Settlement Will Provide for Consumer Restitution in Deceptive Practices Suit over Weight-loss Product Marketing, Sales
HARTFORD – The state of Connecticut and the Federal Trade Commission (FTC) have entered into a settlement with three Branford-based companies and their owner that will provide restitution to consumers harmed by the companies’ alleged deceptive and unfair Internet marketing and sales practices, Attorney General George Jepsen and state Department of Consumer Protection Commissioner William M. Rubenstein said today.
A federal lawsuit, brought jointly by the state and FTC in 2011, alleged that LeanSpa LLC, NutraSlim LLC and NutraSlim U.K. Ltd., all based in Branford, and Boris Mizhen of Guilford, individually and as the owner or corporate officer of the three companies, used unfair and deceptive practices to advertise, market and sell dietary supplements. Mizhen’s spouse, Angelina Strano, was also named as a relief defendant who received or otherwise benefitted from funds gained through the deceptive practices.
The companies allegedly engaged in various deceptive practices, including: using fake news Web sites and testimonials to market their products; offering “free” trials if consumers paid for shipping and handling, but then using credit or debit card information to charge consumers for the trial; billing of unauthorized charges after enrollment in “negative option” purchase plans, which require consumers to take affirmative action to cancel the plan; failure to clearly disclose preconditions for order cancellations and refunds; and failure to provide refunds.
The settlement, which must be approved by the court, includes a monetary judgment in favor of the state and FTC in the amount of $32,725,453; however, the judgment is suspended in part due to evidence that the defendants were unable to pay the full amount. The settlement requires a court-appointed receiver to sell certain real estate of Mizhen and Strano, and requires the liquidation and transfer of other assets in order to make partial payment towards the judgment. It is anticipated that sale of these assets may yield as much as $7 million. Suspension of the judgment will be lifted immediately, upon motion to the court, if the defendants misstated or failed to disclose any material assets in their financial disclosures to the plaintiffs.
The settlement also calls for significant injunctions against deceptive practices, greater oversight over affiliate programs and significant compliance reporting measures for the next 20 years.
“My office reviewed approximately 1,278 consumer complaints not just from Connecticut, but around the country, and the unfair and deceptive conduct alleged in those complaints was simply unacceptable,” Attorney General Jepsen said. “While the defendants have submitted affidavits and tax returns demonstrating their inability to pay the full judgment, this settlement ensures that substantial assets they do possess will go toward making whole those consumers who were harmed. This settlement also includes significant safeguards to prevent these companies from engaging in such conduct in the future. I’m pleased that our partnership with the Federal Trade Commission has brought us to this positive resolution. Consumers must be on guard against scams and phony marketing, which have proliferated on the Internet. This resolution sends a strong message that Internet fraudsters operating out of Connecticut do so at considerable risk.”
“The pattern of conduct alleged in this complaint was appalling,” Commissioner Rubenstein said. “The use of fake news websites with false claims to lure consumers to buy products is unacceptable by itself. It is made all the worse when consumers are tricked into unwanted purchase plans and then are improperly thwarted in their attempts to cancel and obtain refunds. Consumers are entitled to honest claims about products and fair purchase and refund terms. This settlement will prevent those responsible from repeating their behavior and they will forfeit their assets to help compensate consumers.”
Funds recovered through the settlement will be placed in an FTC-administered fund to be used to provide relief to consumers harmed by the companies’ alleged conduct.
The companies marketed their weight-loss and colon-cleanse products under various names, including LeanSpa, LeanSpa with Acai, LeanSpa with HCA, LeanSpa Cleanse, NutraSlim, NutraSlim with HCA, QuickDetox and SlimFuel.
The settlement imposes permanent injunctions against specific deceptive practices, including all negative option purchase plans; the use of unsubstantiated claims about product efficacy; any misrepresentation of facts about the costs of product trials; any unauthorized charges on consumer credit or debit cards or accounts; and any failure to disclose terms, limitations or conditions of any program or plan.
Assistant Attorneys General Jonathan Blake, Matthew Fitzsimmons, JoseRene Martinez and Phillip Rosario, head of the Consumer Protection Department, are assisting the Attorney General with this matter.