INSIDER Law
Judge Shutters Dietary Supplement Business That Played Cat-And-Mouse Game

Judge Shutters Dietary Supplement Business That Played Cat-And-Mouse Game

<p>It was just 15 months ago that prosecutors announced the government could keep $700,000 in assets that were seized from James Cole after a jury found businesses owned by the then 66-year-old were traceable to fraud.</p>

Editor’s note: This story is part one of a two-part series that examines an FDA enforcement action against a dietary supplement firm.

An Oregon-based dietary supplement firm that has been battling FDA on numerous fronts has been shut down, marking the latest defeat to a businessman whose assets the government seized years ago.

James G. Cole Inc., which operates under several names, including Advanced Sports Nutrition and Maxam Neutraceutics, must recall and destroy all its products.

U.S. District Judge Michael Simon found the company introduced into the market unapproved, new drugs and adulterated products that failed to meet FDA regulations.

The defendants “played a cat-and-mouse game with the FDA for more than four years," Simon wrote in a 17-page order on Feb. 5.

The order dealt a monstrous blow to the owner James Cole, whose years-long skirmishes with the feds are reminiscent of the clashes between regulators and Kevin Trudeau, the TV pitchman who was sentenced last year to 10 years in federal prison.

FDA, Cole predicted in the comments section of a Natural Products INSIDER story that profiled the government's 2011 raid on his home and businesses, is on “a crusade to shut Maxam Labs down and to keep the moneys and inventory they have stolen from me totaling nearly $2 million."

Mission accomplished.

Admissions

According to the judge, the defendants acknowledged the company’s processes failed to meet FDA regulations, and admitted “they still do not know the measurements of the ingredients in their products."

Maxam was found to have violated a number of cGMPs (current good manufacturing practices), including requirements to establish specifications, test components and detail the steps of the manufacturing process.

The judge ruled Cole’s products were “per se adulterated" under the Federal Food, Drug, and Cosmetic Act (FD&C). He found testimonials on websites and social media showed the dietary supplement company was selling drugs to treat such diseases as autism, Alzheimer’s and HIV.

“Defendants ask the Court for 45 days to come into compliance before the permanent injunction takes effect. But Defendants have had four years to come into compliance—and Defendant Cole has admitted that full compliance is ‘impossible,’" Simon wrote in his order.

First Amendment Defense

Cole and his counsel—Boston-based attorney James Markham, a former federal prosecutor who also has experience at a Wall Street law firm—argued the testimonials are true statements that are protected by the First Amendment.

Prohibition of such content, Cole and his legal team argued, would fail to withstand scrutiny under a 1980 U.S. Supreme Court decision. The famous case, Central Hudson Gas and Electric Corp. v. Public Service Commission, laid out the government’s burden in justifying a restriction on commercial speech.

Simon wasn’t persuaded that the government had infringed on protected speech. Claims that a product can treat a disease, the judge said, are not barred by the FDCA and don’t violate the First Amendment. Instead, the law bars the sale of products with an intent to treat a disease, he explained.

“When Defendants incorporate a customer testimonial into advertising material, they endorse and adopt the disease claims made in the testimonial; therefore, the testimonial is evidence of their intent that the product be used to treat disease," Simon wrote.

FDA Wars

Just 15 months ago, federal prosecutors announced the government could keep USD $700,000 in assets that were seized from Cole after a jury found businesses owned by the then 66-year-old were traceable to fraud. Prosecutors painted him as an unscrupulous businessman who relied on a felon to make his spray bottle supplements.

Lawyers for Cole later demanded a new trial, arguing testimony from an FDA official unfairly prejudiced his client and should have been excluded. The FDA employee testified at trial that Cole's products could have contained analogue drugs that simulate Ecstacy and other drugs, even though Maxam's products tested negative for such substances, according to a Dec. 30, 2013 motion requesting a new trial.

The case dates back to 2011 when agents searched Cole’s home and businesses. Federal agents recovered a safe in Cole’s Hood River, Oregon home. It contained 320 ounces of gold coins and bars worth $523,000, according to an affidavit.

Cole blamed FDA for damaging his business by notifying customers that Maxam was under investigation. He said Maxam was well established at the time with around 68,000 customers.

“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,’" Cole said in a 2012 interview with INSIDER. "They do a pretty good job of destroying a human. I would blame the FDA."

Cole and Markham did not respond to emailed requests for comment on the permanent injunction. But Cole has been very public about his fight with the feds.  Maxam tweeted last month, “Be in the courtroom Friday 1/23 when Jim Cole #StandsUp2FDA & fights 4 your #HealthFreedom."

That fight has raging for years.

Warning Letters

More than four years ago, FDA warned in an Oct. 12, 2010 letter that Cole’s websites were making claims that products could treat drugs.

One testimonial quoted by Simon declared, “I am happy to report that after only 10 days of being on your product, I am seeing changes in the amount of facial paralysis." “Try our oral chelation therapy called clathration," the judge quoted a non-testimonial, “for autism, Alzheimer’s, allergies, heavy metal detox and more."

On Nov. 2, 2010, the defendants advised FDA the statements had been removed from the website. But in March 2012, Simon noted, FDA discovered through an inspection of Maxam’s manufacturing facility that it was out of compliance with cGMPs, and the company was continuing to make disease claims.

On April 19, 2012, the defendants outlined steps to comply with cGMPs and assured FDA the disease claims had been removed.

The public health agency wasn’t satisfied. Five months later, FDA warned the company that such steps were inadequate, prompting Cole to personally respond. According to the judge’s order, Cole asserted “with little explanation that Defendants’ manufacturing processes had been brought into complete compliance."

In early 2013, FDA returned to Maxam’s facility. It found the company was still making disease claims and cited Maxam for 16 cGMP violations, according to the court. Again, Cole promised to take corrective action.

“As of August 19, 2014, however—almost a year after the Government filed this action in September 2013—Maxam’s Facebook page still contained the claim that one of defendants’ products was effective to treat ‘environmentally induced cases of Alzheimer’s, autism, fibromyalgia and more,’" Simon wrote.

The judge also said depositions taking early last year divulged Maxam’s manufacturing facility was still not cGMP-compliant.

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