the money paid by them to Koscot by recruiting other distributors and supervisors. See e.g. FF 42, 43. Although the sales structure was set up ostensibly to market cosmetics, the system was designed so that the sale of distributorships was primarily encouraged. Distributorships were sold when no products were available, and the potential return from the sale of distributorships was misrepresented. FF 45. The continual recruitment of additional participants became impossible when the geometric progression exhausted the number of potential investors available in a given community. FF 46. Thus, promised profits from the sale of distributorships did not occur due to exhaustion of the number of people willing to invest. FF 48. The record reveals many misrepresentations by Glenn W. Turner and the people he controlled. Koscot misrepresented the amount of money that could be made from the sale of distributorships and the number of distributorships that could be sold per year. FF 54, 55. The ease of recruiting beauty advisers and the market for cosmetics were misrepresented. FF 57, 58. Although Koscot represented that a distributor's annual product sales ranged from $50,000.00 to over $200,000.00, the national distributor averages were $1,125.00 in 1970, $1,733.00 in 1971, and $938.00 in 1972. FF 61. Glenn W. Turner rejected the suggestion that Koscot literature be revised to reflect actual retail sales experience of Koscot distributors as appeared on the Koscot books, and not the deceptive claims of huge retail sales. FF 64. Koscot misrepresented its status in the marketplace. Koscot claimed to have sold $67,000.00 in retail cosmetics during its first month of operation and to have grown to sales in excess of $4,000,000.00 per month nineteen months after Koscot began operation. FF 66. In fact, no products were sold for many months after Koscot began operations, and Koscot retained considerably less than one percent of the cosmetic market throughout its history. FF 67. High pressure sales meetings following preconceived scripts created an emotionally charged atmosphere in which Koscot convinced investors that they would succeed if they purchased distributorships. FF 68. Success stories were fabricated or exaggerated, and large bills and checks were displayed to bolster the credibility of the success stories. FF 69.

Koscot misrepresented product availability. In fact neither Koscot nor any of its distributors had any product available for immediate sale for more than a year after Koscot was organized. FF 78. Turner selected officials on the basis of their ability to sell distributorships rather than to manage cosmetic sales. Product shortages were the predictable consequence of his selection of unqualified personnel. FF 81. Products sales were always subordinate to recruitment, and Koscot was primarily in the business of selling distributorships. FF 83, 84. The misrepresentations as to the availability of product, extent of advertising, training offered, and likelihood of success were knowing misrepresentations. FF 87. Glenn W. Turner falsely represented that anyone could achieve success in selling cosmetics, and distributorships were, therefore, sold to unqualified people. FF 99, 101,

106, 107, 109. Although Koscot promised to spend millions of dollars in advertising within two years to create consumer demand, Glenn Turner disapproved advertising expenditures for product recognition. FF 112, 115. Turner was the alter ego of his corporations, and the "architect and prime mover" of Koscot's marketing scheme. FF 132. Turner knew that the Koscot wholesale operations was based on deception and fraud. FF 133, 134. Koscot's representation that any individual can recoup his or her investment by means of inducing others to invest is an "inevitably deceptive representation," and the Koscot plan has resulted in actual deception and consumer injury. Opinion of the Commission at 6.

Conclusion

The terms "dishonest" and "fraudulent" as used in Section 57b(a)(2) are not defined therein. The obvious purpose, however, of the section in which the criteria are found is to afford protection against deceptive practices which are not necessarily criminal. The legislative history indicates:

It is not intended that the court in applying the statutory standard must find that a reasonable man under the circumstances would have considered such act or practice to be criminal.

S. Conf. Rep. No. 93-1408, 93d Cong., 2d Sess. (1974), reprinted in (1974) U.S. Code Cong. & Ad. News 7755, 7773. Acts which are fraudulent or dishonest for purposes of consumer redress should fall at least within the scope of the activities which would be deemed fraudulent for purposes of the mail fraud statute. 18 U.S.C. § 1341. Acts within the purview of that statute need only be reasonably calculated to deceive persons of ordinary prudence and comprehension. See Blachly v. United States, 380 F.2d 665 (5th Cir. 1967).

The findings of fact adopted by the Federal Trade Commission demonstrate that the conduct which was the subject of the cease and desist order was conduct which a reasonable man would have known under the circumstances was reasonably calculated to deceive persons of ordinary prudence and comprehension. This follows from the nature of the representations, their frequency, purpose and effect as found by the Commission. This court, therefore, concludes that no genuine issue of fact exists with respect to the liability of the defendant to redress injuries to consumers resulting from the unfair and deceptive acts and practices which were the subject of the cease and desist order. The motion for summary judgment will, therefore, be granted to that extent. There obviously exist issues of fact and law with respect to the amount and type of redress appropriate under the circumstances. Those, however, are the only issues remaining for adjudication.

CIVIL PENALTY CASES

RESPONDENTS-FTC ORDERS 1982

United States v. National Dynamics Corp. and Elliott Meyer-United States District Court for the Southern District of New York; consent decree in the amount of $100,000 for civil penalties was entered January 7, 1982, for alleged violations of a consent order and a litigated consent order, both of which prohibit certain practices in the advertising and selling of battery additives. (Dockets 7305 and 8803, 56 F.T.C. 21 and 82 F.T.C. 488, as modified by 85 F.T.C. 391).

United States v. Foremost-McKesson, Inc.-United States District Court for the Northern District of California; consent judgment in the amount of $175,000 for civil penalties was entered on February 5, 1982, for alleged violations of an FTC order prohibiting certain acquisitions without prior Commission approval. (In the Matter of Foremost Dairies, Inc., Docket C-1161, 71 F.T.C. 56).

United States v. Phelps Dodge Industries, Inc.-United States District Court for the Southern District of New York; consent judgment in the amount of $100,000 for civil penalties and injunction entered on February 9, 1982, against one of the defendants, the Anaconda Co., for alleged violations of an FTC order prohibiting certain companies from fixing the price of impregnated paper cable. (In the Matter of National Electrical Manufacturers Association et al., Docket 2565, 24 F.T.C. 306).

United States v. Talent, Inc. and Theodore Rosen-United States District Court for the District of Massachusetts; consent decree with no civil penalties, but containing an injunction, was entered April 11, 1982, for alleged violations of a consent order prohibiting certain practices in the advertising and selling of talent promotion schemes. (Docket C-2512, 83 F.T.C. 1528).

United States v. Van Schaack & Company-United States District Court for the District of Colorado; consent decree in the amount of $30,000 for civil penalties, and an injunction were entered May 11, 1982, for alleged violations of a consent order prohibiting certain practices in the offering of consumer credit. (Docket 2769, 86 F.T.C. 1526).

United States v. CPC International, Inc.-United States District Court for the Northern District of California; consent decree entered on June 7, 1982, against defendants CPC International, Inc., A.E. Staley Manufacturing Company, Standard Brands, Inc., American Maize-Products Com

pany, Anheuser-Busch, Inc., and The Hubinger Company, for alleged violations of an FTC order prohibiting certain companies from fixing the price of corn derivatives. (In the Matter of Corn Products Refining Co., et al., Docket 5502, 47 F.T.C. 587).

United States v. R.J. Reynolds Tobacco Co., Inc.-United States District Court for the Southern District of New York; consent decrees in the amount of $100,000 for civil penalties and an injunction were entered June 10, 1982 and December 3, 1981, for alleged violations of a consent order prohibiting defendant from failing to disclose the Surgeon General's health warning clearly and conspicuously in cigarette advertising. (Docket C-2184, 80 F.T.C. 455).

United States v. Gulf Coast Builders Exchange, Inc.—United States District Court for the Middle District of Florida; consent judgment in the amount of $30,000 for civil penalties entered on July 16, 1982, for violations of an order prohibiting boycott activities in connection with operation of a bid depository in the commercial construction industry. Docket C-2888, 89 F.T.C. 505).

United States v. Standard Educators, Inc. and James A. Melley, Sr.United States District Court for the District of Connecticut; consent decree in the amount of $25,000 for civil penalties and an injunction were entered October 5, 1982, for alleged violations of a litigated cease and desist order prohibiting certain marketing practices in the selling of encyclopedias. (Docket 8807, 79 F.T.C. 858).

SPECIAL REPORTS 1982

United States v. Nanlo, Inc.-United States Court of Appeals, First Circuit; consent judgment in the amount of $6,330 was entered March 22, 1982, for failure to file a special report in connection with the Quarterly Financial Reporting Program.

United States v. Erie Coco-Cola Bottling Co.-United States District Court for the Eastern District of Pennsylvania; consent judgment in the amount of $3,000 was entered May 26, 1982, for failure to file a special report in connection with the Quarterly Financial Reporting Program.

United States v. Elgin Grain Co. -United States District Court for the Northern District of Ohio; consent judgment in the amount of $3,000 was entered June 2, 1982, for failure to file a special report in connection with the Quarterly Financial Reporting Program.

United States v. Packer Plastics, Inc.-United States District Court for the District of Kansas; consent judgment in the amount of $6,000 was entered June 7, 1982, for failure to file a special report in connection with the Quarterly Financial Reporting Program.

United States v. Ritchie Rubber & Plastic Co.-United States District Court for the Northern District of West Virginia; consent judgment in the amount of $5,000 was entered June 7, 1982, for failure to file a special report in connection with the Quarterly Financial Reporting Program.

United States v. Quinn Concrete Co., Inc.-United States District Court for the Western District of Missouri; consent judgment in the amount of $4,000 was entered June 23, 1982, for failure to file a special report in connection with the Quarterly Financial Reporting Program.

United States v. Altex Ready Mixed Concrete Corp.-United States District Court for the Middle District of Louisiana; consent judgment in the amount of $8,780 was entered June 30, 1982, for failure to file a special report in connection with the Quarterly Financial Reporting Program.

United States v. San Lorenzo Lumber Co.-United States District Court for the Northern District of California; consent judgment in the amount of $3,500 was entered June 30, 1982, for failure to file a special report in connection with the Quarterly Financial Reporting Program.

United States v. Missouri Distributing Co.-United States District Court for the Western District of Missouri; consent judgment in the amount of $10,419 was entered August 1, 1982, for failure to file a special report in connection with the Quarterly Financial Reporting Program.

United States v. Jandy Textiles Corp.-United States District Court for the Southern District of New York; consent judgment in the amount of $1,000 was entered September 14, 1982, for failure to file a special report in connection with the Quarterly Financial Reporting Program.

United States v. Hattiesburg Coca-Cola Bottling Co.-United States District Court for the District of Mississippi; consent judgment in the amount of $2,300 was entered September 30, 1982, for failure to file a special report in connection with the Quarterly Financial Reporting Program.

United States v. Alexander Laufer & Sons, Inc.-United States District Court for the Southern District of New York; consent judgment in the amount of $5,000 was entered on October 15, 1982, for failure to file a special report in connection with the Quarterly Financial Reporting Program.