TEXAS AG SETTLES WITH MLM - NETWORK MARKETING COMPANY MANNATECH
Mannatech Company and Sam Caster accused of falsely claiming dietary supplements treated, prevented diseases
27 Feb 2009 - The Texas Attorney General Greg Abbott today reached an agreement that resolves the state’s enforcement actions against Coppell (Dallas) Texas based Mannatech Inc. and its former CEO, Samuel L. Caster.
Back In 2007, the state of Texas charged both defendants with orchestrating an unlawful marketing scheme that exaggerated their products’ health benefits. Under the settlement, Mannatech will pay $4 million in restitution to Texas customers. The State of Texas will get $2 million for it’s investigation costs.
Sam Caster, the company’s founder and largest shareholder, will pay a $1 million civil penalty out of his pocket and is prevented from serving as an officer, director, or employee of Mannatech for the next five years.
According to the state’s enforcement acton, Mannatech, under the direction of Caster and through its multi-level marketing network, exaggerated claims about the therapeutic benefits of its dietary supplements and nutritional products in order to increase sales.
WatchDog Editorial Opinion Note: The nutty thing is that Sam Caster came back to Texas after tangling with the Texas AG over his Eagle Shield Company, then his Funds for Kids was clobbered by Kansas, then the failed “custom nutritionals by survey” ran in his sisters name had to generate complaints with his name since he was the one pitching the company. Your editor was surprised that Mannatech didn’t get smacked sooner!
The AG said, "Marketing materials falsely claimed that Mannatech’s dietary supplements could cure and treat Down Syndrome, cystic fibrosis, cancer and other serious illnesses. Under state and federal law, drug manufacturers cannot claim their products cure, treat, mitigate or prevent illness unless the product has been approved by the U.S. Food and Drug Administration as a drug."
The Texas Attorney General Press Release went on to say, “Mannatech’s products are supplements – not drugs – and they have not been approved as drugs by the federal regulatory agency.”
The state’s enforcement action against Mannatech and Caster involves a referral from the Texas Department of State Health Services for violations of the Texas Food, Drug, and Cosmetic Act. Ed. Note: These same Texas Health Services also brought down monster growth Alliance USA... years ago for spiking their weight loss product with ephedrine hydrochloride.... boosting the performance of the natural ephedra in the Formula One weight loss formula.
Web traffic to Mannatech.com is down about 27% below a year ago. Mannatech's stock shares went from about $25 before the 2007 AG hit..... and have slid down to around the $3 range. Check below Mannatech, Inc. (Public, NASDAQ:MTEX)
ORIGINAL LAWSUIT BY STATE OF TEXAS
Thursday, July 5, 2007 - Texas Attorney General Charges Mannatech With Unlawful, Misleading Sales Practices
Illegal scheme markets supplements as cure for cancer, improved health
DALLAS – Texas Attorney General Greg Abbott today charged Coppell-based Mannatech, Inc., its owner, Samuel L. Caster, and several related entities with operating an illegal marketing scheme in violation of state law. Today’s enforcement action stems from a large-scale investigation by state authorities, who examined Mannatech’s dubious claims about the health benefits of its products.
Documents filed in Travis County district court reveal Mannatech’s scheme to exploit families, including those challenged by cancer, Down’s syndrome, cystic fibrosis and other serious illnesses. According to investigators, exaggerated claims about the therapeutic benefits of Mannatech’s dietary supplements and nutritional products were unlawfully used to increase sales. The attorney general’s enforcement action asserts that Mannatech’s deceptive practices pose a health risk to seriously-ill consumers who may forgo traditional medical attention because of the company’s false claims.
Plaintiff's Original Petition In This Civil Lawsuit
“Texans will not tolerate illegal marketing schemes that prey upon the sick and unsuspecting,” Attorney General Abbott said. “Aided by an army of multi-level sellers and their fictitious claims about its products, Mannatech has aggressively marketed supplements to countless unwitting purchasers. With today’s enforcement action, the Office of the Attorney General seeks to shut down an elaborate scheme to defraud innocent consumers across the nation.”
Mannatech, a self-described “global wellness solutions provider,” claims scientific validation from the field of glycoscience, which is the legitimate study of sugars, their structure and how they function. Through its multi-level marketing network, Mannatech claims that its proprietary products’ main ingredients, glyconutrients, enhance the body’s cell-to-cell communication and improve overall health.
The Texas AG lawsuit charges Mannatech with encouraging their salespersons’ false statements by allowing sellers to continue utilizing various sales tools, brochures, videotapes and personalized Web sites that exaggerate the supplements’ effectiveness. According to investigators, the defendants encourage product user “testimonials” that tout their supplements’ alleged healing effects. These exaggerated testimonials, along with misleading “before and after” photos, are displayed prominently in seminar booths, brochures, videos, sales associates’ personal Web sites and training materials. Together, these marketing techniques mislead consumers into believing that the supplements dramatically cure or treat serious illnesses.
In fact, the company’s health claims are not supported by legitimate scientific studies, nor are its products approved as drugs by the U.S. Food and Drug Administration.
The defendants are accused of violating the Texas Deceptive Trade Practices Act, which can result in civil penalties of $20,000 per violation. In addition to DTPA violations, the attorney general, along with the Texas Department of State Health Services, also charges Mannatech with violating the Texas Food, Drug, and Cosmetic Act. Under the Act, the defendants face penalties of up to $25,000 per day, per violation.
Mannatech Inc. sells its nutritional supplements in 10 countries, including the U.S., through more than 500,000 independent sales distributors worldwide. It is traded on the NASDAQ stock exchange under the symbol, “MTEX.”
Consumers who encounter a business that is making false claims may file a complaint with the Attorney General’s Consumer Protection Division at (800) 252-8011 or online at www.oag.state.tx.us.
