Markets Wired

As part of its ongoing crackdown on deceptive health claims, the Federal Trade Commission has filed a complaint jointly with the State of Connecticut, seeking to permanently stop a Connecticut-based operation that allegedly used fake news websites to promote their products, made deceptive weight-loss claims, and told consumers they could receive free trials of acai berry and “colon cleanse” products, and only have to pay the nominal cost of shipping and handling. The FTC alleges that many consumers ended up paying $79.99 for the trial, and for recurring monthly shipments of products that were hard to cancel. The defendants have allegedly taken in more than $25 million from consumers in the United States.

The parties have agreed to a court order temporarily halting the illegal conduct of Boris Mizhen, LeanSpa LLC, and two other companies Mizhen controls; continuing an asset freeze; appointing a temporary receiver; and giving the receiver, the FTC, and the State of Connecticut immediate access to the business premises.

The complaint alleges that the defendants hired affiliate marketers who used fake news websites to promote the defendants’ products. The fake news websites used domain names that appear to be objective news or health sites, such as channel8health.com, dailyhealth6.com, and online6health.com. The sites included stories such as “Acai Berry Diet Exposed: Miracle Diet or Scam?” and “1 Trick of a Tiny Belly: Reporter Loses Her ‘Belly’ Using 1 Easy Tip,” and often displayed the logos of major news sources, such as CNN, MSNBC, and Fox News. Fake reporters on the sites claimed to have tried the defendants’ weight-loss products, such as LeanSpa, NutraSlim, and SlimFuel, and to have lost a substantial amount of weight quickly – sometimes as much as 25 pounds in four weeks without any special diet or vigorous exercise regime. The fake news sites had links to the defendants’ own websites, where consumers were offered trial samples of two weight-loss dietary supplements: an acai-berry product and a colon cleanse product. The affiliate marketers earned a commission for each consumer who landed on their sites and signed up for a trial.

According to the complaint, once consumers landed at the defendants’ sites – including TryLeanSpa.com, TryNutraSlim.com, and TryQuickDetox.com – they were told that for a limited time only, in exchange for a nominal shipping and handling fee, typically $4.95 or less, they would receive trial samples of the acai berry or colon cleanse product, or both, and consumers were urged to provide their credit or debit card account information to pay the nominal fee to obtain a trial sample. If they tried to navigate away, a pop-up message sometimes appeared stating: “Don’t miss out on this GREAT OFFER!!! Just press Cancel to remain on this page and receive an instant discounted S&H price of $1.95.” The defendants allegedly would typically charge consumers either $79.99 for one of the products, or $158.98 for two.

The complaint alleged that the defendants used several entities known as “Independent Sales Organizations,” including Check21, LLC and Eureka Payments, LLC, to obtain merchant accounts at banks to process credit and debit sales transactions. Using these merchant accounts with several banks, including National Bank of California, WestAmerica Bank, HSBC Bank, and First Bank of Delaware, the defendants caused millions of dollars of unauthorized credit and debit card charges. The bulk of those unauthorized charges allegedly were processed through First Bank of Delaware.

The defendants’ allegedly deceptive practices also included charging some consumers $79.99 for products before the consumers even received the trial samples or before the 14-day trial period had ended; falsely promising a “100% Satisfaction Guarantee” and full refunds to customers who were dissatisfied with the product; misrepresenting that objective news reporters have performed independent tests on the products and independent consumers have endorsed the products; making unsupported claims that consumers could lose a significant amount of weight quickly; and falsely stating that the claims were clinically proven. The complaint alleges that the defendants’ business practices violated Sections 5 and 12 of the FTC Act, the Electronic Funds Transfer Act and Regulation E, and the Connecticut Unfair Trade Practices Act.

The stipulated court order halts the defendants from marketing or selling “negative-option” continuity plans, from making unauthorized charges while selling any good or service, and from making certain deceptive claims. The order also requires the defendants to cease collecting on customer accounts, and extends an asset freeze over the defendants until a final resolution of the court action.

This is the FTC’s 11th case involving fake news websites used to promote dietary supplements. In April 2011, the agency charged 10 companies that operated “fake news” sites promoting acai berry weight-loss products. For more information, see: THIS JUST IN: Fake News Sites Promote Bogus Weight Loss Benefits of Acai Berry Supplements.

At the request of the Federal Trade Commission and the State of Connecticut, the U.S. District Court for the District of Connecticut issued an ex parte temporary restraining order freezing the assets of the defendants on November 14, 2011. The court entered the Stipulated Preliminary Injunction Order on November 22, 2011. The Commission vote authorizing staff to file the complaint against Boris Mizhen, LeanSpa, LLC, NutraSlim, LLC, and NutraSlim U.K. Ltd. (also doing business as LeanSpa U.K. Ltd.) was 4-0.

The FTC would like to thank the United States Attorney’s Office for the District of Connecticut for its assistance and the Connecticut Better Business Bureau for its collaboration in this investigation.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook and follow us on Twitter.

(FTC File No: 1123135)