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Department of Health and Human Services DEPARTMENTAL APPEALS BOARD Civil Remedies Division |
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| IN THE CASE OF | |
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Social Security Administration Petitioner, |
DATE: December 14, 2006 |
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National Taxpayers Union, Respondent |
Docket No.C-05-439 Decision No. CR1543 |
| DECISION | |
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DECISION
The Respondent, National Taxpayers Union (NTU), is an advocacy group with headquarters in Alexandria, Virginia. In order to increase membership and raise money, NTU regularly sends out solicitations and other mailers. Here, because it persisted in sending mailers asserting (among other claims deemed misleading): "OFFICIAL NATIONAL SURVEY ON SOCIAL SECURITY," the Inspector General (I.G.) of the Social Security Administration (SSA) proposes imposing against it a $274,582 civil money penalty (CMP) under section 1140 of the Social Security Act (Act). For the reasons set forth below, I agree with SSA and impose against NTU a CMP of $274,582. I. Background In February 2002, a United States Senator forwarded to SSA a constituent complaint about a letter and survey that NTU sent him. (1) P. Ex. 3. The matter was referred to the I.G. who, in a letter dated April 3, 2002, advised NTU of the complaint and of the I.G.'s determination that the mailing violated section 1140 of the Act because its language could reasonably be construed as conveying the impression that NTU was conducting a survey authorized by SSA. In fact, SSA had not endorsed, approved, or authorized NTU to conduct such a survey on its behalf. The I.G.'s letter asked that, in all its direct mailings and other communications, NTU immediately cease and desist from using the words "Social Security" or "Social Security Administration" in a manner that could reasonably be construed as conveying the false impression that the communication was authorized, approved, or endorsed by SSA. P. Ex. 5. NTU's president, John Berthoud, responded in a letter dated April 12, 2002, apologizing for any unintended appearance of impropriety. The letter explained that NTU intended to use the survey results "in lobbying the government, Congress, and the Social Security Administration for much-needed changes (which was our purpose for commissioning it)," and promised to change the package design "so that there is no impression that the SSA has provided any formal authorization for our project." (2) P. Ex. 6; Stipulation; Tr. 2-3. On September 4, 2002, however, SSA received another complaint about an NTU mailing similar to the one that generated the first complaint. P. Exs. 9, 11. After verifying that this new version of NTU's mailing was developed and mailed after NTU promised to change its package design (P. Ex. 10), the I.G. determined that the revised mailing also misled the public into believing that the survey was authorized, endorsed, or approved by SSA. (3) In a letter dated November 7, 2002, the I.G. demanded that, within 10 days of its receipt of the letter, NTU provide written confirmation of its plan to comply with section 1140. The letter warned that, if NTU failed to act, the I.G. would take administrative action under section 1140 and its implementing regulations. P. Ex. 11. NTU declined to submit the requested plan. Instead, characterizing section 1140 as unconstitutional, on December 6, 2002, NTU filed a law suit against SSA in U.S. District Court for the District of Maryland. P. Ex. 12; see SSA's post-hearing brief (SSA Br.), Appendix A. In January and February 2003, while the court action was pending, NTU mailed out a third version of its solicitation/survey, which SSA also considers misleading and violative of section 1140. P. Exs. 14, 16, 19. (4) The District Court subsequently dismissed NTU's complaint. National Taxpayers Union v. SSA, Civil Action No. WMN-02-3949 (September 3, 2003) (SSA Br., Appendix A). NTU appealed, and, in a decision dated July 15, 2004, the U.S. Court of Appeals for the Fourth Circuit affirmed the dismissal. National Taxpayers Union v. SSA, 376 F.3d 239 (4th Cir. 2004), cert. den. 125 S.Ct. 1300 (2005). Shortly thereafter, in a letter dated May 10, 2005, the I.G. proposed imposing against NTU a CMP in the amount of $274,582 (or 50� per violation), based on its determination that, between December 2001 and February 2003, NTU mailed 549,164 solicitation surveys that violated section 1140. The letter advised NTU of its appeal rights and NTU timely requested a hearing. I held a hearing in Washington, D.C. on July 12 and 13, 2006. I have admitted into evidence SSA Exhibits (P. Exs.) 1-37, and NTU Exhibits (R. Exs.) 1-19, and 24-51. Tr. 2, 247. Following the hearing, the parties submitted post-hearing briefs (SSA Br. and NTU Br.) and reply briefs (SSA Reply and NTU Reply). II. Statutory and Regulatory Background Section 1140 of the Act prohibits misuse of symbols, emblems, or names in reference to Social Security or Medicare.
* * * *
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, he determines,
20 C.F.R. � 498.102(b). CMPs 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 section 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 a 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). NTU 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. III. Issues I must determine whether the three solicitations sent by NTU violate section 1140 of the Act. Specifically, (1) Did NTU 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 NTU 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 NTU had some connection with or authorization from the agency? If I find in the affirmative on either of these questions, NTU has violated the statute and is subject to the imposition of a CMP. (3) If I conclude that NTU has violated section 1140, what, if any, CMP should be imposed? IV. Discussion NTU relies on direct mail solicitations "to help build and maintain grass roots support." R. Ex. 9, at 5. According to NTU's then Membership Director, Douglas Frank, in June 2001, NTU decided to use the issue of private investment accounts for Social Security in its effort to increase membership and raise funds. R. Ex. 17, at 1 (Frank Decl. �� 1, 2), Tr. 6. He directed D. Richard Geske, an independent copywriter, to put together a solicitation package that addressed the issue. He gave no specific directions, leaving the choice of "response device" up to the copywriter. R. Ex. 17, at 1 (Frank Decl. � 3); Tr. 7. He did not ask Copywriter Geske to design a survey. Tr. 7-8, 11; R. Ex. 15, at 1-2 (Geske Decl. � 3). On his own initiative, Copywriter Geske decided to include a survey in the package. R. Ex. 15, at 3 (Geske Decl. � 6). All of the mailers are "self-mailers;" the entire package is one piece of paper that "comes open in the reader's hands, but the parts stay together until used." R. Ex. 15, at 2 (Geske Decl. � 4); R. Ex. 17, at 1-2 (Frank Decl. � 3).
NTU argues that a "reasonable person" could see that its mailers originated from NTU, and not from SSA or any other government agency. But this is not the statutory standard. The baseline inquiry under section 1140(a)(1) is whether NTU's mailers reasonably could be interpreted or construed to have conveyed the false impression that SSA approved, endorsed, or authorized their contents. Further, the statute does not require any evidence of actual confusion by those who received the mailers. As the Court of Appeals for the Fourth Circuit has acknowledged, this test creates a "relatively low threshold to support a finding of liability." United Seniors Association v. SSA, 423 F.3d 397, 405 (4th Cir. 2005). Here, although NTU's mailers do not purport to be from SSA itself, they are simply chock-full of language that conveys the impression that SSA approved, authorized, or endorsed their contents. I consider below some of the more egregious examples: Version 1.
(Emphasis in original). (8) P. Ex. 17, at 1; R. Ex. 1. I find this language, by itself, sufficient to establish a section 1140 violation since it creates the impression that NTU's survey has official sanction. Even though it shows that NTU sent the mailer, the recipient would still reasonably think that SSA approved, endorsed, or authorized its contents. See United Seniors Association, 423 F.3d at 405. The reader is led to believe that NTU is acting with "official" sanction from three governmental entities. See also P. Ex. 37, at 2 (Arnold Decl.); Tr. 147-48. In enacting section 1140, Congress was particularly concerned that direct mailers put "Social Security" words and symbols on the face of their mailers to entice recipients into opening them. As the Court of Appeals noted, once a recipient of a misleading envelope opens the envelope and begins reading its contents, the deceptive "communication" has served its purpose. United Seniors Association, 423 F.3d at 404. NTU has made much of what I consider an inconsequential distinction between the outside of a self-mailer and an envelope. For all practical purposes, the information printed on the outside of these self-mailers has the same impact as information printed on the outside of an envelope, and, as with an envelope, once the recipient opens the self-mailer, the deceptive communication has achieved its purpose.
(Emphasis in original). P. Ex. 17, at 1. Director Frank acknowledged that the mailer was simply sent at the third class, non-profit rate, and that nobody "certified" the survey. Tr. 62. Even Copywriter Geske eventually conceded that this language is there to "increase the importance of a piece." Tr. 283, 284. William E. Arnold, Ph.D, is a Professor Emeritus in Communications at Arizona State University, and a Professor of Gerontology at the University of Arizona. He has conducted research on the use of information to change attitudes and behavior. P. Ex. 37, at 16 et seq. (Arnold Decl.); Tr. 121-22. He has extensive experience in conducting surveys, and testified credibly during these proceedings. Tr. 130. Professor Arnold points out that, taken together, the language on the outside of the mailer conveys a sense of urgency that a Social Security beneficiary would be reluctant to ignore. Even non-beneficiaries could reasonably infer that the mailing contains official documents that could affect personal earnings records maintained by SSA. P. Ex. 37, at 3 (Arnold Decl.). (9)
OFFICIAL
NATIONAL SURVEY ON CONDUCTED
BY
THE
SOCIAL SECURITY ADMINISTRATION (Emphasis in original). P. Ex. 17, at 3. The page then addresses the recipient by name (ISSUED TO: [name deleted]), followed by what appears to be very specific identifying information (QUALIFYING ZONE & RATING; CERTIFICATION NUMBER, and RETURN DATE). But this identifying information is, in fact, of absolutely no consequence except to create the impression of consequence. Following that language, in underlined, red capital letters is the "IMPORTANT INFORMATION" section. The recipient is again mentioned by name (in fact, the recipient's name is repeated throughout the mailer) and told:
(The ellipses are in the original; emphasis is also in the original). Then the mailing tells the recipient (again by name) that the recipient's participation in the survey is crucial.
P. Ex. 17, at 3; R. Ex. 1. In reviewing this language, Professor Arnold observed that "the recipient's logical conclusion is that SSA has shared official information with NTU, information that only SSA would be privy to, in order for NTU to conduct an official survey on SSA's behalf." P. Ex. 37, at 3-5 (Arnold Decl.). I agree. The references to the recipient's social security number and eligibility create the impression that NTU has specific information that it could only have obtained from SSA. As one recipient of an NTU mailer (and of Social Security) (10) explained to NTU's private investigator,
Tr. 233-34. Further, I agree with the I.G. that the assertion that NTU is required to select at least one participant from each "qualifying zone" tells the recipient that NTU is not conducting the survey for itself, but is acting at the direction of others who have imposed this requirement. Inasmuch as no other entities are mentioned, logic dictates that SSA, the White House, and/or Congress imposed that requirement.
(Emphasis in original); P. Ex. 17, at 6; R. Ex. 1. Director Frank defended this language by asserting that NTU was the "authorized sponsor" because it authorized itself to conduct the survey. Tr. 61. And Copywriter Geske insisted that if the recipient "read the entire package" he/she would "understand very clearly that it was the National Taxpayers Union." Tr. 287. But no one would reasonably infer that NTU required authorization from itself to sponsor a survey. "Authorization" suggests approval by an outside entity with some authority, and, again, according to the mailer, SSA, the White House, and Congress are the authorizing entities. The mailer then includes the inevitable, and repeated, requests for donations, along with the ersatz survey. P. Ex. 17, at 8, 10; R. Ex. 1 ("[Name deleted] thank you for your valued participation in this important survey on Social Security. Please return your survey today in the envelope provided and won't you please do your part to help the National Taxpayers Union save Social Security by enclosing your donation of $25 or more. . . ."). Tr. 14-16. Version 2. Director Frank responded to the I.G.'s cease-and-desist letter by removing from the mailer the most conspicuous references to the "Social Security Administration." Tr. 19-20. The revised mailer still purports to contain an "OFFICIAL NATIONAL SURVEY ON SOCIAL SECURITY" that was "COMMISSIONED BY THE NATIONAL TAXPAYERS UNION FOR THE WHITE HOUSE AND CONGRESS OF THE UNITED STATES." (Emphasis in original). P. Ex. 18, at 1; R. Ex. 2. The mailer contains the same specific, faux-consequential identifying information. The recipient is addressed by name and advised that her name was "SPECIFICALLY CHOSEN" to receive this OFFICIAL NATIONAL SURVEY ON SOCIAL SECURITY because she lives in a "QUALIFYING ZONE" from which NTU is "required" to select a participant and she is the "ONLY individual from a total of 89" in the above "QUALIFYING ZONE" whose name matches the other "important demographic and economic data that's central to the purpose of this survey." P. Ex. 18, at 3; R. Ex. 2. (11) It still refers to the recipient's Social Security eligibility, and refers to NTU as the "authorized sponsor" of the survey. P. Ex. 18, at 6; R. Ex. 2. I do not find that eliminating "Social Security Administration" from the listed "survey sponsors" brought the mailer into compliance with section 1140. The mailer continued to use the term "Social Security" as "part of an overall design" that conveys the impression that the mailer contains an important Social Security document (the survey) sent on behalf of official government sources. This violates section 1140. See United Seniors Association, 423 F.3d 405. Laura Fischer is a retiree receiving Social Security benefits. P. Ex. 34, at 1 (Fischer Decl. � 1). She has had no association with NTU, but a copy of Version 2 was mailed to her in about June 2002. Id. at 2 (Fischer Decl. �� 4, 5). She testified, credibly, that she does not generally open such solicitations, but she opened this one because of the bold red reference to Social Security and because it indicated that a "certified survey" was enclosed. Id. at 2 (Fischer Decl. � 4). Tr. 80, 227-28, 235. At first she thought that SSA was involved with NTU's request, but, having worked for SSA in the distant past, she considered it unlikely that SSA would sponsor a private solicitation for funds. So she called SSA to inquire. Id. Thus, the I.G. has not only shown that NTU's mailing "could be interpreted" as conveying a false impression (satisfying the "low threshold" set by the statute), but has also shown that the mailing in fact confused its recipient, enticing her to open it, read its contents, and call SSA. Had the envelope not referred to SSA, she would have discarded it, unopened. (12) Version 3. After receiving the I.G.'s November 7, 2002 cease-and-desist letter, NTU mailed out a third version of the solicitation/survey. P. Ex. 19, at 1; R. Ex. 3.
(Emphasis in original).
(Emphasis in original). P. Ex. 19, at 3; R. Ex. 3. Even if this were a credible disclaimer, the statute explicitly precludes me from considering a disclaimer in determining a violation under section 1140. Determination of a violation "shall be made without regard to any inclusion in such item . . . of a disclaimer of affiliation with the United States Government or any particular agency or instrumentality thereof." Act, � 1140(a)(3). Moreover, the disclaimer paragraph is more an exercise in obfuscation than a legitimate disclaimer. First, NTU claims legal recognition and registration by the U.S. government, which suggests some official government sanction beyond that afforded a typical non-profit organization. The next sentence, though, disavows any financial connection with the government. Then comes the reference, in bold, to the OFFICIAL NATIONWIDE OPINION POLL ON SOCIAL SECURITY, sponsored, not by NTU, but by "said organization." The antecedent for "said organization" is ambiguous. Careful parsing of the passage suggests that it refers to NTU, but the more casual reader could easily conclude that it refers to SSA, or some other government agency or branch. See P. Ex. 37, at 10-11 (Arnold Decl.)
Again the reference to the recipient's eligibility status suggests that NTU obtained confidential information from SSA about this particular recipient. The admonition that she "must participate" suggests that her failure to do so could adversely affect her receipt of benefits. See P. Ex. 37, at 12 (Arnold Decl.). NTU argues that I should require "a properly designed survey to establish whether the recipient class (the reasonable person) would understand the NTU solicitations to be government-sponsored." NTU Br. at 7. Of course, at approximately $100,000 per survey, such a requirement would render section 1140 virtually unenforceable. See Tr. 155. While such a survey might be admissible as evidence, and NTU was certainly free to conduct and submit the results of such a survey, nothing in the statutory language, regulations, nor case law suggests that SSA must do so in order to halt the blatant misuse of protected words and symbols. Indeed, the reviewing courts have unanimously affirmed the ALJ's authority to determine violations without such evidence. United Seniors, 423 F.3d 397; SSA v. National Federation of Retired Persons, DAB No. 1885 (2003), aff'd, 115 Fed.Appx. 763, 2004 WL 2980374 (C.A.5). Moreover, this argument - that a survey would show that no one could reasonably interpret the mailer as conveying a false impression of government involvement - would be in the nature of an affirmative defense, for which respondent bears the burden of going forward and the burden of persuasion. 20 C.F.R. � 498.215(b)(1). I note also that NTU has exclusive control over the recipient information necessary to conduct such a survey, information it did not share with the I.G., even in response to subpoenas (see SSA Reply at 11; Tr. 39-41), and was thus the only party in a position to undertake such a survey. All three versions of NTU's Social Security mailer were designed to entice the recipient to open it, to send in a response, and to send money. Tr. 141. To achieve these purposes, the mailers are fraught with deliberately ambiguous and deceptive language that repeatedly includes the protected "Social Security" words. By any objective standard, NTU's use of those protected words conveyed the false impression that the mailers' contents were approved, endorsed, or authorized by SSA. The language used in the mailers also suggested that NTU had some connection with or authorization from SSA. The I.G. has thus established that NTU violated section 1140, without regard to what NTU knew or should have known about how its mailing would be interpreted. I next consider what NTU knew or should have known.
In SSA v. United Seniors, Judge Kessel wrote:
United Seniors, DAB CR1075, at 13 (2003), aff'd 423 F.3d 397 (4th Cir. 2005); see also National Federation of Retired Persons, DAB No. 1885, at 23, 28, aff'd, 115 Fed.Appx. 763, 2004 WL 2980374 (where Respondent deliberately and prominently displayed protected language on the outside of its mailings to induce recipients to open them, and where it used protected language on the inside to induce recipients to respond, it not only knew or should have known that its mailing created a false impression, it specifically designed those mailers to create that impression). Judge Kessel's words also apply to NTU; it is an experienced mass marketer of ideas that knew exactly what it was doing when it designed the mailers in this case. Richard Geske is an experienced copywriter, well-versed in direct mail techniques. (13) He carefully and deliberately chose the mailer language. He put on the outside of the mailer "OFFICIAL NATIONAL SURVEY ON SOCIAL SECURITY." He acknowledges that he chose this language "to get attention."
Copywriter Geske admitted that the survey was his idea; he came up with it as an "involvement technique," which he described as a technique, commonly used in direct mail, that is "proven" to increase responses. Tr. 252-53. (15) He included the personalized references and the language, "you or your spouse has paid into the Social Security system and are receiving or expect to receive benefits in the future." He admitted that he did not actually know whether any particular recipient fell into this category; he assumed that most people did, and included the language because a higher degree of personalization is shown to increase response rates. Tr. 263. Next, I find unconvincing NTU's assertion that it would deliberately have avoided any suggestion of an association with the government because its target audience is so hostile. The above discussion establishes, however, that Copywriter Geske deliberately included references to "Social Security," and, as Director Frank acknowledged, the Social Security program does not engender a negative response, even from those most hostile to government. Tr. 35-36. Moreover, NTU's mailers and some of its mailing lists suggest no animosity to the administration in power at the time. See P. Ex. 19, at 3; R. Ex. 3 ("COMMISSIONED FOR THE PRESIDENT OF THE UNITED STATES, THE HONORABLE GEORGE WALKER BUSH, AND MEMBERS OF THE UNITED STATES CONGRESS"); P. Ex. 19, at 8 ("The President of the United States, the Honorable George Walker Bush, the Honorable Members of the United States Congress . . . owe you a debt of gratitude and appreciation.") I note finally that NTU knew or should have known that its mailers conveyed a false impression because the I.G.'s April 3, 2002 warning letter told them so when the I.G. attempted to elicit voluntary compliance. But NTU not did comply. Instead, it made minimal, cosmetic changes, and sent out Versions 2 and 3.
Having found that NTU violated section 1140, I must now determine an appropriate penalty. The statute and regulations authorize penalties of up to $5,000 for each piece of mail containing the violative language. Act, � 1140(b); 20 C.F.R. � 498.103. Responding to a subpoena, NTU advised SSA that it sent out 549,164 of the mailers. P. Ex. 14. (16) The I.G. proposes imposing a penalty of 50� per mailer, for a total of $274,582. I am authorized to affirm, deny, increase, of reduce this amount. 20 C.F.R. � 498.220. In reaching my decision, I must consider the following factors: (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 the penalty. 20 C.F.R. � 498.106. I note, initially, that 50� per violation is a low penalty. Compare United Seniors, DAB CR1075, at 18 ($1.00 per envelope) and National Federation of Retired Persons, DAB CR968, at 3 ($1.00 per mailer).
As discussed above, NTU's solicitations were designed to increase its "membership" (17) and to raise money. Employing well-established marketing techniques, NTU deliberately employed protected language to induce recipients to open its mailers and to respond.
NTU mailed 549,164 solicitations from January 2002 through February 2003. P. Exs. 14, 16. I consider this a substantial number of solicitations. The elderly are among the most vulnerable in our population, and the group about whom Congress expressed the most concern when it enacted section 1140. SSA asserts that the elderly were targets of NTU's solicitations, which would justify an increased penalty. NTU denies that charge, claiming that it targeted a somewhat younger group, and selected names from mailing lists of those likely to share its views. While NTU sent mailers to all of its "members" (see Footnote 17), (18) the objective data shows that it also specifically targeted the elderly. That data is found at P. Ex. 16 (see also R. Exs. 12, 13, and 14). The document is initially confusing because it includes figures for at least two additional mailers, which have nothing to do with this case (a "Fair Tax Insert Package" and an "Abolish the IRS" mailer). Pages 1-3, 7-9, and 12-14 of P. Ex. 16 (R. Ex. 12, at 1-3; R. Ex. 13, at 1-3; and R. Ex. 14, at 1-3) contain the data for those irrelevant mailers. The relevant data is at P. Ex. 16, pages 4-6 (containing Version 1 mailing information), pages 10-11 (containing Version 2 mailing information); and page 15 (containing Version 3 mailing information). See also, R. Ex. 12, at 4-6; R. Ex. 13, at 4-5; and R. Ex. 14, at 4. Tr. 159 et seq. Version 1: NTU sent solicitations to individuals selected from mailing lists provided by specific groups with which it had arrangements to share such lists. NTU mailed Version 1 to 148,238 individuals from selected mailing lists (including some NTU internal lists) and 57,425 to individuals whose names were in NTU's "house file," for a total of 205,663 mailers sent. Tr. 166; P. Ex. 16, at 5, 6; R. Ex. 12, at 5, 6. (19) Of these 37,976 mailers were sent to individuals whose names were drawn from five group lists targeting senior citizens: Direct Mail Seniors (20) (providing two lists of 5,945 names and 19,253 names); American Seniors for Government Reform (providing two lists of 4,097 names and 5,290 names); and United Seniors Association PAC Donors (3,391 names). SSA Ex. 16, at 4; Tr. 163-65. Version 2: NTU sent out 291,968 of the Version 2 mailers. Of those, more than half, 149,631 mailers, were sent to individuals whose names were drawn from groups targeting seniors: American Seniors for Government Reform (5,414 names); Seniors Against Benefit Cuts (18,814 names); Seniors Coalition (62,125 names); Seniors for Equitable Retirement (4,941 names); and Direct Mail Seniors (58,337 names). P. Ex. 16, at 10, 11; Tr. 167-69. Version 3: NTU sent out 51,414 of the Version 3 mailers. These went exclusively to names drawn from either the house file or seniors organizations. 28,705 of the names were drawn from lists targeting seniors: Seniors for Equitable Retirement (4,047 names); Seniors Against Benefit Cuts (two lists of 3,620 names and 9,471 names); and American Seniors for Government Reform (11,567 names). P. Ex. 16, at 15; Tr. 170-71. Thus 40% of the mailers were sent to individuals whose names were selected from senior citizen mailing lists (216,312 of 549,045). Ryder T. Ulon is a "list broker." For the last six years, he has been NTU's exclusive account representative. His job includes identifying the best lists for NTU's mailings. R. Ex. 16. He testified that he selects the lists that he deems appropriate and he considers the content of the mailing in selecting the lists. Tr. 176, 184. He also claimed, unconvincingly, that he made "absolutely no effort to select retired persons, senior citizens, social security recipients or the like," and to bolster this claim, suggests that "Biker Magazine" provided one of the lists he used for the Social Security mailers. R. Ex. 16, at 1-2 (Ulon Decl. �� 1-2, 6); R. Ex. 6; Tr. 179. But the data shows that, in fact, none of the Social Security mailers went to "Biker" listees. P. Ex. 16. Broker Ulon's testimony is misleading because he did not limit himself to the lists he drew from for the Social Security mailers. He provides a long "list of lists" from which he purportedly selected names for the "3 NTU mailings (including the Social Security package)." R. Ex. 16, at 3 (Ulon Decl. � 8). But in referring to the "3 NTU mailings" he does not mean the three versions of the Social Security mailing, which are the subject of this appeal. He means the Social Security mailer in all three forms plus the "Fair Tax" mailer and the "Abolish the IRS" mailer. So his "list of lists" tells us virtually nothing about where the violative mailings were sent. It only suggests that the recipient names were drawn from some of the listed organizations. And in fact, R. Ex. 5 and P. Ex. 16 show that the Social Security mailing was not sent to anyone from the Biker Magazine list. The "Fair Tax" mailer went to Biker Magazine list names. P. Ex. 16, at 2. Broker Ulon also omitted from his "list of lists" an organization called Seniors Coalition, even though 62,125 Social Security mailer recipients were selected from that list. R. Ex. 16, at 3; Tr. 169; P. Ex. 16, at 11. The "Seniors Coalition" is described as "the premier direct mail seniors list in the industry!" That list is made up of individuals concerned about senior citizen issues. The "donors" are "age 60+," and the list is recommended for any mailer trying to reach "the mature audience with disposable income." R. Ex. 6, at 19. Broker Ulon characterized his omission of the group as an "oversight." Tr. 169. But I find it strange that he would include Biker Magazine and multiple other organizations, to which NTU sent zero of the Social Security mailers, and omit an organization to which it mailed tens of thousands. The evidence thus establishes that NTU targeted senior citizens for receipt of these mailers.
While NTU was in the process of sending out Version 1, the I.G. notified NTU of its concerns, and sought voluntary compliance. P. Ex. 5. In a response that I consider less than straight-forward, NTU agreed to cooperate, and to change the package design so that it would not create the impression of SSA authorization. P. Ex. 6; see footnote 2, supra. But NTU's changes were superficial, and its subsequent mailers were violative, and it continued to send them out for almost a full year after receiving the I.G.'s letter.
SSA concedes that NTU has no prior section 1140 offenses.
I am satisfied that the I.G. has carefully reviewed NTU's financial records, and correctly determined that NTU is capable of paying this penalty. For its part, NTU has not argued otherwise.
I am concerned about NTU's investigative tactics in this case. It was certainly within the organization's rights to interview the I.G.'s potential witnesses. However, NTU's private investigator, John Roche, went to Laura Fischer's home where he misrepresented himself, claiming that he represented the attorney for "Agora Publishing." R. Ex. 19; Tr. 226 et seq. I found wholly unconvincing his assertion that this was simply "my error." Tr. 240-41. Frankly, this action alone might have justified my increasing the penalty in this case, and, had the I.G. asked that I consider it, I would seriously have entertained the prospect. V. Conclusion For all of these reasons, I find that NTU has violated section 1140, and, under the authority granted me in 20 C.F.R. � 498.220, I affirm the $274,582 CMP proposed by the I.G. |
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| JUDGE | |
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Carolyn Cozad Hughes Administrative Law Judge |
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| FOOTNOTES | |
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1. We refer to this mailing as "Version 1." An original example of Version 1 is in the record as R. Ex. 1. See also P. Ex. 17. 2. President Berthoud's statement could be construed as misleading. NTU neither solicited the survey nor used its results for any purpose. NTU's Membership Director, Douglas Frank, hired a copywriter, D. Richard Geske, to design a mailing for the purpose of increasing membership and raising money. The copywriter decided that the survey would be an effective response device or "involvement technique." Tr. 11; 252. The survey itself was not a valid survey, by any objective standard. Tr. 131-32. The survey "results" have never been used. They were not tabulated until March 2003, and were not shared with the NTU Board. Tr. 10, 17, 43, 48 ("Actually, no particular plan of operation for [tabulating survey results]."). When tabulated, the results were not particularly supportive of NTU's position - a fact NTU seems to have ignored. R. Ex. 10. NTU's then Director of Government Affairs, Alfred W. Cors, Jr., was not even aware of the survey, and opined that it was designed more to raise money for NTU than to lobby Congress. Tr. 109-11. 3. This revised mailing is referred to as Version 2, and an original example is in the record as R. Ex. 2. See also P. Ex. 18. 4. Referred to as Version 3, an original example of the mailing is in the record as R. Ex. 3. See also P. Ex. 19. 5. Citation to the Health Care Financing Administration (HCFA) at section 1140 has been changed to the Centers for Medicare & Medicaid Services (CMS). P.L. 108-173, � 900(e). 6. 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. 7. In United Seniors, the Court observed that mass mailers purposely use bold red ink for the "Social Security message" and black ink for the sender block "to detract attention from the sender block and focus attention on the Social Security message." United Seniors Association, 423 F.3d 401. Copywriter Geske conceded that he wanted "to bring attention to this particular piece." 8. To the extent possible, quotations from the mailers are presented in their original format, including capitalization, italics, underlining, and bold text. 9. NTU attacks Professor Arnold's expertise, pointing out that the professor admitted that he is not an expert on direct mail tactics. NTU Br. at 8; Tr. 146. I see no reason why he would need such expertise in order to opine knowledgeably in this case. Professor Arnold's expertise in communications is undeniable; he has spent forty years researching, publishing and teaching in that field. He understands the significance of language and is fully qualified to comment on how people might reasonably construe particular words and phrases. Moreover, much of his testimony simply states the obvious. Interpreting the plain meaning of the language on such blatantly deceptive mailers does not require great expertise. Even NTU, although denying the section 1140 violation, concedes that its use of language "might abuse the recipient." NTU Br. at 4 n.6. 10. As discussed infra, Laura Fischer received Version 2 of the mailer, which contains this same language. 11. Copywriter Geske would not admit that this "one of 89" number was a fabrication, but he could not explain why the remaining 88 names would not have qualified, nor why recipients from various zones were all "one of 89." Tr. 270-77. 12. Ms. Fischer's inclination to discard such mail illustrates Congress' additional concern about the effect of deceptive mailers. People are so inundated with "official" mail that they are not able to distinguish genuine correspondence from SSA, and are more likely to discard it, seriously hampering SSA's ability to communicate with its constituents. United Seniors Association, 423 F.3d at 399. See also SSA v. United Seniors Association, DAB CR1075, at 4-5 (2003); House Comm. on Ways and Means, 102d Cong., 2d Sess., Report on Deceptive Solicitations 5 (Comm. Print 1992). 13. Copywriter Geske was not a particularly credible witness. He attempted to circumvent even simple questions, and, at times, his spirited defense of NTU's actions bordered on the absurd. For example, notwithstanding the names of three governmental bodies on the outside of the mailer, Copywriter Geske refused to acknowledge that the envelope contained any reference to the government:
Tr. 260-62. 14. NTU has argued that its mailers so resembled "junk mail" that no reasonable person would have considered it anything else. Copywriter Geske's testimony here - that he designed the outside of the mailer to distinguish it from "junk mail" so that the recipient would take it more seriously - undercuts that argument. Moreover, there is simply no "junk mail" exception to section 1140. Congress enacted section 1140 to address problems created by "direct mailers," i.e. purveyors of junk mail. See 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); Deceptive Solicitations, Including Findings and Recommendations of the Subcommittees, H. R. Rep. No. 9, 102d Cong. 2d Sess. 45 (1992) (1992 House Report). A "junk mail" exception would devour the rule, leaving nothing. 15. On the other hand, he also claimed that NTU planned to use the survey as the "centerpiece" for its lobbying campaign. "The results of the survey were going to be collected, tabulated, and then used literally, again, as a centerpiece for their lobbying campaign." Tr. 254. But when reminded that NTU was not even aware of the survey, that he had concocted it to increase responses, he said "I can't answer for them." Tr. 254. 16. NTU has provided numbers that do not exactly add up. Compare P. Ex. 14 with P. Ex. 16 (suggesting a total of 549,045 mailers sent - 205,663 Version 1 mailers + 291,968 Version 2 mailers + 51,414 Version 3 mailers). NTU has exclusive control of the figures, and can hardly complain that the I.G. has taken it at its word. So I accept the 549,164 figure. 17. Recipients were not told that sending money made them members of NTU. Tr. 14. They were told that their contribution would "help . . . save Social Security." See, e.g., P. Ex. 17, at 10. In fact, their contributions were simply added to NTU's general revenues. Tr. 44. 18. NTU's former lobbyist, Alfred W. Cors, Jr., noted that the "average direct mail recipient and respondent" is a 70-year-old widow. Tr. 113. 19. In his declaration, Director Frank agrees with the total, but divides it differently, stating that Version 1 was sent to 119,207 names selected from mailing lists and 86,456 names from NTU's own house file. R. Ex. 17, at 4 (Frank Decl. � 9). (The house file consists of those who have previously responded to NTU solicitations. Tr. 37-38). NTU has not explained these figures, but it appears that in May 2002, NTU sent 57,425 mailers to individuals whose names were drawn from its house file. P. Ex. 16, at 6. To that Director Frank adds earlier mailings sent to names drawn from NTU's internal lists: NTU Petition Signers/Nondonors (7,531 mailers); NTU Email Names from 1/02 (7,886 mailers); NTU Email Names from 2/02 (6,691 mailers); NTU Email Names Non-donors (835 mailers); and NTU Expires (6,088 mailers) for a total of 86,456. P. Ex. 16, at 4. The remaining 119,207 mailers were sent to names drawn from other lists. 20. According to its list manager, Direct Mail Seniors are "older Americans" who are "are genuinely concerned about the rights of senior citizens, and have donated to a campaign addressing Social Security and Medicare issues." R. Ex. 6, at 34.
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