Mannatech

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Mannatech Inc.
Type Public (NASDAQ: MTEX)
Founded Coppell, Texas, USA
Headquarters 600 S. Royal Lane, Suite 200 Coppell, Texas
Key people Sam Caster, Founder
Wayne Badovinus, CEO
Industry Wellness
Biotech
Website Mannatech.com

Mannatech, Incorporated, is a multinational firm engaged in multi-level marketing, research, development, and distribution of glyconutrients, the company's name for blends of sugars. Mannatech was founded in 1994 by Samuel L. Caster and is headquartered in Coppell, Texas.[1] It operates in the United States, Canada, Australia, the United Kingdom, Japan, New Zealand, Republic of Korea, Taiwan, Denmark, Germany, South Africa and Singapore. The company's stock is traded on the NASDAQ exchange. In 2006, Forbes magazine named Mannatech the #5 company on its annual list of the "200 Best Small Companies." Since its inception, Mannatech has faced public scrutiny regarding the efficacy of its products, including a class-action lawsuit in 2005 [2] and an attorney general investigation in 2007 [3], but by 2009 the company settled these issues and restructured its compliance department. Mannatech now offers six-month money-back guarantees on all of its products. [4]

Contents

[edit] Products and scientific evaluation

[edit] Products

As of December 31, 2006, the company offered 24 nutritional products, three topical products, seven different skin care products, and a weight-management system consisting of four different products. Mannatech is most widely known for Ambrotose, "a glyconutritional dietary supplement ingredient consisting of a blend of monosaccharides, or sugar molecules," its lead product.[5] In an SEC filing, the company stated that its products "are formulated with predominately naturally-occurring, plant-derived, carbohydrate-based ingredients that are designed to use nutrients working through normal physiology to help achieve and maintain optimal health and wellness, rather than developing synthetic, carbohydrate-based products, as other companies are doing."

[edit] Independent research

The body cannot digest Ambrotose, as it lacks the enzymes needed. [6] Prominent glycobiologist Dr Ronald Schnarr of Johns Hopkins told 20/20 in a June 1, 2007 interview, "All of the sugar building blocks that we need in our body are made from the most common foods we eat."[7] Dr Hudson Freeze, another leading glycobiologist[7] said this about glyconutrients: "There are authentic, scientific studies that have looked at people drinking these kinds of materials, and it doesn't really do anything except increase flatulence."[7]

[edit] Company-funded research

Mannatech's products have not been evaluated for efficacy in treating any illness or curing any disease, although the company states in its fiscal year 2006 SEC filing that it has contracted with several firms for the purpose of product testing.[5] In December 2006, Mannatech renewed its 2002 research agreement, previously renewed in 2004, with St George's Hospital Medical School, in London, United Kingdom to aid in the funding of a "three-year clinical trial related to dosing and optimization study" on Ambrotose."[5] St George's Hospital & Medical School employs Dr John Axford, a member of Mannatech's board of directors since 2002,[8] who serves as principal investigator in the trial. In addition to benefiting from Mannatech clinical trial funding, Dr Axford has received financial and stock compensation from Mannatech for consulting and for his duties as a board member and spokesman for the corporation.[5][9] According to the Wall Street Journal, Mannatech will be publishing some of these results, although the results will not be subject to the peer review process.[6]

The results of a preliminary study on Mannatech's OsoLean™ powder was released on March 23, 2009. This was an open-label, eight-week study of 112 overweight adults which was published March 16, 2009 in the Open Nutraceuticals Journal. The study was conducted by Mannatech scientists in collaboration with researchers in the Department of Biostatistics at the University of North Texas Health Science Center. [10] The results demonstrated that daily intake of Osolean powder appeared to reduce appetite, support weight loss, and reduce waist circumference. [11]

On March 19, 2009 Mannatech launched the scientific web site www.mannatechscience.org. The website contains Mannatech's published, pre-clinical and clinicals studies, basic information about ingredients in its products, and information about nutrition and dietary supplementation.[12]

[edit] Public Scrutiny

[edit] Securities Exchange Act class-action lawsuit

The company is known for its literature, websites and multilevel marketing with claims of scientific links to cellular glycobiology long disputed by the relevant individual Nobel prize winners. [13] On September 9, 2005 a class-action lawsuit was filed against Mannatech for alleged violations of the Securities Exchange Act. The plaintiff class accused Mannatech of violating the act by by "issuing a series of material misrepresentations"; specifically: failing to control its sales associates and allowing them to make false claims concerning the efficacy of Mannatech products. The plaintiffs consisted of the purchasers of Mannatech stock during the period August 10, 2004 through July 30, 2007. [2] On March 20, 2008, Mannatech settled the class-action lawsuit by agreeing to pay $11.25 million to the plaintiff class. As part of the settlement, Mannatech admitted no wrongdoing. [14]

[edit] Texas Attorney General civil complaint

Mannatech came under investigation by the Texas Attorney General on October 27, 2006 for alleged violations of that state's Deceptive Trade Practices Act. [15] In response to this criticism, Mannatech’s founder and chief executive officer at the time, Samuel L. Caster, offered his view: "We walk the fine line of always stating our case appropriately and always training our people: We're not into the treatment, cure or mitigation of disease. We're into the improvement of quality of life. Now, who can benefit from good nutrition? Sick people, well people, everybody. Everybody benefits from good nutrition." [15] On July 5, 2007, Texas Attorney General Greg Abbott formally charged Mannatech, Inc., Sam Caster, and several related entities with operating an illegal marketing scheme in violation of state law. A press release stated, "Today’s enforcement action stems from a large-scale investigation by state authorities, who examined Mannatech’s dubious claims about the health benefits of its products." [3] In response to the civil complaint, Mannatech expanded its compliance department and began to provide periodic reports to the Attorney General's office to ensure that the marketing efforts of its affiliate network adhere to appropriate guidelines. [4] Mannatech settled the civil complaint on February 26, 2009 by agreeing to pay $4 million in restitution to clients who purchased products and $2 million to the state to cover its costs in the case. In addition, Sam Caster agreed to pay a $1 million civil penalty and steer clear of any type of leadership position or employment relationship with Mannatech for five years. [16] When discussing the settlement at a news conference, Abbot stated, "Bottom line, this is a warning to the general public: Be wary of phony claims of magic cure-all pills or false hope in a bottle. You could be duped into purchasing something that has no real effect and no real value." [17] Mannatech did not admit wrongdoing; settling was easier than debating Abbott, according to current CEO Wayne Badovinus. "If they do it again, we will ensure they get put out of business," Abbott said. [18]

[edit] ABC investigation

A 20/20 undercover investigation that aired June 1, 2007 on ABC Television showed Mannatech's sales associates teaching sales recruits how to target Mannatech products to patients with specific illnesses in a manner that purportedly does not violate U.S. federal law, including U.S. Food and Drug Administration regulations, by avoiding direct claims that the products cure any particular diseases.[7] Mannatech CEO Sam Caster was interviewed for the show and told 20/20 that Mannatech makes no specific health claims about its products. “I don’t think dietary supplements treat, cure, mitigate anything. It is not meant to substitute a doctor’s oversight, but it plays an important role in the whole health equation.” [19]

[edit] Sam Caster

[edit] Prior to Mannatech

Sam Caster, founder and former Chairman of the Board of Directors of Mannatech, has a history of questionable dealings and run-ins with the Texas Attorney General. His first major venture, Eagle Shield, was an insulation product that claimed to utilize technology developed by NASA and could supposedly reduce heating and cooling costs by up to 40%. The Attorney General of Texas concluded that the product did not reduce consumers' bills in the amounts advertised.

Caster's second product, the "Electrocat," was sold as a pest control device. The Electrocat reportedly emitted pulsed vibrations that repelled rats, crickets, snakes, ticks, spiders, mosquitoes, and scorpions. However, in January 1991, the Attorney General of Texas investigated the product and found that the Electrocat emitted no vibrations whatsoever. The Attorney General declared, "The device is a hoax, and stands on the same scientific footing as a perpetual motion machine."[20] Caster pulled the product off the shelves.

[edit] Mannatech's inception

Caster then started Mannatech in 1994, coinciding with Congress' passage of the Dietary Supplement Health and Education Act of 1994, which made profitable marketing of a wider spectrum of dietary supplements a possibility. Caster's wife Linda later wrote and released a book titled Undeniable Destiny, in which she refers to Mannatech as a "Joseph company," based on Joseph in the Bible, who, as she noted in her book, had a divinely inspired destiny to fulfill.

On August 22, 2007, Sam Caster resigned as CEO of Mannatech.[21] The Wall Street Journal reported: "Mr. Caster suggested his own resignation so he could focus on company marketing, said (Mannatech board member) Mr. (Larry A.) Jobe. Mr. Jobe said the board wasn't displeased with Mr. Caster, but that the lawsuits gave members 'a lot of concern.'"

On October 19, 2007, it was reported that Mannatech Inc. had fired Grant Thornton LLP as its auditor after the accounting firm demanded that Mannatech remove Sam Caster from all responsibilities.[22]

Sam Caster now is barred by the Attorney General of Texas from serving as a director, officer, or employee of Mannatech for five years. Caster is also barred from taking a role in any other multilevel marketing programs for five years. Despite this, current CEO Wayne Badovinus stated Caster will work as a consultant answering directly to him. [17]

[edit] MannaRelief non-profit organization

Mannatech founded the MannaRelief non-profit organization in 1999. The organization has assisted in providing dietary supplements to over 83,000 orphans in over 80 countries.[23]

[edit] Resources

[edit] Citations and footnotes

  1. ^ "Mannatech, Inc.". Mannatech, Inc.. http://www.mannatech.com/AboutMannatech/Default.aspx. Retrieved on 2007-07-08. 
  2. ^ a b "Milberg Weiss Announces the Filing of a Class Action Lawsuit Against Mannatech, Inc.". All Business. September 12, 2005. http://www.allbusiness.com/legal/legal-services-litigation/5061603-1.html. Retrieved on May 27, 2009. 
  3. ^ a b Texas Attorney General Greg Abbott (July 5, 2007). Texas Attorney General Charges Mannatech with Unlawful, Misleading Sales Practices. Press release. http://www.oag.state.tx.us/oagnews/release.php?id=2086. Retrieved on 2007-07-08. 
  4. ^ a b "Mannatech Reaches Settlement with Texas Attorney General". AOL Finance. February 26, 2009. http://money.aol.com/news/articles/qp/pr/_a/mannatech-reaches-settlement-with-texas/rfid189209203. Retrieved on May 27, 2009. 
  5. ^ a b c d Mannatech, Incorporated (March 16, 2007). Form Mannatech, Incorporated: 10K SEC Public Filing for FY 2006. United States Securities and Exchange Commission. http://www.sec.gov/Archives/edgar/data/1056358/000119312507056895/d10k.htm. Retrieved on 2007-07-08. 
  6. ^ a b Sataline, Suzanne (May 11, 2007). "Health Claims by Sales Force Boost Supplement Firm". Wall Street Journal / Dow Jones & Company, Inc.. http://online.wsj.com/article/SB117884606430799400.html?mod=home_health_right. Retrieved on 2007-07-08.  Note that full article is available only to WSJ subscribers. "True Believers: Health Claims by Sales Force Boost Supplement Firm; Mannatech's Products Attract the Gravely Ill; Disclaimers on Labels". "Some researchers say they doubt that Ambrotose offers any health benefits. Hudson Freeze, who studies complex carbohydrates as a professor of glycobiology at the Burnham Institute for Medical Research in La Jolla, Calif., contends the body can't digest Ambrotose because humans lack the enzymes necessary to break down the plant fibers it contains into simple sugars."
  7. ^ a b c d Avila, Jim; Geoff Martz, and Andrew Paparella (June 1, 2007). "Cure for Your Disease or Empty Promise?". ABCNews Internet Ventures. http://abcnews.go.com/2020/story?id=3228488. Retrieved on 2007-07-08. 
  8. ^ "Dr John Axford BSc, MD, FRCP Profile". Forbes.com. 2007. http://www.forbes.com/finance/mktguideapps/personinfo/FromMktGuideIdPersonTearsheet.jhtml?passedMktGuideId=2. Retrieved on 2007-07-08. 
  9. ^ "Mannatech, Incorporated: Form 10Q SEC Public Filing". August 8, 2004. http://sec.edgar-online.com/2004/08/09/0001193125-04-135816/Section2.asp. Retrieved on 2007-07-08. 
  10. ^ http://finance.yahoo.com/news/Study-Finds-Mannatechs-bw-14714520.html
  11. ^ Sinnott RA, Maddela RL, Nelson EK, Bae S, Singh KP, Anderson JA. The modifying effects of a calcium-rich whey protein supplement (OsoLeanTM Powder) on weight loss and waist circumference in overweight subjects: a preliminary study. Open Nutraceuticals J 2009; 2:36-41.
  12. ^ http://finance.yahoo.com/news/Mannatech-Launches-Scientific-bw-14688140.html
  13. ^ "Nobel Prize winners say sites falsely cite research". Fort Worth Star-Telegram (Ross Institute Internet Archives). September 11, 2006. http://www.rickross.com/reference/mannatech/mannatech28.html. Retrieved on 2009-05-27. 
  14. ^ "Mannatech Reaches Settlement in Securities Class-Action Lawsuit". All Business. March 20, 2008. http://www.allbusiness.com/legal/civil-procedure-settlement-compromise/7751569-1.html. Retrieved on May 27, 2009. 
  15. ^ a b Greenberg, Herb (October 27, 2006). "Texas Attorney General probing Mannatech". MarketWatch, Inc.. http://www.marketwatch.com/news/story/story.aspx?guid=%7B50e126ad-f88b-4070-ba5e-635ddd72b298%7D. Retrieved on 2007-07-08. 
  16. ^ "Mannatech Settles with Attorney General". Dallas Business Journal. February 26, 2009. http://dallas.bizjournals.com/dallas/stories/2009/02/23/daily52.html. Retrieved on February 26, 2009. 
  17. ^ a b "Coppell-Based Mannatech to Pay Millions to Settle Diet-Supplement Lawsuit". Ft. Worth Star Telegram. February 26, 2009. http://www.star-telegram.com/business/story/1228328.html. Retrieved on February 26, 2009. 
  18. ^ "Mannatech, former CEO settle with state". Dallas Morning News. February 26, 2009 accessdate = February 26, 2009. http://www.dallasnews.com/sharedcontent/dws/bus/stories/022709dnbusmannatech.77ae57d.html. 
  19. ^ Cure for Your Disease or Empty Promise?. VideoMeeo Blog of Nations. http://videomeeoh.com/?p=26. Retrieved on May 27, 2009. 
  20. ^ Brammer, Rhonda (May 9, 2005). "Manna from Texas". Barron's Online / Dow Jones & Company, Inc.. http://users2.barrons.com/lmda/do/checkLogin?mg=evo-barrons&url=http%3A%2F%2Fonline.barrons.com%2Farticle%2FSB111542290501327322.html. Retrieved on 2007-07-08.  Full text available only to Barron's Online subscribers, but reproduction of article is available at Jonathan Crowell, et al. v. Mannatech, Inc.
  21. ^ Sataline S. "Caster Resigns as CEO of Mannatech - WSJ.com". http://online.wsj.com/article/SB118775074805504989.html?mod=googlenews_wsj. Retrieved on 2008-04-06. 
  22. ^ Sataline S. "Mannatech Fires Its Auditor Amid Dispute Over Founder". http://online.wsj.com/article/SB119275727764064354.html?mod=googlenews_wsj. Retrieved on 2008-04-06. 
  23. ^ "MannaRelief.". MannaRelief Ministries. http://www.mannarelief.org/icws290w3/html/blessing.html. Retrieved on 2009-06-26. 
Retrieved from "http://en.wikipedia.org/wiki/Mannatech"
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