Abbott won't talk about inaction on Mannatech

Fort Worth Star-Telegram/June 25, 2007
By Danny Robbins

Texas Attorney General Greg Abbott has yet to take action against Mannatech Inc. despite being informed by the Department of State Health Services nearly nine months ago that the agency believes that the company is a threat to public health and safety.

Abbott was notified of the department's concerns in a letter Oct. 5 regarding the Coppell-based company, among the industry leaders in selling dietary supplements through multilevel marketing. The letter accompanied a memo that outlined issues to be addressed.

"DSHS believes that these persons will continue to violate Texas law as described in the enclosed memorandum unless enjoined from doing so and that such continued operations pose a threat to the public health and safety," wrote Cathy Campbell, the agency's general counsel at the time.

"DSHS requests that your office seek whatever remedies you determine are appropriate based on the attached file, including temporary and permanent injunction and/or civil penalties."

Tom Kelley, a spokesman for Abbott, declined to comment on the letter.

"We just can't acknowledge investigations or anything about such issues," he said. "We routinely get referrals from our client agencies. But that's as far as I can go."

A Mannatech spokesman did not respond to a request for comment.

The attorney general's office acknowledged in October that it had been investigating Mannatech since July 2005 on suspicion of deceptive trade practices. It also noted that it received a referral from the DSHS after initiating its inquiry.

Those disclosures were made in a memo written by Karen Rabon, Abbott's public information coordinator, seeking to withhold documents relating to the investigation from an investor who sought them under the Texas Public Information Act. Rabon cited the investigation and the likelihood of litigation as reasons why the documents should be withheld.

Documents recently obtained by the Star-Telegram show that the DSHS formally sought action from the attorney general in a memo written Oct. 4 by Margaret Paynter of the department's enforcement unit.

The memo says a review revealed that a Mannatech Web site was "promoting dietary supplements as products that are intended to prevent, diagnose, mitigate, treat or cure a disease."

It also says an inspection of a company facility in July found that "terminology on dietary supplement labels make unauthorized health claims."

The strong wording in the letter from Campbell, who has since retired, is typical of a departmental request that the attorney general become involved, said Mike Greenberg, DSHS assistant general counsel. Although such letters indicate the need for immediate legal action, he said, the attorney general often requires more time to build a case.

"Just because we've done inspections and developed a certain amount of evidence, that doesn't mean there isn't more development that has to take place to support a complicated case," he said.

The referral was made two weeks after the department sent a warning letter to Mannatech President Terry Persinger stating that company products were being marketed as drugs when they in fact are not. The conclusion was based on a review of a company Web site (glycoscience.org), distributors' Web sites and other material used by distributors selling the products, the letter said.

Mannatech's supplements, known as glyconutrients, are plant extracts said to contain sugars missing from modern diets. The products are sold by sales associates who build "downlines" by persuading others to buy.

In an article about the company in September, the Star-Telegram described how some associates say the products can treat a variety of illnesses and conditions, including cancer and Down syndrome, and do so using testimonials from pamphlets and CDs available at company functions.

Similar reports have since appeared in The Wall Street Journal and on the ABC News program 20/20.

Sam Caster, Mannatech's chairman and chief executive officer, has said the company promotes only the nutritional benefits of its products and does not believe that it is out of line in allowing material containing personal testimonials to be sold to associates.

An article about Mannatech in Barron's in 2005 triggered a drop in the company's stock price and a series of class-action lawsuits. The suits have since been consolidated.

An amended version of the complaint, filed in March, quotes an unidentified former company vice president as saying that more than 80 percent of associates' sales were based on false health claims.

In a motion to dismiss the suit, filed May 21, the company challenged the assertion, saying it is "obviously plucked from thin air with no factual basis pleaded to back it up."