Berkeley Nutraceuticals to pay $2.5m, orders court
states $2.5 m, to refund customers who filed complaints and to stop
making health claims they can't back with scientific proof.
The Cincinatti-based company, which sells herbal dietary supplements including Enzyte, Avlimil and Rogisen, has denied wrongdoing.
Berkeley reported in a press release Wednesday that by the time the settlement had been reached it had "already begun to implement a series of measures to enhance the Company's business practices, better inform consumers about its products and provide restitution to consumers with outstanding complaints."
Thousands of customers, as well as merchant banks, were allegedly defrauded of $100m by Berkeley.
Enzyte is perhaps Berkeley's best know product owing to its national "Smilin' Bob" ad campaign which featured a man whose life improves after he uses the product which Berkeley's website claims supports "firmer, fuller-feeling, better quality erections".
"Smiling Bob may have been happy, but many customers were not," said California Attorney General Bill Lockyer in a statement.
Although Steve Warshak, the owner of Berkeley and its four subsidiaries, reached the settlement with the attorneys general, he and company executives are still disputing other charges in court. Berkeley's subsidiary companies are: Boland Naturals, Lifekey, Wagner Nutraceuticals and Warner Health Care.
Based on thousands of customer complaints, the Federal Trade Commission charged that consumers provided credit or debit card information to pay a shipping and handling fee for the "free" samples, and that Berkeley later used that information to bill consumers for shipments which they sent automatically, without their consent, or without disclosing the terms and conditions of the plan.
Berkeley is also alleged to have made it difficult for customers to cancel shipments as they faced a wall of busy phone lines and web sites that did not work.
"Companies like Berkeley that choose to market their products with 'free' offers and grand claims of effectiveness must do so in compliance with the law," said Ohio Attorney General Jim Petro, who directed the multi-state investigation and settlement.
"Consumers have the right to know all the terms of a so-called 'free' offer and that the product works as advertised."
The company must still defend itself against an FTC class-action lawsuit over false advertising regarding Avlimil and Rogisen. The federal body charges that Berkeley was deceptive in marketing these products as treatment for female dysfunction and night vision problems.
Although Warshak has not been charged, $24 m of his fortune remains frozen by a federal judge after federal agents raided his offices in March of 2005. Another five of the former Berkeley executives have pleaded guilty to conspiracy to defraud, but are cooperating with the continuing investigation of Berkeley.
Each of the defendants could face up to 20 years in prison.
