Dietary supp execs incarcerated for civil contempt

Dietary supp execs incarcerated for civil contempt

After 10 years of litigation over misleading claims made by dietary supplement manufacturer Hi-Tech Pharmaceuticals, two of its executives were recently ordered to jail for contempt.  Jared Wheat and Stephen Smith surrendered to federal marshals on September 5, per the court's September 2 order, and are presumably cooling their heels as guests of the U.S. government until they can bring themselves into compliance with the court's previous orders.

The whole sordid saga is an excellent case study demonstrating why the current laissez-faire regulation of dietary supplements is inadequate to protect consumers.

In 2004, the Federal Trade Commission filed suit against Hi-Tech, Wheat and Smith (among others) for marketing dietary supplements with unsubstantiated claims.  It was not until 2008 that the court issued a permanent injunction against the defendants, ordering them to quit making these claims unless they were backed by "competent and reliable scientific evidence." According to the FTC, the court held Hi-Tech, Wheat and Smith, as well as other parties 

liable for more than $15.8 million in deceptive sales of Thermalean, Lipodrene, and Spontane-ES. Thermalean and Lipodrene are purported weight loss treatments. According to the defendants’ advertisements, they were clinically proven to cause substantial weight loss, including a 19 percent loss in total body weight. Spontane-ES is a purported treatment for erectile dysfunction. According to the defendants’ advertisements, it was clinically proven to safely and effectively treat 90 percent of men with erectile dysfunction. The court permanently barred the defendants (except now-dissolved National Institute for Clinical Weight Loss) from engaging in deceptive conduct in the future and also ordered Terrill Mark Wright, M.D., to pay $15,454 for his deceptive endorsement of Thermalean.

Note the pharmaceutical-sounding names and the phony "Institute." 

Apparently undeterred, Wheat, Smith and Hi-Tech continued to make claims for their weight-loss supplements without that essential ingredient -- competent and reliable scientific evidence. To be fair, Wheat and Smith may have been distracted by the fact that they were incarcerated after pleading guilty to criminal charges of selling knockoff prescription drugs over the internet. 

In a plea bargain, the defendants admitted to operating a manufacturing facility in Belize that made generic versions of such pharmaceuticals as Xanax, Valium, Ambien, Vioxx, Zoloft, Viagra and Cialis and selling them over the Internet without requiring prescriptions. 

So, in 2011, the FTC went back to court and asked the judge to hold the defendants in contempt. The wheels of justice grind slowly.  In August 2013, the court found the defendants in contempt for violating the 2008 order and earlier this year issued a final order with a $40 million judgment.  The court also ordered that their weight-loss dietary supplements be recalled from all retailers and laid out specific instructions for doing so.  

Forty million dollars apparently didn't get their attention. Neither the FTC nor the judge were amused and it is thus that Wheat and Smith are in jail for civil contempt.  And there they will stay until they comply with the court's most recent order.  

 Under the Court’s ruling, they will be incarcerated until they provide evidence that four conditions have been met:

  1. No more violative products are available for purchase at retail stores;
  2. A recall notice, identifying what is being recalled and including details about the return procedure, is in use.
  3. The recall notice has been distributed (via letter or e-mail) to all relevant parties.
  4. The recall notice is prominently displayed on each page of the company’s website.  (The order details the manner of display).

I imagine it is difficult to work on your website from jail, but someone at Hi-Tech got the message.  The company has complied by disabling all the links to other pages on the site so that only the home page and a link to the recall information are available.  Perhaps they are attempting to avoid the embarrassing prospect of having the notice of recall appear on each and every page.  That would be a real marketing bummer.  I don't know how efforts to satisfy the rest of the court's requirements, if any, are going, but I imagine the FTC is on the case. 

Wouldn't it seem reasonable to require a manufacturer to demonstrate, by "competent and reliable scientific evidence," that a dietary supplement is safe and effective prior to marketing it?  And perhaps find some way to keep bad actors like Wheat and Smith out of the dietary supplement industry? Of course it would.  But  even the most reasonable attempts to regulate supplements seem to go nowhere in Congress. 

 

 

 

 

 

Points of Interest 9/14/2014
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