Mannatech is a multi-level marketing firm that sells dietary supplements and personal care products. Samuel Caster founded this firm in 1993, and its headquarters is in Flower Mound, Texas. Before Mannatech developed its products, it primarily sold Manapol, an aloe extract made by another company. Since its inception, the company has had several lawsuits. Some of the lawsuits have been about unproven claims about their products. For instance, they have claimed that their products can treat diseases like autism, AIDS, and cancer. Also, the company has been sued due to unethical business practices. Due to the constant lawsuits, Mannatech has had to part with a lot of money. How much money has the company parted with in its lawsuits, you may ask? Here are the four biggest Mannatech lawsuits in company history.
4. Mannatech Paid $750,000 to Settle a Lawsuit Pertaining to Fraud and Privacy Invasion in 2005
Mannatech was sued by a woman whose child died of Tay-Sachs disease. According to Mayo Clinic, the disease is a rare genetic disorder whereby the person lacks enzymes that break down fatty substances.
The woman sued the company for using her child’s photograph to market its products without her permission. Also, the company claimed that the child benefited from Mannatech’s products. In actual sense, the child died in 1997 shortly after using the products. The company did not use the child’s picture to market its products once. Instead, it ran a marketing campaign with the child’s photograph from 1997 to 2004. The firm ran the campaign despite the mother asking them not to use her child’s picture.
When she presented her case, she claimed the company’s actions caused her emotional distress. As a result, Samuel Caster and Dr. Kathryn Dykman were voluntarily dismissed as defendants. The company decided to enter into a confidential settlement agreement with the woman. After paying the settlement, the company vowed not to reference the child in any way in its marketing campaigns.
3. Mannatech Made an $850,000 Settlement to Four Shareholders
The shareholders accused Mannatech of gross mismanagement, wasting corporate assets, and not monitoring sales staffers’ websites. In a nutshell, the company used such tactics to boost its stock’s value. The lawsuit compelled the company to make some corporate governance changes. However, the company did not inform the court of the changes it made. These changes were made following the settlement to the shareholders.
After agreeing to the settlement, the company maintained that it had done nothing illegal. You are probably wondering why the company made the settlement if it did nothing illegal. Some companies do that, thinking customers would abandon them if they admitted they were guilty. However, according to Washington Post, there are some benefits of admitting to wrongdoing. One benefit is that you can get tax deductions from the settlement. Also, some courts resent the non-admission of guilt because it makes them look like they are after extracting fines. As a result, other companies will lose faith in the court systems in case they are in the middle of a lawsuit.
2. The Company Paid a $6 Million Settlement to the Texas Attorney General in 2007
The state sued the firm for making false claims about their products curing certain diseases. Essentially, the company marketed its drugs without getting the approval of the U.S. Food and Drug Administration (FDA). FDA approves a drug once they determine its benefits far outweigh the risks. Besides making false claims, Mannatech was guilty of using illegal practices to sell the products. The company sold its products through a multi-level marketing plan.
The Texas government claimed the company made false claims during its annual corporate event, MannaFest. Mannatech used consumers to lie that their products improved their health. Moreover, the company allowed vendors at the event to sell printed and recorded material that made false claims. Lastly, the company used its employees to write the claims despite not bearing enough scientific knowledge. Although the company agreed to pay the settlement, there was one more condition it had to fulfill. The state proposed that Mannatech would pay a $25,000 fine each time it violates the state’s law.
1. In 2008, Mannatech Settled a Class-Action Lawsuit for $11.3 Million
This lawsuit consolidated three securities class action complaints against the company and some of its officers and directors. The lawsuit was subject to court approval, which meant Mannatech could resolve the claims without admitting any wrongdoing. Mannatech made the settlement through its management and insurance company.
The settlement class consisted of people who bought Mannatech stock between August 10, 2004, and July 30, 2007. These stakeholders filed the lawsuit after they got wind of Barron’s article. The article detailed some of the company’s unethical practices. For instance, Mannatech failed to adequately supervise its sales staff and allowed false claims to be made about the effectiveness of its products. Mannatech made the settlement about four months after the lawsuit was made.
Other Consequences of Mannatech Engaging in Fraudulent Activities
Typically, an organization will pay a settlement fee after a lawsuit. It may seem like a punishment for companies to pay huge fees, but it is usually not one. That would explain why the company found itself in three more lawsuits. The reason why paying money is not a colossal punishment is that Mannatech already makes a lot of money. According to Zippia, its revenue is about $176.7 million annually. Its highest settlement of $11.3 million is not much when you consider its annual revenue. As a result, the court has punished the company in different ways besides asking for settlement fees. Here are the non-monetary consequences Mannatech endured.
In 2006, Mannatech’s Distributor, Vivienne Balonwu, Was Dismissed
Vivienne was not just a distributor but a general practitioner from the United Kingdom. The United Kingdom General Medical Council (GMC) found her guilty of abusing her power as a doctor. She illegally promoted and sold the company’s products to people claiming they cured stroke and chronic obstructive pulmonary disease.
Soon, her clients began to complain about the inefficiency of the products. Due to the endless complaints, she was dismissed by her employer, Harmoni, a medical services company. Moreover, the GMC panel imposed a 15-month penalty period during which she would avoid private or short-term locum work. Also, she was to complete a supervised personal development plan to tackle issues with her practice.
There Was an Expose About Mannatech on ABC’s 20/20 Show in 2007
By 2006, the Texas government had already conducted its investigations on Mannatech. This likely triggered ABC to explore the company further. The show revealed that Mannatech’s sales associates were training sales recruits on how to target people with particular illnesses. This action meant the company violated U.S. federal law since it claimed the products could cure certain diseases. The expose caused Caster to resign from the company that year.
In 2017, Mannatech Received an FDA Warning Letter
Mannatech received the letter after illegally marketing most of its products as medicinal agents. The company also violated the Title 21 and Good Manufacturing Practice regulations by selling adulterated and misbranded products. If you want to read the letter, you can visit this link to read about the accusations leveled against the company.
From the letter, Mannatech was accused of listing fruit and vegetable powders as a group. By listing them as a group, the company failed to identify the specific individual ingredients. Usually, each ingredient must be identified and listed in descending order based on weight.
Also, there was some confusion based on how the company was marketing its products. For instance, some of their products were labeled as conventional food yet marketed like a supplement. FDA thus urged the company to label their product as a supplement instead. Besides receiving the letter, Mannatech made an agreement with the Town Council of Texas to relocate its headquarters to an existing facility in the state.
Mannatech Made Some Claims That Were Thoroughly Dissected by Experts in 2017
Are people refuting your claims that bad, you may ask? Actually, it is. When experts discredit your products, people are likely to shy away from them. For years, Mannatech made unwarranted claims about its “glyconutrient” products. The company claimed that certain sugars were lacking in people’s diets, so using the products would help such people. Mannatech even used sources from journals to back up their theory. One of the journals Mannatech used was a 2008 journal, Glycobiology.
Two researchers, Schnaar and Freeze, analyzed their theories and highlighted some issues. They admitted that while the journals may be accurate, they had no relevance to Mannatech’s health claims. Also, they pointed out that there was no credible data to support claims of health benefits of oral administration of glucomannan. Despite the problems of the products, the researchers maintained that the products were a good source of indigestible fiber.
Mannatech Inadvertently Soiled Ben Carson’s Reputation
Ben Carson, America’s neurosurgeon, is famous for authoring Gifted Hands and Think Big. The doctor had made a lot of speeches in support of Mannatech’s products. In 2004, in a speech at a Mannatech event, he claimed the company’s products eradicated his prostate cancer symptoms. Besides making speeches, he has also given interviews with the company. The company has since used his interviews as promotional videos. In 2014, the company used the doctor’s face on its website. Still, in the same year, he praised the company’s “glyconutrient” supplements in a PBS special. A group of Mannatech distributors sponsored the show.
In 2016, Dr. Carson decided to run for president of the United States. During the presidential debate, he was asked about his association with Mannatech. The doctor denied his association with the company. By the time he declared his bid for the presidency, Mannatech had removed all images of the doctor from its website. During the debate, he was asked why he continued to use the company’s products even after they were proven not to work. However, he claimed the products somehow helped him to feel less sick. This debate does not mean he is any less of a doctor, but such an incident can turn people from you.
Why Mannatech Found Itself in Several Lawsuits
Some companies learn to do things differently after one lawsuit. The same cannot be said for Mannatech since it had four lawsuits. You may be wondering why the company constantly finds itself in this position. The answer is simple: Samuel Caster. Believe it or not, Mannatech is not Caster’s first company. In the late 1980s, he established his first company, Eagle Shield. The aim of the company was to make products that would cut energy costs. As you may have surmised, there were issues with the products. His company was accused of using products that were unoriginal and dubious. He agreed not to make future false statements.
In 1991, he formed another company called Electracat. The company sold devices that repelled insects and other pests with high-frequency vibrations. Of course, his product was termed a “hoax” by an assistant attorney general. Caster agreed to stop selling the product and refrain from making unscientific claims. He had to part with $125,000 for investigation costs. When he founded Mannatech in 1993, it is no surprise that he still found himself in legal trouble. Although his companies sold different products, his behavior still remained the same. Once again, the company was accused of making false claims about its supplements. Mannatech making false claims about its products is worse than Electracat making false claims. If a sick person does not recover after taking supplements, they will either die or remain sick. That explains why it received four lawsuits.
After reading about the company’s lawsuits, you could be wondering whether Mannatech is a genuine company. Should you still buy their products? There is nothing wrong with the company’s product. The problem is the company exaggerating what the products can do. If the company marketed its products as important sources of certain nutrients, it could easily have avoided these lawsuits. It is no secret that companies engage in illegal practices to make profits. However, if your fraud is detected, you will pay huge settlements that exceed the profits made.
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