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Mannatech Sues Author of Study Promoting Its Products for Fraud

David Evans

©1999 Bloomberg, LP
August 25, 1999

Mannatech Inc. is suing its former $10,000-a-month consultant for fraud, alleging research he published promoting the company's nutritional supplements contained false claims. The study by Dr. Darryl See, a former associate clinical professor at the University of California Irvine Medical School, ranked Mannatech's pills in the top five of 196 nutritional supplements tested. The company's more than 400,000 distributors used the study to sell its products. See also claimed the pills are effective against cancer and AIDS.

Mannatech's lawsuit, filed Friday in U.S. District Court in Dallas, alleges See lied when he said his study was funded by the National Institutes of Health. It charges he falsely claimed it was conducted under the auspices of the University of California Irvine Medical School. Both alleged misrepresentations were first reported by Bloomberg News on Aug 4. "The fraudulent representations were material and intentional on the part of See," the company's suit alleged.

Shares of Mannatech, which first sold stock to the public in February, when See's study was published, closed yesterday at 7 7/8, down from their Feb. 17 high of 31 3/4. The Coppell, Texas-based company could now face shareholder lawsuits alleging securities fraud, said Columbia University law school professor John Coffee. "I suspect this company is legally dead in the water," said Coffee. "The real question is whether it has enough assets after legal expenses to be able to settle."

Taking Responsibility

In a written response to questions from Bloomberg News last month, the company defended the study, saying it didn't contain falsehoods, and it acknowledged responsibility for its contents. "Mannatech takes responsibility for the scientific materials its associates use to sell product regardless of where the material is produced or who produced it," it said.

In its lawsuit, Mannatech says See provided it with a document he said was his NIH grant application. The company said it recently contacted the agency, which told it See's study didn't receive NIH funding. Mannatech also alleged See's wife, who has been a Mannatech distributor since 1997, recently solicited three Mannatech distributors to become involved with FreeLife, a competitor. The company seeks in excess of $100,000 from See, including the return of all money paid to the physician since he began speaking at Mannatech sales meetings in May 1998. It also seeks to end their consulting contract, dated June 1.

See resigned from UC Irvine's faculty last year after a school investigation censured him for violating research rules, including falsifying documents and conducting laboratory experiments on a rabbit without sufficient anesthesia. The Journal of the American Nutraceutical Association, which published See's study featuring Mannatech supplements, has stopped selling reprints of See's articles, books and videotapes.