B-234910, Apr 14, 1989

B-234910, Apr 14, 1989

MISCELLANEOUS TOPICS - Commerce - Mailing provisions - Misrepresentation - Determination criteria MISCELLANEOUS TOPICS - Law Enforcement - Mailing provisions - Misrepresentation - Determination criteria DIGEST: Chairmen of House Ways and Means Subcommittees on Oversight and Social Security asked us to discuss the legality of mail solicitations by a private organization, the Social Security Protection Bureau. Issue generally is whether Bureau improperly used term "social security" to misrepresent itself or otherwise defrauded recipients. Memorandum discusses the possible application of: (1) Section 428 of Public Law 100- 360 (classified to 42 U.S.C. Sec. 1320b-10); (2) 18 U.S.C. Sec. 1341; (3) 39 U.S.C. Sec. 3005; (4) 15 U.S.C. Sec. 45; and (5) S. 273, introduced in the 101st Congress, without attempting to determine whether violations occurred.

Evaluator, HRD - Tom Smith

Acting Associate General Counsel, OGC/HRD - Barry R. Bedrick

Assistant General Counsel, OGC/HRD - Dayna K. Shah

Attorney-Adviser, OGC/HRD - George Bogart

Social Security Protection Bureau - B-234910:

In response to a request from the Chairmen of House Ways and Means Subcommittees on Oversight and Social Security, concerning recent solicitations by the Social Security Protection Bureau (SSPB), the following language can be included in response to question #11, which asks if there is any indication that the SSPB may have violated any federal laws or regulations:

As agreed with your staff, our response to this question will be limited to a discussion of the possible legal standards applicable to the activities of the SSPB, without attempting to determine whether violations occurred. We have identified four federal laws and one bill currently under consideration which, depending upon the facts developed, may be relevant to solicitations by the SSPB.

(1) Section 428 of Public Law 100-360 (classified to 42 U.S.C. Sec. 1320b -10) prohibits a person from using, among other things, the term "Social Security" in connection with advertisements, solicitations or other communications, in a manner that the person knows or should know would convey the false impression that the person has some connection with, or the communication is authorized by, the Social Security Administration (SSA), Health Care Financing Administration, or the Department of Health and Human Services (HHS). The provision vests enforcement authority in the Secretary of HHS, authorizing the Secretary, pursuant to regulations, to impose civil monetary penalties on communications not involving a broadcast or telecast, of not more than $5,000 per violation.

When a prior version of this provision was introduced, its sponsor, Representative John Myers, specifically declared that it was intended to apply to the SSPB. However, to find the SSPB solicitation in violation of Section 1320b-10, one would have to demonstrate that the SSPB knew or should have known that recipients would receive the false impression that the solicitation was authorized by the SSA or that the SSPB was somehow associated with the SSA. The SSPB likely would counter that the text of its solicitation conveys no such impression. For example, the text states that the SSPB "will arrange for you to get (information) directly from the United States Government," suggesting that the SSPB is not part of the U.S. Government. In addition, the SSPB includes on its solicitation a disclaimer, stating that it is not an agency of the federal government and that its solicitation has not been approved by the federal government.

The conference report on this law indicates that the Secretary should use informal means to deal with potential violators prior to initiating enforcement action. One such informal means suggested by the conferees involves communicating to a potential violator that a conspicuously placed disclaimer of affiliation with the SSA could avoid the need for action under this provision. SSPB likely would argue that its disclaimer is conspicuously placed. Further, the law stipulates that the Secretary of HHS shall impose civil monetary penalties for violations pursuant to regulations. SSPB might argue that HHS has not promulgated the enforcement regulations and challenge enforcement on a procedural basis.

Since this provision was enacted in July of 1988, there have been no examples of its application by HHS. However, the HHS Office of Inspector General recently requested the HHS Office of the General Counsel to render a decision regarding the legality of SSPB solicitations under section 1320b-10.

(2) 18 U.S.C. Sec. 1341, the "Mail Fraud Statute," makes it a crime to use the mails for a number of specified fraudulent practices, including schemes to obtain money by means of false or fraudulent pretenses or representations. Enforcement authority is vested in the Attorney General. Persons who violate this statute are guilty of a felony and are subject to fines of up to $1,000 per violation and possible imprisonment. In order to successfully prosecute under this provision, the government must prove beyond a reasonable doubt that the defendant had specific intent to defraud, that is, that the defendant knowingly intended to deceive. In response to an allegation that SSPB intended to deceive recipients into believing that it is affiliated with the SSA, SSPB, as discussed above, would likely contend that the text of the solicitation and the addition of the disclaimer would prevent such an impression. SSPB presumably would also argue that it did not intend to deceive recipients into believing that it was going to provide members with services and things of value, when in fact this was untrue. SSPB could point out in this respect that the services or items advertised in the solicitation are, indeed, provided, and do have some value to the recipients.

(3) 39 U.S.C. Sec. 3005, the "Postal False Representation Statute," prohibits any attempt to gain money or property through the mails by false representation or the operation of a lottery. The Postal Service (PS) is authorized to seek a mail-stop order, prohibiting an operator of such a scheme from continuing unlawfully to use the mails. A violator who fails to comply with such an order may be subject to civil penalties of up to $10,000 per day.

The established common law definition of "lottery" requires "consideration"-- that is, something of value-- as an essential element. Accordingly, the PS requires evidence of consideration being required from entrants before it will determine that a lottery scheme is in effect. Postal officials told us that it has not been the practice of the PS to issue mail-stop orders where solicitations permit recipients to enter contests by sending in void checks. However, the Postal Inspection Service is currently conducting an investigation to determine if sufficient evidence exists to seek such an order against the SSPB based on false representation. Under this statute, the PS must establish that the false representation was material and substantial.

(4) 15 U.S.C. Sec. 45 declares unfair or deceptive acts or practices in or affecting commerce to be unlawful. It vests enforcement authority in the Federal Trade Commission (FTC), which may issue cease and desist orders to prevent further violations. Violators of such orders may be required to pay civil penalties of up to $10,000 per day.

Under prior decisions of the FTC, it is not clear whether the SSPB solicitation would be considered a deceptive act or practice under Section 45. FTC regulations include in a listing of prohibited trade practices, advertising falsely or misleadingly that one has a government connection or indorsement. The FTC declined to comment on whether it considers this issue as within its enforcement jurisdiction and, hence, whether it will entertain issuing a cease and desist order against the SSPB. In such an event, the SSPB is likely to use the same defense mentioned in relation to 42 U.S.C. Sec. 1320b-10. That is, the SSPB may argue that the text of the solicitation is not deceptive, especially with the addition of the disclaimer.

(5)S.273, introduced in the 101st Congress by Senator Heinz, would amend Section 3001 of Title 39, United States Code, to prohibit the use of mails for certain solicitations that could reasonably be interpreted as implying any federal government connection, approval or endorsement in such a manner that may cause confusion, mistake or deception. However, this bill would allow such solicitations if they contain specified disclaimers on their face and on their envelopes or outside covers. In this case, the SSPB solicitation already has the specified disclaimer on its face, and at least one example of a SSPB solicitation envelope displays the specified disclosure as well. Thus, if S. 273 became law, even assuming that it was found to apply to the SSPB, it is quite possible that the SSPB would already be in compliance.