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Posted February 27, 2009

$4 Million Settlement by Supplement Maker for False Claims

On February 26, 2009, the Texas Attorney General announced that an agreement was reached with Mannatech Inc. and its former CEO, Samuel L. Caster, both of which had been charged 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. Caster, the company’s founder and largest shareholder, will pay a $1 million civil penalty and is prevented from serving as an officer, director, or employee of Mannatech for the next five years.

According to the state’s enforcement action, 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. 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. 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.

Under the agreed final judgment, Mannatech agreed not to advertise or otherwise claim that its dietary supplements can cure, treat, mitigate, or prevent disease. The company also agreed to implement a comprehensive monitoring and compliance program that will monitor sales associates’ statements about Mannatech’s products in the future.

“Texans will not tolerate illegal marketing schemes that prey upon the sick and unsuspecting,” Attorney General Abbott said. “These deceptive practices posed a health risk to seriously ill consumers who may forgo traditional medical attention because of the company’s false claims. Today’s agreements put an end to Mannatech’s deceptive marketing practices in Texas.”

Mannatech is a self-described “global wellness solutions provider” that manufactures and markets food supplements. Citing its research in the field of glycoscience, Mannatech claimed that its products’ main ingredients, glyconutrients, enhanced the human body’s cell-to-cell communication and therefore cured, treated, mitigated, or prevented diseases. Glycoscience is the academic study of sugars, their structure and how they function.

The state’s enforcement action also cited Mannatech for encouraging product “testimonials” that exaggerated its products’ healing effects. According to state investigators, Mannatech’s independent sales associates employed misleading “before and after” photos in seminar booths, brochures, videos, sales associates’ personal Web sites and training materials.