Published August 17, 2010
Dreams of rapid weight loss and fake celebrity endorsements from Oprah Winfrey and Rachael Ray lured customers into providing their credit or debit card numbers as they signed up online for a "free trial" of acai berry pills.
Instead, month after month, consumers got shipments of pills they didn't want and charges of $45 to $65 that mounted despite their attempts to cancel. It was a scam that bilked consumers out of up to $100 million, according to the Federal Trade Commission, which announced Monday it has filed a lawsuit in an attempt to shut down a massive Internet scam.
A federal judge has frozen the assets of Phoenix-based Central Coast Nutraceuticals Inc. and ordered the company and its executives, Graham D. Gibson, 34, and Michael A. McKenzy, 27, to stop making false claims for their products. The judge appointed a receiver to take charge of the company's books and ordered the defendants to appear in court Friday in Chicago.
Several other companies with the same Phoenix address as Central Coast Nutraceuticals were also named as defendants.
A recorded message on a phone number listed to a Michael A. McKenzy said the number was not accepting calls. A phone message left on a number listed to a Graham D. Gibson was not immediately returned.
AcaiPure and Colopure, two herbal supplements, don't work for weight loss or to prevent cancer as the company claimed, the FTC said. The company's Internet ads enticed consumers by saying its products break down and remove "toxic waste matter" stuck in the body "for years and years."
"Our expert tells us that these pills were nothing but a laxative," said David Vladeck, director of the FTC's Bureau of Consumer Protection. Vladeck said it might be harmful to take the pills for prolonged periods.
Acai, a popular beverage flavor, is a dark purple fruit from a palm found in Central and South America. Vladeck said it's uncertain how much acai, if any, was included in the supplements.
The lawsuit was filed in federal court in Chicago on Aug. 5 and sealed until Aug. 12. Both Winfrey and Ray filed statements with the court denying they'd ever endorsed the products.
"I did not approve or agree to the use of my name or my image on this website," Rachael Ray said in her statement, which also said she doesn't endorse any acai berry product.
Winfrey's company, Harpo Inc., filed a similar statement. "Ms. Oprah Winfrey has never endorsed any acai berry supplement or acai berry related product by name," the declaration said.
Randall Samborn, a spokesman for the U.S. Attorney's office in Chicago, said the office wouldn't comment on whether it planned to press criminal charges, in keeping with its policy.
Last year, the Better Business Bureau alerted consumers to the company's alleged deceptive practices. At that time, McKenzy told The Associated Press that customers weren't reading the fine print on the company's website when they ordered the sample product.
The FTC's investigation followed more than 2,800 complaints to law enforcement and the Better Business Bureau about the company since 2007.
Because the company does business nationally, the FTC could have filed its lawsuit anywhere in the country. "We chose to sue in Chicago because our Chicago office conducted the investigation and is handling the litigation, and because this scam has victimized many Illinois consumers," said FTC Midwest Director C. Steven Baker in an e-mail.
Rhonda Wooten, 48, of Paxton in east-central Illinois, said she learned "a hard life lesson" after losing up to $500 trying to stop shipments of weight-loss pills and charges to her checking account.
She had given the company her debit card number after seeing a photo on its website of a supposed satisfied customer, who coincidentally also hailed from Paxton. In reality, Vladeck said, it was a stock photo and the company's software had automatically inserted "Paxton" because it detected Wooten was from there.
"I'm a preschool teacher and they don't make good money, so $200 to $500 is a lot," Wooten said. "It could buy a lot of food for my kids and my family."
Martin Elliott of Visa Inc. said consumers should notify the bank that issued their credit card or debit card if they think they've been a victim of fraud. Elliott appeared at the FTC's Chicago news conference.