Mail Fraud Laws

July 17, 2004

The United States Postal Service (USPS) has jurisdiction when money is sent through the mail for products or services. Postal inspection offices exist in many cities, with about 500 inspectors available to investigate all types of mail frauds. Attorneys in the civil practice section of the agency’s law department and postal inspectors with law degrees are available to prosecute cases. The case selection process is decentralized, so that different types of cases are emphasized in different regions of the country.

Title 39, Section 3005, of the United States Code can be used to block promoters of misleading schemes from receiving money through the mail. If sufficient health hazard or economic detriment exists, an immediate court order to impound mail may be sought under Section 3007 of the code. However, the Postal Service cannot proceed unless the Justice Department approves such action or takes the case itself.

Title 18, Section 1341, provides for criminal prosecution but requires proof of intent to deceive. The maximum penalties are 5 years in prison and a fine for each instance proved. The 1984 Criminal Fine Enhancement Act allows fines of up to $100,000 (or $250,000 if death results) per offense for up to two offenses. However, criminal prosecution is rarely used in cases involving mail-order health products because (a) administrative procedures are simpler and quicker and (b) intent to deceive is difficult to prove when a perpetrator pretends to believe that the product works. The Postal Service does not have jurisdiction when companies take credit card orders by telephone and deliver through private carriers such as United Parcel Service. However, the Justice Department may seek such an injunction under Section 1345, which allows federal district courts to enjoin acts of mail and wire fraud.

When a mail fraud is detected, postal attorneys can file a complaint or seek an agreement with the perpetrator. When a complaint is contested, a hearing is held by an administrative law judge assigned to the Postal Service. If the evidence is sufficient, this judge will recommend that the Postal Service issue a False Representation Order (FRO) blocking money sent through the mail in response to the misleading ads. Although the order can be appealed to the courts, very few companies do this. Each voluntary agreement and FRO is accompanied by a cease-and-desist order that forbids both the challenged acts and similar acts. Under the Mail Order Consumer Protection Amendments of 1983, if this order is violated, the agency can seek a civil penalty in federal court of up to $11,000 per day for each violation.

Most mail-order health schemes attempt to exploit people’s fear of being unattractive. Their promoters are usually“hit-and-run” artists who hope to make a profit before the Postal Service stops their false ads. Common products include “miracle” weight-loss plans, fitness and bodybuilding products, “spot-reducing” devices (claimed to reduce specific parts of the body), antiaging products, and alleged sex aids.

Before the 1983 law was implemented, many unscrupulous mail-order promoters considered legal defense costs and occasional fines as a normal part of their operating overhead. If prosecuted, they would remain in business by changing the wording of an ad, the name of the product, or their company name. For several years after the 1983 law was implemented, its penalty provision appeared to have decreased the number of schemes for mail-order health products. However, in the early 1990s, postal authorities stopped enforcing the law in this area, so the problem has been getting worse.

The USPS Web site archives the mail-fraud cases for which Administrative Law Judge hearings have been held since 1957. Because its searching system is cumbersome, we are archiving the health-related cases.

Click here to access our archive

This page was posted on July 17, 2004.