Medifast, Part Two: Weight-Loss Miracle or Pyramid Scheme?

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The firm was successful until the Attorney General of Illinois charged that it was running a pyramid scheme. He also agreed to a lifetime ban on promoting products using infomercials, but excluded restrictions to promote his books via infomercials. Friday, March 30, That would be some sort of excuse. Trudeau responds that by not having such training, he is not biased toward pharmaceutical companies and the FDA, and that medical doctors "are taught only how to write out prescriptions" for "poisons" and "cut out pieces of a person's anatomy. Instead, Tripharma is only seeking an injunction prohibiting the associates from continuing to advertise, market, and sell the MaxWLX product, and from using the tests or studies for marketing, advertising, or other purposes.

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Nonetheless, opinions of its critics aside, if Medifast's success going forward is measured by recruiting rates of the TSFL segment, then the company is in a healthy position to witness continued strong revenue growth in the second half of and fiscal David Phillips has more than 25 years' experience on Wall Street, first as a financial consultant and then as an equity analyst for several investment banking firms.

He sifts through SEC filings for his blog The 10Q Detective, looking for financial statement soft spots, such as depreciation policies, warranty reserves and restructuring charges. A decade after the Great Recession, the U. The top-paying jobs tend to cluster in two industries -- and may prove less vulnerable automation. Share Tweet Reddit Flipboard Email. Last Updated Aug 17, 5: See my previous post evaluating Medifast's claims of a "clinically proven" weight-loss method.

Medifast Direct -- In the direct to consumer channel, customers order Medifast product directly through the Company's website, www. Take Shape for Life -- The channel offers the personal support of a health coach that is often a person who h as achieved success on the Medifast program and has turned their success into a business opportunity generating incremental revenue for the company through relationship marketing.

Private Physicians -- Health practitioners carry inventories of Medifast products and resell them to their patients.

Medifast Weight Control Centers -- A medically supervised and structured model for customers who prefer more accountability and personalized counseling on the program. The Take Shape for Life unit is the fastest growing sales channel, accounting for 58 percent of total revenue for the first half of , up from 33 percent in We continue to see the benefits of a physician-lead network of coaches that are able to support their clients in their weight-loss efforts.

In today's environment where trust and personal recommendations are becoming a more important component in consumer purchasing decisions, the Take Shape for Life model of one-on-one communication continues to excel. Take Shape for Life customers who have utilized the Medifast products and programs and successfully have addressed their body weight and health issues are increasingly choosing to become active health coaches. In contrast, the direct marketing sales channel, which is fueled primarily by consumer advertising, witnessed an eight percent year-over-year decline in revenue, as compared to the first six months of This distribution model now accounts for only 31 percent of sales, down from 56 percent in In fact, one could infer from available data found in the compensation plan table that the only way a health coach can earn significant income is through recruiting to advance to higher payout levels-the classic recruitment con of a multilevel pyramid scheme.

In June , the Fraud Discovery Institute published a detailed, page report by Robert FitzPatrick of Pyramid Scheme Alert , a consumer information website dedicated to identifying and differentiating legitimate from shady business opportunities.

Securities and Exchange Commission. Illinois sued Trudeau and Jules Leib, his partner, accusing them of operating an illegal pyramid scheme. Michigan forbade him from operating in the state.

Callahan" was "studying quantum physics. In July , Trudeau entered into a stipulated preliminary injunction that prohibited him from continuing to make the challenged claims for Coral Calcium Supreme and Biotape. In the summer of , the court found Trudeau in contempt of court for violating the preliminary injunction, because he had sent out a direct mail piece and produced an infomercial making prohibited claims.

The court ordered Trudeau to cease all marketing for coral calcium products. He also agreed to a lifetime ban on promoting products using infomercials, but excluded restrictions to promote his books via infomercials. District Court for the District of Columbia seeking declaratory and injunctive relief.

Trudeau also filed a motion for preliminary injunction, which the court denied. The complaint charged that the FTC had retaliated against him for his criticism of the agency by issuing a press release that falsely characterized and intentionally and deliberately misrepresented the Final Order.

The FTC responded with a motion to dismiss the complaint for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12 b 1 , and for failure to state a claim for which relief can be granted under Rule 12 b 6.

The district court granted the FTC's motion to dismiss. First, the court concluded that it lacked subject-matter jurisdiction because the press release was not "a 'final agency action'" under "section of the [Administrative Procedure Act]", 5 U. Second, the court held, "in the alternative, that Trudeau's claims failed to state a viable cause of action as a matter of law.

Trudeau later filed an appeal which was unsuccessful in reversing the court's ruling. The temporary restraining order was replaced by a preliminary injunction. However, Trudeau lost a motion to have the Board send a "corrective letter" to the television stations and subsequently dropped all claims for monetary damages. The case is still in litigation.

The FTC filed a contempt of court action against Trudeau and the companies that market The Weight Loss Cure 'They' Don't Want You to Know About , alleging that Trudeau was in contempt of a court order by "deceptively claiming in his infomercials that the book being advertised establishes a weight-loss protocol that is 'easy' to follow.

When consumers buy the book, they find it describes a complex plan that requires intense dieting, daily injections of a prescribed drug that is not easily obtainable, and lifelong dietary restrictions. On November 19, , Trudeau was found in contempt of the court order for "patently false" claims in his weight loss book. District Court Judge Robert W. Gettleman ruled that Trudeau "clearly misrepresents in his advertisements the difficulty of the diet described in his book, and by doing so, he has misled thousands of consumers.

The court denied Trudeau's request to reconsider or stay this ruling on December 11 of the same year. On February 11, , Trudeau was arrested and appeared in U. District Court before Gettleman for criminal contempt of court after he "asked his supporters to email the federal judge overseeing a pending civil case brought against him by the Federal Trade Commission.

That is, no one can touch him," Barrett said. On November 28, , the U. Food and Drug Administration and the Federal Trade Commission issued warnings to companies selling human chorionic gonadotropin HCG as weight loss products as the claims are unsupported.

In February , the court-appointed receiver announced that a number of Trudeau's known assets, including a home in Ojai, California , would be auctioned, with proceeds to be applied toward unpaid fines and restitutions. Court officials informed GIN members that the club's business model "likely amounted to an illegal pyramid scheme", and that its relentlessly publicized group of 30 billionaire financial advisors known as the "GIN Council" did not exist. GIN's remaining assets were later auctioned as well.

In March , Trudeau was sentenced to 10 years in prison, an "unusually lengthy" term for a contempt conviction. In April , Guzman ordered that royalties payable to Trudeau from continuing sales of his books—now owned by a California company called Free is My Favorite LLC, which purchased the rights from Trudeau—be forwarded to a government-controlled trust and used for fine and restitution payments.

One common criticism by consumer groups is that Trudeau has had no medical training. Trudeau responds that by not having such training, he is not biased toward pharmaceutical companies and the FDA, and that medical doctors "are taught only how to write out prescriptions" for "poisons" and "cut out pieces of a person's anatomy.

Trudeau has been criticized for his inability to provide evidence to back up his claims. Although he recites anecdotes, he has never provided evidence evaluated by licensed medical practitioners. In instances where Trudeau has been asked to provide proof, he has misinterpreted medical studies or cited dubious or fictitious studies.

For example, Trudeau cited a nonexistent year research study involving a natural cure for diabetes at the University of Calgary. In University of Calgary officials announced in a public statement that none of Trudeau's claims about the university's research were true, and that its attorneys had sent Trudeau a "cease and desist" letter, demanding that he stop associating himself with the school.

In August , the New York Consumer Protection Board warned consumers that Trudeau has used false claims of endorsements to promote his products, noting that the back cover of Natural Cures includes false endorsements. Further, the NYCPB states that Trudeau's television advrtisements "give the false impression that Tammy Faye Messner opposes chemotherapy in favor of the 'natural cures' in Trudeau's book.

The back cover includes the following quote from Dr. Herbert Ley , a former commissioner of the U. Food and Drug Administration who died three years before the book was written: What the FDA is doing and what people think it's doing are as different as night and day. Bradford, says that this quote does not constitute a false endorsement of the book by Ley, but rather is merely a statement that is in line with the purpose of the book.

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