Branford Diet Supplement Firms To Pay Millions Of Dollars In Restitution
Three Branford-based dietary supplement companies and their owner that will provide millions of dollars in restitution to consumers harmed by the companies' alleged deceptive Internet marketing and sales practices, state officials said.
Though the settlement calls for a $32.7 million payment, Attorney General George Jepsen and state Consumer Protection Commissioner William Rubenstein said the Branford companies are unable to pay the full amount. Instead, the companies and their owner will liquidate real estate and other assets, with the estimated payment being $7 million.
The officials said if additional assets are discovered, the payment will increase.
The state and the Federal Trade Commission brought a federal lawsuit in 2011 against LeanSpa LLC, NutraSlim LLC and NutraSlim U.K. Ltd., all based in Branford, and Boris Mizhen of Guilford, who owns the companies. The lawsuit claims the companies used deceptive practices to advertise, market and sell dietary supplements.
The companies allegedly engaged in various deceptive practices, including: using fake news websites and testimonials to market their products; offering "free" trials if consumers paid for shipping and handling, but then using credit or debit card information to charge consumers for the trial; billing of unauthorized charges after enrollment in "negative option" purchase plans, which require consumers to take affirmative action to cancel the plan; failure to clearly disclose preconditions for order cancellations and refunds; and failure to provide refunds.
In addition to the monetary payments, which must be approved by the court, the settlement also calls for significant injunctions against deceptive practices, greater oversight over affiliate programs and significant compliance reporting measures for the next 20 years. Specifically, it bars all negative option purchase plans; the use of unsubstantiated claims about products; any misrepresentation of facts about the costs of product trials; and any unauthorized charges on consumer credit or debit cards or accounts.
"My office reviewed approximately 1,278 consumer complaints not just from Connecticut, but around the country, and the unfair and deceptive conduct alleged in those complaints was simply unacceptable," Jepsen said. "While the defendants have submitted affidavits and tax returns demonstrating their inability to pay the full judgment, this settlement ensures that substantial assets they do possess will go toward making whole those consumers who were harmed."
He added that "consumers must be on guard against scams and phony marketing which have proliferated on the Internet. This resolution sends a strong message that Internet fraudsters operating out of Connecticut do so at considerable risk."
Rubenstein, the consumer protection commissioner, said "the pattern of conduct alleged in this complaint was appalling. The use of fake news websites with false claims to lure consumers to buy products is unacceptable by itself. It is made all the worse when consumers are tricked into unwanted purchase plans and then are improperly thwarted in their attempts to cancel and obtain refunds."
Funds recovered through the settlement will be placed in an FTC-administered fund to be used to provide relief to consumers harmed by the companies' alleged conduct.