Can Mannatech cure its legal concerns?

Miracle pitches from distributors of nutritional supplements draw scrutiny

Dallas Morning News/November 27, 2006
By Karen Robinson-Jacobs

On Web sites and in sales pitches, nutritional supplements from Mannatech Inc. are said to treat and even cure everything from attention deficit disorder to cancer.

Such claims, as described by consumers in complaints to the Federal Trade Commission obtained by The Dallas Morning News, would be illegal under federal regulations for dietary supplements.

Mannatech has attracted attention from miracle seekers here and abroad – as well as from the Texas attorney general's office, which revealed in October that it is investigating the company.

For the most part, the statements appear to have come from third parties or Mannatech associates, an army of independent distributors more than a half-million strong.

Now, with Mannatech under legal scrutiny, some consumer advocates say current regulations may not be sufficient to protect consumers who are snapping up more and more supplements to try to keep or regain their health.

"Whenever you have someone who ... has a health problem, who's scared, they're in this semi-desperate place," said Elisa Obadashian, director of the West Coast office of Consumers Union. "So you'll believe what the beautiful package says or the beautiful words."

"It's [the company's] responsibility to make sure whoever is representing them doesn't break the law," said Ms. Obadashian, who has worked on dietary supplement issues.

Executives at Coppell-based Mannatech declined to be interviewed. But in a written response to questions, the company said that it "strives to meet or exceed the highest legal and ethical business practices."

Mannatech said its legal department works closely with its global sales and marketing department and with regulatory counsel to ensure corporate-produced materials comply with all applicable laws, rules and regulations.

In a recent conference call with analysts, Samuel L. Caster, Mannatech's chairman, chief executive and co-founder, said the company has not "done anything wrong."

Mr. Caster, 56, an affable man who associates say dislikes conflict, has twice before drawn attention from the Texas attorney general's office for making unsubstantiated claims about products he was trying to sell.

In 1988, the issue was energy-saving devices and "claims that exceed substantiation," according to an agreement that Mr. Caster, then president of Eagle Shield Inc., signed to settle the matter.

In January 1991, Mr. Caster agreed to stop selling a pest control device he acknowledged did not work as advertised.

With his current business venture, the erstwhile restaurateur and stage performer has tapped into a gold mine, fueled in part by consumers' growing obsession with health and wellness, an increased inclination to self-medicate and a greater openness to alternative medicines.

Sales of nutritional supplements in 2005 reached $21.3 billion, nearly double the $10.8 billion posting in 1995, says Grant Ferrier, editor of the trade publication Nutrition Business Journal.

Among nutritional supplement makers that sell directly to consumers, publicly held Mannatech has rocketed to the No. 3 slot, behind Alticor Inc., owner of Amway, and Herbalife International of America Inc.

General wellness

Founded in 1994, Mannatech says its core products are intended to provide nutrients that promote general wellness, supporting the immune system as well as the ability of cells to communicate with one another.

"When your cells are healthy, so are your glands and organs," the company says on its Web site.

The company's top product line, Ambrotose, a "glyconutritional supplement," accounts for nearly 50 percent of sales, which were $389.4 million in 2005 – more than double 2003 sales of $191 million.

A 2.65-ounce jar of Ambrotose can cost up to $72.75.

On its Web site and in company-produced brochures, Mannatech notes that its claims about "proper gland and organ function" have not been evaluated by the U.S. Food and Drug Administration.

Mannatech adds that its products "are not intended to diagnose, treat, cure or prevent any disease."

That's because a 1994 federal law – the Dietary Supplement Health and Education Act – bars supplements from claiming to treat or cure anything. They are allowed to make claims about the effect the supplements may have on the structure or function of the body. For example, "supports cardiovascular health" is allowed but "cures heart disease" is not.

"Any claim for a dietary supplement that it can cure a disease is a claim that is unusually extreme, and it very specifically violates the [dietary supplements] act," said Joel Rothman an attorney in Boca Raton, Fla., who runs the Nutritional and Dietary Supplement Law blog.

Current regulations lead to a "loosey-goosey" atmosphere, said Ms. Obadashian of Consumers Union. The rules don't require government review of supplement tests before the products are marketed, she said, nor require companies to report adverse reactions.

Amid the criticism, industry officials say they are carefully policing themselves.

Daniel Fabricant, vice president for scientific affairs with the Natural Products Association, said, "Most of the industry is adhering to the regulations."

He added, "We do a great deal of educating of ... [members] that they need to follow the law."

The sales pitch

Education can't always control what happens in the trenches, where Mannatech associates work to sell their products.

There, the "heals/cures" prohibition sometimes takes a back seat to the sales pitch, according to complaints to the FTC and a class-action shareholder lawsuit filed in federal court in New Mexico.

"They are making claims that they can cure cancer through the use of glyconutrients," a consumer from Kansas City, Mo., complained to the FTC in March.

(For privacy reasons, the agency declined to release the names and ages of the consumers.)

One sales pitch forwarded to the FTC in August 2004 offered, "If you have a child with ADD, ADHD, bipolar or any learning disorder, than [sic] do yourself and your child a favor and check into www.manna"

Attempts to reach the distributor, Robin Drolla, were not successful.

In its response to the News, Mannatech noted that the distributors aren't employees. The company said its ability to address misconduct is restricted to the policies and procedures in contracts with its "associates."

Mannatech said it has a "vigorous" program that seeks to track down associates' Web sites that don't comply with policies and procedures – or laws and regulations – so the material in question can be removed.

Jackie Dizdul, an FTC spokeswoman, said, "The parent company has an obligation to police its distributors and the representations they make." The FTC monitors claims made by companies to ensure that they don't violate deceptive trade practices laws.

Ms. Dizdul said the agency does not confirm or deny an investigation. When asked for any investigative records regarding Mannatech, the agency said, "Our search of FTC's records did not identify any record that would respond to your request."

But the agency does monitor consumer complaints, like one in May from a consumer in Amissville, Va.

"This Web site makes the statement, 'Please, if you know anyone with Shy-Drager, get this information to them – this really does work to give their bodies what they need to heal from this condition,' " the complaint said.

The contact person was listed as Thelma Jerden, 66, a Mannatech associate from Eads, Tenn.

Ms. Jerden said she started taking Ambrotose more than two years ago for a host of ailments ranging from rheumatoid arthritis to fibromyalgia, a chronic condition causing pain and stiffness of the muscles and joints. v"It worked because I got better," she said. "I've been telling people about how it helped me."

Ms. Jerden doesn't recall putting the reference to Shy-Drager – a rare, progressive degenerative disorder of the nervous system – on her Web pages but says it's possible that she did.

"We try to be very careful about the way we word things," she said.

Ms. Jerden said Mannatech itself doesn't make claims of miraculous healing.

"I don't think you'll ever hear the company say anything like that," she said. "You might hear some people who get too excited.

"I don't tell people that [it cures], and they didn't tell me that."

She has included testimonials in her sales literature, which brought a mild rebuke from the company

But until recently, similar testimonials of healing, sorted alphabetically by disease type, could be found on a Web site for a charitable organization called MannaRelief, co-founded in 1999 in part by Mr. Caster and his wife, Linda.

The MannaRelief site was recently revised and the testimonials removed. But a search of archived pages uncovers testimonials for everything from partial blindness to Down syndrome and behavior problems in schoolchildren.

Shareholder concerns

Shareholders who filed the suit were concerned about the impact the claims could have on the company's share price, which has flagged since reports surfaced Oct. 27 of the attorney general's inquiry,

"The No. 1 thing that sold these products are [health] testimonials from individuals," said a former Mannatech project manager in the complaint. "The underlying message is this will cure you."

Despite the legal attention, and what Mr. Caster refers to as "negative press," Mannatech enjoys a good reputation in the industry, said Mr. Ferrier of Nutrition Business Journal.

"The majority of companies that have made it to the size [of] Mannatech, those are not a bunch of hucksters," he said. "There is always a certain element of companies that stretch the boundaries of the claims guidelines. Those guys come and go, and the egregious violators are out of business."

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