| U.S. Federal Trade Commission |
FTC News Release, Sep 21, 2005
Three Cortislim Defendants to Give up $4.5 Million in Cash and Other Assets
FTC’s Litigation Continues Against Four Remaining Defendants
Three defendants will give up $4.5 million in cash and
other assets to settle Federal Trade Commission charges
stemming from their roles in the marketing of CortiSlim and
CortiStress, dietary supplements promoted for weight loss and
disease prevention, respectively. The surrendered assets will
include an investment partnership and related charitable
foundation, a boat, a truck, and a variety of real estate
interests. As part of the settlement, the defendants cannot
seek a cash refund of state or federal taxes for 2003, 2004,
or 2005 that were paid prior to the settlement. In its
complaint, the FTC alleged that the defendants made false or
unsubstantiated product claims and used deceptively formatted
infomercials in pitching the dietary supplements.
The defendants in the settlement announced today,
California-based Pinnacle Marketing Concepts, Inc.
(“Pinnacle”) and its president, Thomas F. Cheng, and
Utah-based Shawn M. Talbott, cannot make benefit or efficacy
claims for any dietary supplement, food, drug, cosmetic, or
device unless the claims are truthful and substantiated.
Litigation continues against the four defendants who have not
settled.
In September 2004, the Commission filed a complaint against
Window Rock Enterprises, Inc.; Stephen F. Cheng; Infinity
Advertising, Inc.; Gregory S. Cynaumon; and Shawn M. Talbott.
The Commission later amended its complaint to add Pinnacle and
Thomas F. Cheng as additional defendants. The FTC alleges that
advertising claims about CortiSlim’s ability to, among other
things, cause rapid, substantial, and permanent weight loss in
all users were false or unsubstantiated, as were claims about
CortiStress’s ability to reduce the risk of, or prevent,
osteoporosis, obesity, diabetes, Alzheimer’s disease, cancer,
and cardiovascular disease. The FTC also alleges that
CortiSlim and CortiStress infomercials were deceptively
formatted to appear as talk shows rather than advertisements.
The advertising campaign for CortiSlim ran nationwide,
including ads on broadcast and cable television, radio, print
media, and the Internet.
The FTC announced two separate
stipulated final agreements and orders for permanent
injunction today, one with Pinnacle and its president, Thomas
Cheng, who the FTC alleges participated in the marketing of
Cortislim and CortiStress; and one with Talbott, who the FTC
alleges formulated the two products and participated in the
advertising. Both orders prohibit the making of certain claims
about CortiSlim and CortiStress and require competent and
reliable scientific evidence to support any other claims made
about the products. The orders also bar misrepresentations of
any tests or studies and prohibit claims about the
performance, effects on weight, or other health benefits of
any dietary supplement, food, drug, cosmetic, or device unless
the claims are true, not misleading, and substantiated by
competent and reliable scientific evidence. Finally, both
orders prohibit the use of deceptively formatted television
and radio advertisements and require the use of “paid
advertisement” disclosures for television ads longer than 15
minutes and for radio ads longer than five minutes.
The settlement with Pinnacle and Thomas Cheng requires them
to give up $3.4 million in assets: $700,000 cash; the net
proceeds from an investment partnership and related charitable
foundation; a $215,000 boat; a $40,000 truck; and a $450,000
property lien. If they are later found to have misrepresented
their financial status, the two defendants would be liable for
a $23.8 million judgment.
The settlement with Talbott requires him to give up $1.12
million in assets: $225,000 cash; $350,000 from equity in
property in Centerville, Massachusetts, or title to the
property; $38,700 from the sale of a timeshare in Hawaii or
title to the timeshare; and cash equal to 80 percent of the
current market value of a property in Lisbon, Ohio, or title
to the property. If Talbott is later found to have
misrepresented his financial status, he would be liable for a
$3.5 million judgment.
Under the agreements, the defendants also assign to the FTC
all claims they might have against the other defendants in
this case, and they will not use their settlement with the
Commission as a basis for seeking a cash refund of income
taxes that they reported as paid. In addition, the agreements
include standard record-keeping provisions and require the
defendants to distribute copies of the orders to certain
entities and individuals.
The Commission vote to
authorize staff to file the stipulated final orders was 4-0.
The stipulated final orders for permanent injunction were
filed in the U.S. District Court for the Central District of
California on September 20, 2005.
NOTE: These stipulated final orders are
for settlement purposes only and do not constitute an
admission of liability by the defendants. A stipulated final
order acquires the force of law when signed by the judge.
The text in this article was prepared by the U.S. Federal Trade Commission.