Dietary Supplement Executive Sentenced in Alleged Fraud Scheme

On February 19, 2021, the U.S. Department of Justice announced that a federal court in Texas sentenced a former dietary supplement company executive to prison for his role in fraudulently selling popular workout supplements.

A U.S. District Judge sentenced the former corporate vice president to 41 months’ imprisonment and one year of supervised release.  The court previously ordered the individual’s former company to forfeit $6 million in connection with the case.

According to documents filed in the case, the individual played a key role in developing and manufacturing the popular workout and weight loss supplements, which were distributed by a Dallas-based entity.  In pleading guilty in 2019 to conspiracy to introduce misbranded food into interstate commerce, the individual and several of his co-defendants admitted that they imported substances with false and misleading labeling to avoid law enforcement and regulatory agency attention.  The individual also pleaded guilty to introduction of misbranded food into interstate commerce.

The misbranding charges relate in part to the one of the supplements, which was recalled in 2013 in the wake of an investigation by the U.S. Food and Drug Administration into whether the supplement caused liver injuries in consumers.  An indictment returned by a Dallas federal grand jury in 2015 against the individual and four other individuals associated with the distributor alleged that the defendants sold some of their products without determining whether they would be safe to use.

“Consumers should not have to question whether the dietary supplements they find on store shelves will cause them physical harm,” said Acting Assistant Attorney General Brian Boynton of the Department of Justice’s Civil Division.  “This case demonstrates the department’s commitment to working with our agency partners to prosecute individuals and companies that defraud the public and place consumers at risk.”

“Dietary supplement manufacturers must not be allowed to mislead the public about untested ingredients mixed into their products,” said Acting U.S. Attorney Prerak Shah for the Northern District of Texas.  “We are proud to hold this defendant accountable for lying to the public about ingredients that had the potential to cause them harm.”

“FDA regulation of the manufacturing and distribution of dietary supplements helps ensure the safety of American consumers. Illegal schemes to subvert FDA’s oversight and trick the public into buying a product that does not meet FDA standards create a serious threat to public health,” said Judy McMeekin, Pharm.D., FDA’s Associate Commissioner for Regulatory Affairs.  “We will continue to work with our law enforcement partners to investigate and bring to justice those who put profits ahead of the health of U.S. consumers.”

“The defendant knowingly profited by deceiving American consumers, causing harm to them by concealing the true ingredients of a product intended to improve the very health it damaged,” said Acting Special Agent in Charge Mark Pearson of the IRS-Criminal Investigation, Dallas Field Office.  “Working to prosecute those people and institutions who endanger consumers is something the IRS-CI is dedicated to continuing to pursue with our partners in law enforcement.”

The court previously sentenced the CEO of the distributor to 60 months’ imprisonment, and the distributor’s president to 24 months’ imprisonment for their alleged roles in the fraud.  The court also sentenced a former consultant for the distributor and a co-owner of the company to 18 months’ and 15 months’ imprisonment, respectively.  In addition, the distributor was ordered to pay $4.7 million in criminal forfeiture.

The case was investigated by the FDA’s Office of Criminal Investigations and the IRS-Criminal Investigation.  The case was prosecuted by trial attorneys with the Consumer Protection Branch of the Department of Justice’s Civil Division, and Assistant U.S. Attorneys of the U.S. Attorney’s Office for the Northern District of Texas.

Federal Trade Commission (FTC) lawyers and the Food and Drug Administration work together under a long-standing liaison agreement governing the division of responsibilities between the two agencies.  As applied to dietary supplements, the FDA has primary responsibility for claims on product labeling, including packaging, inserts, and other promotional materials distributed at the point of sale.  FTC lawyers have primary responsibility for claims in advertising, including print and broadcast ads, infomercials, catalogs, and similar direct marketing materials.  Because of their shared jurisdiction, the two agencies work closely to ensure that their enforcement efforts are consistent to the fullest extent feasible.

Richard B. Newman is an FTC defense attorney at Hinch Newman LLP.

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Richard B. Newman

Richard B. Newman is a nationally recognized FTC advertising compliance, CID investigation and regulatory enforcemetn attorney. He regularly provides advertising counsel and represents clients in high-profile investigations and enforcement proceedings initiated by the Federal Trade Commission, state attorneys general, departments of consumer affairs, and other federal and state agencies with jurisdiction over advertising and marketing practices. Richard is also an ecommerce lawyer and spam defense attorney. His practice additionally focuses upon false advertising defense, data privacy, cybersquatting, intellectual property law and transactional matters relating to the dissemination of national advertising campaigns, including the gamut of affiliate marketing, telemarketing, lead generation, list management and licensing agreements. Richard advises clients on how to minimize the legal risks associated with digital marketing, email marketing, telemarketing, social media influencer campaigns, endorsements and testimonials, negative option marketing models, native advertising, online promotions and comparative advertising,

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