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
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
"`SUCCESSFUL SYSTEMS' Post Office Box 815
Horace Harding Station Flushing, New York
program pays you
up to $100 per single order.
You never have to buy stamps, en- velopes,
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 our program.
We have the ONLY program available anywhere that
pays you TWO WAYS! . . . Not only will you receive
$1 for every envelope that you secure for us and
STUFF with our offers . . . you will also receive
50% COMMISSION on every sale generated by your
mailings! . . . Up to $100/ORDER! Commission checks
are mailed out weekly!
I can assure you that as a participant in our
program, you will NEVER mail out anything
objectionable or pornographic. There are no quotas
to meet, and no-one will be looking over your
shoulder. You can work as much or as little as YOU
want. You are your own boss! There are no
contracts to sign, and we further GUARANTEE that
your name will never appear on any of our
circulars. And don't forget, commission checks are
sent out from our home office . . . EVERY WEEK! NO
LONG WAIT . . . to get all the money you have
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 homework.
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 whatsoever.
Third, and, significantly, nowhere in the ad does it say that
the consumer will have to spend his or her own money to place
ads in newspapers and periodicals. In fact, the ad implies that
there will be no expense to the consumer ("You never have to
buy stamps, envelopes, circulars or any supplies").
After reading the "come-on" ad (Plaintiff's Exhibit 1), the
unwary consumer sends $27 to Associates and then receives
Plaintiff's Exhibit 2, a brochure entitled, "`Successful
Systems' Home-Mailing Program Procedure Manual, by Lisa
Michaels". Now the consumer is advised that he or she will be
a "registered distributor of our HOTTEST MONEY-MAKERS,
specifically we offer a No-Nonsense way to $550 a day". Still
no mention of the product or the program. On page two of the
manual the consumer is again assured that he or she "never have
to spend one cent on any circulars, envelopes or stamps".
On page two, the consumer is finally advised what to do
— "Your only expense in this program will be for placing one
or more inexpensive classified ads". The consumer is advised to
place a classified advertisement, as follows:
"`A NO-NONSENSE WAY TO $500 A DAY!' . . . $1
Self Addressed Stamped Envelope (SASE) . . . Your
name and address."
When the consumer places the ad(s) he or she will then
receive replies containing $1.00 in each reply and he or she
will stuff the self-addressed stamped envelope. With what? With
circulars (Plaintiff's Exhibit 3) that advertise "A No-Nonsense
way to $500 a Day". Still no mention of the product to be sold.
The second consumer fills out a coupon and sends $20 to the
first consumer (with immediate refund rights). The coupon
states, "Please rush me a copy of your `ultimate' home business
plan". Still no mention of any product or program; only
double-talk and evasive, confusing language for an anonymous
McDermott testified that this plan is in the nature of a
chain letter because the first level of consumer pays $27 and
advertises to the second level of consumer who pays $20. Of
this $20, the first level consumer
keeps $10 of the $20. The second line consumer gets the same
manual (Plaintiff's Exhibit 2) and they, in turn, place ads and
bring in a third level consumer. According to Inspector
McDermott, "after approximately ten levels, you will run out of
the number of people on earth that could qualify as purchasers
. . ." and such a plan is in the nature of a chain letter or
pyramid scheme. The Court notes that chain letters violate the
mail fraud statute (see, e.g., United States v. Armantrout,
411 F.2d 60, 61-62 [2d Cir. 1969], citing Blachly v. United States,
380 F.2d 665, 672 [5th Cir. 1967] [other citations omitted]).
Plaintiff's Exhibit 3 is a document sent to the first
consumer with the manual. In this document there are similar
vague and misleading representations such as:
"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 ELSE!"
This flyer again emphasizes the "complete refund" available,
which is the apparent "fail-safe" feature of this operation.
As to the "money" portion of the flyer (Plaintiff's Exhibit
3), it continues, as follows:
. . . I don't care if you are a professional
person, a housewife, a high school student, or a
RETIRED senior citizen! . . . You owe it to
yourself and your loved ones to CHECK ME OUT! . .
. Completely at MY RISK! . . . I GUARANTEE THAT
YOU HAVE NEVER SEEN SUCH AN `HONEST' plan, with
absolutely NO CATCHES, that can produce income as
quickly and effortlessly offered anywhere! . . .
FOR ANY PRICE! . . . I PERSONALLY GUARANTEE IT!
P.O. Box 815 Dept. ()
Horace Harding Station
Flushing, New York 11362
Please RUSH me a copy of your `ULTIMATE' Home
Business Plan and FREE BONUS REPORT via FAST FIRST
CLASS MAIL! I understand that if after trying your
system for 30 days I am not ABSOLUTELY DELIGHTED
for ANY REASON that I may return it for an
IMMEDIATE REFUND! . . . On that basis here is my
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 product.
They stipulated that if I wasn't satisfied with
their program I would return their material and
they would refund my money.
They don't sell anything. They just want people to
send the same information they sent me to other
people. To me that is cheating the public, so I
returned their material. They have not returned my
money. I have written them twice.
/s/ Clara Dillinger"
The Ellis complaint, also handwritten, reads, in part, as
"I received this kit on Monday 11/13/89; I was not
impressed with it, as I saw that the `Successful
Systems' program involved a lot of newspaper
advertising expense on my part which their sales
letter made no mention of. I then promptly
returned their starting kit materials to them . .
. and requested my $27.00 back . . . To date, I
have heard or received nothing. Please help me get
my money back from this rip-off.
/s/ George W. Ellis 12/4/89"
Based upon his experience as a postal inspector, in the
opinion of Inspector McDermott, the "Successful Systems"
program "is nothing more than a chain letter pyramid scheme in
which no product is involved, and is only sustained by
recruiting other members to sell in essence the same nothing
program" (Tr. p. 54).
Further, in his opinion as a postal inspector, the initial
solicitation sent out by "Successful Systems", Plaintiff's
Exhibit 1, "is filled with deceptions and misrepresentations"
in that: (1) it mentions nothing about advertising costs; (2)
it mentions nothing about the major thrust — to recruit others
to join and sell similar programs; (3) it says nothing about
the product involved; and (4) it promises a refund within
On cross-examination, Inspector McDermott testified that he
did not know how much of the $410,000 in the seized bank
account constituted monies derived from the "Successful
Systems" program. While on cross-examination he summed up his
analysis of the defendants' program as follows:
"Q Tell me, how did this scheme work?
A Again, when somebody answers an advertisement in
the hopes that they would be employed stuffing
envelopes, they receive a program, a booklet.
After paying $27 they receive this booklet which
tells them to spend additional money advertising
essentially the same program in which you can make
up to $500 a day."
Although counsel for the defendants vigorously tried to bring
out that the Association was selling two products, namely, (1)
a pamphlet entitled "How to `erase bad credit' and ...