Even sans smoke, there's still fire in NYAG affair, expert says

By Hank Schultz contact

- Last updated on GMT

Even sans smoke, there's still fire in NYAG affair, expert says

Related tags: United states

The heat surrounding the  NYAG affair may have abated somewhat. But an expert in investigations conducted by the offices of state attorneys general said the episode is far from over.

The office of New York Attorney General Eric Schneiderman accused four big retailers of selling fraudulent herbal dietary supplements in his state, asserting that there was little if any of the botanical that was on the label in the bottles. He based that assertion on a now widely-discredited DNA test.  One of the four original retailers, GNC, has signed an agreement with Schneiderman that calls for increased testing of its products while admitting to no wrongdoing and securing Schneiderman’s admission that it was manufacturing its products in accord with FDA guidelines.

There has been no word about what, if anything, is happening with the other members of the original quartet: Target, Walmart and Walgreens.  But Katherine Winfree, an attorney in the Washington, DC office of Manatt, Phelps & Phillips, said the news interregnum is not a sign that the whole thing has blown over.  Winfree knows a thing or two about attorney general investigations, having served as Maryland’s chief deputy AG for seven years.

“I think from my perspective it’s fair to say that this is still very much of a live issue in New York, Indiana and some of the other jurisdictions that signed on,” ​Winfree told NutraIngredients-USA.

Aspects of GNC agreement

Many observers in the dietary supplements industry were downcast at the news of GNC’s decision to enter into the agreement. Many in industry said that Schneiderman’s investigation was clumsily conducted and was based on a wholly inappropriate testing methodology and thus arrived at nonsensical conclusions. They viewed as a victory of sorts the sections of the GNC agreement that served to exonerate the company of any wrongdoing in the manufacture of its products. They also viewed those aspects of the agreement as an admission of sorts by Schneiderman that he lacked proof to back up the full measure of his original, bombastic assertions.

katherine_winfree

Not so fast, Winfree said. Sidestepping the issue of admission of wrongdoing is the norm rather than the exception in these kinds of agreements, and it’s unwise to read more into it than that, she said.

“It is not unusual for an AG to reach this kind of an agreement in a civil case without any admission of wrongdoing. In fact, it is almost unheard of to go the other way.  ​(Admission of guilt) is really not relevant to how the AG proceeds moving forward,”​ Winfree said.

Another point of contention for industry was how Schneiderman seemed to be angling toward setting up his own regulatory agency for herbal supplements in New York. The GNC agreement calls for the company to report regularly to the state on its testing results. Observers wondered, why, if FDA is already in the game of regulating dietary supplements, does the NYAG need to step in?

Winfree said from her point of view it’s not at all unusual that a state AG would seek redress in an industrial sector that is already regulated under federal authority.

“Everybody thinks the big, bad Federal government has unlimited resources and that’s just not the case. There are cases of AGs stepping in when they think the federal government is moving too slowly. Environmental laws, for example; how they’re enforced has something to do with who’s in the White House,” ​Winfree said.

“There are a few things that are specifically preempted by federal law. Banking regulations, for example. But unless it is specifically preempted, AGs have a lot of authority to move forward in the realm of consumer protection,” ​she said.

What is to be done?

Winfree said there are some simple ground rules for dealing with state attorneys general offices.  Trying to fly under the radar is usually a bad move, she said.  It’s always helpful to have a prior relationship with the state AG in the event of the day when you receive an official communication as part of an investigation.

“In my time as chief deputy AG of Maryland I took dozens of meetings in which companies doingbusiness in Maryland were introducing themselves,” ​Winfree said. “It makes a company come alive with a name and a face. We knew the players and they knew us and it just promotes a smoother process.

“Being suspicious and staying away from ​(the authorities) because you are concerned they might take some action against you . . . I don’t think that is a very productive approach,”​ she said.

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2 comments

The NY AG Caved on GNC

Posted by Marc Ullman,

Maybe I'm misreading the sentence in General Schneiderman's agreement with GNC stating "NY AG found no evidence in the course of its investigation that GNC deviated from the
federal Food and Drug Administration ("FDA") "Current Good Manufacturing Practices", but this seems to be a pretty express admission that GNC did nothing wrong and that the AG was way off the mark here. In my experience, this is a lot more than the standard "non-admission of wrongdoing" that's in every settlement agreement.

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Winfree is right

Posted by Jeff Nedelman,

For 20 years Sen. Hatch has swatted away the problems for the industry. Times change as issues grow larger and more people die.

When there is no congressional oversight and no or almost no FDA enforcement,the State AGS always act.

Rather than dealing with one regulatory body, the FDA, the supplement industry is going to be chasing its tail around and around as other State AG's, who know a good political issue when they see it, step into the fight.

Industry always loses. Pick your poison.

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