Texas Attorney General Sues Nutraceutical Firm

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AG sues Coppell firm over claims

Mannatech accused of exaggerating benefits of its health supplements

 

12:00 AM CDT on Friday, July 6, 2007

By JASON ROBERSON / The Dallas Morning News

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Texas Attorney General Greg Abbott on Thursday accused Coppell-based Mannatech

Inc., its chairman and chief executive, Samuel L. Caster, and other related

defendants of operating an illegal marketing scheme. The civil allegations,

which carry penalties of at least $20,000 per violation, followed a large-scale

investigation by state authorities into Mannatech's claims about the health

benefits of its products. Investigators said Mannatech exaggerated claims

about the therapeutic benefits of its dietary supplements and nutritional

products for people with cancer, Down syndrome, cystic fibrosis and other

serious illnesses in order to increase sales. Documents filed in Travis County

District Court allege Mannatech's " deceptive practices " pose a health risk to

seriously ill consumers who may forgo medical attention because of the company's

claims. In a prepared statement, Mannatech said it had not received or

reviewed a copy of the complaint. However, the 57-page

complaint is displayed in the news release section on the attorney general's

Web site: www.oag.state.tx.us. " Mannatech always advises consumers that the

company's products do not treat or cure disease and should be used to supplement

a proper diet and to complement standard of care therapy, " Mannatech spokeswoman

Erin Martelli Groover said in the statement. Mannatech, a self-described

" global wellness solutions provider, " says it has scientific validation from the

field of glycoscience, the study of sugars. Mannatech says its products' main

ingredients – glyconutrients – enhance the body's cell-to-cell communication,

improving overall health. The attorney general said the lawsuit against

Mannatech accuses its sales staff of using brochures, videotapes and

personalized Web sites that exaggerate their supplements' effectiveness. Those

marketing tools carried misleading " before and after " photos and testimonials

from other customers, and substitute the name of its

products with the term " glyconutrients, " the lawsuit said. Only drugs approved

by the U.S. Food and Drug Administration can be marketed in that fashion, the

attorney general's office said. Among the testimonials Mannatech's sales force

used was one from a man said to have non-Hodgkin's B-cell lymphoma – a cancerous

growth in the body's disease-defending system, or lymph system. The oncologist

was reported to have told him the cancer had spread to eight places in his body

and could not be cured; treatment would only give him a limited number of years.

A friend told him of Mannatech's products, referred to as " glyconutritionals. "

After five months, his lab work starting looking better, according to the

testimonial recorded by the attorney general's office; in June, his doctor told

him that maybe he didn't have lymphoma after all. The defendants are accused

of violating the Texas Deceptive Trade Practices Act, which carries civil

penalties of $20,000 per violation.

Mannatech also is accused of violating the Texas Food, Drug and Cosmetic Act,

under which defendants can face penalties of up to $25,000 per day, per

violation. For its first quarter, ending March 31, Mannatech reported a net

income of $6.9 million, or 26 cents per share. That was up 16 percent from the

$5.8 million, or 22 cents per share, reported for the same period a year

earlier. Despite Mannatech's growth – last year's sales of $410 million were

up 39 percent from 2004, and its profits of $32 million were 66 percent higher

than those in 2004 – not all shareholders are happy. The company's annual report

on March 16 listed six pending shareholder lawsuits. One accused the company

of violating U.S. securities law by " artificially inflating the value of our

common stock by knowingly allowing independent contractors to recklessly

misrepresent the efficacy of our products, " according to a Securities and

Exchange Commission filing by the company. Shares of Mannatech

closed Thursday at $16, up 10 cents. Its 52-week range is $11.47 to $19.89.

Mannatech sells its nutritional supplements in 10 countries, including the U.S.,

through more than 500,000 independent sales distributors.

 

 

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