The case of a dietary supplement company that became ensnared in an IRS complaint and a potential criminal investigation related to a couple of celebrity politician endorsers points out the possible pitfalls of the practice of hitching your marketing wagon to a star. The message: Be careful whom you choose and how you use them, says an expert.
“There is a onus on a celebrity if they make claims about a product,” Justin Prochnow, an attorney with the firm Greenberg Traurig, told NutraIngredients-USA. “They are responsible for ensuring the statements they make are true.”
It’s important to state upfront that the company in question, Star Scientific Inc., which markets an antioxidant product called Anatabloc, is not at this point alleged to have done anything wrong. But the company is prominently mentioned in an IRS complaint filed by a liberal-leaning political watchdog group called Citizens for Responsibility and Ethics in Washington (CREW) and has been cooperating in a federal investigation.
IRS complaint, criminal investigation
The CREW complaint asks the IRS to investigate whether Virgina Gov. Robert McDonnell, his wife, Maureen McDonnell, and Virginia Attorney General Kenneth Cuccinelli violated tax law by failing to report and pay taxes on income received from Jonnie R. Williams, Sr. and Star Scientific, Inc.
And according to a story Friday in the Washington Post, Williams, a prominent political donor and the CEO of Star Scientific, has been cooperating for several months with federal prosecutors as they investigate allegations of corruption in McDonnell’s administration.
According to the Post, Williams has given more than $120,000 to McDonnell and his wife, as well as a number of luxury gifts. McDonnell has said repeatedly he did nothing wrong and did no favors for Star Scientific in exchange for the gifts and cash. But according to CREW’s IRS complaint, Maureen McDonnell did host a gathering of potential Star Scientific investors.
“I’m not saying anything on regards to (McDonnell’s) actions on behalf of Star Scientific. But whether or not it’s income is based on the motives of the person who gave the gift,” said Melanie Sloan, executive director of CREW.
“Celebrity endorsements are very different from those of politicians. In politicians it will vary widely from state to state as to what they are permitted to do. If they were federal politicians they wouldn’t be allowed to do this. There are no endorsements of any kind permitted,” she said.
Tahlia Tuck, vice president of communications for Star Scientific, said she couldn’t comment on the Virginia situation. But she did say that Star Scientific has nothing to hide in regards to its strategy of employing celebrity endorsers, one of whom is prominent pro golfer Fred Couples.
Main points for celebrity endorsements
Prochow said it’s wise for companies to revisit the parameters for the legal (and low risk) way to employ celebrity endorsers in ads, whether in print, online or on radio or TV before signing up a spokesperson.
“There are two main things you need to keep in mind. The first is you have to disclose any material connection between an endorser and the company behind the product. You don’t have to do it if it’s clear that it is an endorsement; Derek Jeter or LeBron James or Michael Jordon, they don’t have to disclose that they are getting paid to endorse Nike or Coke when they are in an ad on TV because everyone know they are getting paid,” Prochnow said.
But Prochnow said in the case where you wouldn’t necessarily expect that connection, as in the case of a politician endorsing a supplement company, disclosure is essential.
“In the case of the attorney general or the governor, if they were in fact getting paid to endorse then that is something they should have disclosed,” he said.
The second key point: Don’t lie.
“If an endorser is make a claim about a product, (such as “Rest Away” helped them sleep) that claim has to be true. You can’t say that if you haven’t used the product (and experienced that effect).”