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.
Twice before, in 1988 and 1991, the then-Texas attorney general brought suit against Caster and his earlier concern, Eagle Shield Inc., which sold an electronic pest control device known as the Electracat. A 1991 judgment, fining Caster, said that the Electracat was neither effective in controlling or wiping out household pests.
“Clearly there were things on the Internet, testimonials that were taken that were inappropriate. But in terms of this consent, there was no requirement for any admission of guilt,” said Wayne Badovinus, the company’s new CEO. “The company has been compliant for at least 19 months.” Caster’s attorney, Bill Jones in Austin, said: “He specifically and purposefully denied any wrongdoing.”
Mannatech was the subject of a page-one story in the Journal back in May, 2007, which contained some interesting details on the company’s annual employee-sponsored event, called MannaFest. Part bonding session, part Christian revival, Mannafest in 2007 in Dallas included numerous sales associates and consumers who stepped on the stage and testified how they had taken Mannatech products and recovered or had found relief from their paralysis, their tumors, and their lesions. Others said they found relief after taking “glyconutrients,”’ sugars that were in the company’s best-seller, Ambrotose. Another of the product’s ingredients back then: ground larchwood bark.