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The Federal Trade Commission has sued an operation selling green coffee bean extract as a dietary supplement for weight loss, alleging it made false and deceptive claims and used fake new sites and phony consumer endorsements to sell the product.
Named in the complaint are NPB Advertising, Inc., which also does business as Pure Green Coffee; Nationwide Ventures, LLC; Olympus Advertising, Inc.; JMD Advertising, Inc; Signature Group, LLC; Nicholas Scott Congleton; and Paul Daniel Pascual.
According to the FTC complaint, green coffee bean extract for weight loss began to become popularized after it was called “the magic weight loss cure for every body type” on a syndicated television show. A discussion on the show referenced a study that purportedly supported the claim, but no specific brand of green coffee extract was recommended.
Fortune Hi-Tech Marketing and additional defendants, settling claims by the Federal Trade Commission and three states that it operated an illegal pyramid scheme, have agreed to be banned from multilevel marketing and surrender at least $7.75 million in assets.
The surrendered assets will be used to compensate consumers enrolled in pyramid scheme. The original complaint, filed by the FTC and the states of Kentucky, Illinois and North Carolina, alleged that in addition to operating an illegal pyramid scheme and making false earnings claims, Fortune Hi-Tech Marketing provided consumers with false and misleading materials for recruiting new participants.
The FTC has approved the final consent order settling charges that L’Occitane, Inc. deceptively claimed that two of skin creams have body slimming capabilities and are clinically proven. The settlement requires L’Occitane to pay $450,000 for consumer redress, as well as prohibiting it from making future false and deceptive weight-loss claims.
The two products are Almond Shaping Delight, which sold for $48 for 7 ounces, and of Almond Beautiful Shape, which cost $44 for 6.7 ounces. L’Occitane claimed that the skin creams would slim users’ bodies, even though they had no scientific evidence to support the claim.
At the request of the Securities and Exchange Commission, a federal court in Los Angeles has frozen the assets of a group of businesses that the SEC alleges to be operating a pyramid scheme masquerading as a multilevel marketing organization. The companies are based in California and Hong Kong and controlled by “Phil” Ming Xu, a California resident.
According to the SEC, businesses operating under the names WCM and WCM777 posed as multilevel marketing companies selling third-party cloud computing services. The SEC complaint alleges that they raised more than $65 million by falsely promising returns on investment of 100 percent or more in 100 days.
The Direct Selling Association’s recent Code Responsibility teleconference featured a presentation on deceptive representations in earnings claims by FTC attorney Janice Kopec.
An earnings claim is a statement made by a company or its representative about the income an individual can earn from a business opportunity. The FTC requires any earning claims be presented in writing; any claims not supported by written documents are illegal. According to Ms. Kopec, the Earning Claims Statement must include:
- The name of the person making the claim and the date
- The specifics of the claim
- The start and end date those earnings were achieved
- The number and percentage of your buyers who got at least that result
- Any information about the buyers who got those results that might vary from prospective buyers – for example, where they’re located
- A statement that prospective buyers can get written proof for your earnings claims if they ask for it
Kopec talked about how the FTC examines earnings claims to determine whether they comply with the rule. Aside from the basic criteria – whether a claim is material, whether the proper disclosure statements are provided, etc. - the FTC looks at how the typical consumer will perceive the claims.
A federal judge has sentence Kevin Trudeau to 10 years in prison after his November conviction by a jury for criminal contempt of court by violating a 2004 stipulated order to pay a $37.6 million fine for misrepresenting in infomercials the content of his book, “The Weight Loss Cure They Don’t Want You to Know About.”
Federal prosecutors in a filing had asked that Trudeau be sentenced to at least 10 years in prison for repeatedly defying court orders to pay the fine, claiming to lack assets while allegedly living a lavish lifestyle. According to prosecutors, between 2010 and 2013, Trudeau spent at least $12 million on such things as first-class airfare, a single pair of cufflinks costing $12,000 and two residences that together cost more than $15,000 per month.
In his sentencing of Trudeau, U.S. District Judge Ronald Guzman agreed, saying, “He has treated federal court orders as if they were mere suggestions,” adding that, at most, Trudeau considered them “impediments to be sidestepped, outmaneuvered or just ignored.”
The FTC has won a $2.2 million judgment against Wellness Support Network, Inc. as the U.S. District Court for the Northern District of California found that WSN’s marketing of dietary supplements to treat and prevent diabetes violated Section 5 of the FTC Act. The FTC said that any money recovered will be used to reimburse consumers.
The court also prohibited WSN and its two principals from claiming that their supplements would treat and prevent diabetes without rigorous proof to support the claims, as well as from making other deceptive claims.
One of the first Federal Trade Commission actions brought under the updated Business Opportunity Rule has led to a settlement that permanently bans the operators of Smart Tools LLC, Kristin Hegg and Curtis Dawn, from deceptive sales practices. The settlement order imposes a $7.4 million judgment that will be suspended when $234,847 has been paid. The full judgment will be due immediately if they are found to have misrepresented their financial condition.
The FTC charged Smart Tools LLC, Hegg and Dawn, with deceptively selling a work-at-home business opportunity that promised buyers earnings up to $38,943 per year as “Government Insurance Refund Processors.” As processors, the buyers of the program would find people eligible for refunds of their mortgage loan insurance premiums and charge a fee for telling them how to get the refunds.
U.S. Marshals in Norcross GA, acting at the request of the FDA, seized $2 million in dietary supplements from Hi-Tech Pharmaceuticals, Inc. According to the FDA, the products contained 1, 3-Dimethylamylamine HCl (DMAA) or its chemical equivalent.
Kevin Trudeau, who in 2010 was ordered by a federal judge to pay more than $37 million for violating a 2004 stipulated order by misrepresenting in infomercials the content of his book, “The Weight Loss Cure They Don’t Want You to Know About,” was found guilty of criminal contempt for violating that order. The jury took less than an hour to reach its verdict, which was read in a Chicago courtroom Nov. 12.
Prosecutors argued Trudeau knowingly violated the order when he used infomercials to tout the book’s plan that would “cure” obesity without requiring a special diet or needing to exercise, even though the book called for limiting calories to 500 a day and required walking an hour a day.
The defense argued that there was no violation, since the statements made in the infomercials were presented as opinions, and thus were protected speech under the First Amendment. In addition, because nothing was said in the infomercials that did not appear in the book, the defense maintained that a Trudeau was not misrepresenting the content of the book.