Opinion ID: 2188320
Heading Depth: 1
Heading Rank: 2

Heading: is it legal?

Text: Yes! In structuring this program, we have paid close attention to Postal, FTC and Atorney Generals' (sic) Regulations. We have retained Mr. D. Jack Smith, a highly-qualified multi-level Attorney, to ensure our compliance with State and Federal regulations. With over three years in business, we are here to stay and our Attorney will ensure the security of our distributors. It is clear from the record that FHE in fact was illegal. While Rahmani claimed at trial that Smith knew all along that his name was being used in this manner, Smith emphatically denied that he authorized the use of his name for the promotion of FHE and said he was not even aware of it until much later. The trial court found Smith to be the more credible witness. In an equity case such as this, we give weight to the fact findings of the trial court, especially when considering the credibility of witnesses, but we are not bound by them. Iowa R.App.P. 14(f)(7). In April 1986, Rahmani again traveled to Memphis to consult with Smith about his new program called Vacation America. The product being offered under this program was supposedly a vacation. However, airline tickets were essentially all Rahmani ever intended to deliver. Smith assisted Rahmani in drafting the promotional materials for the program. He also registered the program in the six states that require registration. In October 1986, Smith mailed to the attorneys general of all fifty states a letter introducing Vacation America and requesting that they direct any inquiries or concerns to his office. Enclosed in the letter was a copy of Rahmani's brochure which had been printed up. Smith testified that he was not happy with some portions of the brochure. He testified, however, that since Rahmani had gone to the expense of printing it, he felt it was good enough for the purpose of submitting it to the attorneys general in order to gain their input. Although Smith never authorized the mailing of this version of the brochure to consumers, Rahmani began mailing it out immediately. This version of the brochure contained the Is it Legal? Yes! language which Rahmani had also inserted into the FHE brochure. The Vacation America brochure also contained numerous false and deceptive statements. In the fall of 1986, both FHE and Vacation America came under investigation by the postal authorities. Rahmani's mail was held, and Smith represented him in an effort to get the mail released. Smith met with a postal official in Chicago and went over the brochures line-by-line. Several changes were made and the mail was eventually released. The Is it legal? Yes! paragraph in the Vacation America brochure was changed to read as follows: LEGALITIES. We have retained Mr. D. Jack Smith, a highly qualified, multi-level attorney, in an effort to ensure our compliance with State and Federal regulations. We find that this was the first authorized use of Smith's name. Vacation America ultimately failed. Fewer than five people, if any, ever received an airline ticket through the program. In the spring or summer of 1987, Rahmani began the scheme known as R & A Enterprise. R & A was touted as an interest free loan program. The loans did not have to be repaid. In effect, R & A was nothing but a chain letter. Smith testified that he was not involved in the development of R & A, that he did not like it, and that he did not take it on as a client or authorize Rahmani to use his name in promoting it. Smith testified that while he may have given Rahmani some advice over the telephone, in general he tried to stay away from R & A. He also told Rahmani he should get out of it. Not surprisingly, R & A soon ran afoul of the postal authorities. In an effort to keep R & A in business, Rahmani asked Smith to meet with post office officials to bring the R & A promotional literature into compliance with the postal laws so that Rahmani's mail could be released. In August 1987, Smith met in Ames with a postal official to go over the R & A literature. The materials proved to be unsalvageable, however, and the next day the post office filed a temporary restraining order in federal court. Some modifications to the R & A literature were drafted in the course of Smith's negotiations with the post office, including the addition of the legalities language used in the Vacation America brochures. Smith never authorized the mailing of these revised materials to consumers because of the impasse reached in his negotiations with the post office. There was some evidence offered at trial that Rahmani mailed out the modified materials anyway. We find, however, that Smith had nothing to do with the mailing of these materials. While Smith was in Ames in August 1987, Rahmani told him of his most recent brainstorm which was simply to rename R & A as Resource Access Enterprise and forge ahead. Smith testified that he was furious with Rahmani for undermining Smith's good-faith negotiations with postal officials. Smith testified he was fearful that Rahmani's transparent, patent attempt... to run around end ... would jeopardize Smith's credibility with postal officials. While the brochure for Resource Access contained the legalities statement of earlier brochures, Smith did not authorize the use of his name, nor was he connected at all with Resource Access. Resource Access lasted from seven to ten days before the post office shut it down. About the time of the August 1987 postal investigation, the Iowa Attorney General's office also began investigating Rahmani's operations. Rahmani subsequently terminated all the schemes discussed above, and this action followed.