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DOJ prevails in fraud case against dietary supplement businessman

Oregon businessman operating a dietary supplement firm had $700,000 in assets seized.

A jury last Wednesday found the U.S. government is entitled to keep $700,000 in assets that were seized in 2011 from an Oregon businessman who operated a dietary supplement firm that advertises its products as being effective in treating autism, federal prosecutors said. 

Prosecutors won a civil forfeiture case against 66-year-old James Cole.

Following about four hours of deliberations in the wake of a six-day trial, the jury found the assets of Cole's businessesincluding his supplement firm Maxam Nutraceutics and a separate business that sold electronic vibration machines, TurboSonic USAwere traceable to fraud, the U.S. Department of Justice announced in a Nov. 14 news release.

The civil forfeiture verdict dealt a heavy blow to Cole at a time when he is facing two other government actions, a criminal indictment and a separate civil action in which the FDA is seeking a permanent injunction against Cole and his supplement business for violating current good manufacturing practices (cGMPs) and making unlawful claims that the products can treat such diseases as autism, Alzheimer's and cancer.

"Jim Cole and all of his employees are very disappointed at the verdict," said John Markham, a Boston lawyer representing Cole, in a statement to Natural Products Insider. "They believe to their core that the Maxam products are safe and render truly remarkable results. Clearly, Mr. Cole has to make peace with the FDA, and he looks forward to doing that," Markham added. "He will not give up on the products involved. He thinks they have saved his life and done a world of good for other people."

According to Markham, some witnesses who spoke on behalf of Cole testified "through tears about how wonderful the products are and how they intend to continue taking them as long as they are available." 

The government doesn't paint such a rosy picture of Cole's products. According to its news release, prosecutors argued Cole misrepresented that a Harvard chemist manufactured Maxam's sprays when they were actually "made by a twice-convicted federal felon and self-taught chemist in the Boston area operating in unknown labs under unknown conditions."

Evidence also showed Cole neglected to reveal Maxam's "products contained rare bacteria not listed on the labels and believed by the government's expert to have been intentionally put into the products by the felon manufacturer," the Justice Department stated. The government also said Cole failed to disclose he had not conducted clinical trials on Maxam's products despite a contrary statement.

In April 2011, federal authorities seized $700,000 in assets from Cole's home and businesses, including three bank accounts, Cole's interest in a California condominium and roughly 320 ounces of gold found in a safe. The evidence at trial disclosed Maxam and TurboSonic grossed nearly $21 million between 2005 and mid 2011, the Justice Department said.

In an interview with Natural Products Insider last year, Cole said FDA's decision to notify his customers that Maxam was under investigation took a toll on his business.

"We had customers that called us to let us know, 'don't ever contact me again. We don't want to do business with your company because you are under investigation," he said. "They do a pretty good job of destroying a human. I would blame the FDA." 

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