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Mannatech Under Investigation
Texas Attorney General probing Mannatech
By Herb Greenberg, MarketWatch
Oct 27, 2006
SAN DIEGO (MarketWatch) -- The Texas Attorney General's office is investigating and has considered taking legal action against Mannatech, a fast-growing manufacturer of nutritional supplements, whose stock has been one of the year's sizzlers.
Its lead product, Ambrotose -- formally known as a "glyconutritional" -- is a type of sugar pill that has been touted for its ability to treat all sorts of ailments, including Down's Syndrome. The product is sold through company's 490,000 person direct-sales network.
An Oct. 24 memorandum in response to a public information request says the state's top cop has "anticipated filing suit against Mannatech" for a number of alleged violations.
The public information request was filed by someone who has sold short Mannatech's shares.
The memo further states that the company has been under investigation by the attorney general's Consumer Protection and Public Health Division since July 2005 regarding possible violations of the state's Deceptive Trade Practices Act "and other related consumer protection statues."
Subsequently, the Texas Department of State Health Services contacted the attorney general's office "with similar concerns..." Among those concerns, the memo says, are "unproven health claims" allegedly made by Mannatech about its products, "such as the ability to cure or treat cancer" and other ailments.
"The claims being made are not approved by the Food and Drug Administration, making the claims potentially in violation of both state and federal law," the memo says. "There is also concern that Mannatech does not disclose certain health risks associated with its product."
Mannatech General Counsel Keith Clark did not return my call Thursday. A spokesman for the Attorney General wouldn't comment beyond the memo's disclosure. He explained the detail regarding the investigation was included in the memo to explain why certain information should be exempt from the public information request.
In September the Ft. Worth Star-Telegram reported that two former Mannatech employees who had been quoted in a shareholder class action lawsuit against the company had also been interviewed by the Texas Attorney General.
The story also quoted Mannatech Chairman and Chief Executive Sam Caster as saying that legitimate statements relating to lifestyle improvements are often misunderstood as cures. "We walk the fine line of always stating our case appropriately and always training our people: 'We're not into the treatment, cure or mitigation of disease," he said. "We're into the improvement of quality of life. Now, who can benefit from good nutrition? Sick people, well people, everybody. Everybody benefits from good nutrition."
Scientists Charge Mannatech with Deception
Three Nobel Prize-winning scientists recently complained to New York Attorney General Eliot Spitzer that Web sites are falsely tying their research to the dietary supplements of Mannatech Inc. They wrote cease and desist letters to Mannatech.
Mannatech Accused of Stock Manipulation
Mannatech is the target of class action suits charging stock manipulation.
Mannatech's CEO Charged with Deception at Previous Company
Mannatech's President, Sam Caster has a checkered history. In 1991, his Eagle Shield Inc. claimed its Electracat device would repel insects by emitting high-frequency vibrations. The Texas Attorney General called it a hoax and won a permanent injunction against Caster and Eagle Shield. Caster agreed to stop making unsupported scientific claims about any other product, and to pay $125,000 in investigative costs. Two years earlier, Caster and Eagle Shield were accused of deceiving consumers by claiming their Eagle Shield Radiant Barrier was a scientific breakthrough in home insulation. The Texas Attorney General got a court order banning such claims .