Despite Claims, ‘Chains’ Ignore Letter of Law

The chain letter recently received by some Los Angeles residents claims to be different from most: It’s legal. Or so says Edward L. Green, the plan’s originator, whose cover letter says he made “over four million dollars” before he “retired from the plan.”

The standard chain letter asks recipients to send money, or something else, to the top name on a list, add their own name and send a similar letter to a bunch of friends. Participants in this chain peddle “a legitimate product”--four reports, which they order for $5 each from the four names listed in the letter. They photocopy the reports they receive, add their name at the top of the list, drop the other names down one space and start waiting for their own orders to roll in.

“Green,” who is not identified further, then supplies a little math: If one mails out 200 such letters and gets a 5% response, one gets $5 orders from 10 people who may also mail out 200 each. “The 5% response to that brings 100 orders. Those 100 mail out 200 each, or 20,000 total. The 5% return on 20,000 is 1,000. The 1,000 send out 200,000 total, and the 5% response will generate 10,000 $5 bills for you, cash! Your total income in this example situation is $50 plus $500 plus $5,000 plus $50,000: total $55,550!”

He also provides affidavits from four participants in different states, all in the same style, none of whom have listed phone numbers. One claims he sent out 1,000 packets and got $87,000 in six weeks; one received $40,000. Two claim to have done several mailings.

The essence of chain letters is the promise of easy money, “with practically no risk and just a little bit of effort,” as Green wrote. They’re said to flourish when people are particularly worried about making ends meet--during the Depression, for example, or in times of inflation, or even now, in areas hit by high unemployment.

Inherently Fraudulent

With few exceptions, they’re also illegal. For one thing, they present all three elements of a lottery--chance, prize and consideration--and lotteries under federal law cannot go by mail. For another, they’re inherently fraudulent, says Don Davis, manager of the U.S. Postal Inspection Service’s fraud branch in Washington, “because the plans allege that anyone who joins at any time will get something, although you don’t know what’s going to happen below you in the chain.”

The exceptions usually involve no money. Some chains exist to exchange recipes, for example, or prayers, or pen pals, or assurances of continued good luck.

Contrary to Green’s assertion, those that offer “products” are not exceptions, according to the Postal Inspection Service. Green’s reports--including “How to Make $250,000 through Multi-Level Mail Order Sales” and “Sources for the Best Mailing Lists”--are basically “just little one-page jobs, something to give some legality for the plan,” says Alton Fulton of Owensboro, Ky., a participant in the Green chain. Others, says Davis, offer reports “on how to grow grass or make chocolate chip cookies. We consider them chain letters because the product’s of no intrinsic value.”

Ultimately, a judge would decide the value, but few chain letter cases go that far. They’re “not inherently appealing for prosecution,” says Davis, “because you don’t know who the victims are, the dollar amounts involved are low, and though we’ll get 30,000 complaints a year, they’re not people who’ve lost money. They’re people who get a letter and say, ‘hey, this is illegal.’ ”

Enforcement usually consists of the Postal Inspection Service writing to people listed on the letter, explaining that they’re violating the law and that most participants lose money, and asking them to stop. Participants in the “Green” letter are already getting such notices (with the exception of Green, who has never been found and may not exist). If they don’t stop, the Service may take civil action against them.

Uncooperative recipients also break up chains. People today have little time, and even less inclination, to write letters, and savvy consumers tend to suspect strange offers. As a result, many participants find the returns far behind the promises. In the month since he mailed out 400 letters, at a cost of about $200, Alton Fulton has had only seven or eight orders for reports-- nowhere near the rate of 17,400 (the $87,000) in six weeks from 1,000 mailers.

Participants Unknown

Indeed, legality aside, what defines chains as “chance” in the eyes of the law makes them chancy as a practical matter. “You’re relying on people you don’t know, and you don’t know where you are in the chain,” says Tom Dugan, a Pasadena postal inspector.

Given the use of mailing lists, the listed participants are generally unknown and unverifiable: Of the nine names in the “Green” mailing--those taking orders and those providing testimonials--only one had a phone number or a street address. They may simply be people hiding to avoid income tax, but they may also be con men renting mail boxes in several cities, says Dugan.

The other catch is the unknown number of participants. “Even if everyone’s faithful,” says Burbank postal inspector Larry Johnson, “you can’t have the same hope further down in the chain as those at the top. After a certain number of repetitions, you can no longer solicit somebody who hasn’t already been solicited.”

Odds Questioned

Chain letter critics have their own mathematical argument. If each recipient sends out only six letters, but all do so, participants in the 10th tier of mailings will have contacted everyone in the United States. If everyone sends out 200 letters, the entire U.S. population will be solicited by the fourth tier of mailings. Thus only the early participants have much chance to make money.

To some, this doesn’t seem any worse odds than one meets in everyday life. When a Sears, Roebuck store advertises refrigerators to hundreds of thousands of people, Fulton argues, “you think they’ve got 100,000? They’ve probably got 20.”

There’s a school of thought--actually, two schools--that thinks chain participants should be left alone. One school says they deserve what they get, and why protect greedy people who reject protection and the other says they deserve their freedom. The letters “don’t promise you anything,” says Fulton. “They say you might make money. This is a free country; in America, you have the right to do what you want. If you want to spend the money, it’s your right.”