Mannatech
Encyclopedia
Mannatech, Incorporated, is a multinational multi-level marketing
firm engaged in research, development, and distribution of "glyconutrients," the company's name for blends of plant-sourced saccharides (sugars). Mannatech was founded in November 1993 by Samuel L. 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, Mexico, South Africa, Singapore, Sweden, Norway, Austria, the Netherlands, Ireland, Estonia, Finland and Czech Republic. The company's stock is traded on the NASDAQ
exchange under the symbol MTEX. Mannatech employs over 550 people and sells its products through approximately 570,000 independent sales associates
.
In 2006, Forbes magazine named Mannatech the #5 company on its annual list of the "200 Best Small Companies"
and in 2007 Mannatech was ranked 12th in BusinessWeek magazine's 2007 list of America's "Top 100 Hot Growth Small Companies."
Mannatech has experienced periods of public scrutiny regarding the efficacy of its products, including a class-action lawsuit in 2005
and an attorney general investigation in 2007.
By 2009 the company had settled the suits and restructured its compliance department.
filing, the company stated that its products "are formulated with predominately [sic] 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.".
and positive effects on human brain wave activity, and cognition, mood and memory.,
To evaluate the effects of Ambrotose products on human serum glycosylation profiles, Mannatech commissioned two research studies with an expert in the fields of glycobiology and rheumatology, Dr. John Axford, BSc MD FRCP, a Consultant & Reader in Rheumatology & Clinical Immunology at St. George’s Hospital & Medical School (University of London). Dr. Axford is highly regarded for his work correlating specific serum glycosylation profiles with inflammation and rheumatic disease. Dr. Axford was a member of Mannatech’s board of directors from 2002 through 2007, during which time he served as the chairman of the science committee. He received financial and stock compensation for his service as a board member. Additionally, Dr. Axford received consulting fees from Mannatech related to his research work and also received compensation for speaking or acting at Mannatech sponsored events. Two human clinical studies from his laboratory were published in 2011 in peer reviewed journals, Rheumatology and the European Journal of Clinical Nutrition. Both studies indicated that intake of either Ambrotose complex powder or Advanced Ambrotose powder significantly impacted the serum glycosylation profiles of healthy adults or adults with rheumatoid arthritis. The first author of both studies was a glycobiologist, Dr. Azita Alavi, Associate Research Fellow, Division of Cellular & Molecular Medicine at the Sir Joseph Hotung Centre for Musculoskeletal Disorders at St. George’s University of London. Co–authors included St. George’s University researchers Professor John Axford, Lucy Goodfellow, Dr. Edward Tarelli, Dr. Owen Fraser; and Professor Martin Bland, Department of Health Sciences, University of York, UK. To the authors’ knowledge, these are the first studies to show that dietary changes can affect serum glycosylation profiles.
In an in vitro study, Dr. John E. Kalns and fellow scientists at Hyperion Biotechnology, Inc., in San Antonio, Texas, demonstrated that human fecal bacteria can hydrolyze Advanced Ambrotose powder and two of its constituent polysaccharide ingredients (aloe vera gel powder and larch arabinogalactan). Colonic bacterial feeding on the product lead to abundant generation of relatively small (~1,000 molecular weight [MW]) polymers. Polymers of this size could be absorbed in the intestine. Preliminary data from this research received first prize at the Scripps Center for Integrative Medicine's 4th Annual Natural Supplements Conference’s pre-clinical research poster competition in 2007. The complete study was published by Hyperion and Mannatech scientists in the International Journal of Probiotics and Prebiotics.
In a study published in the International Journal of Food Microbiology in 2010, Drs. Massimo Marzorati and Sam Possemiers (University of Ghent and ProDigest, Ghent, Belgium) and colleagues employed state‐of‐the‐art human gastrointestinal tract simulations and microbiological analyses to show that Ambrotose® complex and Advanced Ambrotose® powder exerted positive prebiotic effects. Both products exhibited quality selective fermentability throughout the entire colon and positive and selective bifidogenic effects. They also demonstrated the possibility of enhancing species belonging to Bacteroidetes, a phylum recently associated with body weight management.
Mannatech has commissioned researchers to conduct human clinical trials on other products formulated to provide antioxidant benefits (AmbrotoseAO capsules), a healthy inflammatory response (BounceBack capsules), athletic endurance (EM•PACT sports drink) and fat loss support (OsoLean powder). In a five-week combined Phase 1 and 2 open label, forced titration dose response study of 21 healthy adults, physicians and scientists from Southern Cross University showed that the Ambratose AO dietary supplement was safe and raised serum oxygen radical absorption capacity (ORAC) by 36.6%. The study was published in BMC Complementary and Alternative Medicine. In a subsequent 21-day randomized, double-blind, placebo-controlled crossover trial of 25 healthy adults, scientists from the University of Memphis (Tennessee) showed that Ambrotose AO capsules significantly increased two measures of antioxidant capacity in the blood: ORAC and Trolox Equivalent Antioxidant Capacity (TEAC).
, Adelaide, Australia) and fellow scientists from Flinders University and the University of South Australia showed, in a trial of 109 healthy middle-aged male and female adults, that Ambrotose complex powder (4 grams/day for 12 weeks) significantly improved memory and improved psychological well-being.
The opinion of independent glycobiologists
is that the body cannot digest Ambrotose, as it lacks the enzymes needed.
Prominent glycobiologist Dr. Ronald Schnaar, PhD of Johns Hopkins School of Medicine
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." Ambrotose studies have since refuted this allegation, showing that the products can: 1) be broken down into smaller, absorbable fragments by GI tract bacteria and 2) modify human serum glycosylation profiles.
Hudson Freeze, PhD, leading glycobiologist at the Sanford-Burnham Medical Research Institute 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
." According to the glycobiologist Dr. Azita Alavi, there are six main categories of physiologic effects of functional polysaccharides. These effects include: 1) colonic microflora and GI physiology, prebiotic; 2) immunomodulatory; 3) anti-angiogenic and anti-tumor; 4) altered lipid metabolism; 5) improved bioavailability of essential minerals; 6) beneficial health effects, such as enhanced production of growth factors involved in re-epithelization and wound healing. Dr. Freeze is a member of the editorial board of Glycobiology
, whose current editor-in-chief is Dr. Schnaar. Schnaar and Freeze published a critique of Mannatech's products in Glycobiology in 2008, describing the lack of published clinical benefits of the "partially purified polydisperse plant polysaccharides" found in "Ambrotose Complex."
In Glycobiology, another article described the potential for the public to be misled about the science of glycobiology by the nebulous "glyconutrient" term. The authors' concern was that the public would be susceptible to the "scientific-sounding label" of glyconutrient, which may "generate a feeling of security and credibility...despite the lack of acceptance among many glycobiologists of the term." In November 2007, Science
published an article in its "News Focus" section detailing the scientific controversy surrounding Mannatech. It included criticisms and comments from glycobiologists, including Ajit Varki
, Raymond Dwek
, Gerald Hart, James Paulson, Hudson Freeze, and Ronald Schnaar.
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 "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.
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.
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."
On July 5, 2007, Texas Attorney General Greg Abbott formally charged Mannatech, 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."
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.
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.
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."
Mannatech did not admit wrongdoing; settling was easier than debating Abbott, according to then-CEO Wayne Badovinus. "If they do it again, we will ensure they get put out of business," Abbott said.
One year later, Mannatech Co-CEO Robert Sinnott reflected on the ramifications of the legal action, saying, "The civil action related mainly to some actions by our salesforce. We were embarrassed and also financially impacted by the attorney general suit. We learned from that chapter and it is closed. We've reached a settlement and we've paid the fees associated with it. We've done everything in our power to correct that and make sure we're in compliance in the future."
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.
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."
to be replaced by Wayne Badovinus as the new chief executive. Several corporate initiates were undertaken, but after 17 months on the job Badovinus resigned in December 2009.
His efforts had not met the performance expectations of the board of directors.
Another member of the board resigned shortly after.
Mannatech's Chief Science Officer Dr Robert Sinnott and Mannatech's Chief Financial Officer Steve Fenstermacher were named Co-CEOs.
Publicity over the company's lawsuits began to damage the balance sheets and stock performance. After profits of $32 million in 2006 and $6.6 million in 2007, Mannatech reported a $12.6 million loss in 2008 and a $17.3 million loss in 2009.
By mid-year 2010, one quarter of Mannatech's sales were gone.
2010 losses were 10.6 million.
As the company's market capitalizations continued to fall, S&P Indices dropped it from the S&P 600 Index, stating "They are no longer representative of the small cap market space."
Sam Caster is an early cast member of Up With People
, a motivational organization and musical performance troupe. The Up With People International Alumni Association has recognized Caster as an alumnus who exhibits leadership, intercultural understanding, and humanitarian outreach.
Sam Caster's first major business venture, Eagle Shield, was an insulation product that claimed to utilize new technology developed by NASA
and could reduce heating and cooling costs by up to 40%. The Attorney General of Texas concluded that the product's technology long predated NASA and 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."
, who, as she noted in her book, had a divinely inspired destiny to fulfill.
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.'"
Paperwork filed with the SEC indicate disagreements between Caster and the board of directors were the reason for Caster's resignation.
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.
Sam Caster was barred by the Attorney General of Texas from serving as a director, officer, or employee of Mannatech until 2014. Caster was also barred from taking a role in any other multi-level marketing programs. Despite this, then-CEO Wayne Badovinus stated Caster would work as a consultant answering directly to him.
Multi-level marketing
Multi-level marketing is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation...
firm engaged in research, development, and distribution of "glyconutrients," the company's name for blends of plant-sourced saccharides (sugars). Mannatech was founded in November 1993 by Samuel L. Caster and is headquartered in Coppell, Texas
Coppell, Texas
-Demographics:As of the census of 2000, there were 35,958 people, 12,211 households, and 9,781 families residing in the city. The population density was 2,418.5 people per square mile . There were 12,587 housing units at an average density of 846.6 per square mile...
.
It operates in the United States, Canada, Australia, the United Kingdom, Japan, New Zealand, Republic of Korea, Taiwan, Denmark, Germany, Mexico, South Africa, Singapore, Sweden, Norway, Austria, the Netherlands, Ireland, Estonia, Finland and Czech Republic. The company's stock is traded on the NASDAQ
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
exchange under the symbol MTEX. Mannatech employs over 550 people and sells its products through approximately 570,000 independent sales associates
Sales
A sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....
.
In 2006, Forbes magazine named Mannatech the #5 company on its annual list of the "200 Best Small Companies"
and in 2007 Mannatech was ranked 12th in BusinessWeek magazine's 2007 list of America's "Top 100 Hot Growth Small Companies."
Mannatech has experienced periods of public scrutiny regarding the efficacy of its products, including a class-action lawsuit in 2005
and an attorney general investigation in 2007.
By 2009 the company had settled the suits and restructured its compliance department.
Products
As of July 2011, the company offered 22 nutritional products, two topical products, five skin care products, and four weight-management/fitness products. Mannatech is most widely known for its glyconutritional dietary supplements, Ambrotose products, which are patented blends of plant-sourced saccharides. Glyconutritionals were formulated to support cellular communication by positively impacting human glycoforms, a claim that has generated controversy among some members of the scientific community but has since been validated by two human clinical studies. In an SECUnited States Securities and Exchange Commission
The U.S. Securities and Exchange Commission is a federal agency which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States...
filing, the company stated that its products "are formulated with predominately [sic] 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.".
Company-funded studies
As stated in Mannatech’s 2010 SEC filing, to evaluate the safety and efficacy of its products, the company seeks expert scientists to conduct independent pre-clinical and clinical research. Independent and contract researchers have conducted studies on many of its products, particularly the Ambrotose product line. The Ambrotose studies indicate that the products can: 1) be broken down into smaller, absorbable fragments by GI tract bacteria and 2) modify human serum glycosylation profiles. Additional studies have shown that the products also exert positive prebiotic effectsand positive effects on human brain wave activity, and cognition, mood and memory.,
To evaluate the effects of Ambrotose products on human serum glycosylation profiles, Mannatech commissioned two research studies with an expert in the fields of glycobiology and rheumatology, Dr. John Axford, BSc MD FRCP, a Consultant & Reader in Rheumatology & Clinical Immunology at St. George’s Hospital & Medical School (University of London). Dr. Axford is highly regarded for his work correlating specific serum glycosylation profiles with inflammation and rheumatic disease. Dr. Axford was a member of Mannatech’s board of directors from 2002 through 2007, during which time he served as the chairman of the science committee. He received financial and stock compensation for his service as a board member. Additionally, Dr. Axford received consulting fees from Mannatech related to his research work and also received compensation for speaking or acting at Mannatech sponsored events. Two human clinical studies from his laboratory were published in 2011 in peer reviewed journals, Rheumatology and the European Journal of Clinical Nutrition. Both studies indicated that intake of either Ambrotose complex powder or Advanced Ambrotose powder significantly impacted the serum glycosylation profiles of healthy adults or adults with rheumatoid arthritis. The first author of both studies was a glycobiologist, Dr. Azita Alavi, Associate Research Fellow, Division of Cellular & Molecular Medicine at the Sir Joseph Hotung Centre for Musculoskeletal Disorders at St. George’s University of London. Co–authors included St. George’s University researchers Professor John Axford, Lucy Goodfellow, Dr. Edward Tarelli, Dr. Owen Fraser; and Professor Martin Bland, Department of Health Sciences, University of York, UK. To the authors’ knowledge, these are the first studies to show that dietary changes can affect serum glycosylation profiles.
In an in vitro study, Dr. John E. Kalns and fellow scientists at Hyperion Biotechnology, Inc., in San Antonio, Texas, demonstrated that human fecal bacteria can hydrolyze Advanced Ambrotose powder and two of its constituent polysaccharide ingredients (aloe vera gel powder and larch arabinogalactan). Colonic bacterial feeding on the product lead to abundant generation of relatively small (~1,000 molecular weight [MW]) polymers. Polymers of this size could be absorbed in the intestine. Preliminary data from this research received first prize at the Scripps Center for Integrative Medicine's 4th Annual Natural Supplements Conference’s pre-clinical research poster competition in 2007. The complete study was published by Hyperion and Mannatech scientists in the International Journal of Probiotics and Prebiotics.
In a study published in the International Journal of Food Microbiology in 2010, Drs. Massimo Marzorati and Sam Possemiers (University of Ghent and ProDigest, Ghent, Belgium) and colleagues employed state‐of‐the‐art human gastrointestinal tract simulations and microbiological analyses to show that Ambrotose® complex and Advanced Ambrotose® powder exerted positive prebiotic effects. Both products exhibited quality selective fermentability throughout the entire colon and positive and selective bifidogenic effects. They also demonstrated the possibility of enhancing species belonging to Bacteroidetes, a phylum recently associated with body weight management.
Mannatech has commissioned researchers to conduct human clinical trials on other products formulated to provide antioxidant benefits (AmbrotoseAO capsules), a healthy inflammatory response (BounceBack capsules), athletic endurance (EM•PACT sports drink) and fat loss support (OsoLean powder). In a five-week combined Phase 1 and 2 open label, forced titration dose response study of 21 healthy adults, physicians and scientists from Southern Cross University showed that the Ambratose AO dietary supplement was safe and raised serum oxygen radical absorption capacity (ORAC) by 36.6%. The study was published in BMC Complementary and Alternative Medicine. In a subsequent 21-day randomized, double-blind, placebo-controlled crossover trial of 25 healthy adults, scientists from the University of Memphis (Tennessee) showed that Ambrotose AO capsules significantly increased two measures of antioxidant capacity in the blood: ORAC and Trolox Equivalent Antioxidant Capacity (TEAC).
Independent studies
Independent researchers in Washington, D.C. and Australia have conducted human clinical studies investigating the effect of Ambrotose complex on brain function. Mannatech provided the products at no charge, but did not fund these studies. A study funded by Kraft Foods, Inc. reported that a single one-tablespoon serving of Ambrotose complex can significantly improve visual discrimination and working memory. Drs. Atiya N. Stancil and Leslie H. Hicks, both of Howard University, published the randomized, double-blind, placebo-controlled study investigating the impact of the product on 62 healthy young adults. Dr. Talitha Best and Flinders UniversityFlinders University
Flinders University, , is a public university in Adelaide, South Australia. Founded in 1966, it was named in honour of navigator Matthew Flinders, who explored and surveyed the South Australian coastline in the early 19th century.The university has established a reputation as a leading research...
, Adelaide, Australia) and fellow scientists from Flinders University and the University of South Australia showed, in a trial of 109 healthy middle-aged male and female adults, that Ambrotose complex powder (4 grams/day for 12 weeks) significantly improved memory and improved psychological well-being.
The opinion of independent glycobiologists
Glycobiology
Defined in the broadest sense, glycobiology is the study of the structure, biosynthesis, and biology of saccharides that are widely distributed in nature...
is that the body cannot digest Ambrotose, as it lacks the enzymes needed.
Prominent glycobiologist Dr. Ronald Schnaar, PhD of Johns Hopkins School of Medicine
Johns Hopkins School of Medicine
The Johns Hopkins School of Medicine , located in Baltimore, Maryland, U.S., is the academic medical teaching and research arm of Johns Hopkins University. Hopkins has consistently been the nation's number one medical school in the amount of competitive research grants awarded by the National...
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." Ambrotose studies have since refuted this allegation, showing that the products can: 1) be broken down into smaller, absorbable fragments by GI tract bacteria and 2) modify human serum glycosylation profiles.
Hudson Freeze, PhD, leading glycobiologist at the Sanford-Burnham Medical Research Institute 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
Flatulence
Flatulence is the expulsion through the rectum of a mixture of gases that are byproducts of the digestion process of mammals and other animals. The medical term for the mixture of gases is flatus, informally known as a fart, or simply gas...
." According to the glycobiologist Dr. Azita Alavi, there are six main categories of physiologic effects of functional polysaccharides. These effects include: 1) colonic microflora and GI physiology, prebiotic; 2) immunomodulatory; 3) anti-angiogenic and anti-tumor; 4) altered lipid metabolism; 5) improved bioavailability of essential minerals; 6) beneficial health effects, such as enhanced production of growth factors involved in re-epithelization and wound healing. Dr. Freeze is a member of the editorial board of Glycobiology
Glycobiology (journal)
Glycobiology is a monthly peer-reviewed scientific journal covering all aspects of the field of glycobiology and the official journal of the Society for Glycobiology. The journal was established in September 1990...
, whose current editor-in-chief is Dr. Schnaar. Schnaar and Freeze published a critique of Mannatech's products in Glycobiology in 2008, describing the lack of published clinical benefits of the "partially purified polydisperse plant polysaccharides" found in "Ambrotose Complex."
In Glycobiology, another article described the potential for the public to be misled about the science of glycobiology by the nebulous "glyconutrient" term. The authors' concern was that the public would be susceptible to the "scientific-sounding label" of glyconutrient, which may "generate a feeling of security and credibility...despite the lack of acceptance among many glycobiologists of the term." In November 2007, Science
Science (journal)
Science is the academic journal of the American Association for the Advancement of Science and is one of the world's top scientific journals....
published an article in its "News Focus" section detailing the scientific controversy surrounding Mannatech. It included criticisms and comments from glycobiologists, including Ajit Varki
Ajit Varki
Ajit Varki is a physician-scientist who is currently distinguished professor of medicine and cellular and molecular medicine, associate dean for physician-scientist training, co-director of the Glycobiology Research and Training Center at the University of California, San Diego , and co-director of...
, Raymond Dwek
Raymond Dwek
Professor Raymond Allen Dwek BSc DPhil DSc FRS is a scientist at the University of Oxford and founded its spin-off biotechnology company, Oxford GlycoSciences Ltd. ....
, Gerald Hart, James Paulson, Hudson Freeze, and Ronald Schnaar.
Securities Exchange Act class-action lawsuit
The company has been known for its literature, websites and multi-level marketing with claims of scientific links to cellular glycobiology long disputed by the relevant individual Nobel prize winners.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 "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.
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.
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.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."
On July 5, 2007, Texas Attorney General Greg Abbott formally charged Mannatech, 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."
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.
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.
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."
Mannatech did not admit wrongdoing; settling was easier than debating Abbott, according to then-CEO Wayne Badovinus. "If they do it again, we will ensure they get put out of business," Abbott said.
One year later, Mannatech Co-CEO Robert Sinnott reflected on the ramifications of the legal action, saying, "The civil action related mainly to some actions by our salesforce. We were embarrassed and also financially impacted by the attorney general suit. We learned from that chapter and it is closed. We've reached a settlement and we've paid the fees associated with it. We've done everything in our power to correct that and make sure we're in compliance in the future."
ABC investigation
A 20/20 undercover investigation that aired June 1, 2007 on ABC TelevisionABC Television
ABC Television is a service of the Australian Broadcasting Corporation launched in 1956. As a public broadcasting broadcaster, the ABC provides four non-commercial channels within Australia, and a partially advertising-funded satellite channel overseas....
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
Food and Drug Administration
The Food and Drug Administration is an agency of the United States Department of Health and Human Services, one of the United States federal executive departments...
regulations, by avoiding direct claims that the products cure any particular diseases.
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."
Company losses
Mannatech announced in August 2007 that company founder Sam Caster was stepping down as CEO of Mannatech,to be replaced by Wayne Badovinus as the new chief executive. Several corporate initiates were undertaken, but after 17 months on the job Badovinus resigned in December 2009.
His efforts had not met the performance expectations of the board of directors.
Another member of the board resigned shortly after.
Mannatech's Chief Science Officer Dr Robert Sinnott and Mannatech's Chief Financial Officer Steve Fenstermacher were named Co-CEOs.
Publicity over the company's lawsuits began to damage the balance sheets and stock performance. After profits of $32 million in 2006 and $6.6 million in 2007, Mannatech reported a $12.6 million loss in 2008 and a $17.3 million loss in 2009.
By mid-year 2010, one quarter of Mannatech's sales were gone.
2010 losses were 10.6 million.
As the company's market capitalizations continued to fall, S&P Indices dropped it from the S&P 600 Index, stating "They are no longer representative of the small cap market space."
Prior to Mannatech
Samuel L. Caster, founder and former Chairman of the Board of Directors of Mannatech, Incorporated, was an entrepreneur in other lines of business and was part of other organizations prior to Mannatech.Sam Caster is an early cast member of Up With People
Up with People
Up with People is an international education organization founded in 1968 by J. Blanton Belk, building from roots in the similar "Sing-Out" program of 1965. Up With People is best known for their musical performances by international casts consisting of 70–100 students from, on average, 20...
, a motivational organization and musical performance troupe. The Up With People International Alumni Association has recognized Caster as an alumnus who exhibits leadership, intercultural understanding, and humanitarian outreach.
Sam Caster's first major business venture, Eagle Shield, was an insulation product that claimed to utilize new technology developed by NASA
NASA
The National Aeronautics and Space Administration is the agency of the United States government that is responsible for the nation's civilian space program and for aeronautics and aerospace research...
and could reduce heating and cooling costs by up to 40%. The Attorney General of Texas concluded that the product's technology long predated NASA and 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."
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. His new company quickly became a success. 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 BibleBible
The Bible refers to any one of the collections of the primary religious texts of Judaism and Christianity. There is no common version of the Bible, as the individual books , their contents and their order vary among denominations...
, who, as she noted in her book, had a divinely inspired destiny to fulfill.
Consultant to Mannatech
On August 22, 2007, Sam Caster resigned as CEO of Mannatech.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.'"
Paperwork filed with the SEC indicate disagreements between Caster and the board of directors were the reason for Caster's resignation.
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.
Sam Caster was barred by the Attorney General of Texas from serving as a director, officer, or employee of Mannatech until 2014. Caster was also barred from taking a role in any other multi-level marketing programs. Despite this, then-CEO Wayne Badovinus stated Caster would work as a consultant answering directly to him.
MannaRelief non-profit organization
Sam Caster and his wife Linda founded the MannaRelief non-profit organization in 1999. The independent organization has assisted in providing nutritional support to orphans in foreign countries and has partnered with numerous other life-giving organizations.External links
- Corporate Website
- MTEX CNN Money