The government will prove that an herbal supplement company defrauded customers of $100 million, mostly for sexual enhancement products, a federal prosecutor said during opening statements in the company’s trial Wednesday.
The case against Berkeley Premium Nutraceuticals and its executives is based on the systematic use of unauthorized credit card charges and thousands of complaints over unordered products, Assistant U.S. Attorney Anne Porter told jurors.
In opening statements for the defense, an attorney said the government is relying on tainted testimony and said the company’s rapid growth caused the customer service problems.
Berkeley Nutraceuticals marketed a number of products it said would help in weight control, memory loss and clear skin, but its main business was sexual enhancement products such as Enzyte “male enhancement” pills.
The company claims Enzyte has 2 million users worldwide. Television ads for Enzyte feature “Smiling Bob,” a goofy, grinning man whose life gets much better after he uses the product.
According to an indictment, customers responding to free-trial offers were placed in an automatic shipping program, through which credit cards were billed without authorization. The company at various times offered full refunds, “double your money back,” and “triple your money back” guarantees that were false. It also is accused of referring complaints to a director of customer care who did not exist.
Defendants include Berkeley, its president Steve Warshak, his mother, an in-house lawyer, a computer expert and a warehouse manager. They are accused of conspiracy to commit money laundering plus fraud and of obstructing two federal agencies in their investigations.
“Evidence will show that he implemented and directed the entire scheme,” Porter said of Warshak.
The government plans to call as witnesses seven co-conspirators, including Warshak’s sister and brother-in-law.
However, Warshak attorney Martin Weinberg said the witnesses’ cooperation came through “deals and bargains, from fear and threats, and promises of leniency.”
He said customer service problems were not from criminal intent, but a result of the company’s “meteoric growth,” from a one-person startup in 2001 to 1,500 employees by 2004.
The safety and usefulness of the company’s products are not on trial.
Last year, Berkeley agreed to pay $2.5 million to settle allegations by attorneys general in Ohio and other states that the company engaged in deceptive practices in the sale of its products. The company did not admit any wrongdoing.