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USE OF POSTAGE METERS IN THE

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>, HEARING

BEFORE THE

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OFFICE AND CIVIL SERVICE

nu USE OF REPRESENTATIVES

EIGHTY-NINTH CONGRESS

SECOND SESSION

JANUARY 19, 1966

Printed for the use of the

Committee on Post Office and Civil Service

U.S. GOVERNMENT PRINTING OFFICE

54-72 I WASHINGTON: 1966

I.
COMMITTEE ON POST OFFICE AND CIVIL SERVICE

TOM MURRAY, Tennessee, Chairman

JAMES H. MORRISON, Louisiana, Vice Chairman

THADDEUS J. DULSKI, New York

DAVID N. HENDERSON, North Carolina

ARNOLD OLSEN, Montana

MORRIS K. UDALL, Arizona

DOMINICK V. DANIELS, New Jersey

LINDLEY BECKWORTH, Texas

ROBERT N. C. NIX, Pennsylvania

JOE R. POOL, Texas

WILLIAM J. GREEN, Pennsylvania

SPARK M. MATSUNAGA, Hawaii

PAUL J. KREBS, New Jersey

RAYMOND F. CLEVENGER, Michigan

JAMES M. HANLEY, New York

JOHN V. TUNNEY, California

CHARLES H. WILSON, California

CHARLES E. JOHNSON, Staff Director

B. BENTON BRAY, Associate Staff Director

JOHN H. MARTINY, Counsel

WILLIAM A. IRVINE, Assistant Staff Director

THEODORE J. BAZY, Senior Staff Assistant

ROBERT J. CORBETT, Pennsylvania

H.R. GROSS, Iowa

GLENN CUNNINGHAM, Nebraska

EDWARD J. DERWINSKI, Illinois

ROBERT F. ELLSWORTH, Kansas

ALBERT W. JOHNSON, Pennsylvania

JOHN H. BUCHANAN, JR., Alabama

JAMES T. BROYHILL, North Carolina

SUBCOMMITTEE ON POSTAL FACILITIES AND MODERNIZATION

ARNOLD OLSEN, Montana, Chairman

JAMES H. MORRISON, Louisiana EDWARD J. DERWINSKI, Illinois

DOMINICK V. DANIELS, New Jersey GLENN CUNNINGHAM, Nebraska

PAUL J. KREBS, New Jersey JAMES T. BROYHILL, North Carolina

JAMES M. HANLEY, New York

JOHN V. TUNNEY, California

Ex Officio Voting Members

TOM MURRAY, Tennessee ROBERT J. CORBETT, Pennsylvania

II
CONTENTS

Statement of— Page

Irwin, Hon. Donald J., of Connecticut 2

Nicholson, Hon. Ralph W., Assistant Postmaster General, Bureau of

Finance and Administration; accompanied by A. C. Hahn, Deputy

Assistant Postmaster General, Bureau of Operations; N. W. Woodworth, Bureau of the Chief Postal Inspector; and Carlton Jencks,

executive assistant to the Assistant Postmaster General 3

Wheeler, Walter H., Jr., chairman of the board, Pitney-Bowes, Inc.;

accompanied by John 0. Nicklis, president; E. R. Krantz, director

of post office relations; and James Turrentine, director of public

relations 18

111

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USE OF POSTAGE METERS IN THE U.S. POSTAL

SERVICE

WEDNESDAY, JANUARY 19, 1966

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON POSTAL FACILITIES AND MODERNIZATION

OF THE COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, D.C.

The subcommittee met at 10 a.m. room 215, Cannon House Office

Building, Hon. Arnold Olsen, of Montana (chairman of the subcommittee), presiding.

Mr. OLSEN. The subcommittee will now come to order.

First of all I would like to extend a very cordial welcome back to

my colleagues on the subcommittee. This is the first official meeting

of our subcommittee this year, and I certainly look forward to a most

productive session and the same fine spirit of cooperation that we

enjoyed last year.

Our subcommittee is meeting this morning to begin a general study,

review, and evaluation of the use of postage meters in our U.S. postal

service. Quite candidly, our action at this time was prompted by

recent news stories revealing that a New York mail-order company

may have defrauded the U.S. Government of over $2 million in postage

revenues through misuse of a postage meter.

At the outset, however, I wish to make it quite clear that our discussions this morning will purposely not include any of the facts or

circumstances involved in this fraud case. It is still pending in the

courts, and we have no intention of prejudicing the Government's

position in any way.

Nevertheless, I do feel that we have an urgent responsibility in this

matter that we are obligated to discharge as promptly as possible;

hence I have decided to commence these hearings on a general basis,

and when the situation permits, to review and examine the specific

facts in the New York fraud case.

Postage meters are in widespread use today, not only in this country

but in most of the countries of the world. During our recent inspection

tour of European postal facilities I was very much impressed at the

extensiveness of their use, particularly in England and Germany.

Here in the United States, postage meters account for a considerable

portion of all postage revenues. They are used on all classes of

mail—in fact, it is estimated that approximately one-half of all firstclass mail is actually metered mail.

In fiscal year 1965, total postal revenues were nearly $4.5 billion.

These are moneys which go directly into the general fund of the U.S.

Treasury, exactly the same as tax revenues, for the general support of

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2 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

our governmental activities. Any erosion of postal revenues, whether

through theft or fraud or any other means, is just as serious as any

erosion of our tax revenues. Certainly, postal revenues should be as

inviolate as revenues from tax sources.

The fact that we also have a widening gap between postal revenues

and postal expenditures is also of no little concern to the members of

this committee. There is every likelihood that we will be called upon

again this year to enact legislation that will require users of the mails

to pay higher rates to bridge this gap.

I think it is abundantly clear, therefore, why we do have this

responsibility to begin a comprehensive study on the use of postage

meters for the collection of postal revenues.

I will now call on our colleague, Congressman Irwin of Connecticut,

who has brought some of his constituents who are in the postage

meter business.

Mr. Irwin.

STATEMENT OF HON. DONALD J. IRWIN, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF CONNECTICUT

Mr. IRwIN. Mr. Chairman and distinguished colleagues of the subcommittee, as a former member of the committee I am especially

happy to be back here and see your faces and that of the members

of the staff who I had the pleasure of working with when I was on

the committee.

I am pleased to introduce to you—as I understand the Government

witnesses will appear but I have my own committee responbibilities—

some friends and constituents Mr. Walter Wheeler, the chairman of

the board of Pitney-Bowes; Ir. John Nicklis, the president of the

company; also Jim Turrentine and Gene Krantz.

I will try to get back as soon as I can. I thank you for your

kindness.

Mr. OLSEN. Thank you very much, Mr. Irwin. I assure you that

on your recommendation we will treat these constituents of yours

very kindly.

Mr. IRwIN. I appreciate that, Mr. Chairman. Thank you, gentlemen.

Mr. OLSEN. Thank you very much.

Now, from the Post Office Department we have the Honorable

Ralph W. Nicholson, Assistant Postmaster General, Bureau of

Finance and Administration.

Mr. Nicholson is accompanied by Mr. A. C. Hahn, Deputy Assistant Postmaster General, Bureau of Operations, and Mr. N. W.

Woodworth from the Bureau of the Chief Postal Inspector; also

Carlton Jencks, Executive Assistant to the Assistant Postmaster

General.

Mr. Nicholson, proceed in your own fashion. We are very happy

to have you with us again today, and also your colleagues all of whom

have had so many years of experience in the Post Office Department.
USE OF POSTAGE METERS IN U.S. POSTAL SERVICE 3

STATEMENT OF HON. RALPH W. NICHOLSON, ASSISTANT POSTMASTER GENERAL, BUREAU OF FINANCE AND ADMINISTRATION; ACCOMPANIED BY A. C. HAHN, DEPUTY ASSISTANT

POSTMASTER GENERAL, BUREAU OF OPERATIONS; N. W.

WOODWORTH, BUREAU OF THE CHIEF POSTAL INSPECTOR;

AND CARLTON JENCKS, EXECUTIVE ASSISTANT TO THE ASSISTANT POSTMASTER GENERAL

Mr. NicHoLsoN. Thank you, Mr. Chairman. It is a pleasure to

be back with you and your committee in the beginning of this new

session of Congress.

Mr. Chairman and members of the committee, I am pleased to be

invited to testify on the operation of the postage meters in the United

States. The manufacturing and leasing of postage meters is private

business with six manufacturers involved. The Post Office Department does not manufacture, buy, sell or lease postage meters for

patrons.

Postage meters have become an important cog in our Nation's

economic machinery. Meter postage is used for the letters and

parcels that are the lifeblood of our financial system. Banks, utilities, stores—almost every type of business institution—big and

small—use postage meters.

OPERATING ADVANTAGES

The advantages of using postage meters to both the mailer and the

postal service are significant.

A post office receiving metered mail does not have to cancel or

postmark it. Additionally, since the mailer is required to face all

mail processed through a postage meter, the facing operation is also

avoided.

Use of meters eliminates the cost of printing, transporting, and

accounting for more than $2 billion worth—face value—of adhesive

stamps a year.

Because the metered mail does not have to be faced, canceled or

postmarked, it can be processed more quickly. The meter user gets

better service for his mail.

A businessman using a meter does not have to stock a variety of

denominations of postage stamps, he avoids waste or loss of stamps,

and avoids a number of administrative headaches.

PLACE OF METERS IN U.S. SYSTEM

The U.S. Congress enacted Public Law 187, 66th Congress, on

April 24, 1920, authorizing the Post Office Department to accept

first-class mail without adhesive stamps. This law was passed after it

had been determined by the Post Office Department that postage

meters had been improved sufficiently for use in this country. This

law has been revised to allow meter postage on any class of mail.

Since that time tremendous strides have been made in the use of

postage meters. The rapid growth in the use of these devices has

taken place principally since the close of World War II. In 1948

there were 48,000 machines in operation which produced annual

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4 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

postal revenue of $168 million. During fiscal year 1965 there were

more than 370,000 postage meters in use and they produced postal

revenue of $2,016,070,107. This represents nearly 50 percent of the

Department's gross sale of postage totaling $4,315,142,966 for fiscal

year 1965. The rapid growth of revenue from metered postage for

the years 1956 through 1965 is shown below.

Metered postage

[From table 102, Postmaster General's Annual Report]

1956 $1,003,837,806

1957 1,057,058,471

1958 1,087, 185,002

1959 1, 269,926,811

1960 1, 385,009,833

1961 1, 469,821,626

1962 1, 555, 127,440

1963 1,697,674,699

1964 1,892,643,647

1965 2,016,070, 107

Although there have been several postage rate increases since 1956,

the increase in the usage of postage meters is still a significant factor

in the operation of the postal service. The post office metered mail,

which has been referred to as the first large-scale mechanical mailing

system, continues to make contributions to the Post Office Department's program for maximizing the use of mechanical means for

processing mail.

USE OF POSTAGE METERS IN FOREIGN COUNTRIES

Knowing your concern for the adoption of modern machines and

methods based on findings of your recent inspection tours, I'd like to

relate the growth and present status of the use of meters in the United

States to experience in selected foreign countries.

In Great Britain, for example, there are 57,000 postage meter

machines in operation and they produce 30 percent of the postal

revenue.

In the Netherlands 25 percent of total postal revenue is produced

by 9,700 machines.

Fifteen percent of India's revenue is produced through postage

meters.

In Germany 92,000 franking machines process between 40 and 50

percent of letter mail processed.

The postage meter is a modern device which is increasing in its

popularity worldwide. The use of these machines in the United

States is progressing at a very rapid rate and represents a significant

step in the adoption of modern machines for processing the mail.

HOW METERS ARE CONTROLLED

All postage meters in use in the United States must be manufactured

and owned by manufacturers authorized to do so by the Post Office

Department. The only exception to the ownership regulation is that

covering meters owned and operated by the Post Office Department.

Before a manufacturer may be authorized to manufacture and lease

postage meters for use by mailers, he must apply to and satisfy the

Post Office Department as to his integrity, financial responsibility,

z
USE OF POSTAGE METERS IN U.S. POSTAL SERVICE 5

adequate manufacturing and safeguarding capabilities, as well as the

adequacy of his facilities for the control, distribution, and maintenance

of postage meters. No postage meter may be placed into use until a

complete unit made to production drawings and specifications has been

submitted, tested, and approved by the Post Office Department. In

addition, meters are required to be furnished from current production

for test at the National. Bureau of Standards or the Post Office Department's laboratory. The postage meters in use in the United

States have three basic elements involved in their control: (1) The

postage die, (2) the ascending register, and (3) the descending register.

In order for a meter to be operable, the descending meter must be

set by a meter setting clerk in the post office. As postage is printed

by the meter, either on envelopes or on adhesive tape, the descending

meter will decrease its control amount by the amount of postage

affixed. The ascending meter similarly increases its reading. One

of the basic controls over malfunctioning of the register is the simple

control of requiring the total of the ascending register and the descending register to equal the cumulative total of meter setting. The

ascending register is set at the factory and the ascending recording

device cannot be changed except by the manufacturer.

In order to describe the controls exercised by the postal service in

the use of metered postage machines, I would like to take a hypothetical case and trace a meter from its manufacture through its leasing

and use by a patron and its final return to and destruction by the

manufacturer and owner.

Before a patron may lease a postage meter he must make application

to the post office where his mail will be deposited. For the purpose of

making application, he may use either a form supplied by the manufacturer or a Post Office Department form. On approval, the postmaster will issue a license. The manufacturer will forward a meter

for setting and sealing to the post office that issued the license. At

the same time he will furnish a report to the postal data center of

the make, serial number, readings, if any, on the ascending and

descending registers, post office where installed, and name and address

of mailer. This information becomes the input for the control system the postal data center exercises over the post offices within its

jurisdiction.

A new meter that comes from a manufacturer will normally have

zero readings on both the ascending and descending registers. The

post office clerk upon receipt of cash or certified check from the patron

will advance the descending register in the amount of payment made

by the patron. Access to the descending register is by use of a key

furnished by the manufacturer and controlled by the postmaster,

and setting of the register is done with a stylus furnished by the

manufacturer. After the register has been advanced, the machine

will be relocked and a new metal seal will be securely placed on the

meter to prevent tampering with the descending register. This seal

is a wire seal with a lead head. The head is imprinted with "U.S.P.O."

by sealing pliers available to the meter setting clerk and also furnished

by the manufacturer.

Upon setting and sealing the machine a meter record book is issued

to the patron. At the same time the post office establishes a record of

postage meter settings (form 3610) which is controlled by the serial

number of the postage meter and which will become a permanent

58-724-66--2
6 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

record of all settings made on that meter while it is under the jurisdiction of that post office.

The machine may now be taken by the patron to his place of business

and placed in operation. It can be continued in operation until the

descending register goes below the maximum amount of a single postage impression. When this occurs the machine will automatically lock

and become inoperable. During the period of usage the patron is

required to keep a daily record of meter register readings in a book

furnished by the post office.

At this point the patron will take his meter to the postmaster where

he received his license and deposits his mail. When the meter

is brought in, it is examined to determine whether the seal,

register windows, breakoff screws, top cover, lock cover, or other

visible parts have been broken or tampered with. If evidence of

tampering or breakage is found, the clerk is required to retain the

meter and notify the postal inspector in charge. If no tampering is

evident, the data on the meter setting record for this meter will be

compared with the register readings. The total of the two registers

must equal the last entry on the form 3610 which is the cumulative

record of meter settings. If the sum of the two registers does not

equal the total, it is not registering properly and will be checked out

of service.

If everything is in order, the seal is broken by the postal clerk,

the descending register opened by means of a key and the register reset

with the stylus. The descending register is then relocked, a new seal

affixed and thoroughly compressed using the official "U.S.P.O."

sealing pliers. After sealing, the clerk makes sure the lead seal has

been properly fastened. The clerk prepares a receipt (form 3603)

which is posted to the post office meter setting record. The meter

now is ready for continued use by the patron and is returned to his

place of business.

When a licensee discontinues the use of a meter, he is required to

take it to the post office, together with his meter record book. If the

licensee has not notified the manufacturer to pick up the machine, the

postmaster must promptly request the manufacturer to call for the

meter. The clerk enters on the record of meter settings (form 3610)

the date and reason for discontinuance and whether any unused

postage units were transferred to another meter—to a replacement

meter for example or to another meter already licensed to the same

user—or were refunded to the licensee. The clerk then clears the

descending register to zero or the lowest possible amount and turns

the meter over to the manufacturer or his representative.

This is a brief description of the methods of control used in operating

postage meters.

OTHER SPECIAL CONTROLS

Additional controls are prescribed for safeguarding the operation

of the postage meters. The principal ones are as follows:

1. If meters are not reset in a 6-month period, they are examined

at the licensee's site by an employee not engaged in setting meters.

The reason for not resetting will be recorded on the post office record

of meter settings.

2. The patron is required to maintain a meter record book and bring

it to the post office each time the meter is reset and at the time it is
USE OF POSTAGE METERS' EV U.S. POSTAL SERVICE 7

taken out of service. The meter record book is checked by the postal

clerk when he resets the meter.

3. The manufacturer is required by the Post Office Department to

inspect all meters which are on lease, at least twice a year. These

checks not only inspect the machine for cleanliness and for proper

operation but also to determine if the seal has been broken or the

machine tampered with. In the event any irregularity is found, the

manufacturer reports the facts to the postmaster and initiates action

to take the meter out of service. Many licensees have maintenance

contracts with the manufacturer which require quarterly inspections.

4. The manufacturer maintains records of all meters manufactured,

showing all movements in and out of his possession from the date of

manufacture to the time the meter is scrapped. Each manufacturer

is required to advise our postal data centers of the register readings and

the identification of the licensee each time a meter goes in or out of

service. These records form the basis for verification of similar data

reported to the postal data centers by postmasters.

5. The financial examination program of the Post Office Department

requires examination of financial records in post offices on an unannounced basis once each 6 months. During this surprise visit

the following points are covered by finance examiners:

(a) Check to see that meters not reset in 6 months have been

called in.

(b) Determine if mail usage, including parcel post, is checked

quarterly against numerical files of authorized meters. This

check should cover all tours for any one day in the quarter.

(e) Determine if keys to locks are protected to prevent their use

by unauthorized persons.

(d) Observe selected incoming and outgoing parcels to detect

any alteration in amounts of postage.

(e) Observe procedure by clerk in setting meters and making

entries on forms.

(f) Verify completeness and accuracy of record of meter settings

(form 3610) on a sample of meters. The sample is prescribed

as one from 10 to 25 percent. As is the practice in audits by

public accounting firms, confirmation of meter readings from the

patrons is made. If confirmation is not secured, the examiner

must physically inspect the meter at the holder's place of

business.

These controls have been revised to protect the postal service and

to insure that all revenue is received for services performed. During

the 46 years that postage meters have been authorized for use in this

country the Post Office Department has received significant operating

benefits and the customers of the post office have enjoyed greater

convenience of service.

I'll be pleased to do my best to answer any questions the committee

may have.

Mr. OLSEN. Thank you very much for a very splendid statement,

Mr. Nicholson, a most comprehensive description of the use of postage

machines. Before proceeding with any questions, however, I want

to give recognition to the fact that our colleague, Congressman Krebs

of New Jersey, has some young people here in the room, students

from his area.

I thank you, Mrs. Krebs, for bringing the group in.
8 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

I would like to recognize Mr. Krebs.

Mr. KREBS. Thank you very much, Mr. Chairman and colleagues.

Actually my wife is one of the lieutenants. The general is the leader

of the South Ward Boys Club, in Newark, an organization which

does an outstanding job, in my judgment, in helping boys in the urban

areas where the temptations to take the wrong road are prevalent

wherever you look.

I want to say that this organization, which I am privileged to have

as part of my district, has done yeoman's work in providing opportunities for these boys in areas that are salutary and valuable in our community. As a matter of fact, one of the outstanding members of this

club is going to medical school with marks exceeding 95. Another

one is going to MIT. I consider it a real privilege to have Dave

Warner and his lieutenants from the South Ward Boys Club and all

of these boys who have a real schedule. They are waiting for the

honor guard at the Arlington Cemetery to open up at 7:30 this

morning.

I want to say that I am particularly happy to welcome them to

Washington and I will do whatever we can to help them learn about

the processes of our republic democracy, and helping them along the

road so that they might very quickly assume their places as responsible

members of our community and help to continue America as the leader

of the free world. I am proud to have you here. Anything that we

can do to make your stay more enjoyable, just holler and we will be

there.

Thank you, Mr. Chairman.

Mr. OLSEN. Thank you, Mr. Krebs.

I think you should be congratulated, and the leaders of your com-

• munity should be congratulated, for this great effort. I am certainly

happy and glad that you came. I welcome you here on behalf of

the committee. Thank you for coming.

Now we will get back to you, Mr. Nicholson, and any of your colleagues who can handle specific questions.

I followed very closely the safeguards that I suppose are supported

by regulations of the Post Office.

Mr. NICHOLSON. Yes, sir, they are.

Mr. OLSEN. I wonder if there is any specific check made upon the

quantities of mail that are deposited in the post office by the users

of meters?

Mr. NICHOLSON. No, sir, there is no such check. The mailing

requirements—mailing provisions—are such that a meter user may

deposit his mail in the normal collection box. Thus, the quantity

of mail that any one meter holder produces is not readily available

in any one place. It may be deposited at collection boxes or brougilt

to the post office.

Mr. OLSEN. I wonder if the inspector's office could tell us of the

feasibility of making a spot check or a random check?

Mr. NICHOLSON. I can answer that question in general and then

Mr. Woodworth could perhaps amplify it.

At one time there was such a requirement, Mr. Olsen. However,

the requirement limited the usage of meters and limited and made less

convenient the use of the mail for the patrons. In response to the

needs and the desires of the mailers, the use of meters was liberalized.

In a very real sense perhaps, the quantities of mail associated with
USE OF POSTAGE METERS IN U.S. POSTAL SERVICE 9

meter impressions is no different from quantities of mail that might

be associated with the use of adhesive stamps.

It is not feasible to check whether or not all mail with postage of

either type, either adhesive stamps or meter impressions that originates from a given mailer, is associated with a purchase of adhesive

stamps, or in the case we are discussing, metered postage from that

mailer.

His use of postage, variety of uses to which he puts his postage, and

variety of ways which he can properly and conveniently deposit his

mail, make it very difficult to associate any given postage purchase

with the actual mail on which that postage was applied.

Mr. Woodworth, do you have any other comments to make?

Mr. WOODWORTH. Mr. Chairman, my name is Woodworth.

I would only add to that. I think Mr. Nicholson has done a splendid

job of explaining why it would not be feasible, because of collection

of revenues based on the volume of mail handled over the years, it

has been our experience that we have had relatively few instances

where any deficiences have been disclosed. This is a matter of experience over 46 years which has not prompted us to increase our

provisions for mailing but rather to make them more suitable to the convenience of the mailer who is using this type of postage.

Mr. OLSEN. Historically speaking, when meters were first authorized, were the regulations much more strict with regard to surveillance

of that particular mail?

Mr. NICHOLSON. Yes, sir; you are correct.

The Post Office Department was quite conservative in its approach

to the installation of postage meters. For some years after postage

meters were first in existence in the world, the Post Office Department

refrained from authorizing the use in the United States because of the

then felt fear that the privilege of creating one's own postage would

encourage the person with this capability to create postage fraudulently. Thus it was a very long time before the first meters were authorized for use in this country.

To answer your question specifically, the restrictions in the beginning

were complete. In other words, a total prohibition of the use of meters

that then were in existence in the world. When the meters were first gradually introduced into the U.S. postal system, the terms of usage

were more restrictive than they are today.

Mr. OLSEN. Could you describe them? When was that first, 1920?

Mr. NICHOLSON. I believe it was in 1920 or very soon thereafter.

The law giving us the authority to accept meters was passed in 1920.

I believe the introduction of meters followed very soon thereafter.

Mr. OLSEN. Could you describe the restrictions on the use of meters

at that time?

Mr. NICHOLSON. Originally, no metered mail could be deposited in the postal stream except at the post office where that meter was registered. Also when the mail was deposited a statement of mailing—

that is, the number of pieces, number of postage units associated

with the mail then deposited—would accompany the mailing.

This meant that each time a postage unit was created by a meter,

that mail had to be accumulated by the patron, a statement prepared

of the amount of postage involved in that particular group of letters,

or parcels, or whatever, and then the group as a whole brought to

the post office together with the statement.
10 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

This means several things from the point of the department. One,

it meant that a meter user would accumulate his mail throughout

the day and bring it in one lump to the department at the end of the

nay. Since all meter users would be doing this at approximately

the same time, the jamups at the post office, the congestion at the

unloading docks, the fact that the mountain of mail was hitting us

during a very short interval at the close of the day, usually between,

perhaps, 5 and 9 o'clock at night, was making for operating inefficiencies.

Of course, from the meter user's point of view, if he had three or

four letters in any given day, and many small users do have a very

small amount of mail that is put through their meters, it was quite

inconvenient for him to carry this mail past perhaps many collection

boxes on corners, to the post office and make a personal entry of that

mail in the mail stream.

Mr. OLSEN. The earlier regulation was, the same as with third class

today?

Mr. NICHOLSON. Third-class bulk mail, yes, sir. Third-class,

single-piece mail may be deposited in any collection box. The same

would be true of permit mail. Permit mail must be entered in the

post office with a statement of mailing.

Mr. OLSEN. Permit mail and bulk third class?

Mr. NICHOLSON. Yes, sir.

Mr. OLSEN. Single-piece, third-class, 4-cent mail may be depositea

anywhere?

Mr. NICHOLSON. Yes, sir.

Mr. OLSEN. When was the regulation changed so that metered mail

could be deposited without a statement?

Mr. NICHOLSON. I will furnish that specific date for the record, Mr.

Olsen. I believe it was 8 or 9 years ago.

(The following information was provided: The furnishing of a daily

statement of register readings was eliminated by Postal Bulletin

notice on September 3, 1953.)

Mr. OLSEN. Then there is no spot check or periodic check of any

kind on metered mail?

Mr. NICHOLSON. No different from checks on mail mailed with

adhesive stamps.

Mr. WOODWORTH. There is a spot check made of the mail to

determine whether the meter is actually in existence. People on

the floor check the meter impressions and the numbers to determine

whether there has been a license issued for this specific meter. This

is one.

Mr. OLSEN. Why do you do that?

Mr. WOODWORTH. To see if a license has been issued at the respective post office for the mail that is being deposited.

Mr. OLSEN. Have you had problems of that nature?

Mr. WOODWORTH. I don't know of any right off, Mr. Chairman.

This is handled in another division than that assigned to me as the

chief inspector.

Mr. OLSEN. Let me get this straight, then. Every meter has a

numbered impression?

Mr. NICHOLSON. Yes, sir.

Mr. OLSEN. That would identify that specific meter?

Mr. NICHOLSON. That is correct.
USE OF POSTAGE METERS IN U.S. POSTAL SERVICE 11

Mr. OLSEN. A meter mailer could deposit his mail then in any post

office in the United States?

Mr. NICHOLSON. No; he may not. He may deposit it only in the

postal area of the post office where his license was issued.

Mr. OLSEN. What do you mean by postal area?

Mr. NICHOLSON. In the case of Washington, for example, it would

be in any of the collection boxes served by the Washington City post

office or its stations or branches.

Mr. POOL. Mr. Chairman, would you identify that?

Mr. OLSEN. What was that?

Mr. Poor,. Could I ask a question right here?

Mr. OLSEN. Certainly.

Mr. PooL. A city or county like Dallas that has 20 to 25 different

postmasters, the main postmaster is downtown but, with all the suburban towns, what is the policy on that? What do you do on meter

mail there?

Mr. NICHOLSON. If it is an independent post office with its postmaster, the metered mail may be deposited only in the area served by

any one postmaster.

Mr. POOL. In other words, the meter mail has to be deposited in

the area that that postmaster controls?

Mr. NICHOLSON. That is correct.

Mr. POOL. Regardless of the city, county, or whatever?

Mr. nem)LsorT. That is correct.

Mr. Poor, If you have a satellite city within a city, it is the same

thing?

Mr. NICHOLSON. If there is a separate post office with its own postmaster, the meter mail from machines licensed by that postmaster

must be deposited in the area covered by that postmaster.

Mr. Pool, In other words, the postmaster controls the area and,

therefore, it has to be deposited in the area he controls and is responsible for?

Mr. NICHOLSON. That is correct.

Mr. OLSEN. Gentlemen of the committee, I am going to try to

stay within the 5-minute rule for everybody as reasonably as I can.

I think we have gone about 6 minutes. Therefore, I call time on

myself and call on Mr. Cunningham.

Mr. CUNNINGHAM. Within that postal manual regulation it says,

"Tampering with or misuse of a meter is punishable by law." What

is the specific law covering this?

Mr. NICHOLSON. There is no specific law, no specific criminal

statute that covers postage meters. I am not competent to cite

the specific law under which a given abuse might be prosecuted.

The Department of Justice makes those determinations and would

be the expert to testify on that point, Mr. Cunningham.

Mr. CUNNINGHAM. Do you know of the specific law?

Mr. NICHOLSON. There is no specific law in the criminal code

referring to misuse of postage meters specifically.

Mr. CUNNINGHAM. In these meters that are used in foreign countries, are they supplied by private industry as in this country?

Mr. NICHOLSON. To the best of my knowledge they are; yes, sir.

Mr. CUNNINGHAM. Post office departments in those countries

do not supply these meters to patrons?

Mr. NICHOLSON. That is my understanding.
•

12 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

Mr. CUNNINGHAM. This is a little beyond the subject, but on this

matter of postage meters, could you refresh my memory on this: A

few years ago relative to these ads was there some fuss about an ad

that was put on these metered mailings? Somebody asked if he had

withdrawn them or somebody took offense to an ad.

Mr. NICHOLSON. Yes.

Mr. CUNNINGHAM. What was that ad?

Mr. NICHOLSON. I don't remember the specific statement, Mr.

Cunningham. The use of ads or statements in connection with a

metered item of postage is allowable insofar as the statement is not

controversial or political. The specific determination or the furnishing of material for printing ads or statements is provided by the manufacturer of the meter who decides whether or not the proposed statement is within the general framework of being noncontroversial or

nonpartisan.

Mr. CUNNINGHAM. It says here, slogans must not be objectionable

or misleading.

Mr. NICHOLSON. Yes, sir.

Mr. CUNNINGHAM. Where does it say partisan?

Mr. NICHOLSON. Perhaps I entered that language. I assumed a

partisan statement would be objectionable.

Mr. CUNNINGHAM. I would presume SO.

Mr. NICHOLSON. Yes, sir.

Mr. CUNNINGHAM. Was this ad approved by the meter company?

Because it was used.

Mr. NICHOLSON. My memory is a little foggy.

Mr. CUNNINGHAM. Do any of the other men know?

Mr. NICHOLSON. Perhaps one of the men from the meter manufacturing company would be more familiar with the case than I am

at this moment:

Mr. CUNNINGHAM. Do you know who it was who stopped the ad?

Did the Post Office interfere?

Mr. NICHOLSON. I believe there was quite a widespread wave of

protest against the use of the statement. The protest obviously

came to the attention of the Post Office Department because people

naturally think that if this is postage the Government authorized

that statement. Since there is such a widespread protest it can be

presumed that the statement is objectionable, at least to the prot est ants .

Mr. CUNNINGHAM. Does anybody with you remember what the ad

said that I am talking about?

Mr. WOODWORTH. I am not familiar with it.

Mr. CUNNINGHAM. Mr. Chairman, may I ask one of the others to

supply that answer?

Mr. OLSEN. You certainly may.

Mr. CUNNINGHAM. Would someone from Pitney-Bowes tell me

what that ad said?

Mr. WHEELER. I believe that you are referring to an ad which

read, "This is a republic, not a democracy, and let us keep it that

way," which had its origin in the John Birch Society. We did issue

several of these slogans not realizing that they had any political

significance. As soon as we found they did, we sought to withdraw

them and did withdraw several. Fortunately there were only a few

that were issued originally.
USE OF POSTAGE METERS IN U.S. POSTAL SERVICE 13

Our policy with respect to meter ads has been the same as the

other companies with whom we are competing. It is possible that

some people may still believe—although as the years go on less and

less so—that because an ad appears up there near the postmark,

somehow the Post Office has approved it, or at least accepted it.

Where we have borderline cases of this kind, a general slogan or

something editorial, we have the mailer underscore the ad with his

own name or the words "mailer's advertisement." Billions and

billions of pieces of mail are going out with these little ads now, and

we believe the vast majority of the public knows they are not Government authorized or sponsored.

Mr. CUNNINGHAM. You voluntarily withdrew the ad?

Mr. WHEELER. Yes, sir.

Mr. CUNNINGHAM. Did the Post Office Department ask you to?

Mr. WHEELER. The Post Office brought it to our attention. We

hadn't understood its significance at all. This sort of thing had happened previously, too. It is hard to tell, on some of these editorial

types of ads, whether they have any political significance or not. We

do not accept any political ads whatever. We, ourselves, take the

responsibility, insofar as we can with our users for—

Mr. CUNNINGHAM. You did accept this ad, did you not?

Mr. WHEELER. We did accept it and then we sought to withdraw

it and did withdraw some of them. I repeat, we had no idea of the

significance of that ad at the time of its issue.

Mr. CUNNINGHAM. I have nothing whatsoever to do with the John

Birch Society and I don't like them or have any association with

them. I hope they fade away. What has that slogan to do with

them?

Mr. WHEELER. At the time it was used very generally, used in

statements by members of the John Birch Society. They had a.

booklet out in which it was used. It got a great deal of publicity

after they started to use this particular slogan, but that is not because of the use of the meter ad itself. It was simply an editorial

exhortation that the John Birch Society thought of and started to

publicize using it in a meter ad, which was just one means of spreading

it.

Mr. CUNNINGHAM. Thank you, Mr. Chairman.

Mr. OLSEN. Thank you, Mr. Cunningham.

Mr. Hanley?

Mr. HANLEY. Mr. Chairman.

I want to commend you, Mr. Nicholson, for the very comprehensive

report that you have presented to us this morning with respect to the

use of metered mail. Other than the case now pending before the

courts, have there been other similar cases?

Mr. NICHOLSON. Involving the use of meters in any way?

Mr. HANLEY. Yes.

Mr. NICHOLSON. No, sir; not to my knowledge.

Mr. HANLEY. This is the first such action?

Mr. NICHOLSON. The only other even remotely related case is a

case in which a metered imprint was counterfeited, but the machine

was not involved. A replica of a meter impression was counterfeited•

just as adhesive postage stamps have from time to time been counterfeited. That is a counterfeiting problem, not a meter problem.

Mr. HANLEY. Was action taken as a result of that case?

58-724 66 3
14 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

Mr. NICHOLSON. I cannot say for sure. My impression is yes;

the case was 2 or 3 years ago.

Mr. Woodworth, do you happen to remember this?

Mr. WOODWORTH. Again, this was in the criminal division. I am

aware of the case but not of the final outcome.

Mr. OLSEN. Will the gentleman yield?

I was advised by the Justice Department yesterday there was a

conviction in that case. It had its origin in a statement in Minnesota,

specifically Minneapolis. There was a conviction in the case.

Mr. HANLEY. We are unaware of a specific law dealing with this

type of fraud?

Mr. NICHOLSON. I made inquiry whether or not there is a specific

criminal statute applying to postage meters. The search revealed

none. To the best of my knowledge there is no specific postage meter

provision in criminal law.

Mr. OLSEN. On that subject, if the gentleman would yield again,

from the Justice Department yesterday I was advised that they think

that the specific law prohibiting frauds against the U.S. Government—that is a general act—that that is sufficient and that is the one

under which they prosecute for this kind of action. That is, any

fraud against the U.S. Government.

In this case they have charged persons with conspiracy to defraud

the U.S. Government. They rather favor this procedure because

a very general act like that allows a scatter gun approach under

which they can prosecute for any misuse of the mails that defrauds

the U.S. Government of revenue.

Mr. PooL. Mr. Chairman, I would like to have them spell out the

criminal statute.

Mr. OLSEN. They would spell out the specific crime but spell out

the specific act in the charge and say these acts constituted defrauding

the U.S. Government of its revenues. They prefer that broad

approach.

Mr. PooL. Who spelled it out and where?

Mr. OLSEN. In the indictment of the defendants.

Mr. Poor,. Where is the statute?

Mr. OLSEN. I cannot tell you the specific one. I was told the

number of the statute yesterday.

Mr. PooL. It does not even mention postage meters.

Mr. OLSEN. In the indictment, they would speak of the specific

• acts involved. Then they would cite title 18, section 371, conspiracy

to commit offense or defraud the United States. That being 

Mr. Pool,. That is pretty general.

Mr. OLSEN. It is a general law. But certainly it is violated if

the U.S. Government is defrauded of revenues. Then there are some

other related statutes constituting fraud.

Mr. Pool,. Have they taken that case up to the Supreme Court

on appeal?

Mr. OLSEN. Yes.

Mr. Pool,. They have taken it to the Supreme Court?

Mr. OLSEN. The case involving the people in Minnesota was

appealed and sustained.

Mr. Pool, By the Supreme Court?

Mr. OLSEN. I do not know if it went to the U.S. Supreme Court.

Mr. Pool, There is serious doubt in my mind that the conspiracy
USE OF POSTAGE METERS IN U.S. POSTAL SERVICE 15

statute would stand up if they did not attack a specific act on that

crime.

Mr. OLSEN. There are many, many specific acts defrauding the

United States which this particular criminal act would cover. Just

about any time the Federal Government is defrauded of revenue,

this statute would apply. It is meant to so apply.

Mr. Pool,. How?

Mr. OLSEN. You spell that out when you describe the acts, when

you describe what the human being did. You explain that in the

indictment. You say they are doing this, and that defrauding the

Federal Government of revenue is a violation of these statutes?

Mr. Pool, The man is supposed to know what he is 

Mr. OLSEN. This very broad criminal statute says that you cannot

defraud the Federal Government of its revenue.

Mr. Poor, That is pretty general. I do not think it holds.

Mr. WHEELER. Mr. Chairman, I think that I can throw a little

light on this. In that Minneapolis case there were two Federal

statutes. Statute 1 is the broad one you quoted but there is another.

U.S. Criminal Code, 18 U.S.C. 503 provides:

Whoever forges or counterfeits any postmarking stamp, or impression thereof

with intent to make it appear that such impression is a genuine postmark, or

makes or knowingly uses or sells, or possesses with intent to use or sell any forged

or counterfeited postmarking stamp, die, plate, or engraving, or such impression

thereof, shall be fined not more than $1,000 or imprisoned not more than five

years, or both.

In this case by the way, sir, I regret to say the counterfeiter's name

was Olson.

Mr. OLSEN. I am aware of that. I do not know that he spelled it

with an e-n or o-n.

Mr. WHEELER. I am sure he did not spell it like yours, sir. Anyway, he is in jail, and we understand the Government has recovered

the loss, which was presumably in the area of $47,000. That is the

only case we know of in the whole 46-year record of metered mail

where there has been any forgery or counterfeiting and no case of

tampering with meters.

Mr. PooL. He was charged under this statute that you read just

now.

Mr. OLSEN. Under both.

Mr. WHEELER. He was charged under both. The second was

U.S. Criminal Code, 18 U.S.C. 1341, and provides:

Whoever, having devised or intending to devise any scheme or artifice to

defraud, or for obtaining money or property by means of false or fraudulent

pretenses, representations or promises, or to sell, dispose of, loan, exchange, alter,

give away, distribute, supply or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented

to be or intimated or held out to be such counterfeit or spurious article, for the

purpose of executing such scheme or artifice or admitting so to do, places in any

post office or authorized depository for mail matter, any matter or thing whatever

to be sent or delivered by the Post Office Department, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail

according to the direction thereon, or at the place at which it is directed to be

delivered by the person to whom it is addressed, any such matter or thing, shall

be fined not more than $1,000 or imprisoned not more than five years, or both.

Mr. POOL. They spell out the crime there.

Mr. HANLEY. How many authorized meter manufacturers do we

have in the States?
16 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

Mr. NICHOLSON. There are six at present, Mr. Hanley.

Mr. HANLEY. Do each of them sell their services on a nationwide

basis?

Mr. NICHOLSON. I cannot say that from personal knowledge, Mr.

Hanley, inasmuch as one of the requirements is that the manufacturer

be able to provide effective and efficient service and maintenance

operations. Whether or not each of these six has the network of

service installations or accessible service installations to operate

nationwide I cannot say with certainty. However, they are approved

for nationwide operation and may do so to the extent their facilities

and controls are adequate.

Mr. HANLEY. Thank you. I have no further questions.

Mr. NICHOLSON. Mr. Chairman, if I may for the record, I would

like to state, just so the record is not unclear, that the preceding

comment about the criminal statutes was not made by a Government

witness. The prosecution of criminal statutes falls within the exclusive jurisdiction of the Justice Department, and the proper statute

to use or the adequacy of that statute is necessarily a matter for the

Department of Justice to determine. So that I as a Government

witness was not making any comment upon the propriety or the

proper or proposed or preferred approach in which to prosecute any

given case against the Government or on behalf of the Government.

Mr. OLSEN. Thank you, Mr. Nicholson. Mr. Krebs.

Mr. KREBS. This is not necessarily directed to anybody and if you

feel that those of you from the Post Office Department cannot answer

this without jeopardizing the pending case that is before the courts,

then you do not have to answer it. In your statement you say there

were 370,000 postage meters in use for fiscal 1965. Do you have any

idea how many cases of a fraudulent use of these machines have been

brought to your attention?

Mr. NICHOLSON. I am aware of only two. The current one and the

counterfeiting case in Minnesota.

Mr. KREBS. In other words, since 1920 when the Congress passed

enabling legislation and they started using the machines there are

only two cases where these have been fraudulently used insofar as

you know?

Mr. NICHOLSON. Yes, sir.

Mr. KREBS. What steps do you take in the Post Office Department

to make this difficult, or to detect this?

Mr. NICHOLSON. There are a number of types of controls, Mr.

Krebs. On the one side there are mechanical requirements. The

machine must have certain mechanical characteristics. It must have

both an ascending and descending register. The ascending register is

inviolate, for all practical purposes. A postal clerk does not have access

to the ascending register. Only the manufacturer himself can have

access and he, because of the mechanics of the thing, has access only

where he has specialized equipment and facilities available. So there

are only a very few limited places where the ascending register can be

opened up and examined or manipulated in any way.

Mr. OLSEN. May I interrupt you there?

Mr. NICHOLSON. Yes, sir.

Mr. OLSEN. Can't the Post Office Department Research Bureau

demonstrate a machine to us?

Mr. NICHOLSON. We do from time to time test machines against

all possible difficulties. That test work is done in a sealed room, a
USE OF POSTAGE METERS IN U.S. POSTAL SERVICE 17

closed room, by screened personnel. We obviously are desirous of not

giving information in a general way as to any possible imperfections

in these machines or any possible weaknesses, in the design of these

machines.

Mr. OLSEN. Would it be possible that we could have a private

session?

Mr. NICHOLSON. Yes, sir.

Mr. OLSEN. Where we could have some demonstration?

Mr. NicHoLsoN. I believe our postal laboratory could indeed show

you the inside of a postage meter. We will be glad to arrange a

demonstration..

If I may quickly summarize, I see you are probably not wanting

too long an answer here, there are aspects of the physical thing itself,

the mechanical controls. Additionally, there is a consistent system

of procedural controls involving such things as where the ownership

of the machine is vested, an inventory of the machine, the name,

address, and location of every machine at all times. The issuance

of a license so that the postmaster knows the name of the user and

the serial number that he is using of each machine in use in his postal

area, the fact that the permit holder with very slight exceptions must

always deposit his mail in the area controlled by that postmaster

who issued the license; the fact that the inventory of machines and

their addresses is furnished to our postal data centers, which furnish

a list to each post office of the machines registered for use in those

post offices so as to check whether or not the postmaster's list and

the list furnished by the manufacturer are in agreement; the fact that

the postage must always be purchased at one point and the meter

record book of all previous meter settings furnished at that one

point—with the result that one set of personnel is familiar with each

holder and his experience of usage with his postage meter—the fact

that if no postage is purchased for a meter in a 6-month period a

personal investigation is made why this meter out in the hands of a

user who is paying a leasing fee for the use of that meter should

have chosen to pay that fee over a 6-month period without purchasing

any postage to run that meter with. Additionally, quarterly inspection is made on the post office floor so that all metered mail in a

24-hour period is recorded. The meter number and the name of

the addressee—I am sorry, the name of the person who created that

mail, the return address on the envelope, the meter number and

return address are recorded and then a different postal employee

checks to be sure that name and that meter number are associated

in the postmaster's file of licensed users.

Still further, another category of controls is that furnished by

the manufacturer. The manufacturer must check the machine at

least once every 6 months and in actual cases does so on a quarterly

basis in many cases.

Still further, the work of all the different systems and the integrity

of the meter, the mechanics of the meter itself, is subject to the

examination by a finance examiner who on unannounced visits to the

post office checks the machines, the files, the maintenance of records

as required as I enumerated above. In the event of any discrepancies,

he reports those and remedial action is taken. So there are basically

four systems of control: The mechanical controls, the procedural

systems of the Post Office Department, thirdly, the actions of the
18 USE OF POSTAQE METERS IN U.S. POSTAL SERVICE

manufacturer, and fourthly, the actions of our own finance examiners

who check to make sure all these things are being done.

Mr. KREBS. Let me say this: I read your basic mechanical controls

in your statement, which I thought was comprehensive and excellent.

However, and I want to say this—I think you have done an excellent

job in policing this and so have the manufacturers—it is my judgment

that two experiences are too many in this field. I wonder if maybe

the mechanical controls, which I think are the primary controls—the

other ones you list are collateral controls—if even two frauds are

possible in virtue of these controls, then it might be that we need more

primary controls on these meters. I would like to suggest that your

Department give some thought to working these things out. It

might be, Mr. Chairman, that we could discuss this further in the

executive demonstration session that we have. Thank you, sir.

Thank you, Mr. Nicholson.

Mr. OLSEN. Thank you, sir.

Mr. Broyhill.

Mr. BROYHILL. No questions, Mr. Chairman.

Mr. OLSEN. Mr. Tunney.

Mr. TUNNEY. I have a couple of questions, Mr. Chairman. I would

like to know what steps have been taken within the last few months

to prevent an occurrence of mail meter fraud in the future?

Mr. NICHOLSON. No steps have been taken, Mr. Tunney. We are

in the same position, I believe, that this committee is in; namely, it is

just over a week ago that a rare occurrence has come to our attention

and like the committee we are in the process of trying to learn all we

can how even this rare exception could have taken place. If our study

and the work of this committee reveals any remedial action that is

necessary, we will, of course, take it. But no action has been taken

at this time.

Mr. TUNNEY. Thank you. I do not have any further questions.

Mr. OLSEN. Are there any further questions from the committee?

There being no further questions, we will excuse Mr. Nicholson and

his colleagues. Thank you very much for a splendid presentation.

Mr. NICHOLSON. Thank you Mr. Chairman.

Mr. OLSEN. Mr. Wheeler, if you will step forward, and your colleagues.

Mr. Walter H. Wheeler, chairman of the board, Mr. John 0. Nicklis,

president, Mr. E. R. Krantz, director of post office relations, Mr. James

Turrentine, director of public relations, Pitney-Bowes, Inc.

STATEMENT OF WALTER H. WHEELER, JR., CHAIRMAN OF THE

BOARD, PITNEY-BOWES, INC.; ACCOMPANIED BY JOHN 0.

NICKLIS, PRESIDENT; E. R. KRANTZ, DIRECTOR OF POST

OFFICE RELATIONS; AND JAMES TURRENTINE, DIRECTOR OF

PUBLIC RELATIONS

Mr. WHEELER. Yes, sir.

Mr. Chairman, as you have already stated, my name is Walter H.

Wheeler, Jr. I am chairman of the board of Pitney-Bowes, Inc., of

Stamford, Conn., originators of the metered mail system approved by

the Post Office Department in 1920. Our first meter was authorized

on September 20 of that year. Since that time some eight other unaffiliated makes have been authorized. Three separate companies
USE OF POSTAGE METERS IN U.S. POSTAL SERVICE 19

are actively competing in the field today, and three more are listed by

the Post Office Department as having equipment available.

I have been with Pitney-Bowes since its incorporation in 1920, and

in fact was the employee who at that time was brought to Washington

by Messrs. Pitney and Bowes to demonstrate our first postage meter

to the postal authorities. I became general manager of the company in

1924, president in 1938, and chairman of the board in 1960. Thus, I

am personally familiar with the entire history of metered mail.

I retired as chief executive officer of Pitney-Bowes on January 1,

1964, and have been serving the company as board chairman and in

an advisory and consulting capacity over the past 2 years. The company's president and chief executive officer, Mr. J. 0. Nicklis, who is

here with me today, requested me to make this statement on behalf of

the company because of my initial and long experience with the

metered mail system.

We were very pleased to have the invitation to appear before you

today, and to set forth the extent and efficacy in operation of the

metered mail system from the viewpoint of the original manufacturer.

We have prepared a kit of materials for each member of your committee containing our most recent annual report, two booklets: "Metered

Mail: What It Does for the Post Office," and "How To Help the

Mail Do a Better Job for You," as well as a copy of this statement.

During the 46 years of their use, postage meters have collected approximately $22 billion of postal revenue. Last year nearly half of

all of the postal revenue, more than $2 billion, was collected through

over 400,000 postage meters.

I may say this is our estimate of the current number; 370,000 was

mentioned earlier. That was the number, I believe, in use last July.

The $2 billion collected through meters last year represented an

estimated 60 percent of the revenue from all business mail. Similar

or nearly identical systems of collecting postage through postage

meters are used extensively throughout the developed countries of

the world.

We estimate that the use of postage meters currently saves the U.S.

Post Office Department well over a hundred million dollars annually

by eliminating the manufacture and distribution of adhesive stamps

and the necessity for canceling these stamps and postmarking mail,

as well as facing a very large portion of it.

It may be of interest to the committee to know that the predecessor

of Pitney-Bowes, the Universal Stamping Machine Co., started in

business in 1912 as makers of stamp-canceling machines. PitneyBowes has since developed a number of specialized mechanical devices

for use by the Post Office Department in its mechanization program.

The most important of these is the highly successful facer canceler

which, by means of an electric eye, locates the stamp on each letter,

turns them all face-side up in readable position, cancels the stamps

and postmarks the mail at a rate of about 30,000 per hour. It pays

for itself in a little over a year, and was commented on yesterday by

the Postmaster General in his forecast of the modernization program

of the Post Office Department.

Returning to metered mail—which, incidentally, saves the entire

operation just mentioned—its benefits and savings to the public,

particularly the business public, are many times as great as to the

Post Office Department. They include general convenience in the
20 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

monetary purchase of postage through the setting of the meter at

the post office (to be used in whatever denominations may be needed);

ease in accounting for postage and protection against petty pilfering

or theft; and great timesaving in printing the postage on mail instead

of having to affix adhesive stamps.

Moreover, the metered system expedites the dispatch of mail in the

post office. It goes directly to the sorting cases without delay for

facing and canceling. This often results in catching earlier planes or

trains, which may mean as much as a 24-hour earlier delivery.

Postage meters are made in a variety of models for small and large

users. Some are completely self-contained desk models in one unit.

This type of meter has, in fact, been our fastest growing model and is

a great boon to small mailers. We brought out little DM, as we call

it, our desk model over here. Mr. Krantz, would you hold that up

and point out the ascending and descending counter?

Mr. OLSEN. Maybe you can carry it along the dais and show each

member the two registers.

Mr. KRANTZ. This is our small desk model. The actual operation

of this meter is identical to some 14 additional models. We have on

two registers the recording of the postage figures. Here, on the upper

register, is the recording of the descending or credit balance. The

bottom register is the ascending or debit balance, much like a bank

checking account. Over here, as I wish, I can dial any amount of

postage; 5 or 7 or 8 cents. As I print that amount, there is a deduction

from the descending balance and a like figure added to the ascending

balance.

Mr. OLSEN. This machine merely imprints postage; is that correct?

Mr. WHEELER. There is a little device for moistening the envelope

on the side. The flap is pulled through first, folded under and the letter

put in the machine and printed. You also may print on tape. We

have a little unit that has metered stamp tape for parcel post and

bulky first-class pieces of mail. There is the unit.

Mr. OLSEN. This machine will not seal envelopes.

Mr. WHEELER. Not completely seal them. It may be used for

moistening the flaps. Incidentally, one out of three users of the

machine have only about a dollar's worth of postage a day.

Mr. OLSEN. Does the user buy that machine or rent it?

Mr. WHEELER. They must rent it. Meters may not be sold outright. This overcame one of the problems in the early years of

securing approval. The idea that a machine capable of printing

postage could get on the secondhand market was obviously bad. We

had to undertake to keep the meters in our possession and be responsible for them, inspect them, maintain them, and replace them as

necessary under lease. This has been so ever since the system started.

It is true of all of the manufacturers.

Mr. OLSEN. What is the rental charge for this particular model?

Mr. WHEELER. $6.50 per month.

Mr. PooL. Mr. Chairman, you can purchase the base and the

meter fits on bigger machines.

Mr. WHEELER. Yes; that is right.

Mr. POOL. Will you explain that?

Mr. WHEELER. In your kits you have folders of five machine

models. Some of them are quite large models that handle the mail

at the rate of 300 pieces a minute. On these models the meter is a
USE OF POSTAGE METERS IN U.S. POSTAL SERVICE 21

detachable unit. The base in that case, which has nothing to do with

the safeguards of the meter, may be purchased and is sold by us.

They are also leased to our customers, if they want to lease them,

but generally they are sold outright.

On these larger machines, meters are a detachable unit, containing

the printing die and registering mechanism. The larger machines

feed, seal, and stack letter mail, or deliver meter stamp tape to be

affixed to parcels.

All meters must meet the rigid standards and tests of the Post

Office Department before they are offered for lease to mailers. Companies authorized to distribute postage meters must assume responsibility for their location, operation, maintenance, and replacement

when necessary. They must be systematically inspected by authorized distributors.

As for the factor of safety, the 46-year history of metered mail

presents a remarkable and outstanding record, equalled by few if

any devices or systems, of safeguarding revenue either public or

private.

In this connection, it may be interesting to your committee to

know :that postage meters were not approved by the Post Office

Department for some 20 years after they were first proposed in 1900.

The delay was almost entirely due to fear of loss of revenue.

Even we, as the initial advocates of this system, did not expect so

convincing a record as has been established. A number of times

over the years we have expressed our opinion to the Post Office

Department that with the system's rapidly growing use, inevitably

some fraud and loss of revenue must be expected, as occurs from time

to time in all other areas of revenue collection.

We ourselves had not fully recognized the extent to which the safe

operation of the metered mail system depended upon a protection

inherent in the system itself, as well as upon the many mechanical

safeguards built into meters, and to the Department's system of

checks and balances

'

and the continuous sampling inspections of

mail made by postal inspectors.

It did not seem to me that perhaps this point was made fully

clear earlier, although it was mentioned several times by the Post

Office officials. But there is a continuous examination of postal

operations by the postal inspectors as well as by other postal employees. This includes examination of mail coming in for irregularities of any and all kinds. Nobody knows when their mail is going

to be examined.

Man has never invented any mechanism or system which has been

absolutely and under all conditions fraudproof. Newspapers record

almost daily cases of large and small losses to the Government, as

well as private individuals and organizations, arising from forgery,

counterfeiting, raising of checks, collusion and falsification of records,

as well as out-and-out burglary and breakage in one form or another;

the latter many times circumventing the most elaborate mechanical

and electrical safeguards.

We believe the essence of the situation is that criminals are not as

much deterred from crime by physical deterrents as by the risk of

detection and subsequent conviction, as compared to the possible

gain. Physically it is relatively easy to steal, to forge a signature, to

raise a check, to counterfeit, or falsify an account. But what are the
22 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

risks involved compared to possible gains? In this all-important

respect, postage meters are almost unique in the degree of inherent

protection they afford.

This is essentially due to the fact that in the case of postage meters,

the criminal virtually signs his own name and permanent address to

his crime. His potential gain in most cases is relatively small, postage

being a relatively small expense for most organizations. In the case

of very large mailers whose postage costs are large, their risks of

detection multiply in proportion to size—because of postal mail

inspection, and possible disclosure by their own employees who must

handle their mail and operate their postage meters.

If any suspicion is aroused, or evidence obtained of counterfeiting

or forging meter stamps or manipulating postage meters, there can

be no question whatever as to who is responsible.

The readily identifiable meter user must be responsible. He must

be licensed by the Post Office Department to use a postage meter,

otherwise it would be prima facie absurd for him to attempt any

fraud. And his mail bears the identifying number of his meter. If

caught, he cannot plead innocence as he could (and has) in the case

of "washed" or counterfeit adhesive stamps, which he might purchase

from others in claimed innocence. If the meter licensed to him has

been broken into or manipulated, the evidence is there, and he and no

one else must be responsible.

We firmly believe that this is the basic reason for the remarkable

safety record of the metered mail system over the 46 years of its use,

while large losses have occurred in almost every other area.

But neither the Post Office Department nor the licensed manufacturers depend on this inherent protection alone. Meters are designed

not only with every practical mechanical safeguard, but are equipped

with two precision counters, each checking the other for accuracy.

One of these is set by the post office, after breaking its seal and unlocking the accessibility door, for the amount of postage the mailer

wishes to buy from time to time. When this is used up the meter

automatically locks against further use. The other counter, accumulating all the postage the meter has ever printed, can never be reset,

even by a post office clerk, unless the meter is actually broken into.

Meters are carefully inspected against a number of specific checkpoints by the authorized distributor's representatives at least once

every 6 months at unannounced times. They may be similarly inspected by postal inspectors at any time. Meters are further inspected

at the post office each time postage is purchased. The post office

also maintains a procedure of internally checking the meter settings.

Furthermore, the mail itself is examined in the post office by sample

spot-checking to detect any irregularities.

Considering all of these things, it can be well understood why the

metered mail system has worked so satisfactorily over the years for

the Post Office Department and the public. There will Undoubtedly

be occasional cases of fraud in the future. Human nature is such that

occasionally some people will try anything in blindness of the risks

involved. But every instance where losses occur, serves to alert more

vigilence in respect to the points in question. I may mention in this

connection that this Minneapolis case and also the current case were

both turned up by the normal procedures of the Post Office Department in the inspection of mail.
UST OF POSTAGE METERS IN U.S. POSTAL SERVICE 23

May I close, Mr. Chairman, by expressing my thanks and those of

my company and colleagues for the opportunity of appearing before

you today. I am proud to set forth the record of metered mail over

its 46-year history—both with respect to the great savings it provides

the Government and the public, and to its safety in revenue collection.

Now, Mr. Chairman, if I could just add one more thing that I do

not think was mentioned earlier; that is, the Post Office actually

inspects the procedures used by manufacturers in the manufacture

and handling of meters, right through to the final destruction of each

printing die. Postal inspectors inspect the branch or distributing

officers of the authorized concern at unannounced times. There are

a great many internal procedures having to do with keeping a careful

check on keys issued to postmasters, the sealing pliers, as well as the

seals, and for seeing the meters themselves are kept in a separate

locked room in the branch office. A number of other protections of

that kind exist both in the plant where meters are manufactured and

in the distributor's offices. Thank you, sir.

Mr. OLSEN. Thank you, Mr. Wheeler, very much. I only have

questions relating to the inspections made by the authorized distributor. Can someone describe in what manner this is done?

Mr. WHEELER. The meter is examined in the mailer's office.

There are different models of meters, but usually there are anywhere

from eight to a dozen particular checkpoints. In the first place, the

meter is cleaned so that it prints clearly and the mailer is cautioned

to keep the die better inked, if that is necessary. Then as to the

meter itself, our inspectors examine it very carefully for any signs of

being tampered with or any attempt to break into it. The meter has

to be physically broken in some part to get into the interior. Even

we as manufacturers destroy a unit of a meter to get into the meter

to do any repair work. Incidentally, that repair work on meters

is not done in all of our sales offices throughout the country, of which

we have about 140, but only in 6 meter repairs outside of Stamford.

Mr. NICKLIS. Then we have the main plant where they are rebuilt

and repaired. There are only a limited number of places where a

meter can be opened by our people.

Mr. OLSEN. Is some record kept by your people of the date and

place of inspection?

MT. WHEELER. Indeed SO, sir; yes.

Mr. OLSEN. Are they required to do this within every 6 months?

Mr. WHEELER. That is correct, sir.

Mr. OLSEN. Where do you keep the record of that fact of inspection?

Mr. WHEELER. Mr. Nicklis, do you want to answer that?

Mr. NICKLIS. The meter inspection is recorded on a small ticket

and part of this ticket is sent to Stamford for analysis along with

other machine and meter inspections made at the same time. In the

branch office the inspection is recorded on a kardex for that user and

the date of the inspection and the initials of the serviceman making

the inspection are entered. That is all that is entered, if the inspection disclosed no irregularity. If the inspection did disclose an irregularity, the meter is withdrawn from service and appropriate

action is taken. In other words, if it looked as though somebody

had tried to enter the meter or tamper with it, the Post Office would

be notified. I do not know any cases where this has actually happened. Occasionally a meter will have some mechanical fault or

k
24 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

won't be printing correctly, some part of the die having become

damaged through normal usage. That meter would be withdrawn

and that information recorded on the ticket. We have many millions

of these tickets because, we inspect these meters as many as four

times a year. The actual inspection tickets are kept for a limited

period of time. But the permanent record is kept on a kardex file in

the branch office.

Mr. WHEELER. If there were any irregularity at all, we would keep

the original inspection report.

Mr. NICKLIS. If the meter has a mechanical fault, it is brought to

Stamford where we have experts who examine it. If there happens

to be a misregistration which can happen with any mechanical device—for example, a tooth could break—then a report is given to the

Post Office Department of exactly what happened to that meter.

Mr. WHEELER. Incidentally, that is an interesting point to bring

out. These two counters that have been referred to several times

this morning are constantly checking each other mechanically. In

the rare cases where something may go wrong in the meter, as will

happen with any mechanical device, we, by inspecting that meter, are

able to determine which counter was the accurate one and to advise the

Post Office as to the correct settlement of the postage.

Mr. OLSEN. Mr. Krebs.

Mr. KREBS. I have a couple questions, Mr. Chairman. First of all,

it was testified to before that for fiscal 1965 there were 48,000 machines

in use. Can you tell us among the three major manufacturers,

Pitney-Bowes, Friden,_ and Postalia, what percentage for each?

Mr. NICKLIS. 400,000.

Mr. KREBS. Yes; I am sorry; you are right.

Mr. WHEELER. I cannot tell you exactly, but the very large proportion of them are Pitney-Bowes' meters. I can tell you more, if you

are interested in competition.

Mr. KREBS. If you will just wait a minute, Mr. Wheeler, I will come

to that. During fiscal 1965, for the record, there are 370,000 meters.

This is what Mr. Nicholson testified to. What percentage of the

370,000, roughly? Can you give me an educated guess?

Mr. WHEELER. Yes. I would say somewhere in the area of

90 percent.

Mr. KREBS. Ninety percent are Pitney-Bowes and the other two

are relatively unimportant after that. Pitney-Bowes consented to

an antitrust decree recently.

Mr. WHEELER. Yes; not too recently. Some 6 or 7 years ago.

Mr. KREBS. Has this whole picture with these new facts made any

difference in the supply of these and the competitive changes that

may have been made?

Mr. WHEELER. I will have to go back a bit, I think, to answer your

question. The Post Office has approved, as I pointed out, eight makes

of meters. The last one is the Postalia meter which has come in recently since the consent decree. There were seven others. In the

first place, during the first 10 years of the existence of this system and

of our company, while other companies did attempt to come into the

field, it was a question whether this system would survive at all because it was tied up so tightly by postal regulations.

But we had a great stake in it at that time and we persisted in it.

Consequently, when the system began to get on its feet, after 1928
USE OF POSTAGE METERS IN U.S. POSTAL SERVICE 25

as a result of extensive hearings here in Congress about it, then the

other manufacturers began to get going again. But one by one those

manufacturers were merged and the result is that all of them today—

yes, I think all of them except one—are combined into our largest

competitor, Friden, through various acquisitions and mergers. The

Friden Division of Singer, which makes postage meters, was formerly

called Commercial Controls. Commercial Controls gave us quite

active competition until about the early 1950's. They then became

interested in data processing and just quit making postage meters.

It was true that their equipment was .not as attractive by quite a

margin as ours. We had redesigned our whole line of equipment

after the war and put a lot of effect and energy in it. This was our

sole business. Friden announced publicly in their annual report

that they were quitting the postage meter field for the time being.

That left us as the sole suppher.

The Department of Justice had been to see us about a year and a

half previously and spent a year going over our entire record. We

had expected this because we were doing an unusually large portion

of the business. The Justice Department concluded its examination

then, without finding any cause for action against us. But then when

Commercial Controls quit there was not anybody else supplying

meters. The Department of Justice felt, I guess, that they had better

come back and look again, which they did. It was our feeling that

there was nothing new or different that they found in the second

investigation, but nonetheless, we were the sole suppliers and they

said they would have to bring suit against us.

Our reply was, "You don't have to bring suit against us because

we want competition. We know we should have it. We know it is

bad for us not to have it. We believe in the competitive system."

The answer was, "The only way you can do that, without probably

getting into trouble, is through a consent decree." We said, "All

right, we will take a consent decree." We agreed in that consent decree

to give a free license to anybody who applied for it under our existing

patents, to help competitors come into the business by disclosing our

techniques, having them visit our manufacturing and engineering

departments and sending our people to theirs. This we did in

the case of Friden. In the case of Postalia, that was a meter which

was already being made in Germany. It had to be changed somewhat

to comply with the U.S. Post Office requirements. They did not ask

us for the help to the extent that Friden did.

Today both of those companies are very actively competing with us.

If you try to judge the competition that exists today by the number

of meters in use today it is misleading and hardly fair. The accumulation of meters goes back over 46 years. We are in constant competition with both Friden and Postalia today. I may say that in

a good number of cases, something in the area of half the cases where

we are in direct competition, they get the business. So there cannot

be any question that we have active competition.

Mr. KREBS. Mr. Wheeler, I had no intention of being unfair. The

reason I asked is that I had some doubts in my own mind and there

were some voids that I wanted filled and you have done it adequately

and I am satisfied with your answer.

Mr. WHEELER. If I may just apologize.

Mr. KREBS. You don't have to.
26 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

Mr. WHEELER. This subject is sort of like waving a red flag at

a bull.

Mr. KREBS. I would not wave any flag, particularly a red flag.

Mr. WHEELER. So help me, all we did was work our tails off to make

a success of this business in every possible way. We have had the

most unusual—if you inquire about us you will find it is so—the most

unusual esprit de corps among our employees. We did a bangup job.

I think if we had taken this to court we might have gotten a judgment

that we had had "a monopoly thrust upon us," to use a legal phrase.

Mr. KREBS. Thank you.

Mr. Nicklis, you testified earlier that parts of the equipment, except

the meter itself, are sold.

Mr. NICKLIS. That is right.

Mr. KREBS. This prevails in all instances except in the case of the

meter irrespective of the size of the machine the model of the machine

or anything else.

Mr. Nicluis. This one is self-contained so no part is sold, obviously

because it is one unit.

Mr. KREBS. Where you have a removable meter, the nerve center

of the machine, this is not sold.

Mr. NICKLIS. That is right.

Mr. KREBS. Is this because of any postal regulation or any statute

on the books?

Mr. NICKLIS. That we sell it?

Mr. KREBS. That you do not sell it.

Mr. Nmuis. The meter?

Mr. KREBS. The meter itself.

Mr. Nicluis. Yes, that is a requirement of the regulations under

which we operate. I believe this was brought out to some degree by

Mr. Nicholson.

Mr. KREBS. Under postal regulations?

Mr. NICKLIS. Yes.

Mr. KREBS. Would you put into the record at some point and you

can send in the information by mail specifically what regulation this is.

Mr. Nmuis. Mr. Krantz can probably give it to you right now.

We can give it to you very shortly. If you want to go on we will put

it in right now.

Mr. KREBS. The last question I have, is there any other reason

why you do not sell the entire machine, including the meter?

Mr. NICKLIS. I have been with the company for the past 20 years

so this regulation was put in at the outset. Perhaps Mr. Wheeler

can answer. My understanding is "No."

Mr. KREBS. Let me ask the question a different way. Supposing

we were to eliminate the regulation that precludes selling these

things, would you sell the machines on the open market? The meters?

Mr. Nicxus. We think it would be inadvisable, but if this was the

way it worked and the way you had to do it, I presume we would have

to. We think it would be a very bad mistake to have meters sold.

Mr. KREBS. Thank you.

Mr. KRANTZ. In the Postal Manual, section 143.14: "Postage meters

may be leased from authorized manufacturers who are held responsible

by the Post Office Department for the control, operation, maintenance, and replacement, when necessary., of meters manufactured by

them. Then the list of meters approved."
USE OF POSTAGE METERS IN U.S. POSTAL SE:RVICE 27

Mr. KREBS. That is the only regulation that you know of that

precludes the sale of these?

Mr. KRANTZ. That is right.

Mr. WHEELER. May I just add, Mr. Krebs, at the outset this

was quite a burden to Pitney-Bowes. We did not have adequate

financing and the idea that we could not get our money back for a long

time because we had to lease them, was a serious matter. It was

not a scheme we preferred at that time. But we saw that this was a

most logical requirement of the system. As has been brought out by

Mr. Nicklis, we feel it would be a mistake to sell meters outright

because the control would become a great deal more difficult.

Mr. OLSEN. Mr. Cunningham.

Mr. CUNNINGHAM. Like Mr. Krebs, I want you gentlemen to know

if we ask some questions it is only for information. I have before me

a clipping from the Washington Evening Star of January 8, 1966.

Mr. Nicklis, you are quoted as saying, referring to this case in New

York, "It was the first case"—and these are your words according to

the press report—"of fraudulent use of a postage meter in the 45-year

history of metered mail in the United States."

Mr. Niciuas. Yes; and I believe that to be true. The case that

we spoke about in Minneapolis had no meter involved at all. A man

counterfeited the stamp but he affixed it with another device. He

did not affix the counterfeit impression with a meter. He merely

photographed the meter impression. I think he ran it off on a multilith machine and it was very obvious to us. We were able to identify

it as a counterfeit almost immediately. We had no difficulty in proving it was a counterfeit. I believe this helped the Government's case

because it was easy to prove it was a counterfeit.

Mr. WHEELER. Mr. Nicklis, perhaps you would like me to add

that at the time the statement was made we ourselves had practically

no information about this case. It just broke pretty much out of the

sky. We first assumed that it had been a manipulation of a meter.

But this is not at all established.

Mr. CUNNINGHAM. The New York case?

Mr. WHEELER. Yes.

Mr. Nicxus. We do not have the information yet.

Mr. CUNNINGHAM. This article is an Associated Press article which

says that two men and a woman faced conspiracy charges of a postage

meter which may have defrauded it of 82 million over a 2-year

period.

Mr. NicxLis. I do not feel qualified to answer, I don't know

whether Mr. Wheeler does or not.

Mr. CUNNINGHAM. I believe one of you made the statement that

a spot check revealed this situation. Two years have gone by.

Mr. NicicLis. Mr. Wheeler made that statement. I do not know,

Mr. Wheeler, whether we can say that this is exactly the way it

was revealed. I think we are getting into an area now that perhaps

we begin to talk about the specific case and it becomes a little difficult.

Mr. CUNNINGHAM. I was only going by the newspaper article which

is public.

Mr. NICKLIS. The part you quoted first was my statement. The

rest was pure Associated Press.

Mr. CUNNINGHAM. Yes, that is right. Has any consideration ever

been given to requiring a bond of you people and your competitors

•
28 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

to reimburse the Government for any such fraudulent cases that may

come to light?

Mr. Nicxus. Not to my knowledge.

Mr. WHEELER. Over the years this has been discussed perhaps

several times. But the stake that an authorized manufacturer has

in this is bigger than any bond. His whole business depends upon it.

If our authorization to distribute postage meters were withdrawn,

we would be in very bad shape. It is true our business now has broadened out and we have diversified a bit but the biggest part is postage

meters. You asked if that was ever discussed, it was never considered

seriously. I think perhaps in the early days—I am trying to think

back now—when we were so anxious to get the Department to liberalize some of their regulations so this thing could really grow, I think

we offered that suggestion to put up a bond.

Mr. Pool, Mr. Cunningham, would you yield?

Mr. CUNNINGHAM. Just a minute, please.

Getting back to these ads, I presume that is quite a selling point,

is it not?

Mr. WIltELER. It is of some assistance in selling, sure, because it

can be put on there really without an extra operation. As you know,

mailers use their envelopes for advertising purposes now. Yes; it

does assist somewhat in sales.

Mr. CUNNINGHAM. Then if you were required to give up that

advertising it would hurt your business, presumably.

Mr. WHEELER. Yes; I think it would.

Mr. CUNNINGHAM. Because I can see, the situation as it is, you

might get into a law controversy no matter what may be put in the ads.

I believe you have "Pray for Peace."

Mr. WHEXLER. Yes.

Mr. CUNNINGHAM. I am sure somebody will object to that.

won't be one, but some kooks in this country will object.

Mr. Niel(Lis. Yes.

Mr. WHEELER. As I tried to bring out, the possibility of difficulty

over this was really in the early years when people were not used to it.

With the billions of pieces that are going out now—I do not know the

percentage of our customers that actually use these ads, but a very

large percentage do. People are quite used to seeing meter ads.

The Government does not approve an ad to buy a Cadillac car, or

what sort of soap you should use.

Mr. CUNNINGHAM. I know you can print almost anything you want

on an envelope but I feel when you have an ad that is part of the

precanceled stamp in metered mail, it does cause some people to feel

that is a Government-sponsored ad. I do not think you can get away

from that.

Mr. WHEELER. You get away from it more and more and more

every year. The point I am trying to make is that all types of meter

ads are becoming very common. But we always turn down political

ads. In our lease contract with mailers we reserve the right to

approve anything that is printed in the meter ad. We do not take

any that are out-and-out political; that is advocating legislation or a

candidate.

Mr. CUNNINGHAM. I understand.

Mr. WHEELER. The borderline editorial sort of things, we now feel

we can accept by use of this signature directly underneath the ad—

"Mailer's Advertisement" or the name of the mailer.
USE OF POSTAGE METERS IN U.S. POSTAL SERVICE 29

Mr. CUNNINGHAM. Have you had this privilege of allowing these

people to put this ad on there ever since meters were authorized?

Mr. WHEELER. No; not since 1920. Since about 1930.

Mr. CUNNINGHAM. In 1930 the ads were authorized.

Mr. WHEELER. Yes; about that time. As a matter of fact, the

ad system was first used in Europe; that is, of printing advertisements

at the same time that meter stamps were printed. That is where we

got the idea. Actually, the Post Office Departments abroad were

considerably more liberal in their regulation surrounding metered

mail than our Department was in the initial years. They were very

conservative, as stated by Mr. Nicholson.

Mr. CUNNINGHAM. On this matter of Europe and other foreign

countries, I asked Mr. Nicholson and he did not know, these metered

machines that are used in these other countries, are they supplied

by private industry such as yours?

Mr. WHEELER. Yes; the same way.

Mr. CUNNINGHAM. Or does the Government have such a machine?

Mr. WHEELER. No; I do not know of any case in which the Government is supplying them. I am sure there are none.

Mr. CUNNINGHAM. Thank you very much.

• Mr. HANLEY. I simply want to commend Mr. Wheeler for a very

fine orientation with respect to Pitney-Bowes and I have but one

question. Does Pitney-Bowes engage in the manufacture of other

items, nonpostal in nature?

Mr. WHEELER. Yes. We manufacture an inserting machine,

scales, letter opening machines, special kinds of counting machines,

folding machines, and so on. Addressing machines are a recent addition. We may go into the office copier business. We have just

acquired a small company, or we are planning to acquire it— it has

been publicly announced which makes equipment that collates

sheets of paper that go in direct mail advertising or into catalogs,

pricelists

'

or material such as you received from us here. Paper

handling has really been our specialty. All of our corporate life we have

been handling paper and envelopes at a high rate of speed. We

have a pretty good knowledge of that. It is quite interesting to see

the evolution. Here we started by making machines to actually

cancel the stamp. But we asked ourselves the question—"Why

should the Government be spending money to spoil something that it

just spent money to make? Why couldn't it be done in one operation?' We said, 'This is very simple. You put a counter on a canceling machine, like a gas meter, and that is it." But it was not quite

as simple as that.

Mr. HANLEY. Thank you, Mr. Wheeler.

Mr. PooL. Mr. Chairman, I just want to make one comment. I

think Mr. Cunningham said something about a bond a while ago. The

use of these machines and the cost or percentage they charge for the

use of the machine is such a small amount,. to add .a bond you add

other cost on there, the customer would probably not use a machine

in a lot of cases if you had a bond. It is a very thin line you draw

there as to whether you use a postage machine. I have used them.

I know all about them. You get the cost up too high, and they will go

back to using stamps. Therefore, the Post Office Department has

to do the canceling and it costs the Post Office Department a lot of

extra money. So the bond in my opinion would be prohibitive and

would run the cost up.
30 USE OF POSTAGE METERS IN U.S. POSTAL SERVICE

Mr. CUNNINGHAM. Mr. Chairman, I disagree that it would be

prohibitive. In the 45 years you have had one case and the bond

would be very low. I happen to know something about the bonding

business.

Mr. Nicimis. May I be permitted to make a comment here?

Mr. Pool, I still have the floor, Mr. Cunningham. You would

not yield to me a while ago.

Mr. CUNNINGHAM. But you are not a member of the subcommittee

and have no right to the floor.

Mr. Pool,. I want to compliment Pitney-Bowes for an outstanding

record in the last 45 years and the fact that we have only had two

cases is a tremendous record. I am pointing out the fact that there

is no use of adding extra cost on these _people's operation because

they are actually saving the Post Office Department $100 million a

year in labor cost. Let us not look a gift horse in the mouth, my

friend. That is all I have to say. I yield the floor.

Mr. NICKLIS. May I just make one observation that I think is

important. First, we are inclined to believe the figures named so

quickly in the news release of $2 million is greatly exaggerated as

Mr. Wheeler commented. The other case was some $50,000 or

$48,000 or $49,000 involved. Even if you took them both at their

face value and relate them to $22 billion of postage collected via

meters, it is a very, very small percentage. This might result in a

bond not being too expensive, but knowing insurance companies a

little bit, I am afraid they would want an individual bond rather than

a blanket bond.

Mr. POOL. Each one of these small machines would have to have

a bond.

Mr. NICKLIS. Yes.

Mr. Pool,. It would be enough to keep from selling them or producing them.

Mr. OLSEN. I want to thank all of you gentlemen for your participation today. I have this observation to make, though. I am not an

expert on this subject. My observation, as of now, is that with the

greatly increased volume of mail, and I am speaking of the increased

volume of mail by specific mailers, it probably would be well for all of

us to concentrate on methods of checking the volume of mail going

through some meters. If metered mail has to go through a post office

in a single area under a postmaster, I think that it probably is possible

to take big mailers and check them out by weight, just as we do with

third class. This can be done from time to time to safeguard against

anything we read in the paper or as Mr. Cunningham referred to.

Mr. WHEELER. Mr. Olsen, may I just comment? As was brought

out earlier, the post office itself makes these quarterly checks of mail

going through the post office. The name, meter number, and so forth.

Mr. OLSEN. They do not check the volume. They admitted they

did not check the volume.

Mr. WHEELER. No. But if there appeared to be any irregularities

about that meter stamp or the volume of mail, it is easy enough. This

is one of the reasons why the post office says you have to mail it in one

city, in the city where you have your meter set. Because if there ever

is an instance of that kind and the post office wanted to do it, if it is

important enough to do it, they could check practically all of the mail—

volume and all. In the case of large users practically all their mail is

I.
USE OF POSTAGE METERS IN U.S. POSTAL SERVICE 31

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all brought into the post office anyway. So they really could, where

there was a suspicion, check it.

Mr. OLSEN. It would be a simple matter to check the volume of the

big mailers. That is the only observation I would want to make

at this time.

Again I want to thank you gentlemen and the gentlemen from the

Post Office and of our committee here, too, for a splendid hearing this

morning. Thank you very much.

Mr. WHEELER. Thank you, sir.

(Whereupon, at 12 o'clock noon, the hearing was concluded.)

(The following supplementary statement was submitted for the

record and is included herewith.)

SUPPLEMENTARY STATEMENT OF W. H. WHEELER, JR.

In the foregoing statement on January 19 I expressed my belief that both cases

of attempted fraud involving metered mail had been turned up by the normal inspection of mail in the Post Office. While the inspection of mail did, I understand,

establish both cases, I now am informed that in the Minneapolis case there was a

factor leading to suspicion, and that there might have been in the pending case,

information concerning which is not yet complete.

JANUARY 24, 1966.

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