, the cards themselves contain virtually no reference to the term "insurance," except the small print Life Ins. Proceeds at the bottom of the cards. Tr. 360, 366; P. Ex. 10 at 2. (11) Mrs. Gibson would not explain why the word "insurance" does not appear in the solicitations, but referred the question to her husband: "That is a question for him." Tr. 511. But Mr. Gibson would provide no satisfactory explanation as to why he had omitted the term "insurance:"

I consider long-term care - - in other words, I will consider "coverage" synonymous with "insurance."

Tr. 523. He later claimed that "death benefit" was synonymous with "insurance." Tr. 542. But then said,

[d]eath benefit from Social Security is a death benefit. It is not insurance. It is not a burial policy.

Tr. 543.

The only reasonable inference to be drawn from the absence of the term "insurance" from the mailers is that the Gibsons did not want the lead-card recipients to know that the mailer solicited names for insurance sales, because, knowing that, people would be less likely to respond. The Gibsons refused to concede that point, but offered no other credible explanation.

Most of the lead-cards suggest that the recipient must respond quickly. ("Completed Card Must be Returned Within 5 Days," "MAIL COMPLETED CARD TODAY FOR FULL INFORMATION," "COMPLETE CARD AND MAIL TODAY!" "COMPLETE THE POSTAGE-PAID CARD AND MAIL TODAY!" P. Exs. 10-14). Ms Hurme noted that expressing the need to act urgently is a "trick of social persuasion." Tr. 359. Again, Mr. Neal, NFRP's marketing witness, did not challenge that characterization. Yet, when Mr. Gibson was asked to explain why the M&B-4 (P. Ex. 12) advises the recipient to "MAIL COMPLETED CARD TODAY," he claimed, incredibly, that NFRP wanted all the cards returned at once so it could get a bulk mailing rate when it sent out pamphlets in response. But then he realized that the M&B-4 does not include a response requesting the pamphlet, and admitted that the "today" was not there to enable NFRP to get a bulk rate. Tr. 100-101. He offered no further explanation.

All of the cards ask the recipient to fill in certain information, such as date of birth (which NFRP already has in its data base) and all require a signature. (12) According to Ms. Hurme (again not contradicted by NFRP's witnesses), this marketing technique is designed "[t]o get a commitment" from the recipient. Tr. 361. Mr. Gibson eventually, effectively admitted that the "required" signature serves no useful purpose. Tr. 69-70. See U.S. v Federal Record Service at 51 (intent to deceive evident from request for unnecessary signature).

The evidence establishes that the text was purposeful. The Gibsons deliberately employed established marketing techniques and used liberal references to SSA, and other indicia of a government connection, such as the picture of the capitol, to obscure the mailers' real purpose and to increase the probability of a response.

    5. NFRP received repeated warnings that its solicitations violated § 1140.

I have discussed how the evidence establishes - by more than a preponderance - that NFRP deliberately used the protected language and symbols to deceive recipients of the solicitations - primarily senior citizens. In the unlikely event that the Gibsons harbored any legitimate doubt about the legality of its solicitations, the I.G.'s letters should have laid them to rest.

Nothing in the statute or regulation requires the I.G. to send warnings to violators or to provide them grace periods for continuing violations. NFRP points to a section in the statute's legislative history, where the Committee expressed the hope that "SSA and HCFA would continue their present practice of seeking voluntary compliance under the law before determining whether to refer cases to the Inspector General." 1994 House Report at 72. The Committee report does not suggest that, after it receives the case, the I.G. should further attempt to obtain voluntary compliance. However, the record in this case establishes that the I.G. sent warnings, and, for nearly a year, attempted to elicit NFRP's voluntary compliance. Its "cease and desist" letter, dated August 1, 2000, contained copies of the statute and the SNAP-5 mailer. P. Ex. 6; Tr. 293. Mr. Gibson admits receiving the letter and reading its enclosures. Tr. 67, 127-128; P. Ex. 6. I find the language of this letter easy to understand:

We are requesting that you immediately cease and desist from all direct mailings in a facsimile Government document and use of the words "Social Security," "Social Security System," "Supplemental Security Income[,]" "Social Security Benefits" in a manner which reasonably can be construed as conveying the false impression that the mailings are authorized, approved or endorsed by SSA.

(Emphasis added). If there were any chance of confusion, the enclosure of the SNAP-5 mailing, with violative words written in bold all over the envelope, leaves no doubt as to what the I.G. was complaining about. I find unconvincing Mr. Gibson's suggestion that he did not understand the I.G.'s complaint. He well understood the violation, but made no effort to correct it.

Instead, he continued sending out the solicitations, and he delayed. He asked that the matter be transferred to San Antonio. Tr. 130 - 132. In a second unambiguous letter, the I.G. responded that she would not transfer the case and demanded evidence of compliance within 14 days. P. Ex. 7; Tr. 131-132. NFRP provided no evidence of compliance. It continued to send the violative solicitations, as it misinformed the I.G. as to its legal representative (See P. Ex. 8), and then sent a wholly unresponsive letter showing that it had been investigated for State Consumer Fraud in 1996. R. Ex. 19. NFRP's delaying tactics were geared to avoiding, not achieving, compliance.

At any point prior to July 2001, NFRP could have escaped penalty if it had stopped sending out the violative solicitations. Tr. 293, 298. Instead, over an 11 month period following receipt of the cease and desist letter, it continued to send them (Tr. 134), not stopping until the day it received SSA's penalty letter. Tr. 94-95, 105, 113. That the I.G. repeatedly demanded compliance before it imposed a penalty confirms that NFRP knew or should have known that its mailers violated the statute. See U.S. v. Federal Record Service at 42. (In which the court refers to the I.G. warning letters, among other factors, to which Federal Record Service Corporation (FRS) made minimal response, to justify imposing a preliminary injunction).

    6. Mr. Gibson's claim that he was misled by the I.G. was wholly incredible.

NFRP asserts

The SSA counsel assigned to the matter led the NFRP to believe that the SSA was still evaluating whether the NFRP was violating the statute and that there was a moratorium on the SSA penalizing the NFRP's actions during this period pending that decision.

R. Br. at 28, ¶ 98, citing Tr. 174-177, 525-526, 529-530; R Exs. 43, 46. This is an affirmative defense for which NFRP bears the burden. 20 C.F.R. § 498.215(b). Yet, Mr. Gibson was not able to articulate a single statement - oral or written - made by any member of the I.G.'s staff that could have led him to believe he was not in violation and subject to penalty.

[Q] You state in the second sentence [referring to the final paragraph of R. Ex. 43] "As you know, in my recent conversation with you I was under the impression that during the time NFRP used what you call or consider false or misleading, that it was all forgiven, or, in other words, a moratorium if we cooperated."

Can you explain what it was with regard to your conversation with Ms. Justice that gave you the impression for making that statement?

[MR. GIBSON] Yes. Yes. I have had several. How many, I do not know, but I would say between three and five conversations with Ms. Justice. And I was led to believe on two different occasions, two different phone calls, conversations, I said - - well, one thing, she started to ask for more material or more information or so on and so forth.

And I said, well, I wanted to comply. I have said all along, I think every letter - - somebody told me since then it was not on a particular letter, but in any event, as least three or four - - that I wished to cooperate in every way. And as far as - - we should obey every law.

And in any event, she said - - and I said, I want to cooperate. I want to do what you all want me to do. And she said, Well, I thought that is what we are doing now.

*******

[Q] And what did you understand her to be saying to you.

[MR. GIBSON] That I was complying. I was complying with all her requests, requests also - - in other words, that we are doing what they say they want us to do.

Tr. 525-526. See also Tr. 529-530. Inasmuch as NFRP had not made a single change in its solicitations, I find incredible Mr. Gibson's claim that he thought "we are doing what they say they want us to do." Moreover, I detect nothing in this testimony or anywhere else in the record suggesting that I.G. staff gave Mr. Gibson any reason to believe that his mailers were not violative. In fact, the opposite is true: as described above, the evidence establishes that NFRP received written warnings, advising, in uncompromising language, that his solicitations violated the statute.

Ironically, Mr. Gibson also points to NFRP's past brushes with state and federal regulators, in which he avoided penalties, to justify his understanding that he could continue to send the solicitations without penalty. He refers to a letter dated February 28, 1996, from the Texas Office of the Attorney General, directing NFRP's appearance for purposes of examination in connection with "its investigation of possible violations of the Texas Deceptive Trade Practices-Consumer Protection Act." R. Ex. 19. The record says little about the particulars of the investigation. Apparently, NFRP was sending out a snap mailer with a return address on the face of the envelope that said "SOCIAL SECURTY," (note the "I" is missing so it reads "SECURTY" rather than "SECURITY), and beneath that "NFRP FORM 9107." R. Ex. 15, at 3. (13) The AG's office apparently closed the case without bringing charges. A form titled Authorization to Close File indicates under "nature of case and final judgment:"

Mail out targeting elderly with a look like official government notice representing Social Security Death Benefits. Misrepresentation. Closed/Responded to 17.60; No Consumer Transaction

R. Ex. 19, at 5. In multiple, lengthy responses, Mr. Gibson fails to explain the investigation, and he fails to provide any credible explanation as to why a 1996 investigation justifies his failure to respond to federal regulators in 2000-2001, particularly since he seems to acknowledge that the state reached no conclusion as to the merits of the case. Tr. 208-209, 212, 536 ("The Attorney General told me that - he didn't say they found fault, not fault, period.").

Nor does he justify his purported reliance on the results of a 1996 I.G. investigation. Again, the record as to the specifics of the investigation is sparse, but documents establish that it centered around the same snap mailer that was the subject of the state investigation, with "SOCIAL SECURTY" as the return address. (14) R. Ex. 15, at 3. The I.G. sent NFRP a "cease and desist" letter on October 3, 1996. R. Ex. 13. NFRP's attorney responded by asking for a copy of the purportedly violative solicitation (R. Ex. 14). The I.G. sent by FAX on October 22, 1996, the front of the mailer and the front of the enclosed lead-card. R. Ex. 15. By letter dated October 23, 1996, NFRP's attorney sent the I.G. a copy of a revised mailer, which removed entirely from the front of the envelope the return address. R. Ex. 16. On October 29, 1996, the I.G. closed its file, with the comment: "Company complying with our C&D letter." R. Ex. 17; Tr. 315-316.

In his testimony, Mr. Gibson claims that the back of the 1996 mailing also listed "Social Security Pamphlets," in a manner similar to that on the contested mailers here, and appears to suggest that the I.G. thus tacitly approved that language. See Tr. 207-210; see also Tr. 214-215. Based on Mr. Gibson's testimony, NFRP gratuitously characterizes as "undisputed" that "NFRP included the SSA pamphlet offer on all its snap mailers through 1996, including the one that SSA challenged in 1996, as well as on its replacement." R. Br. at 66.

First, I consider Mr. Gibson's testimony wholly unreliable in this regard. As discussed throughout this decision, he demonstrated a general lack of credibility. Whether the pamphlet offer was included on the back of the 1996 mailer could easily have been established through NFRP's production of the entire document, in keeping with my prehearing order. (15) However, NFRP deliberately withheld from its exhibits a copy of the back of the 1996 snap mailer, so the documents in the record simply do not support the claim. R. Ex. 15; Tr. 316.

Moreover, even if NFRP established that the "Social Security Pamphlet" language were on the back of the 1996 snap mailer, that fact would not justify its refusal, more than four years later, to comply with the I.G.'s cease and desist letter. That in 1996 the I.G. focused solely on a blatant violation on the front of the mailer does not negate the clear warning notices sent to NFRP in 2000 and 2001, and does not exempt NFRP from bringing its mailers into compliance. The lesson NFRP should have taken from the 1996 experience was that it could avoid a penalty by responding promptly and positively to the cease and desist letter the I.G. sent to it in 2000.

In light of these investigations, I find remarkable NFRP's assertions, quoting Mr. Gibson's testimony, that "During his tenure at the NFRP, no one has ever expressed to Mr. Gibson that he or she was in any way confused as between the NFRP and the SSA." R. Br. at 25, ¶ 86; Tr. 175. NFRP was investigated by both state and federal authorities for a solicitation unquestionably designed to create the impression that it was from SSA. See R. Ex. 15, at 3. That Mr. Gibson could still claim that no one ever expressed confusion casts additional doubt on his credibility.

C. The NFRP mailings could reasonably be interpreted or construed as conveying the false impression that they were approved, endorsed, or authorized by SSA.

NFRP argues

Overall, the conclusion that one reasonably draws from the totality of the outside of the snap mailers is that the NFRP is a Texas-based, non-profit organization from whom one can obtain free pamphlets about SSA-related issues and possibly other information through its education programs or membership.

R. Br. at 74. I find it unlikely that even a very critical reader would be able to discern this information from the outside of the mailer. The recipient sees a block-out envelope with a picture of the capitol on the front, and, in very tiny letters, a San Antonio post office box address. P. Ex. 10. So, the only prominent image on the mailer's front is the capitol. I note that § 1140's legislative history specifically identifies the use of the capitol symbol among the tactics marketers employ to confuse the elderly into believing their solicitations have official sanction. 1992 House Report at 4. The reason is clear: its presence on the front of an otherwise nondescript envelope suggests some official sanction. And, apparently, the capitol emblem is rarely used. Mr. Jerry Kelly, whose company manufactures and sells mailers to NFRP and others, conceded that his other customers "rarely" put buildings (such as the capitol) on their mailings. Tr. 516.

On the back of the envelope is the prominently displayed "Social Security" language. The outside of the mailer thus offers little or no explanation as to its purpose, but strongly suggests that it is somehow related to Social Security. It could thus reasonably be construed that the document is, at least, approved, endorsed, or authorized by SSA. The presence of a purported disclaimer in smaller print below the "Social Security" language does nothing to suggest that the mailing is not authorized by SSA. In U.S. v. Federal Record Service, the Court observed that a small print disclaimer above large-type-font letterhead "would easily cause a consumer to focus on the official-sounding title of the company, not the small and strategically placed disclaimer." Id. at 40. In that case, a second FRS disclaimer, similar in tone to NFRP's, read "A Non-Governmental Service Providing Assistance to Individual's Processing Social Security Name Changes." The Court found that this disclaimer did nothing to redress the false impression. Id. at 40, n.31. In any event, as the Court pointed out, the statute specifically precludes reliance on a disclaimer - no matter how clearly written - to offset an offensive mailer. The mere inclusion of the disclaimer, if it is legally relevant at all, "does not lessen the false impression to consumers." Id. at 40-41.

Ms. Hurme opined that a reasonable elderly person receiving any of the solicitations could get the false impression that NFRP has been authorized or is affiliated with the Social Security Administration. Tr. 373-374. And the evidence establishes that even sophisticated consumers could be and were deceived.

Mr. George Rodriguez is an attorney with the Attorney General's Office for the State of Texas who recently reached retirement age. He received a solicitation from NFRP, identified as P. Ex. 3 (SNAP-5), sometime after he qualified for Social Security benefits. He had been expecting some correspondence from SSA, and initially thought that the mailer came from there. To him, it looked like an official document. Only after opening and reading it, did he realize that it was not from SSA. Tr. 271-279. NFRP concedes that Mr. Rodriguez was initially misled by the exterior of the envelope, and opened it

initially thinking it might be expected materials from the SSA. . . . Almost immediately, within 15-30 seconds, however, Mr. Rodriguez realized that the snap mailer had nothing to do with Social Security.

R Br. at 39, ¶ 145. Mr. Rodriguez is unquestionably a sophisticated consumer. Yet, as NFRP concedes, he initially construed the mailer as an SSA document, and, because of that false impression, was induced to open it. As discussed above, this was exactly Mr. Gibson's intention when he placed the violative language on the outside of the envelope, so he was successful in that regard. But he violated the statute.

Ms. Ima Gray testified that in May or June 2001 she received a solicitation from NFRP, identified as P. Ex. 2, at 4-5 (SNAP-5). Initially, she was confused because it was addressed to Ima Greathouse Gray, and she does not ordinarily receive mail so addressed. She was not sure where it came from, but then saw the "Social Security" language. When she opened the mailer, she noted the solicitation for what appeared to be supplementary death benefits under Social Security. She was not aware that SSA offered supplementary insurance of any kind. She held on to the document for a couple of days, showed it to her husband, who is a retired judge, and finally decided that it was not what it appeared to be, that it was aimed at people likely to take out insurance thinking it was sponsored in some way by Social Security. So she decided to report it. Tr. 249-252

Of the I.G.'s consumer witnesses, Ms. Marian Oden was the only one able to figure out before she opened the envelope that it was likely not sanctioned by SSA. In 1998 she received a solicitation from NFRP, which she identified as P. Ex. 1 (the M&B-4). She testified that when she saw the capitol superimposed under the caption "Medicare supplement lower rates," on a snap-out solicitation, she "took it to be a very official document." The document was addressed to her, using her complete name, which she uses only for voter registration and her driver's license. When she saw the listing of Social Security pamphlets, she immediately inferred an association with SSA. However, she read the small print, and when she saw the instruction to send a self-addressed, stamped envelope, she realized that this was not a government mailer because SSA makes such pamphlets readily available, without requiring a stamped, self-addressed envelope. She then realized that the mailing was not from SSA. Tr. 219-222. Thinking it misleading, she complained to the Attorney General's office in Austin.

Ms. Oden is a very sophisticated consumer, having worked in the insurance industry for a number of years. Tr. 223. When she reviewed the lead-card, she recognized the solicitations as "an offensive way to solicit insurance even though it was through a middle man." Tr. 225. She later explained that, as a former insurance person, she saw this as from someone who was selling insurance to senior citizens. Tr. 242-243. Probably because of her insurance background, she alone among the consumer witnesses fully understood the real purpose behind the mailer.

NFRP's marketing witness, Mr. William D. Neal, opined that the group of people who testified on behalf of SSA "represent an educational and social class that I don't think is representative of the class of people that presumably could be misled by these contested documents." He conceded that they would be among the least likely to be deceived by the mailing. Tr. 633-634. (16)

I found Mr. Rodriguez, Ms. Gray, and Ms. Oden to be completely credible witnesses. None has any personal interest in the outcome of this matter. None made any effort to overstate his/her case. Each readily agreed that he/she eventually figured out that the mailer was not from SSA and probably not "approved, endorsed, or authorized" by SSA. But each had initially been misled. Ms. Oden determined the false impression before she opened the envelope. Mr. Rodriguez was induced to open the envelope. Ms. Gray was induced to open the envelope, and then was confused for several days thereafter.

If these sophisticated consumers were deceived, even momentarily, what chance has the less educated, less aware, more vulnerable senior citizen? That the complaining witnesses were people who ultimately concluded that the mailer was not sanctioned by SSA is hardly surprising. Only someone who actually recognizes the deception would be in a position to complain. Recipients who are under the false impression that they are responding to an SSA-sanctioned mailer would have no way of learning that they had been deceived. Even as an insurance agent appears at their doorstep, they would not be able to trace his appearance to the NFRP mailer. This is in contrast to the situation in U.S. v. Federal Record Service where recipients were deceived into sending in money in return for a purported service. Those recipients were in a much better position to learn eventually that the promised service had no official sanction. When money changes hands, the connection is more direct and traceable; consumers are more likely to learn of the deception and to complain.

Applying a standard sometimes found in consumer protection cases, NFRP suggests that § 1140 requires a strong showing of consumer complaints. Quoting cases brought under the Lanham Act, NFRP asserts

[T]he law has long demanded a showing that the allegedly infringing conduct carries with it a likelihood of confounding an appreciable number of reasonably prudent purchasers exercising ordinary care.

(emphasis added). R. Br. at 80, quoting International Ass'n of Machinists v. Winship Green Nursing Ctr., 103 F.3d 196, 200-201 (1st Cir. 1996). This is simply the wrong legal standard. Under the Lanham Act the standard is "likely to cause confusion, or to cause mistake, or to deceive" (emphasis added). 15 U.S.C. § 1125(a)(1)(A). Under § 1140 the standard is significantly lower: "reasonably could be interpreted or construed as conveying the false impression." The Lanham Act requires, at least, a likelihood of confusion, or an actual mistake or deception. A "false impression" does not rise to the level of "mistake," "deception," or even "confusion." And § 1140 does not even require an actual "false impression," so long as the offending solicitation "reasonably could be interpreted or construed as conveying the false impression," the standard is met.

Moreover, accepting NFRP's proposed standard would make impracticable enforcement of § 1140 in cases involving lead-card solicitations. As noted above, unlike transactions involving the exchange of money, consumers who respond to lead-cards are far less likely to understand that they have been misled. The M&B-4, for example, tells the recipient, "You may qualify for a final expense program that could pay up to $10,000 to your beneficiary." P. Ex. 12, at 2. In light of the Social Security language on the outside of the mailer, the recipient might reasonably assume that this refers to a Social Security program. Because the card is captioned "Medicare Supplement Lower Rates," he/she might assume that the "final expense program" relates to the Medicare program. But the promised information is not about a "final expense program" under either SSA or Medicare. It is about purchasing $10,000 of private insurance. But a reasonable person would not know that from this solicitation, and would have no reason to connect sending in the lead-card with a later visit from an insurance agent. See Tr. 367.

As the I.G. points out, requiring a high complaint rate as a prerequisite for enforcement would reward those who successfully conceal their true identity and purpose. The more effective the deception, the less likely to generate a complaint.

In enacting § 1140, Congress was not only concerned that recipients would unwittingly respond to misleading solicitations. As Judge Kessel observes in his recent ruling, Congress also recognized that recipients might become so inured to deceptively worded solicitations that they throw out, unopened, mailings sent by government agencies. SSA v. United Senior Association, Ruling at 5. Quoting from the Committee Report:

Such deception potentially interferes with the ability of the Government to effectively correspond with the public and increases the likelihood that true Government mailings will be destroyed without being opened.

1992 House Report at 5. It is possible that recipients of NFRP's mailers threw them away unopened, not because they could not reasonably have construed them as authorized by SSA, but because they have been so inundated with official-appearing solicitations, that they no longer take note of any of them. Congress wanted to insure that any envelope appearing to be an official government mailing actually is an official government mailing, so its recipients are secure in the knowledge that they are not being deceived, and will take appropriate notice of government correspondence. Adopting NFRP's standard would defeat that legitimate statutory purpose.

I therefore reject NFRP's suggestion that the I.G. must produce a substantial number of aggrieved consumers in order to sustain its case.

NFRP claims that its allegedly violative mailers did not generate a significant response from consumers. From this it concludes that the mailers were not deceptive. (17) Mr. William D. Neal is a senior executive officer with a marketing and survey research firm which specializes in marketing strategy. He has an undergraduate degree in industrial engineering (Tr. 550), and an unspecified graduate degree in operations research and systems analysis. Tr. 551, 635. (18) NFRP hired his company to conduct various analyses of their mail campaign data. According to Mr. Neal, they considered surveying the recipients of contested mailers, but decided to rely instead on data supplied him by NFRP. Tr. 557-558. Apparently NFRP or Nacogdoches keeps detailed records of the solicitations it mails, and the return of lead-cards in response. (19) Mr. Neal conceded that his analysis is based on unaudited data. He did not go back and check to make sure that the actual numbers he received were true and accurate numbers, and his results are only as reliable as the information NFRP supplied to him. Tr. 636-637.

Mr. Neal begins with the following hypothesis: If the mailers are deceptive, there will be a strong consumer response. Tr. 593. He then presents NFRP's data in a variety of ways tending to show that it did not receive a strong consumer response to the contested mailers. R. Ex. 63, 63A-Z . Based on this, he concludes "that if the contested mailers had been deceptive, we should have seen a strong behavioral response" (essentially his hypothesis). Tr. 624. Putting aside potential problems with his blind reliance on the data supplied by NFRP (which has not demonstrated itself to be particularly reliable in any of its other representations), Mr. Neal's conclusion fails because his data does not prove his underlying premise. His data (if accepted) only show that the mailers elicited a relatively weak consumer response; it says nothing about the relationship between level of consumer response and deceptiveness of the solicitation. (20)

Essentially Mr. Neal poses a logical syllogism (in the form of a contrapositive):

If a solicitation is deceptive, then you will receive a strong consumer response. NFRP did not receive a strong consumer response. Therefore, the solicitation was not deceptive.

The implied premise for his syllogism, however, is that all deceptive solicitations elicit a strong consumer response, and, ultimately, only deceptive solicitations elicit strong consumer response. One must accept these premises to accept Neal's conclusion: no strong response, no deception. But a multitude of variables could cause a strong (or weak) consumer response, including the timing of the solicitation, the demand for the product, the language of the mailer (independent of the violative language), (21) and the targeted group of recipients, including the age of the targeted group. (22)

As discussed above, NFRP deliberately used language and symbols protected by § 1140 to convey a false impression and induce recipients to respond by sending in lead-cards. At best, Mr. Neal's data analysis establishes that, notwithstanding their creating a false impression, the solicitations did not cause measurable harm. Frustrated by their ineffectiveness, NFRP assumes that the solicitations did not create the intended false impression. Should the I.G. therefore give Mr. Gibson the opportunity to work out the kinks in his misleading solicitations, and stop him only after he has caused demonstrable and quantifiable harm? Such a result is incompatible with the letter and the spirit of § 1140.

D. Applying the regulatory criteria for determining the amount of the CMP, $2.00 per violation is an appropriate amount

By stipulation, the parties agreed about the number of solicitations in dispute, 83,569. Tr. 5; ALJ Ex. 2. NFRP withdrew certain assertions made in its opening statement as to the financial conditions and incomes of the principals here (NFRP, Nacogdoches, and the Gibsons), and withdrew its remarks as to the appropriateness of the proposed penalties. ALJ Ex. 1, Stip. 1. The parties agreed that "neither party will raise any issues regarding the amount in the notice of proposed penalty." ALJ Ex. 1, Stip. 4. See I.G. Br. at 13, n.4.

In the final footnote to its brief (R. Br. at 99, n.48), NFRP asserts, without citation to anything in this record:

The parties have stipulated that in the event the Board rules against the NFRP, that 83,569 mailers will serve as the basis for any penalty, which shall be assessed at a rate of $1.00 per mailer.

(Emphasis added). I believe that NFRP has overstated the parties' stipulations. They have agreed only to the number of mailers, and not "to raise any issues regarding the amount of the proposed penalty." I recognize that the I.G. may settle this case or any particular issue in this case without my consent. 20 C.F.R. § 498.126. However, no evidence in this record - to which I am bound to limit my consideration - establishes that the I.G. has agreed to anything substantive beyond the number of solicitations mailed out. ALJ Ex. 1; Tr. 5.

Under the regulations, I am obligated to consider specific regulatory criteria in determining the appropriateness of the CMP. I am specifically authorized to increase or reduce the penalties proposed by the I.G. 20 C.F.R. § 498.220. In determining the appropriateness of the CMP, I must consider: 1) the nature and objective of the advertisement, solicitation, or other communication, and the circumstances under which they were presented; 2) the frequency and scope of the violation and whether a specific segment of the population was targeted; 3) the prior history of the individual organization or entity in their willingness or refusal to comply with informal requests to correct violations; 4) the history of prior offenses of the individual, organization, or entity in their misuse of program words, letters, symbols, and emblems; 5) the financial condition of the individual or entity; and 6) such other matters as justice may require. I note also that the use of a disclaimer of affiliation with the U.S. government, SSA, or its programs is not a mitigating factor in determining the amount of penalty. 20 C.F.R. § 498.106.

1. Nature and objective of the solicitations, and the circumstances under which they were presented.

The evidence establishes that NFRP's solicitations were designed to solicit business for insurance agents, brokers, and companies, without disclosing that purpose, thus circumventing state insurance disclosure rules. Employing well-established marketing techniques, NFRP/Nacogdoches deliberately employed protected language and symbols to induce recipients to open the mailing, and respond, without understanding that they were being solicited by a private insurance company with no connection to SSA.

In a cynical attempt to lend respectability to the scheme, NFRP promised the elderly recipients what purported to be important information about Social Security, in the form of Social Security pamphlets. But NFRP's promise of information was a ruse; NFRP sent pamphlets that were hopelessly out-of-date, in fact, misinforming the elderly.

2. Frequency and scope of the violation and whether a specific segment of the population was targeted.

Ms. Gray and Ms. Oden received their copies of the violative mailers in 1998, so the violation continued for three years or more. In the 11 months following NFRP's receipt of the cease-and-desist letter, it admits to sending out 303,507 violative solicitations. R. Ex. 63, at 5. NFRP/Nacogdoches was thus mailing a substantial number of solicitations. No one disputes that the elderly were the clear targets of the solicitations. I note that the elderly are among the most vulnerable in our population, and the group about whom Congress expressed the most concern when it enacted § 1140.

3. The prior history of the individual, organization, or entity in their willingness or refusal to comply with informal requests to correct violations.

In 1996, NFRP timely complied with informal requests to correct violations. However, between August 2000 and July 2001, NFRP refused to comply with the I.G.'s requests, and continued mailing its violative solicitations for 11 months, stopping only upon receipt of the penalty letter. I also find that, in an effort to avoid sanction, Mr. Gibson has deliberately misrepresented his discussions with I.G. staff.

4. The history of prior offenses of the individual, organization, or entity in their misuse of program words, letters, symbols, and emblems.

NFRP has a significant history of misusing program words, letters, symbols, and emblems in connection with insurance solicitation. NFRP mailings were among those specifically brought to the attention of the House Subcommittee on Social Security in 1987. (23) Congress enacted § 1140 in response to the information elicited during those subcommittee hearings. In his testimony, Mr. Gibson referred obliquely to that mailing and to the critical correspondence he received from SSA in 1987. (24) See Misleading and Deceptive Mailings to Social Security Beneficiaries: Hearing before the Subcomm. on Social Security, 99th Cong., 1st Sess. (1987) at 277, 280-281.

I consider especially egregious NFRP's mailings that were the subject of the 1996 investigations. Mr. Gibson put the words "Social Securty" where the return address is found on the front of the envelope, creating the unmistakable impression that the mailing is from SSA. That he misspelled the word "Security" does not lessen the offense; that he put the incomprehensible notation "NFRP FORM 9107" under the violative words does not lessen the offense. If anything, those tactics suggest an effort to avoid penalty for an obviously offensive solicitation.

5. The financial condition of the individual or entity.

Because of the parties' stipulations, the record as to NFRP's financial condition is somewhat thin. Mr. Gibson claimed in passing that NFRP itself has little money, which I have no reason to doubt, particularly given the relationships among NFRP, Nacogdoches, and the Gibsons. However, the evidence establishes that, through its solicitations, NFRP and Nacogdoches have generated large sums of money. According to NFRP, these contested solicitations represent only a small percentage of its total mailings. NFRP admits to sending out 303,507 of the violative solicitations in the 11 months between August 2000 and July 2001. R. Ex. 63, at 5, 6; R. Br. at 30, ¶ 105. The insurance agent or company paid $300 to $350 per thousand solicitations mailed. Tr. 169. So, in less than a year, NFRP grossed between $91,050 and $106,227 from mailing just a small percentage of its solicitations.

I note also that NFRP keeps a record of all the respondents, thus maintaining a mooch list, which is itself a valuable asset.

6. Such other matters as justice may require.

Justice requires that I also consider Mr. Gibson's lack of veracity, and his refusal to acknowledge the harm done by his violative solicitations.

Congress recognized the difficulty in attempting to regulate this type of activity. It appears that the odds of incurring a penalty weigh heavily in the violator's favor. Consider NFRP, with its significant history of creating false impressions. Yet, this appears to be the first time a penalty in any amount has been proposed against it. In the past, it ceased one example of violative behavior, but started another. So to deter violative practices, the penalties must be substantial. Violators should not view the unlikely imposition of a CMP as simply another cost of doing business. Congress explicitly intended to "provide a strong deterrent" to those who violate § 1140 (1994 House Report at 71-72), and imposing a potential penalty of up to $5,000 per mailing underscores Congressional resolve to stop these violative practices.

I consider a $1.00 per violation penalty too minimal, particularly where, as here, the I.G. effectively gave NFRP a lengthy grace period, imposing a penalty for only a fraction of the total violations. For those 83,569 solicitations alone, NFRP grossed between $25,000 and $30,000 from insurance agents. Over the 11 months following issuance of the cease-and-desist letter, it grossed somewhere between $91,050 and $106,227, suggesting an element of cost effectiveness in its failure to stop the mailings. Indeed, if it had ceased the violative mailing at any time before the I.G. issued its penalty letter, continuing its practice would have been cost-effective.

In light of the seriousness of the offense, NFRP's history, Mr. Gibson's lack of veracity, and his refusal to acknowledge the seriousness of the offense, I do not consider a $1.00 per violation CMP sufficient to deter future violations. This man and his organization continue to characterize as a "service" to the elderly his misuse of protected words and symbols in order to mislead, and his practice of providing to private insurance companies the names and personal information of those who have been deceived, without their knowledge or consent. To meet the Congressional objective in this case requires a much stiffer penalty. I therefore increase the CMP to $2.00 per violation for a total CMP of $167,138.

VI. Conclusion

For all of these reasons, I find that NFRP has violated § 1140, and, under the authority specifically granted me in 20 C.F.R. § 498.220, I impose upon NFRP a $2.00 per violation CMP, for a total CMP of $167,138.

JUDGE
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Carolyn Cozad Hughes

Administrative Law Judge

FOOTNOTES
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1. Nacogdoches is also known as Mailing Surveys of Nacogdoches Business Center. Tr. 468-471.

2. In 1988 SSA and HCFA were agencies within the Department of Health and Human Services (HHS). SSA became an independent agency on March 31, 1995. Social Security Independence and Program Improvements Act of 1994, Pub. L. No. 103-296. HCFA remains within HHS, but changed its name to the Centers for Medicare and Medicaid Services in 2001. See 66 Fed. Reg. 35,437 (July 5, 2001).

3. Appearing before the Subcommittees, Claire Korioth, Chair of the Texas State Board of Insurance, described practices akin to those employed by NFRP, and urged Congress to consider new legislation to "take the profit out of lead-card operations that deceive the public, especially the elderly." 1992 House Hearing. I discuss below the parallels between NFRP's practices and the tactics described by the Texas Chair.

4. In her testimony before the Subcommittees, the Commissioner of Social Security, Gwendolyn S. King, described these tactics and observed that the use of the term "Social Security" likely compels people to read the mailing even after they realize it has nothing to do with the Social Security program. 1992 House Hearing.

5. There is nothing original about these practices. They are typical of the practices described by Texas Insurance Board Chair Korioth in the 1992 House Hearing:

Here is how the sifting process works: Using mailing lists of elderly Americans, lead-card operators send out millions of letters a month . . . . For free information or assistance, [recipients] are advised to fill out a return card and drop it in the mail.

* * * *

[T]he word "insurance" is seldom seen in [the] mailings. . . . Postage-paid cards or envelopes are provided for their answers, along with personal information. To encourage more returns, some personal benefit may be promised - free booklets, "valuable information," "peace of mind," or maybe tips on . . . their Social Security benefits.

* * * *

To increase sales leads and produce more profit, direct mail operations primarily deceive consumers in three ways: 1) They mask their true intent by posing as a public opinion surveyor or a consumer group; 2) they conceal the fact that they are selling insurance, knowing that disclosure would prompt many more people to throw their letters in the wastebasket . . . .

Few of these recipients realize . . . that returning the response card will result in a call or visit from an agent with a sales pitch for insurance. . . .

6. R. Ex. 23 is a slight variation on the SNAP LT-2 submitted by the I.G. At the top of the lead card is written "LEGISLATIVE UPDATE:"

7. I was not impressed by the affidavits of Ms. Nancy Zachgo, claiming substantial difficulty obtaining pamphlets from SSA. R. Exs. 5, 5A. Using her inefficient methods, it could take just as long to obtain the pamphlets from NFRP. The pamphlets can be obtained from local SSA offices, by calling SSA's toll-free number, by visiting SSA's website, or through numerous civic organizations. See U.S. v. Federal Record Service at 33 (where the Court characterizes obtaining a form by visiting an SSA office or telephoning the toll free number as simple and uncomplicated).

8. Supplemental Security Income (SSI) is a federal welfare program, and, to be eligible, income may not exceed certain limits. According to NFRP's out-of-date pamphlet, those income limits are $427 for an individual and $630 per couple. R. Ex. 9. Tr. 50-51, 299-301. Obviously, the SSI earnings have increased in the last decade. Current allowable income for SSI can be as high as $1,175 for an individual, and $1,719 a month for a couple. SSA Publication Number 05-11069 (February 2002). A second NFRP pamphlet sets forth decade-old earnings limits for those receiving retirement benefits. The current earnings limit is $11,280, well above the $6,840 cited in NFRP's pamphlet. SSA Publication Number 05-10069 (March 2002). The SSA documents setting forth this information can be obtained literally within minutes by visiting the SSA website.

9. I find no merit in NFRP's suggestion that NFRP and AARP are competing organizations, so AARP "would likely benefit" if NFRP folded. Since NFRP has only one identified member (Mr. Gibson), and imposes no membership fee, I do not see how AARP would gain membership or dues money as a result of NFRP's demise. With respect to NFRP's attacks on Ms. Hurme's competence and credibility, I note that NFRP's own marketing witness voiced no disagreement with any of her specific assertions. In fact, as discussed in the text of this opinion, NFRP's witnesses tended to confirm her observations and opinions.

10. 90% of all persons over age 65 are Social Security beneficiaries. For two-thirds of them Social Security represents 50% of their monthly income. For one-third, Social Security represents 90% of their income. For 18% of those receiving Social Security, it represents 100% of their livelihood. Tr. 358.

11. According to § 1140's legislative history, omitting the term "insurance" from these insurance lead-card solicitations is a common practice. See Korioth testimony in the 1992 House Hearing. ("the word insurance is seldom seen in their mailings ")

12. Combining a name, address, zip code, date of birth, telephone number and signature on a postcard makes the individual vulnerable to identity theft. Tr. 363.

13. Incredibly, Mr. Gibson claims that "it wasn't our intent" to confuse people with this mailing. Tr. 205. I find only one credible explanation for putting the words "Social Securty" in the return address position of an envelope, and that is to create the impression that the mailing is from SSA.

14. That this immediately post-dates the state investigation suggests that the state may have closed its file and either referred the matter to the federal investigators, or deferred to the federal investigation.

15. Pursuant to my prehearing orders and Civil Remedies Division Procedures, the parties were compelled to submit their exhibits prior to hearing. The parties were specifically informed that

[i]f a party comes to the hearing and attempts to . . . offer an exhibit not listed (and a copy not having been furnished timely to the other party), the judge might not allow the party . . . to introduce the exhibit. . . . The judge may require the offering party to demonstrate . . . extraordinary circumstances . . . which explain the failure to comply with prehearing requirements.

Civil Remedies Procedures. In prehearing conferences I repeatedly warned the parties that, absent a showing of good cause, I would not admit untimely exhibits. In submitting its exhibits, NFRP deliberately omitted the back of this solicitation. The regulations specifically authorize me to prohibit a party from introducing such evidence. 20 C.F.R. § 498.214.

16. Mr. Neal offered his unsolicited opinion that they were not deceived. I reject that opinion, and, as explained above, find these witnesses credible.

17. In a related context, the Court in U.S. v. Federal Record Service noted, "Of course, the Government need only prove that this harm is contemplated, not that the deception succeeded." Id. at 49 (discussing the mail fraud statute).

18. I find puzzling NFRP's rather harsh attacks on Ms. Hurme's academic credentials as lacking in "any discipline that might be pertinent to this case . . . not consumer fraud issues, not marketing, not gerentology, not elder care, not sociology, not statistics." R. Reply Br. at 26. Mr. Neal's degrees are in industrial engineering and operations research/systems analysis. Both witnesses started in fields that may or may not lend themselves to expertise in any of these areas. However, both witnesses have held positions that should reasonably lead to their developing knowledge and experience in marketing and consumer fraud.

19. This list of respondents, sometimes referred to as a "mooch list," is itself a valuable commodity. A "mooch list" includes the names, addresses and telephone numbers of persons who have shown themselves vulnerable or gullible by having responded to a telemarketing or direct-mail solicitation. Tr. 371. Mooch lists are valuable; depending on the quality of supplemental information contained in them, they may sell for anywhere from $5 to $250 per name. Tr. 372.

20. Mr. Neal's evidence raises a number of other questions. NFRP had what he characterizes as a very sophisticated data base. The Gibsons apparently kept careful track of the effectiveness of its solicitations. Why would they continue mailing a solicitation that has not been effective, particularly knowing that they faced significant sanctions for doing so? Why would insurance agents pay to send out demonstrably ineffective solicitations?

21. Mr. Neal conceded that he did not compare other aspects of the mailers:

I was told that the basic offer of LT-2 was the same kind of offer being made by Snap LT; that the basic offer being made by ENV M&B-1 was similar to that that was in Snap M&B-4; and that the offer being made by B-5 was similar to that of Burial Snap 5. I did not go back and make a qualitative comparison between the two.

Tr. 668-669. Mr. Neal also conceded that the return rates for Spanish language mailers differed, but for most of the mailers, he had no idea how the number of Spanish/English mailers break down. Tr. 639-641, 643

22. Evidence establishes that the older the population, the more vulnerable to misleading solicitations. Tr. 354. Mr Neal conceded he could not determine from the data what was going on in terms of age. Tr. 645-646.

23. Also on that list were solicitations distributed by the FRS. In U.S. v. Federal Record Service, the Court cited to this legislative history, characterizing FRS' solicitations as a "prototypical example of the type of misleading solicitation against which the statute . . . was directed." U.S. v. Federal Record Service, at 9, n.14.

24. The contested mailing then referred to "Social Security Funeral Benefits Information," and SSA advised Mr. Gibson that SSA provided no "funeral benefits." Mr. Gibson paraphrased the information contained in SSA's letter:

Death benefit from Social Security is a death benefit. It is not insurance. It is not a burial policy. You can do what you want to. I can go get drunk if it is my wife's death benefit.

Tr. 543.

CASE | DECISION | JUDGE | FOOTNOTES