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Mannatech Company, Founder, Settle False Marketing Claims

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Nice summary of the Mannatech lawsuit from the WSJ

"The multi-level marketing world - the same industry that gave forth Amway and other home selling networks - got a black eye this week.

Mannatech Inc., a maker of dietary supplements, agreed to pay $6 million to settle a lawsuit brought by the Texas attorney general.

The state alleged that the Coppell, Texas company made false claims about its health benefits and marketed products as cures and treatments for diseases.

Possibly the most unusual aspect of the agreement was that the Sam Caster, the company's founder, former chairman, former CEO and biggest shareholder, agreed to pay a $1 million civil penalty.

The lawsuit, filed in 2007, alleged numerous instances in which freelance sales associates falsely claimed that the products helped cure or prevented diseases such as cancer, autism and Down syndrome.

Caster, the suit alleged, failed to effectively stop these tactics.

According to Texas Attorney General Greg Abbott, there was another reason for the fine against Caster. "He's a repeat offender," says Abbott."

Texas Attorney General Greg Abbott charged Coppell-based Mannatech, Inc., its owner, Samuel L. Caster, and several related entities with operating an illegal marketing scheme in violation of state law.

Documents filed in Travis County district court reveal Mannatech's scheme to exploit families, including those challenged by cancer, Down's syndrome, cystic fibrosis and other serious illnesses.

According to investigators, exaggerated claims about the therapeutic benefits of Mannatech's dietary supplements and nutritional products were unlawfully used to increase sales.

The attorney general's enforcement action asserts that Mannatech's deceptive practices pose a health risk to seriously-ill consumers who may forgo traditional medical attention because of the company's false claims.

Press Release from July 5, 2007Plaintiff's Original Petition

Much more on Mannatech

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Full post as published by Misleading Advertising Law on March 01, 2009 (boomark / email).