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FEDERAL RESERVE BANK OF DALLAS F IS C A L A G E N T O F T H E U N IT E D S T A T E S Dallas, Texas, M arch 15, 1962 REAPPEARANCE OF CHAIN LETTERS INVOLVING UNITED STATES SAVINGS BONDS To All Issuing Agents an d Others Concerned in the Eleventh Federal Reserve District: There is some indication th at there is renewed activity involving the use of savings bonds in connection with chain letter schemes. The following statem ent regarding this m atter has been issued by the Treasury D epartm ent and is furnished for your information: “The T reasury D epartm ent is aware th at despite its efforts, in association with the Post Office D epartm ent, the Federal Reserve Banks, issuing agents, and others, to stop chain letter activities involving the use of United States Savings Bonds, these schemes continue to reappear and m ay be expected to reappear from tim e to time. The Treasury wishes to reiterate its opposition to such schemes. “The bases for the Treasury’s firm and continuing opposition to the chain letter have been declared on numerous occasions, but it m ay be advisable to restate them here so as to avoid any pos sible doubt. “Chain letter schemes, including those involving U nited States Savings Bonds, which use the mails to facilitate their purpose, are considered by the Post Office D epartm ent as violative of the Postal lottery and fraud laws (18 U.S.C. 1302, 1341). Such schemes are deemed to be lotteries because the question as to whether the chain will be broken is a m atter of chance. So, also, is it a m atter of chance whether a participant will reap anything from his participation in these schemes. A savings bond purchased in connection with such schemes is deemed, under postal laws, to represent a share, or interest in or dependent upon the event of the lottery, and is, therefore, non-mailable. “The fraud aspect enters into these schemes because representations are m ade th at the partici pants will eventually receive substantial rewards. In the usual case, however, the chain of gullible persons soon vanishes, and there is no way by which a new participant can determ ine whether there is available a reservoir of interested persons sufficient to move his name to the top of the ‘list*. “Although participants in chain letter schemes have sometimes reported th at the ‘lists* used in these schemes are exchanged only by hand, it seems highly probable th at since the num ber of indi viduals in a given locality interested in participating in a scheme is soon exhausted, the use of the mails will eventually be m ade to keep the scheme alive. The Post Office authorities have w arned that even though the lists of participants are not circulated in the mails, this d o es not alter the illegality of the operation since usually the bonds or other evidence of participation in the schem e are mailed. Investigations are being m ade of these schemes as they come to the attention of postal officials, and whenever there appears to be a violation of the fraud and lottery statutes, the m atter will be referred to the D epartm ent of Justice for possible prosecution. “In addition to the fact th at these chain letter schemes violate Federal law, the Treasury D epart m ent believes th a t the public should be made aware th at these schemes, which are essentially get-richquick endeavors, do a distinct disservice to the savings bond program. R ather than encouraging persons to make genuine investments, they create the illusion th at participants are both aiding their Govern m ent and themselves. Even in those rare cases where an individual receives a large return, it is likely th at he would quickly redeem the bonds, thereby placing a further burden on the Treasury. “F or the foregoing reasons, the Treasury, as early as February 1955, asked the Federal Reserve Banks to advise all issuing agents th at the D epartm ent had authorized and requested them to reject applications for purchases of savings bonds where the applicant states, or where the agent has reason to believe, th at the applications are made in connection with a chain letter scheme. This request was m ade under authority reserved to the Secretary of the Treasury perm itting him to authorize the rejection of any application for purchase of Series E bonds, in whole or in part, where he deems such action to be in the public interest. The Treasury’s position in this regard rem ains unchanged.” Additional copies of this circular will be furnished upon request. Yours very truly, W atrous H. Irons President This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
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