FTC: Hi-Tech to Pay $15.8M Fine

WASHINGTON—Under charges from FTC, dating back to 2004, a federal court has ruled Hi-Tech Pharmaceutical and related defendants—National Urological Group (dba Warner Laboratories), the National Institute for Clinical Weight Loss Inc., Dr. Terrill Mark Wright, and corporate officers Jared Wheat, Thomasz Holda, Michael Howell and Stephen Smith—are responsible for paying about $15.8 million in consumer redress, on charges it violated the FTC act via false advertising and unsubstantiated claims for several weight-loss products. The court has also approved a permanent injunction against Wright, a physician associated with the online pharmacies, as well as a fine of $15.4 million for his ill-gotten gains.

U.S. District Judge Charles A. Pannell agreed with FTC's method of calculating redress amount based on the sales figures for the offending weight-loss products, rebuffing the defendants' claims that the redress amount should be based only on profits, not sales, and that it should be distributed directly to consumers, not to FTC. Pannell further rejected defendant claims that consumers who re-ordered the products should be excluded from the redress because they re-ordered due to positive experience with the products; the judge said there is no evidence why these consumers re-ordered, as they could have been influenced by the advertising claims at the center of this FTC fraud case. In addition, Pannell ruled all the defendant companies involved can be held jointly liable, as they acted as a common enterprise.

In the case against Wright, FTC accused the physician of making "numerous false and unsustainable endorsements that afforded the product an air of clinical safety that it otherwise may not have had." The court rejected Wright's defense that FTC cannot prove he will violate the law again. In fact, FTC showed Wright violated the law in the past and continues to make endorsements for Hi-Tech and the other companies, including making some of the same claims central to this case.