Mannatech

Mannatech, Incorporated, is a multinational firm engaged in multi-level marketing, research, and distribution of glyconutrients. Its stock is traded on the NASDAQ exchange and as of July, 2007 has a market capitalization of about US $280 million, classifying it as a small-cap corporation. Mannatech was founded in 1994 by Sam Caster and is headquartered in Coppell, Texas. It operates in the United States, Canada, Australia, the United Kingdom, Japan, New Zealand, Republic of Korea, Taiwan, Denmark, Germany and Mexico. In 2006, Forbes magazine named Mannatech the #5 company on its annual list of the "200 Best Small Companies." A 20/20 undercover investigation aired on June 1, 2007 showed Mannatech's independent contractor 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.

Products and scientific evaluation

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. 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."

Independent research

Some researchers doubt that Ambrotose confers any health benefits, because the body lacks the enzymes needed to break down the plant fibers contained within Ambrotose. 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." Dr. Hudson Freeze, another leading glycobiologist 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."

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. In June 2006, Mannatech signed a research agreement with Hyperion Biotechnology, Inc., in which Mannatech agreed to fund a research study related to Ambrotose. Additionally, in December 2006, Mannatech renewed its 2002 research agreement, previously renewed in 2004, with St. George's Hospital Medical School, in London, England to aid in the funding of a "three-year clinical trial related to dosing and optimization study" on Ambrotose." St. George’s Hospital & Medical School employs Dr. John Axford, a member of Mannatech's board of directors since 2002, 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. 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.

Current litigation and state investigation

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. A class-action lawsuit was filed against Mannatech in 2005 for alleged violations of the Securities Exchange Act. The plaintiffs allege Mannatech made "materially false and misleading statements" with respect to its products. Mannatech is also currently under investigation by the Texas Attorney General for alleged violations of that state's Deceptive Trade Practices Act. In response to these and similar criticisms, Mannatech CEO Sam Caster has 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."

On July 5, 2007, Texas Attorney General Greg Abbott charged Mannatech, Inc., its owner, Samuel L. 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."

Mannatech's inception and Sam Caster

CEO Sam Caster 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 deterred rats, crickets, snakes, ticks, spiders, mosquitoes, and scorpions away from an area. However, in January of 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." Caster pulled the product off the shelves.

Mr. 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 authored and released a book entitled 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 22nd, 2007, Sam Caster resigned as CEO of Mannatech. [1] The current President and Chief Operating Officer, Terry Presinger, will serve as interim CEO until he retires as planned, in June 2008. The Wall Street Journal reported: "Mr. Caster suggested his own resignation so he could focus on company marketing, said (Mannatech board member) Mr. Jobe. Mr. Jobe said the board wasn't displeased with Mr. Caster, but that the lawsuits gave members 'a lot of concern.'"

On October 19th, 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. [2]