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Mannatech, former CEO settle with state(Dallas Morning News, The Via Acquire Media NewsEdge) Feb. 27--The state reached a $7 million settlement with Coppell-based Mannatech Inc. and its former chief executive on Thursday for marketing its nutritional supplements as remedies for cancer and other serious conditions. Texas Attorney General Greg Abbott said tens of thousands of customers may have been duped into purchasing the company's products, thinking that they were cure-alls for Down syndrome, cystic fibrosis, cancer and other serious illnesses. Mannatech does not admit wrongdoing; settling was easier than fighting Abbott, chief executive Wayne Badovinus said. "He's got the hammer," Badovinus said. "We have no interest in getting in a debate and having it drag out for many years." Under terms of the settlement, former CEO Samuel Caster must pay a $1 million civil penalty and not be allowed to serve as an officer, director or employee for five years. In addition, Mannatech must establish a marketing compliance program for its 500,000 sales associates, set aside $4 million as restitution for customers who purchased products between Sept. 1, 2002, and August 2007 and pay the state $2 million in attorney and investigation fees. "And if they do it again, we will ensure they get put out of business," Abbott said. Abbott launched the investigation in July 2007 after receiving complaints about the company. During the 19-month investigation, he spent money hiring expert witnesses to review marketing claims and to test Mannatech's products for fraud. Mannatech's executives have been engulfed in legal battles for more than three years. Unrelated to the state's lawsuit, four Mannatech shareholders filed five lawsuits accusing top executives of damaging the company through "gross mismanagement, waste of corporate assets" and not monitoring sales staffers' Web sites. In June, Mannatech reached an $850,000 settlement with the shareholders. Badovinus said the publicity about the lawsuits has damaged Mannatech's balance sheets. Second-quarter 2008 sales fell 22 percent, and third-quarter sales fell 19.5 percent. Fourth-quarter results will be released March 11. Shares closed Thursday at $3.13, down 13 percent. Some terms of the settlement already have been implemented. The company has a marketing compliance program, and Caster stepped down from the board of directors earlier this month. At the time, Mannatech did not give a reason for Caster's resignation, only telling The Dallas Morning News, "Sam made the decision to step down from the board." In announcing details of the settlement Thursday, Abbott revealed that the company had no choice in the matter. To see more of The Dallas Morning News, or to subscribe to the newspaper, go to http://www.dallasnews.com. Copyright (c) 2009, The Dallas Morning News Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |