Markets Wired

A federal district judge in Atlanta is expected to provide a ruling in the coming week in a Federal Trade Commission case against the marketers of three weight-loss and health-related dietary supplements. In May, the defendants were ordered to pay more than $40 million for violating a 2008 court order related to the sale of the supplements.

Specifically, the defendants, who ran an operation known as Hi-Tech Pharmaceuticals, Inc., continued to deceptively market the same and other products, in violation of the 2008 order with unsubstantiated claims such as “rapid fat loss,” “fat burner,” “thermogenic,” and “curbs the appetite.” The $40 million judgment is one of the largest the FTC has received against a dietary supplement manufacturer.

The May 2014 order also required Hi-Tech, its CEO, Jared Wheat, and its executive vice president, Stephen Smith, to recall the following products:

• Fastin (with an expiration date of 6/2019 or earlier)
• Lipodrene (with an expiration date of 5/2019 or earlier)
• Benzedrine (with an expiration date of 7/2019 or earlier)
• Stimerex-ES (with an expiration date of 1/2019 or earlier)

Retailers should expect to receive instructions from Hi-Tech Pharmaceuticals relating to the return or exchange of recalled products.

“This judgment makes it clear how serious the FTC is about protecting consumers from phony health and weight-loss claims,” said Jessica Rich, Director of the Commission’s Bureau of Consumer Protection. “These marketers will pay a heavy price for disregarding the court’s orders and continuing to deceive consumers.”

The FTC’s case against the defendants began in November 2004, when it filed a complaint charging them with making deceptive claims about the efficacy and safety of “Thermalean” and “Lipodrene,” purported weight-loss products containing ephedra, and “Spontane-ES,” a supposed erectile dysfunction (ED) treatment containing yohimbine. The complaint named National Urological Group, Inc.; National Institute for Weight Loss, Inc.; Hi-Tech Pharmaceuticals, Inc.; Jared Wheat; Thomas Holda; Stephen Smith, Michael Howell; and Dr. Terrill Mark Wright.

At the FTC’s request, in December 2008, a federal district court ordered the marketers to pay $15.8 million. The court’s final order permanently barred the defendants from claiming that their products cause rapid or substantial weight or fat loss, or affect body fat, appetite, or metabolism unless the claims are true and supported by scientific evidence. Through its efforts, the FTC has now collected over $15 million dollars from defendants and is in the process of sending redress to deceived consumers.

In November 2011, the FTC sought sanctions against Hi-Tech, Wheat, and Smith for violating the 2008 final order. The FTC alleged that, beginning in 2009, the defendants made prohibited weight loss claims for four dietary supplements – Fastin, Lipodrene, Benzedrine, and Stimerex-ES — despite lacking competent and reliable scientific evidence to substantiate those claims.

In August 2013, the court found the defendants in contempt for violating the 2008 order, held a hearing on sanctions in January 2014, and subsequently issued the final order with a $40 million judgment and product recalls. The FTC is seeking to have Wheat jailed for failing to ensure the four weight-loss products were fully recalled.

This case is part of the FTC’s ongoing efforts to protect consumers from misleading advertising. The order determining the sanctions against Hi-Tech Pharmaceuticals, Inc.; Jared Wheat, Stephen Smith, and Dr. Terrell Mark Wright was issued by the U.S. District Court for the Northern District of Georgia, Atlanta Division, on May 15, 2014.

The FTC is a member of the National Prevention Council, which provides coordination and leadership at the federal level regarding prevention, wellness, and health promotion practices. This case advances the National Prevention Strategy’s goal of increasing the number of Americans who are health at every stage of life.

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, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.