The opinion of the court was delivered by: Spatt, District Judge.
By a verified complaint in rem in a civil forfeiture action,
dated December 17, 1990, the plaintiff United States of America
("the plaintiff") requested that a warrant be issued for the
"arrest" of the defendant bank account at Citibank, 2-1 Park
Plaza, Glen Head, New York. The action was brought pursuant to
18 U.S.C. § 981, 1956 and 1957, and also 18 U.S.C. § 1345 and
28 U.S.C. § 1355. A warrant for the arrest of the said bank
account was issued on December 17, 1990 listing, as potential
claimants: Dr. William Savran, William Savran & Associates,
Inc. and Successful Systems. The warrant was executed and the
bank account was seized and/or frozen in its entirety.
Apparently the account was not physically seized, but only
By order to show cause dated December 26, 1990, the defendant
William Savran ("Savran") moved for an order "vacating the
warrant seizing" the said bank account. On December 27, 1990,
the return date of the motion by Savran, the plaintiff also
presented an order to show cause in support of a motion
requesting a broad spectrum of relief including enjoining the
defendant from sending out any mailings or advertisements from
the "Successful Systems" business pursuant to 18 U.S.C. § 1345.
The plaintiff also requested a temporary restraining order
asking for a wide range of remedies similar to the request in
the order to show cause.
An evidentiary hearing was held on both parties' applications
on December 27, 1990 and December 28, 1990. Pursuant to Fed.
R.Civ.P. 52(a), the following constitutes the Court's findings
of fact and conclusions of law (see also Society for Good Will
to Retarded Children, Inc. v. Cuomo, 902 F.2d 1085, 1088 [2d
Cir. 1990]; Weitzman v. Stein, 897 F.2d 653, 658 [2d Cir.
The following is the evidence that was adduced at the hearing
on the motions and the Court's findings of fact based thereon.
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
`Revolutionary' home-mailing program pays you up to $100 per
You never have to buy stamps, envelopes, circulars, or any
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
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 `homework' a black eye. Some have
promised millions of dollars to their homeworkers! Believe
me, you'll never become a multimillionaire 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
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.
Lisa Michaels (Vice-President)
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
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
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:
"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
Multilevel Marketing, Envelope-Stuffing, Gambling, Chain
Letter Schemes, or any other GIMMICK!
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!
. . 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!
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
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
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:
. . 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
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 [ ]
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).*fn1
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:
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
"On July 29 I sent `Successful Systems' $27.00. I thought I was
entering a program to mail their advertizing [sic] for a
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 ...