Mannatech is a multinational multi-level marketing firm that sells dietary supplements and personal care products, with a history of false claims and lawsuits. It was founded in November 1993 by Samuel L. Caster and is headquartered in Coppell, Texas. The company's stock is traded on the NASDAQ exchange under the symbol MTEX. As of 2016, Mannatech employed 290 people and sold its products through some 222,000 independent sales associates.
Mannatech and its sales people made false claims of anti-disease benefits about its lead product called "Ambrotose" which contains sugars derived from plants. The company was profitable soon after its founding until about 2008, when it started losing money due to exposure of its business practices through a class action lawsuit based on the false health claims, a critical 20/20 news special, and a civil suit filed by the Attorney General of Texas.
Video Mannatech
History
Mannatech was founded by Samuel L. Caster in 1993, as Congress prepared to pass the Dietary Supplement Health and Education Act of 1994, which made feasible the profitable marketing of a wider spectrum of dietary supplements. The company has had a Christian orientation since its founding; the name was intended to evoke manna, and it recruited people to sell its products through its multi-level marketing structure in church congregations.
Prior to founding Mannatech, Caster had founded and run Eagle Shield, which sold an insulation product that it claimed was based on new technology developed by NASA and that could reduce heating and cooling costs by up to 40%. In May 1988, the Attorney General of Texas concluded that the product's technology long predated NASA and did not reduce consumers' bills in the amounts advertised. Caster agreed to cease the misleading claims made about Eagle Shield.
Caster's second product, the "Electracat," was sold as a pest control device. The Electracat reportedly emitted pulsed vibrations that repelled rats, crickets, snakes, ticks, spiders, mosquitoes, and scorpions. However, in January 1991, the Attorney General of Texas investigated the product and found that the Electracat emitted no vibrations whatsoever. The Attorney General declared, "The device is a hoax, and stands on the same scientific footing as a perpetual motion machine." Caster was ordered to stop selling the Electracat and to reimburse the state $125,000 in investigative costs.
Mannatech was founded to sell dietary supplements and personal care products; its most widely known product has been "Ambrotose", a dietary supplement made from sugars derived from plants.
From 1993 to 2009, Rafael Bienvenido Cruz, father of presidential candidate Rafael Edward "Ted" Cruz, was a top salesman for Mannatech.
False claims and lawsuits
The company came to be known for unproven claims that its products could be used to treat many diseases and conditions, including cancer, diabetes, autism and AIDS. There is no evidence that any of these claims were or are true.
In January 2001 the company wrote to the U.S. Food and Drug Administration (FDA), stating that it intended to sell several products, with health claims that in its opinion were permissible under the Dietary Supplement Health and Education Act of 1994. The FDA responded in February 2001 that "The statements that you are making for these products suggest that they are intended to treat, prevent, cure, or mitigate diseases." and thus are not permitted.
In September 2005, a class-action lawsuit was filed against Mannatech for alleged violations of the Securities Exchange Act. The plaintiff class accused Mannatech of violating the act by "issuing a series of material misrepresentations"; specifically: failing to control its sales associates and allowing them to make false claims concerning the efficacy of Mannatech products. This caused a misleading price inflation of the company's stock. The plaintiffs were purchasers of Mannatech stock during the period August 10, 2004 through July 30, 2007.
In 2006, Mannatech distributor Vivienne Balonwu, a U.K. general practitioner, was found by the U.K. General Medical Council panel to have "abused her power as a doctor" after it was determined that she had illegally promoted and sold the company's products to people as a treatment for medical conditions such as chronic obstructive pulmonary disease and stroke-related complications. Following patient complaints about her marketing of the products in 2006, Balonwu was dismissed by her employer, Harmoni, a medical services company, and the GMC panel imposed a 15-month penalty period during which she was "to avoid private or short term locum work" and "to complete a supervised personal development plan to tackle shortcomings in her practice".
Mannatech came under investigation by the Texas Attorney General in October 2006 for alleged violations of that state's Deceptive Trade Practices Act. and in July 2006 Texas Attorney General Greg Abbott formally charged Mannatech, MannaRelief, Sam Caster, and Reginald McDaniel, the company's medical director, with operating an illegal marketing scheme in violation of state law.
A 20/20 undercover investigation that aired June 1, 2007 on ABC Television showed Mannatech's sales associates teaching sales recruits how to target Mannatech products to people with specific illnesses in a manner that purportedly does not violate U.S. federal law, including U.S. Food and Drug Administration regulations, by avoiding direct claims that the products cure any particular diseases.
In August 2007, Caster resigned as CEO of Mannatech. In October 2007, it was reported that the company had fired Grant Thornton LLP as its auditor after the accounting firm demanded that Mannatech remove Caster from all responsibilities to be replaced by Wayne Badovinus as the new chief executive. Several corporate initiatives were undertaken, but after 17 months on the job Badovinus resigned in December 2009. Another member of the board resigned shortly after. Mannatech's Chief Science Officer Robert Sinnott and Mannatech's chief financial officer Steve Fenstermacher were named Co-CEOs. Fenstermacher later resigned.
Publicity over the company's lawsuits began to damage the balance sheets and stock performance. After profits of $32 million in 2006 and $6.6 million in 2007, Mannatech reported a $12.6 million loss in 2008 and a $17.3 million loss in 2009.
Mannatech settled the civil complaint with the State of Texas in February 2009; Mannatech did not admit wrongdoing but agreed to pay $4 million in restitution to clients who purchased products and $2 million to the state to cover its costs in the case. In addition, Sam Caster agreed to pay a $1 million civil penalty and steer clear of any type of leadership position or employment relationship with Mannatech for five years.
In March 2008, Mannatech settled the class-action lawsuit by agreeing to pay $11.25 million to the plaintiff class. As part of the settlement, Mannatech admitted no wrongdoing.
2010 losses were $10.6 million. As the company's market capitalizations continued to fall, S&P Indices dropped it from the S&P 600 Index, stating "They are no longer representative of the small cap market space." Recruiting efforts continued dropping in 2011, widening company losses to $20.6 million. For 2012, the company's net loss narrowed to around $1 million from the ~$21 million loss the year before, in 2013, it had around $3M in net income, and in 2014, it had around $6M in net income.
Ben Carson
Starting in 2004, neurosurgeon and conservative speaker Ben Carson made videos and spoke at company events promoting Mannatech and its products. In 2004, in a speech at a Mannatech event, he credited the company's products with the disappearance of his cancer symptoms.
Carson's image still appeared on the Mannatech's website in 2014, and in the same year he praised their "glyconutrient" supplements in a PBS special (The Missing Link - The Science of Brain Health), sponsored by a group of Mannatech distributors, that was subsequently featured on the site. During the CNBC GOP debate on October 28, 2015, Carson was asked about his relationship with Mannatech and denied any involvement with the company. Politifact rated Carson's denial of any involvement as "false". In November 2015, Mannatech said on its website that for compliance with Federal campaign finance regulations the company had removed all references to Carson before he announced his bid for the presidency.
Maps Mannatech
See also
- List of ineffective cancer treatments
References
External links
- Corporate Website
- NASDAQ:MTEX CNN Money
Source of the article : Wikipedia
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