[Senate Hearing 107-190]
[From the U.S. Government Publishing Office]
S. Hrg. 107-190
SWINDLERS, HUCKSTERS AND SNAKE OIL
SALESMAN: HYPE AND HOPE MARKETING ANTI-AGING PRODUCTS TO SENIORS
=======================================================================
HEARING
before the
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
WASHINGTON, DC
__________
SEPTEMBER 10, 2001
__________
Serial No. 107-14
Printed for the use of the Special Committee on Aging
U.S. GOVERNMENT PRINTING OFFICE
76-011 WASHINGTON : 2001
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
SPECIAL COMMITTEE ON AGING
JOHN B. BREAUX, Louisiana, Chairman
HARRY REID, Nevada LARRY CRAIG, Idaho, Ranking Member
HERB KOHL, Wisconsin CONRAD BURNS, Montana
JAMES M. JEFFORDS, Vermont RICHARD SHELBY, Alabama
RUSSELL D. FEINGOLD, Wisconsin RICK SANTORUM, Pennsylvania
RON WYDEN, Oregon SUSAN COLLINS, Maine
BLANCHE L. LINCOLN, Arkansas MIKE ENZI, Wyoming
EVAN BAYH, Indiana TIM HUTCHINSON, Arkansas
THOMAS R. CARPER, Delaware PETER G. FITZGERALD, Illinois
DEBBIE STABENOW, Michigan JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri CHUCK HAGEL, Nebraska
Michelle Easton, Staff Director
Lupe Wissel, Ranking Member Staff Director
(ii)
?
C O N T E N T S
----------
Page
Opening Statement of Senator John Breaux......................... 1
Statement of Senator Larry E. Craig.............................. 4
Statement of Senator Ron Wyden................................... 5
Prepared statement of Senator Blanche Lincoln.................... 36
Panel I
Mike O'Neil, former chief financial officer, GB Data Systems,
O'Neals, CA.................................................... 6
E. Vernon F. Glenn, Law Offices of E. Vernon F. Glenn, Mt.
Pleasant, SC................................................... 22
Panel II
Glen Braswell, president, Gero Vita International, Marina Del
Ray, CA; and Ron Tepper, Editor, ``Journal of Longevity,''
Health Quest Publications, Marina Del Ray, CA.................. 37
Panel III
Janet Heinrich, D.Ph., R.N., Associate Director, Health,
Education, and Human Services Division, General Accounting
Office, Washington, DC......................................... 38
Joyce C. Lashof, M.D., associate chair, Editorial Board,
``Wellness Letter,'' University of California School of Public
Health, Berkeley, CA........................................... 59
Robert S. Baratz, M.D., Ph.D., D.D.S., Newton, MA................ 74
Timothy Gorski, M.D., Arlington, TX.............................. 91
Panel IV
Hon. Joseph Curran, Attorney General, State of Maryland,
Baltimore, MD.................................................. 111
John Taylor, Director, Office of Enforcement, Food and Drug
Administration, Department of Health and Human Services,
Washington, DC................................................. 139
Howard Beales, Director, Bureau of Consumer Protection, Federal
Trade Commission, Washington, DC............................... 168
Dennis M. Lormel, Section Chief of Financial Crimes, Criminal
Investigative Division, Federal Bureau of Investigation,
Washington, DC................................................. 184
APPENDIX
Letter from Nature's Life........................................ 209
Testimony of David Seckman, Executive Director, CEO of the
National Nutritional Foods Association......................... 211
Letter from Born Preventive Health Care Clinic................... 221
Letter from Total Health for Longevity........................... 222
Written submission of Rep. Dan Burton............................ 223
Response to the Statement of the Hon. Dan Burton................. 230
Letter from University of North Texas, Health Science Center..... 253
Letter from Texas College of Osteopathic Medicine................ 254
Letter from Senator Larry Craig.................................. 255
Letter from Senator John Breaux.................................. 256
Letter from University of North Texas, Health Science Center..... 258
Testimony of Michael McGuffin, American Herbal Products
Association.................................................... 259
Statement from American Academy of Anti-Aging Medicine........... 311
(iii)
SWINDLERS, HUCKSTERS AND SNAKE OIL SALESMEN: HYPE AND HOPE OF MARKETING
ANTI-AGING PRODUCTS TO SENIORS
----------
MONDAY, SEPTEMBER 10, 2001
U.S. Senate,
Special Committee on Aging,
Washington, DC.
The committee met, pursuant to notice, at 10 a.m., in room
SD-215, Dirksen Senate Office Building, Hon. John Breaux
(Chairman of the Committee) presiding.
Present: Senators Breaux, Wyden, Lincoln, and Craig.
OPENING STATEMENT OF SENATOR JOHN BREAUX, CHAIRMAN
The Chairman. The Committee on Aging will please come to
order. Good morning, everyone. I would like to thank all of our
guests who are here this morning, and also my colleague,
Senator Wyden. We expect other members of the Aging Committee
to join us in a very short amount of time. This is a very
important hearing of the Senate Aging Committee, and we will
use this hearing as an opportunity to examine the marketing of
dietary and specialty supplements that particularly target our
Nation's elderly and senior citizens. I want to thank Senator
Larry Craig, who will be with us momentarily as the ranking
Republican member of the committee, for his cooperation and
support throughout this investigation. I want to particularly
thank our witnesses who will be testifying before us this
morning for their testimony and their assistance and
cooperation.
People have been searching for the fountain of youth ever
since Ponce DeLeon, and they will probably continue to do so
for decades and generations into the future. Our job in this
hearing is not to kill that hope and desire to remain youthful
and healthy as long as possible, but rather the role of the
committee is to try and help protect American citizens,
particularly our elderly, who are preyed upon by modern-day
snake oil salesmen. I would like to say up front that this
hearing will focus on companies that mislead consumers with
regard to dietary and specialty supplements.
As with any industry, the vast majority of manufacturers
and marketers of supplements are reputable and law-abiding. It
is the bad actors in this industry that we are concerned about
today. Supplements are becoming increasingly popular. I take
them myself and I will continue to do so in the future.
Individuals who are both healthy and ill take supplements for a
variety of reasons. Some take supplements to increase energy,
to build muscles, or to lose weight. Others have begun taking
supplements as alternatives to traditional medicine and
escalating prescription drug cost. More and more, our Nation's
seniors are turning to these supplements.
Today, it is estimated that $27 billion annually or more is
spent on supplements and that 60 percent of these consumers are
older senior citizens. These products are marketed to our
seniors in a variety of ways. Not long ago, my wife and I, at
our home, received in the mail the Journal of Longevity. At
first glance, it appeared to me, as the example on the chart
shows, that this was a scientific journal, extolling the
virtues of supplements, focusing on those that have alleged
anti-aging effects. To me, it resembled the New England Journal
of Medicine, and I was very impressed with the way it was
structured and the way it was presented.
I actually wanted to start ordering everything in the
magazine, and the more I read, the more I came to the
conclusion that if it sounds too good to be true, it probably
is. I was drawn in, until I finally concluded, after consulting
with my staff, that the mailer was simply a very fancy
advertisement for one company's products. The Journal of
Longevity appears to me to simply be a series of articles that
discuss health issues that seniors face, and then provides a
very simple solution, the solution being the dietary
supplements developed and distributed by the same parent
company that publishes the magazine.
Some of the articles and advertisements simply prey on the
fears of the elderly, while others counsel the reader to take a
particular supplement in place of traditional medicine. It
really made me start thinking about the marketing tactics of
some of these companies and the products that they promote. The
dietary supplement industry in this country is largely self-
regulated. Unlike new prescription and over-the-counter drugs,
the law does not require supplements to undergo pre-market
approval for safety and effectiveness.
The current United States regulatory system provides little
assurance that commercial supplements have predictable
pharmacological effects or that the product labels provide
accurate information; and furthermore, the manufacturers of the
supplements are not required to register with any government
agency. This is of great concern to me, and I know to this
committee. Surveys have shown that the use of complementary and
alternative medicine in the United States has increased an
amazing 380 percent between the years 1990 and 1997, and this
trend will almost certainly continue as the baby boom
generation draws closer to retirement age and seeks out new and
different ways to maintain and improve their health and retain
their youth.
We need to know that the products our seniors and all of us
are taking are safe and effective. I want to make it clear one
more time that we are not here today to talk about the science
of complementary and alternative medicine; rather, we are only
looking at the bad apples in the supplement industry, those
folks who market misleading and/or ineffective products.
In an effort to convey the nature of and the methods used
by the companies that mislead the elderly, this morning we are
going to examine the operation of one of the largest companies
that sells the so-called anti-aging and other dietary
supplements. GB Data Systems, Inc. is the holding company for
at least 10 businesses selling dietary supplements. A. Glen
Braswell is the president and owner of GB Data Systems. Gero
Vita International and Health Quest Publications, which
publishes the Journal of Longevity, are both controlled by GB
Data Systems.
As I stated earlier, the Journal of Longevity that my wife
and I received at our home in the mail is simply, in my
opinion, an elaborate, misleading advertising tool that markets
several of the Gero Vita International products. I had the
cover of the one issue of the journal enlarged, and you can see
it to my right. Again, it looks to me to be a medical journal
such as the New England Journal of Medicine when it is received
in your home. I actually asked my staff to order some of the
Gero Vita International products for me. After two attempts, we
have still not received them. I do have enlargements for some
of the advertisements of some of these products.
First of all, I have an ad for a product named ACF 223,
that claims it is the healing breakthrough of the century. You
can note from the cover that one of the assertions is, ``Live
26 percent longer.'' Maybe the doctors here can tell us whether
this is true. One of the amazing things is the bottom section
of it that talks about it can work for people with--and it
names a whole series of very serious illnesses: arthritis;
heart disease; high cholesterol; prostate problems; high blood
pressure; and also can work for people with wrinkles and with
pain, with low sex drive, memory loss and age spots.
Next, I have a copy of the cover of the magazine that was
actually sent to my home. Who would not want to be able to turn
back the hands of time, as apparently this woman appears to
have done on the cover? As I stated earlier, some of these ads,
I think, simply try to scare people into buying the product.
The next chart describes the aging process, as, ``being
murdered from within, one cell at a time.'' It happens to also
be for ACF223.
The next poster describes a ``brown slime,'' developing on
the brain neurons. The associated article in the magazine
suggests that this brown slime is a precursor to Alzheimer's
disease. My staff contacted the National Institute on Aging and
were told by the National Institute on Aging that no such
studies have ever, or are currently underway that support such
a claim.
The next poster, No. 6--is an ad for Prostata, and it
suggests that if you do not take the Prostata supplement, you
could end up in a hospital bed.
Finally, we have posters of products that allegedly
actually slow the aging process. Gero Vita, GH3, poster No. 7.
The longevity caps is poster No. 8.
The HGH activator, poster No. 9.
Teston 6, poster number 10.
I think the question before the committee and I think the
question for many Americans are do these products actually do
what these ads suggest that they do, or do they do anything at
all, for that matter? I am hoping today's hearing can possibly
give us some of the answers to these very important questions.
We have invited several witnesses to testify. We will hear
first from Mr. Mike O'Neil, who is the former chief financial
officer of GB Data Systems, Inc. He can explain to us the
inner-workings of the company and its marketing tactics. Will
also hear from Mr. E. Vernon Glenn, who is a private-practice
attorney, who will tell us about some of his clients' dealings
with GB Data Systems, Inc.
Our second panel, we will have Mr. A. Glen Braswell, who is
president of GB Data Systems, Inc. and Gero Vita International,
and Mr. Ron Tepper, who is editor of the Journal of Longevity.
Both gentlemen are here with their attorneys in compliance with
subpoenas issued by this committee.
The General Accounting Office is here today to release the
findings of a report that I requested several months ago. The
report is entitled, ``Health Products for Seniors, Anti-Aging
Products Pose Potential for Physical and Economic Harm.'' I am
looking forward to hearing what GAO has to say. We have also
invited some experts with extensive background in the areas of
complementary and alternative medicine, and particularly
dietary and nutritional supplements to testify as to the
impact, both physically and financially, on our Nation's
elderly citizens. We will also hear from Dr. Joyce Lashof of
the University of California at Berkeley School of Public
Health, Wellness Letter, along with Dr. Robert Baratz and Dr.
Timothy Gorski.
Finally, we have asked the government agencies that are
tasked with monitoring dietary and nutritional supplements and
protecting consumers from fraud to be here today to tell us
about their efforts and their concerns in this area. We have a
representative from the Food and Drug Administration, the
Federal Trade Commission, the Federal Bureau of Investigation,
and the Attorney General of the State of Maryland.
Before we get to our witnesses, I would like to ask our
colleagues if they have any comments they would like to make,
and first we would like to recognize the ranking member of this
Aging Committee, Senator Larry Craig.
Senator Craig.
STATEMENT OF SENATOR LARRY CRAIG
Senator Craig. Well, thank you very much, Mr. Chairman. Mr.
Chairman, first of all let me thank you and your staff for
putting today's hearing together. I agree that it is important
to not only raise the awareness of the potential of scams and
products in the market that are simply not what they are led to
be by their advertisements. That is our job and our role,
especially when the consumer that is preyed upon may be the
most vulnerable of our population. Clearly, we must enforce the
law, remove the threat of dangerous products from the market
and bring to justice criminals who prey on the frightened and
the hopeless.
I look forward to the hearing and to the government
witnesses and their efforts in this area. But having said that,
I will also say that it is important that we remain wary of
calls for expensive regulation that may restrict an
individual's freedom to make his or her own health decisions.
It is a balance, and that balance should always be adhered to,
and that is something that I think this committee has served
well in its role over the last good number of years. So it is
with that that I approach this hearing with great interest. I
have seen the Journal of Longevity. I have thumbed through it
on many occasions, and having been fairly aware of what good
health and nutrition is all about, I think, oh, my, if it were
only true, because in most instances the claims argued I
believe to be, at best, not true.
With that, let me turn this hearing back to you, Mr.
Chairman, and I will be in and out intermittently. But I do
want to attend some of it, and I thank you.
The Chairman. Thank you, Senator Craig.
Senator Wyden.
STATEMENT OF SENATOR RON WYDEN
Senator Wyden. Thank you, Mr. Chairman. I want to commend
you for your leadership in putting together an extremely
important hearing. This is an issue that I have followed very
closely since the days when I was director of the Oregon Gray
Panthers. I think it is very important now to take a fresh look
at this issue and how it has changed. The fact is that those
who prey on seniors constantly seem to be getting sleazier and
more creative, and what has really changed in the last few
years is that they now have at their disposal tremendous new
technologies, and as a result of worldwide mobility, can
essentially set up offshore overnight.
One of the things that I want us to look at, and we have
not looked at in the past, is international cooperation in this
area, because it is very clear that some of these snake oil--
these information-age snake oil merchants will just look to set
up very close to the United States and then figure out how to
run a worldwide operations, and there have been problems with
the postal laws and other laws in terms of trying to get these
individuals who are preying on seniors and stop their conduct.
I will tell you going into this discussion that I largely
share Senator Craig's view that we do not need a whole lot of
new laws and new programs. What we need is a way to make sure
that the cops on the beat here in the United States and
worldwide have the tools that they need, and we need to look at
some new ways, for example, to try to draw some lines between
what constitutes an authoritative medical article and what
constitutes hype and essentially deception. I think that is why
it has been so helpful that you have taken the committee
through this exercise of looking at some of these articles
that, clearly to those of us who focused on gerontology over
the years, look over the line.
But what is important about this and why we ought to be
taking a comprehensive look at this is that the rip-off
artists, who were once people who would sell stuff door-to-
door, for example, like questionable roofing deals and maybe
they focused in the health field, like selling Medigap policies
that were not worth the paper they were written on, have now
moved into the areas that this committee is looking at; claims
that people will naturally been attracted to, because we have
seen such a health revolution in biology and genetics, that
people will be drawn to these kinds of programs unless they get
the facts. That is what is so important about this hearing, is
your helping to get the facts out. It is putting a hot light on
some of these new and very significant ways in which older
people, both in this country and around the world, are getting
fleeced. I want to make it clear that I think this is just
about the most important work this committee could be doing,
and as usual I will look forward to working with you.
The Chairman. Thank you, Senator Wyden.
We want to welcome our first two witnesses, Mr. Mike O'Neil
and Mr. Vernon Glenn, for their testimony. Because of the
sensitive nature of the testimony and the subject matter that
we are dealing with today, we are going to be asking all of our
witnesses to please be sworn in and promise to tell the truth.
I would just note to all the members that they should be aware
that under Title 18, Section 1621 of the U.S. Code, that lying
before Congress is certainly subject to being prosecuted by
law, and I think that we understand that. So I would ask the
witnesses to please stand and raise your right hand. Do you
promise that the testimony you are about to give will be the
truth, the whole truth, and nothing but the truth, so help you,
God?
Mr. O'Neil. I do.
Mr. Glenn. I do.
The Chairman. Please be seated, and we will be happy to
receive the testimony first of Mr. Mike O'Neil.
STATEMENT OF MIKE O'NEIL, FORMER CHIEF FINANCIAL OFFICER, GB
DATA SYSTEMS, O'NEALS, CA
Mr. O'Neil. Good morning. I would like to begin by giving
you some personal background.
The Chairman. Get that mike, Mr. O'Neil. Get it a little
bit closer to you, so we can all pick it up.
Mr. O'Neil. Is that better? OK. Let me begin by giving you
some personal background so you will have some perspective on
how it is I happen to be appearing before you today. My
education and working career has always been the financial
arena. I spent 20 years in both commercial banking and worked
for companies, but my primary focus has been on financial
reporting and analysis. I have lived in California since 1983,
but consider myself to have New England roots. I am married to
a doctor, have two children.
As a rule, my career and life have been based in logic and
fact. On the surface, this may make me appear to be a poor
candidate to discuss advertising practices of any company.
However, in my capacity as the chief financial officer for the
Glen Braswell Company, I attended and had input in most
meetings of senior staff; included in these were weekly
advertising discussions of content, scheduling, production,
along with senior management meetings to discuss product
development and company direction.
A description of the associated companies of Glen Braswell,
GB Data, et cetera, would list some 13 companies that are
primarily involved in the sales and distribution of what have
become known as nutriceuticals. Combined, these companies have
annual revenues of approximately $200 million. The targeted age
market for these products is 45-to 60-plus-year-olds. As the
CFO from August 1998 to January 1999, I was effectively third
in command at the company, behind the chief operating officer
and Glen Braswell. With the knowledge gained from that
position, I have been asked to come before you to discuss the
focus and intent of the company's advertising practices and why
they should demand any attention at all from this committee.
If the name Glen Braswell sounds somewhat familiar to you,
it should. Mr. Braswell was the subject of a lot of attention
back in January and February of this past year as a result of a
last-minute Presidential pardon, which was arranged through the
former First Lady's brother and which the press referred to as
a pardon-for-money scandal. At the time, Glen Braswell was
reported in the press to be, ``a convicted felon who was under
investigation by the Internal Revenue Service for a massive
offshore tax evasion scheme.''
Because of the pardon, he no longer has a felony conviction
on his record. However, I can tell you that the IRS
investigation is ongoing. As you might imagine, as the former
CFO, I am involved in that investigation. As such, I have been
asked and request from you that we do not place the ongoing
investigation in harm's way by discussing it in this hearing.
The Braswell companies operate as direct-mail marketing
companies; that is, they sell directly to the consumer without
going through retail outlets. This is accomplished by sending
marketing information to consumers through the mail. Consumer
names and addresses are bought and sold by the millions via
brokers who categorize names according to whatever demographic
requirements are required. Gero Vita, Life Force,
Theraceuticals and other Braswell companies rent these lists
and mail four-to 16-page solicitations to people on the list,
touting the benefits of nutritional supplements.
Again, the target market is 40-to 60-year-olds--I'm sorry,
65-year-olds--who have good credit and have been willing to buy
through the mail. These practices, in one form or another, are
virtually identical to all direct mail businesses in the
industry.
What makes the Braswell companies unique to a handful of
marketers is the predatory nature of the advertising message.
The primary vehicle for the sale of products is a 50-page
advertisement that has been referred to here and noted as the
Journal of Longevity, published monthly. The magazine claims to
be a journal of medical research reviews in the preventive
medicine fields. The fact is that it is neither a journal, nor
does it present any reviews of any preventative medicine. Every
word in the magazine is composed by Braswell staff, and
furthermore every word is designed to do one thing, sell
Braswell products.
The magazine is presented in such a manner so as to suggest
that it is a legitimate medical journal with articles written
by various medical professionals. In the articles, they
described a variety of medical situations that are painful,
debilitating or life-threatening. These articles run three to
four pages with medical detail and facts. In these articles,
they describe various nontraditional herbal supplements that
can solve these medical situations and restore health to
whatever you apparently are bothered by. Then, as luck would
have it, there is an ad in the journal for nutritional
supplements sold by a seemingly unrelated company that contains
the ingredients just described in the previous article, and an
800-number where you can order that product.
It is a nice, clean process, except that nowhere in the
journal does it tell anyone that this is an advertisement.
Further, the articles are not written by medical professionals,
but rather by Braswell staff. They are reviewed by medical
professionals, but written in-house. Finally, the ads contain
outright false statements. The ads and articles routinely toss
phrases around such as, ``Thousands of doctors have praised,''
whatever product, and, ``Millions of men use whatever
product,'' which is blatantly false. One product claims to
improve memory, sex drive, and reduces the chance of a heart
attack by 83 percent.
The article routinely described medical problems as life-
threatening, potentially deadly, causing severe illness or
death. They are described to scare or threaten the reader into
purchasing the antidote, or at least try the product for
$29.95. The products sold by the Braswell companies are rotated
through the journals, with new product names and articles
concocted as necessary; that is, if a product does not do well,
it is renewed and given life in treating some other malady. New
products were introduced at marketing meetings, with Mr.
Braswell retaining the right to override any conclusions from
any meetings.
On more than one occasion, products were deemed to be
ineffective and ads too outspoken or provocative for
publication in marketing meetings, only to be overwritten by
Mr. Braswell, many times to the disbelief of the staff
involved. What makes this inappropriate is the nature of the
articles and the advertisement. What makes the activity
inexcusable is it takes advantage of people with legitimate
medical needs who are susceptible to a message of miracle
remedies and cures. What needs to be considered here, in my
opinion, is not what the person who is in pain is thinking when
they read the ads, because they want to believe--they almost
need to believe what is in the story.
But, rather what needs to be considered is what the person
writing the ad knows to be true, and to the extent that there
is a difference, there is fraud. I cannot say that all the
products do not work or the people who take them do not feel
better. I am not a doctor, I am not a research scientist, and I
have no basis to have an opinion on that portion of the
product. What I am saying is that the process that is used to
recruit customers is flawed, laden with lies and deception, and
that the product could not possibly deliver what is promised in
the advertising.
I am not the first person to come to this conclusion. A
Washington Post story of the companies quote the editors of
Consumer Reports as saying in 1988, ``We see a lot of
misleading marketing, but what spews out of Gero Vita Industry
rivals the worst.''
``Consumer Reports,'' continues the Post, ``characterize
the company's literature as masquerading as science.'' The
booklets cite actual studies, but twist the findings to support
the company's own unsubstantiated claims. In South Carolina,
three sports figures, Richard Petty, Stan Musial, and Len
Dawson, filed suit in Federal court against Braswell and Gero
Vita for misusing their names in advertisements for Prostata, a
claimed prostate cancer-preventing supplement. The lawsuits,
filed in 1997 by Mr. Glenn here and Gedmiem Howe III involved a
series of advertisements that identify the three sports figures
among a group of men who, ``waited too long and are suffering
from prostate problems.''
Finally if you look at the company itself, there is an
underlying commitment to deception. All the advertisements by
the company contain a return in Canada, thus suggesting the
company is either located or headquartered in Canada. I
recently placed a call to customer service at the company that
I used to work for and was told that the company chiefs were in
Canada, but that she was in Maryland.
Braswell companies have no employees of an executive or any
other kind in Canada, but have what amounts to a Mailboxes,
Etc. address in Toronto. The reason is simple: The United
States Postal Service cannot easily interrupt mail going
outside the company--outside the country, I am sorry. If you
look at the Journal of Longevity, the return address is Reno,
NV. There are no employees in Reno.
These are two of the list of attempts to confuse both the
general public and the government agencies. When I was there,
and I do not believe things have changed, Braswell companies
had employees in Marina Del Ray, CA, a shipping warehouse in
Las Vegas, NV. The reasons the companies wish to have the
appearance of foreign ownership and ghost locations is to
create a delay for any individual or government agency seeking
to locate the company. To the best of my knowledge, all of
these employees are legal if you pay the appropriate taxes and
file appropriate documentation. However, the elaborate tactical
maneuvering of the company suggests it is aware of its own
deception and has taken preventive measures to delay and
confuse what it must have known would be eventual government
investigation.
One of the reasons I was brought to the company was to help
clean up the company for potential sale. Financial reporting
and operational procedures were improving, but still
compartmentalized and fragmented. During my time with the
company, we had discussions with a number of buyers, and every
one of them had concerns with Braswell advertising practices.
While the potential buyers did not like his style, they wanted
to know the financial effects of reducing the fabrications in
advertising practices, clearly realizing the two are
interdependent.
When I came to work for the company, Mr. Braswell had been
described to me as an advertising genius who had the ability to
build a company to $200 million in annual revenues. As I came
to know the insides of the companies, a different story became
very clear. He is not an advertising genius. He is simply
willing to advertisements outside conventional industrial
boundaries. To me, this is not a genius. It is a liar.
In my position as a chief financial officer, I was able to
obtain answers to questions on advertising and work with the
chief operating officer, Mr. Ted Ponich, to determine the hows
and whys of the company's operating principles and practices.
When he was hired in 1996 and I was hired in August 1998, we
were advertised by senior outside consultants that the company
wanted to improve its image and to convert from a clandestine
operation to a traditional company. By November 1998, it was
clear there was no desire to improve the company, but rather
the desire to appear to be making changes at the company by
hiring persons such as Ted and myself and other department
heads with traditional business backgrounds, while Mr. Braswell
and senior advisors continued to manipulate the advertising and
financial performance of the company.
The goal was to sell the company to an unsuspecting
investor or competitor. Just after Thanksgiving of that year,
Mr. Ponich and I met, where he informed me he was convinced Mr.
Braswell recognized he could not change the company without
senior staff, and he intended to use this leverage to approach
him with his concerns as to the direction of the company.
Things did not go the way Ted had planned. The meeting
ended with Mr. Braswell telling Mr. Ponich he wanted the
company to go back to the old way of doing business. Mr. Ponich
was a man of great integrity, and he told Mr. Braswell either
the company gets cleaned up or I will personally turn you into
every government authority I can find. In January 1999, four
department heads, including Mr. Ponich and I, were terminated
for the stated reason that the company was going in a different
direction. True to his word, shortly after we were terminated,
Mr. Ponich met with myself to discuss going to the appropriate
governmental agencies.
While part of me just wanted to get on with my life, two
things occurred which would not let me. No. 1, I would not let
my friend take this process on by himself. More importantly and
fundamentally, people should not be allowed to get away with
what was going on. We had been insiders. We knew the strategy.
We knew the practices of the company. We knew its professional
advisors and could best ensure that the efforts of the various
agencies were beneficial and productive, and, in fact,
contacted the IRS, Federal Trade Commission, State Franchise
Tax Boards, the Post Office, Food and Drug Administration,
various other government agencies, including the offices of the
two Senators from California.
We expected retaliation from Mr. Braswell. We were not
disappointed. I was sued for a number of issues, as was Mr.
Ponich. The suit against me was ultimately withdrawn. Ponich's
suit has been pending the outcome of a continuing IRS
investigation against the company. However, I am certain that
it is fraudulent and it will be settled in his favor at the
appropriate time. The lawsuits were a not-so-thinly veiled
message of power and money by the Braswell companies against
those who would dare to help us. Suits were no surprise to us,
as it was consistent with the Braswell strategy of overwhelming
any opponent with expensive and extensive litigation brought by
very reputable law firms.
Besides the expensive defense, the strategy is to ruin the
reputation and credibility of individuals and to ensure that it
is near-impossible for them to be employable in the future. As
you may imagine, working in the financial field and having been
sued by your last employer for financial transgressions is not
helpful to a career. Mr. Ponich was tragically killed in an
automobile accident last October. I will tell you I gave up his
cause of trying to expose the Braswell companies, and the
companies continue to publish the Journal of Longevity, mail
out weekly advertisements to millions, and continue to thrive.
However, at the beginning of this year, after the
Presidential pardon debacle, people began to notice the
Braswell companies again. I read a number of articles on
Braswell companies by leading newspapers and periodicals which
describe Braswell as scam artists, convicted felons, supplement
fraudster, huckster, swindler, con artist, and as a man
convicted of mail fraud and perjury. Even with all of this
notoriety, the company still continued to be allowed to go on.
The fundamental reason I am here today is to discuss why a
company headed by a man as described above can remain in
business and continue to prey on the elderly and infirm.
We all know there are Federal and State agencies designed
to protect the public from these activities and there are a
suitcase-full of laws already in place to make sure that what I
have just described does not occur. In my opinion, we do not
need any laws or agencies in addition to what we already have.
What we do need is to have the laws already in place enforced,
and the agencies charged with monitoring these types of
companies do their job.
The challenge is Mr. Braswell's senior advisers are not
going to make it easy for anyone or any agency to impact their
ongoing business. I have had many discussions with Mr.
Braswell. The thing he fears most of all is going back to jail.
He has a substantial amount of money and he will use it. The
first thing he will do is out-lawyer whomever he goes against,
even if that is the government. His current legal team is a
Who's Who of the law profession. They have a client list which
starts at the former President and Vice President and moves to
major companies and influential people. His financial and
technical advisers are the best money can buy. They know the
law and they know what is massage able within the law.
The second thing you face when dealing with companies such
as these are both simple and yet difficult to overcome. They
play fast and very loose with the truth. The company has
elevated deception to an art form. He already knows the
advertising and return policies within the company are
fraudulent. Why should we believe that they are all of a sudden
honest when it comes to dealing with government investigators
or, for that matter, anyone who is a perceived threat to the
ongoing operation? The United States Postal Service, which was
responsible for shutting down the 1983 Braswell operation by
stopping its mail, cannot easily interrupt mail destined to
Canada. So they go get a Canadian address.
The FDA, after reviewing some of Gero Vita and other
Braswell products, issued an import alert for product coming
from Canada. The agency believes it did its job. However, the
fact is there is product coming from Canada because the company
is headquartered in Marina Del Rye, CA. The products are
encapsulated at various labs on the West Coast and product is
shipped from a company warehouse in Las Vegas. The company
maintains its primary banking relationships--the Royal Bank of
Canada. All funds are wired there on a daily basis. While the
money in Canada is not beyond the reach of U.S. officials, it
will delay by 2 or 3 days any seizing process and allow the
company to move funds offshore.
Over the past 2 years, almost all of the agencies that were
contacted by us have come back to say that their initial
investigation revealed the Braswell companies to be foreign-
based, beyond their jurisdiction, even after we advised them of
who Mr. Ponich and I were and what we knew, the best we would
receive was a promise from a few agencies to look into the
matter. For the record, over half-a-dozen calls to each of our
State's Senators yielded zero response.
The Braswell strategy has been effective, and to stop the
predatory nature of the advertising and fraud, in my opinion,
you have to defeat the strategy. In a nutshell, this strategy
is simple--first, remain anonymous. No one knows who you are or
where you are--compartmentalize the company so even employees
do not know exactly what goes on. Contract out much of the
company's activities. Stay off government radar screens and
stay out of the limelight. Mr. Braswell believes that
government agencies love to go after big fish. A legitimate
concern of Braswell is that his company was getting too big,
one of the reasons for sale is that it would begin to attract
attention.
The second strategy is to hire the best attorneys and
accountants that are available, feed them a tale of misery,
accented with deception. These people know the government, they
know the people within the government and they know the
attending weaknesses within any agency. The reputations and
credentials of the professionals representing Mr. Braswell are
known and respected by most agencies and various government
attorneys. This is intimidation, but it works.
Third, delay the process; provide no information or
overwhelm an agency with useless information; ask for
extensions; plead ignorance; mistakes of intent. Most agencies
are very forgiving. Use the bureaucratic nature of government
investigating agencies against them; that is, most bureaucrats
do not want to draw attention to themselves or other agencies
by investing government resources in a losing effort. These
people who work for government agencies do not want attention
any more than Mr. Braswell does, but for different reasons. If
they know that going against Mr. Braswell will be long,
expensive and may yield nothing, they are inclined to look for
a reason to avoid confrontation.
Last, strategic settlement; if there is a chance that the
loss is unavoidable, settle the issue, seal the results,
maintain your anonymity. That is the basis of the company and
provides the freedom from which they operate. The company,
policies and procedures that I have just described exist. It is
real, operates in California, but how do you know that? This
committee has the opportunity to view what I have just told you
as either the truth or the ramblings of a disgruntled former
employee. I would suggest to you that there are consequences to
either avenue. If you ignore me, you take the chance I was
telling the truth and that the company preys on the elderly and
people who are infirm and in need of hope. These people need a
collective voice, and this committee can be that voice. If you
take me at my word, you are going to be taking on a man who has
money, therefore can buy power and influence, both of which are
the non-negotiable currency of many governmental endeavors.
Let's not forget, he just received a Presidential pardon.
Ultimately, if we are successful in changing or eliminating
Gero Vita, GB Data and the Braswell companies, another will
step up and fill the void, as long as there are people in pain
and getting older, when older brings pain and illness, there
will be people who believe that there is an herb in India or a
plant in China that holds the secret to pain-free existence
that our government does not want them to know about it. The
fact is most Chinese and Indians do not live near as long as
Americans, but packaged and presented in the proper format,
there are millions of people, perhaps tens of millions in this
country, that are willing to ignore this fact and buy into the
fraud sponsored by companies such as Gero Vita, Theraceutical,
and other Braswell-type companies and enrich the owners in the
process.
The job of this government and this committee, as I see it,
is to simply make sure there is a level playing field, that
citizens have all the information they need to make an informed
decision, and the information is founded in fact. Fraud and
deceit, wherever it exists, unlevels the playing field and
clouds the facts.
Thank you.
[The prepared statement of Mr. O'Neil follows:]
[GRAPHIC] [TIFF OMITTED] T6011.001
[GRAPHIC] [TIFF OMITTED] T6011.002
[GRAPHIC] [TIFF OMITTED] T6011.003
[GRAPHIC] [TIFF OMITTED] T6011.004
[GRAPHIC] [TIFF OMITTED] T6011.005
[GRAPHIC] [TIFF OMITTED] T6011.006
[GRAPHIC] [TIFF OMITTED] T6011.007
[GRAPHIC] [TIFF OMITTED] T6011.008
The Chairman. Well, Mr. O'Neil, thank you very, very much
for a very detailed and very elaborate tale. I think the
information that you provided in your testimony is extremely
important to this committee. We thank you for being with us. I
know it has not been particularly easy for you to do so.
We will next hear from Mr. Vernon Glenn, who is an attorney
from Mt. Pleasant, SC. Mr. Glenn, we welcome you to the Aging
Committee.
STATEMENT OF E. VERNON R. GLENN, ESQ., LAW OFFICES OF E. VERNON
F. GLENN, MT. PLEASANT, SC
Mr. Glenn. Thank you, Senator Breaux. I appreciate the
committee's invitation to testify and I hope what I have to say
is helpful. My biography has already been provided to the
committee. I am a trial lawyer and I live across the river from
Charleston, SC. I would be remiss if I did not extend the
salutations and good greetings from Mrs. Virginia Kyle Hine and
Mr. Edwin Kyle. Ms. Hine's son, Johnny, is my best friend from
college, and they sent their best to Senator Breaux.
I was taught as a child that if it quacks like a duck,
walks like a duck, waddles like a duck and has white feathers
like a duck and has got an orange bill like a duck, then in all
likelihood it is a duck. I am here to tell you now that what
Mr. O'Neil has told you is not only a story of some significant
tragedy for our seniors in this country, but it is a duck. This
fellow, Braswell, whose deposition I took this time last year
down in Miami, I would submit to this committee is a recidivist
of the highest and most chronic nature.
Let us not forget that Mr. Braswell was sent to jail, to
Federal prison, by Federal Judge Marvin Shoob back in the early
1980's. Now, why was he sent to prison? Let us review: Mr.
Braswell was sent to prison for lying about breast-enhancing
and hair-growth products, and false marketing, and lying before
a grand jury, and income tax fraud. All of it was related to
his marketing. I have with me an excerpt from the Atlanta
Journal Constitution, 1983: ``Glen Braswell, once a reputed
multimillionaire who lived in an Atlanta mansion and ruled a
mail-order empire was sentenced to prison Monday in Federal
court here. 'He can't even pay his phone bill now, they say,'
said Assistant U.S. Attorney Robert Stubbs, who handled the
Braswell prosecution. The picture painted in court testimony
was that Braswell has little left to show for his years of
business and will be lucky to keep one of the three homes that
he owned in better days. He received a 3-year sentence for
filing false tax returns and a perjury conviction, and when he
is released he has 5 years on probation, and he is also to have
Federal alcohol and drug rehabilitation while he is in the
Federal pen in Kentucky.''
Ladies and gentleman, I am here to tell you the more things
change, the more they stay the same, and we are now at another
moment of critical mass. Mr. Braswell is absolutely making
money hand-over-fist on the backs of aging and scared and
fearful Americans. There are two ways to stop this, I would
submit, and I bet somebody else up there has got another idea,
but my two ways are this: One, we have got to educate our
seniors, and that seems to be an ongoing process, because hope
and hopefulness always triumphs education. It just does. We
want to believe. I am 51 now. I have gotten very creaky, and
old, and grumpy about it, and I would love it if somebody would
give me something to make me feel better every morning.
Having said that, I also am old enough and experienced
enough and educated enough to understand that there is no magic
cure in a bottle. I wish that there was, but there is not. So
the ongoing educational process, a little bit, is not going to
be that effective. The other part of it is somebody has got to
start swinging a great big bat at these people. I know about
Braswell because I represented a bunch of people that ended
up--and we ended up suing him, and we sued him in a very
unlikely place. We sued him in Federal court in South Carolina,
and Mr. Braswell did not want to come down to the low country
of South Carolina and sit and face a jury of his peers.
Mr. O'Neil and I were chatting earlier and he told us we
were just a flea on a dog's back. They paid us some money--we
are not allowed to disclose how much and it was a goodly sum,
but I am not going to tell you how much--but it did not mean
anything to Glen Braswell, and his insurance company paid some
of it and Mr. Braswell paid some of it. Isn't that about right?
And Mr. Braswell went on, and that is the reason, when I sent
my remarks up to this committee, ``Sin in haste and repent at
leisure.'' That is something my mother always said to me and I
now say it to my children.
Mr. Braswell has a great time sinning and it takes him a
long time to repent, and until you all get your big stick out
and all these nice law-enforcement agencies sitting back here,
Mr. Braswell is going to continue to get a free pass. He wants
to sell these companies, ladies and gentlemen. He has got a
passport. He is going to leave the building. He is going to
come in here with a phalanx of lawyers. He is going to leave
with a phalanx of lawyers, and we will all throw our hands up
in the air. I submit we can do better than that.
John Cheever, one of the great American authors, once said
that, ``America is a Nation haunted by a dream of excellence.''
I always loved that. He said that at the Bicentennial. Walter
Cronkite interviewed him. What he was saying was we are always
stumbling and staggering and trying to figure out what is the
right thing to do, and we mess it up all the time and we get it
wrong a lot, but we keep trying. So our plea to this committee
is please keep trying, please let's sort of put on our armor
now. Let's tell the big-dog, white-collar law firms no, no
more, we are not going to let you stand in the way here. We are
going to do our job for our senior citizens and for our people
who are sick and scared. It is the right thing to do.
Last, I would draw your attention to three quick things,
and then I will be quiet. My children would look at me when I
say that and say, ``Daddy is lying again,'' so I want to make
full disclosure. There is a poster over here that we pulled up
off the Gero Vita web site, and I would commend this to you. I
know the Braswell people will love it because it is free
advertising. You know that old thing, ``I don't care what you
say about me, as long as you get my name right.'' But it is
www.gvi.com. You can go there and I mean you can buy it all,
and I wish you would look at the bottom. This is the Prostata.
This was the company, the product that GVI sells, that we got
into these lawsuits with, with Jim Ferree and these other
sports celebrities. They have a disclaimer on the bottom, and I
want to read it to you real quickly: ``Gero Vita products are
dietary supplements--that is it--and as such are not intended
to treat, cure or prevent any disease. Those seeking treatment
for specific disease should consult a physician or other
qualified health care professional prior to take a Gero Vita
product or any dietary supplement.'' The message is: Buy our
stuff, but before you put it in your mouth, go on and see your
doctor.
Well, your doctor is going to tell you that it is not worth
a tinker's damn, none of it is. It is junk. It is all junk. I
consulted with one of the finest gerontologists in the country,
Dr. Walter Ettinger, then of Wake Forest University Medical
School. Walter Ettinger knows more about dealing with the aging
issues with elderly Americans than just about anybody I know.
Walter Ettinger said this stuff is not medically efficacious.
My time is up. I have one last comment. In the web site
they have a special section, and I do not mean for this to be
salacious. This is sad. Sexual enhancers, they sell--they list
10 of them, with such fascinating names as Sexativa Plus,
Teston cream and Intamax. I conclude my formal comments to this
committee by giving you a brief description of the so-called
claimed medical efficacy of Teston cream and Intamax, which
they sell, by the way, in a combo-pack. Teston cream--now, you
all tell me if the Federal Trade Commission does not believe
this is false advertising: ``Teston cream is a hormonal
supplement,'' which, by the way, nobody knows how much hormone
is in it or if any is in it because it is not vetted by
anybody. It is only distributed by GB Data Systems through
their operations in Canada, Reno, and all parts of the globe.
But what you do with Teston cream--and this is fabulous--
you rub it on your clean, dry abdomen, and then your sex life
is going to take off. Now, I am going to tell you now if I can
rub some cream on my clean, dry abdomen--I guess if you had a
sweaty or dirty abdomen, you are out of business. The other
part of it is the Intamax. Now, this is even better. Here is
the double-barrel. If you get both--if you can get both, first,
I guess, you put the Teston cream on your clean, dry abdomen,
but then you spray Intamax with its six prosexual nutrients
into your mouth. I do not know when you do this, because they
are not telling us, but I am sure that would really kind of
lighten the mood. ``Can elevate your sexual vigor to new
heights of passionate lovemaking.''
Folks, this is garbage. This is junk. These people walking
in here today, they can dress it up any way they want, but the
truth of the matter is this is real wrong, and you all--and you
all have the power to put the brakes on these people. I have
always felt that during the course of my life, that from time
to time things achieve a critical mass, things evolve. They
kind of come to a point where things are going to happen. Well,
golly, the country is getting older. I am getting older. We are
all getting older, and these people are out there just preying
on us. Stop them.
Thank you.
[The prepared statement of Mr. Glenn follows:]
[GRAPHIC] [TIFF OMITTED] T6011.009
[GRAPHIC] [TIFF OMITTED] T6011.010
[GRAPHIC] [TIFF OMITTED] T6011.011
[GRAPHIC] [TIFF OMITTED] T6011.012
[GRAPHIC] [TIFF OMITTED] T6011.013
[GRAPHIC] [TIFF OMITTED] T6011.014
The Chairman. Mr. Glenn, thank you very much, and Mr.
O'Neil, thank you very much. A couple of questions, Mr. Glenn
has just indicated, in his opinion, that the products are
garbage and junk. But, Mr. O'Neil, can you give us an idea of
how much the company was making selling the products that Mr.
Glenn just described as garbage and junk?
Mr. O'Neil. Sure. The company has a profit--pure profit
percentage of between 18 and 20 percent. As he so effectively
described the product, which I would not even try to do again,
they sell typically for $29.95. Of that $29.95, the majority of
the expense going into that $29.95 is advertising. The product
itself is probably bottled and put in a box for $4, $5 dollars.
So advertising is clearly the No. 1 expense of the company.
The Chairman. Do you have any idea what the gross revenues
were?
Mr. O'Neil. I have no idea what it was for the last couple
of years, but I know they were on target for $200-plus million.
The Chairman. I am sorry. How much?
Mr. O'Neil. They were on target for $200-plus million when
I left the company.
The Chairman. $200-plus million? Was that--over what period
of time?
Mr. O'Neil. A year.
The Chairman. A year?
Mr. O'Neil. Yes.
Mr. Glenn. Let me put it in further perspective. When Mr.
Braswell went to prison in 1983, 1984, he was broke. So in
about 17 years, he has gotten way past back to even. They
advertised last year, after Mr. O'Neil and Mr. Ponich and the
others were summarily kicked out the door for trying to tell
the truth, they advertised in a number of trade journals that
they wanted a director of marketing for a $250 million-a-year
gross sales company. We know that in the cases that we were
involved in, that they mailed out almost 12 million brochures,
and these are expensive brochures. They used one of the biggest
and finest printing outfits in the world, Quebecor, Magog out
of Canada, and they mailed out about 12 million of these
glossy, slick brochures. They were just four-fold, but they
made about $7, $8 million in sales off those brochures.
They track by zipcode a personal note--and I have seen the
document. Mr. Braswell owns all this stuff lock, stock and
barrel. If there is any minority ownership, it is very, very
minority. Just to put it in perspective, this was a man who was
broke 17, 16 years ago, when he got out of prison. He just
settled with one of his wives for $42 million, and he is paying
her. That is a lot of cash.
The Chairman. Mr. O'Neil, we got one of the copies of the
Journal of Longevity at my house. How did I get on the mailing
list?
Mr. O'Neil. Mailing lists are an industry unto themselves.
There are brokers out there who, if you buy something, you
order something, ask for information on something, any time you
give your name and address out somebody is capturing it. It is
a very elaborate industry, because obviously you do not want to
pay for names that are already your customers. But essentially
somebody in your family made a request, ordered something, got
a Visa card, got a TRW report. There are 1,000 different ways
of getting on a list, and these lists are traded, these lists
are sold. They are rented--essentially, you rent them for four
cents a name or thereabout.
The Chairman. Was there a conscious effort to get names of
people who are seniors?
Mr. O'Neil. Absolutely. As Mr. Glenn pointed out, you want
to sell your product to the target market, and the more you can
refine that, the advertising is very expensive. If you look at
the quality of the advertising, not what is contained within
the issue, but just at the quality of the journal itself, the
reason it looks like, as you referred to, the American Journal
of Medicine or the New England Journal of Medicine is because
it is equally well-prepared, probably better prepared, if you
truly wanted to go into the details of it. It is very well
done, it looks legitimate, and that is very expensive to do. So
you do not wish to put that advertising piece, as it truly
should be referred to, in the hands of a 20-year-old who would
not know their prostate if they had to.
The Chairman. Do you have any information or knowledge as
to how--I was impressed with the pictures of the doctors and
all their little initials behind their names, M.D.s, Ph.D.s, et
al., behind each one of their pictures and their names. I am
just wondering, do you have any idea of how the company got
doctors to associate with the articles and did, in fact, the
doctors write the articles, to your information?
Mr. O'Neil. The articles were written at the Journal of
Longevity, which are--the offices of the Journal of Longevity,
the offices of GB Data, the offices of Gero Vita, are all on
one floor, in one building, literately across from each other.
So to presume that there is a distance between them would be an
overexagerration. What happens with the doctors--and as you
know, I am not a doctor--but there are many doctors that
believe that this stuff is valuable to you, as some would say
it is not valuable to you. So they seek out doctors who are
willing to have their names associated, they write the article,
they ship it to the doctor for their review.
The Chairman. Who would write the article?
Mr. O'Neil. Writers. If you flip to the front of that book,
you will see a bunch of budget writers. The people will write
the article, do the research--and they include a bibliography
in there, and the research is from wherever--and then ship the
article off to the doctor to be reviewed for--you know, to see
if they were wiling to come on board with it. There is a list
of doctors, and from within the company, I can tell you that
there are certain doctors that you can ship whatever to and
they will sign off on it, and other doctors are more critical.
The Chairman. My final question--thank you. Was there any
discussion at any time as to whether the word ``advertisement''
should appear in this journal at any time, and if so, what was
the conclusion?
Mr. O'Neil. That would defeat the purpose, simply put. That
is a short answer to a long question, but that would defeat the
purpose. The purpose in not to have that considered as an
advertisement. The purpose in presenting that whole process--if
you look through that journal, there is virtually no other
product, other than the Braswell products, advertised in there,
and yet it presents itself to be a journal, and if you read
under the title, of medical review. So to call that an
advertisement is to put a stake in the heart of it.
The Chairman. Thank you both, gentlemen, very much.
Senator Wyden
Senator Wyden. Thank you, Mr. Chairman.
Mr. O'Neil, a special thanks to you. It takes tremendous
guts to do what you are doing, and not just walking through
that door and talking casually. There is real exposure for
somebody like yourself who does this, and I appreciate it. I
think you heard me say that what I think really has changed
over the years, in terms of how you fleece seniors, is that you
use these new technologies, No. 1, and with modern
transportation you have got worldwide mobility, and I think
what you have documented in your testimony, particularly at the
top of page four, is especially troubling, in terms of the
relationship between California and Las Vegas and Canada.
I want to ask you just a couple of questions about that.
You mentioned that the company's money is sent to Canada so
that if anybody goes after it, there is a delay so it can be
transferred again quickly. Do you have a sense of where the
money ultimately ends up?
Mr. O'Neil. Yes, I do. I imagine you will probably want me
to elaborate on that. As one might imagine, this is a $200-plus
million operation and there are expenses that need to be paid.
The money is collected either through credit card receipts or
through the actual through-the-mail receipts, and starts in the
Royal Bank of Canada. From there, it goes to--or at least it
formerly went to, when I was there--Bermuda, to accounts
controlled by Mr. Braswell directly, and then from then on I
have my suspicions, but I cannot quote exactly where it goes.
But it does not end up back here, and the purpose behind that
is very simple. In 1983, it was the United States Post Office
that shut him down simply by interrupting his stream of cash.
If you take the mail, you take the receipts. Now, credit cards
were not as prevalent back then, but you interrupt his mail,
you interrupt his receipts, you interrupt his cash-flow.
Senator Wyden. Does the money move through multiple
jurisdictions overseas, in your opinion?
Mr. O'Neil. Define multiple jurisdictions.
Senator Wyden. I am trying to be helpful to you. As I say,
I think what you are doing is extraordinarily gutsy, and I
obviously want you to tell me where it is going to end up, but
I realize this is a very sensitive point. As I say, this is a
field I have worked in for 20 years now, since I was director
of the Gray Panthers, and I think there is clearly a new
approach that allows this money to be moved literately all over
the globe virtually overnight, and I want, consistent with what
you feel comfortable saying, for you to tell me a little more
about that.
Mr. O'Neil. Sure. The money flows, as you said, quickly.
The money flows effortlessly, as simply as wire transfers and
the money is in California this morning, this afternoon it is
in Canada, and tomorrow morning it is wherever it needs to be.
As to whether it takes guts to come up here and say something,
I would just like to say one thing on that, and that is that my
friend, Ted Ponich, who passed away, made a promise to this man
of what he was going to do if he did not clean up his act. I am
just fulfilling a promise. I am not--this is not--trust me, I
got other places I would rather be.
Senator Wyden. I got that drift.
Mr. O'Neil. I am not the best person to do this. He was a
gregarious person that would be better served here, but he said
what he was going to do. I agreed with it, so I am here. So
whatever you want to know, less what is going on with the IRS,
I am more than willing to tell you.
Senator Wyden. You also mentioned that you had gone to
several agencies to ask them to work with you on this. Can you
tell us a little bit more about how you were treated by those
agencies?
Mr. O'Neil. Are you sure you want to know? Yeah, all right.
Not well--courteously, but not well. There is a sense among the
agencies of do you really want to take on this man? Do you
really want to face the lawyers that you are going to be facing
in a couple of seconds and go head-to-head with them, and
potentially lose? When you go to the FTC or you go to the FDA,
there is no Mr. FDA or Mr. FTC. It is not one person. You are
talking to a person who works for the agency--I am sure very
well-intentioned--but they work for an agency. They do not
represent the agency. They do not have ownership in the agency.
They want to make their job appear as easy as possible.
Included in that was our two Senators from California, and
they were very courteous--I mean, their staff. You do not talk
to them, naturally. But the staffs of every agency we went to
were very courteous. Some did some investigations and came back
and said Canadian company. And we flat told them--Mr. Ponich
was with me at the time, ``Look, you are looking at the chief
financial officer and the chief operating officer of the
company. We know they are in Marina Del Ray. We know there are
no--'' And then they would say, ``Well, let us look into it
further,'' and it just rolls on down the road.
So it was a frustrating experience at best, and
functionally, as I said, I gave it up. It just was not--it was
not worthy my time to just be told there is nothing here or
there is nothing worth it, in the agency, to go after him, or
there is nothing we can latch our hands on to, or there is some
agency and we are going to subordinate our investigation to the
IRS and wait till it--and they do not have to be--they can
mutually exclusive, I guess is what I am saying.
Senator Wyden. If you could get to me the names of the
people in some of these agencies that you met with, I would
very much like to go over that with them, and I share your
view. I do not think they get up in the morning and say,
``Look, I want to let some people off the book.'' I think that
clearly these are issues that take a whole lot of effort and
whole lot of commitment, and my sense is sometimes that is not
forthcoming, and I want to follow this up.
Mr. O'Neil. Senator Wyden, you are right. Essentially,
there is an investment that they have to make in their own
credibility, their own time, and agency resources, and I am
sure they kind of do a return on investment at their own level,
and say, ``This is what we are going to go up against,'' and
frankly there are not five people in this room that could tell
where O'Neals, CA really is. I am one man from O'Neals, CA. Who
am I going to talk to? Who am I?
Senator Wyden. That really leads to the last question I
want to ask for you, Mr. Glenn, because your testimony was very
good, and I obviously share your concerns. The point about the
agencies and the investment goes right to the heart of what you
need to do in this area.
I am not convinced, for example, you need to bring hundreds
and hundreds of cases. What you need to do is send a very
strong message in instances where it is clear that the conduct
is over the line, because if you send a really strong message,
that has real deterrence value, and then all of a sudden those
who prey on seniors are going to have to be a little more
cautious. That goes to the point that you made with respect to
swinging the bat and swinging the bat hard, which is again
something I have been very committed to in my years, working
with older people.
What is being missed as of now when people swing the bat?
Let's say you are at the plate, you hold the election
certificate, you sit where Chairman Breaux is and a couple of
other members of U.S. Senate, and so you have got an
opportunity now to make sure that when the bat is swung, you
are not just flailing around out there, but you are really
swinging it so has to have the maximum effect when you really
need to send a deterrent, which is what I was trying to elicit
from Mr. O'Neil. So tell us, if you would, how you swing that
bat.
Mr. Glenn. I would have a real brief meeting with the
following people in attendance, and I would ask them for their
full and total corporation. I would invite the head of the
Federal Trade Commission, the head of the Food and Drug
Administration, the United States Postal Inspector, the
Canadian ambassador, the Ambassador from the Grand Cayman
Islands, where one of the big offshore holding companies is
DeLeon Holdings, I believe it is. I am saying it, he ain't. And
I would also have the U.S. Attorney from California, who is in
charge of the ongoing, pending criminal tax fraud
investigation. I would say, ``Gentlemen, ladies, we are going
to get on the same page, we are going to get on the same page
now, and in 10 days I want you back in my office telling me
exactly what we are going to do, and we are going to shut this
scam artist down and we are going to shut down now,'' And I
believe that is probably already in the works. This is part of
my critical mass theory.
But I think that is the easiest way. You get everybody that
has an opportunity to take a shot at this guy, legitimately,
and get them all on the same page at one time, and then run it.
Senator Wyden. We are going to try to--and under Chairman
Breaux's leadership--we are going to try to bring that kind of
meeting about.
Mr. Glenn. I do not think there is any question there is.
Senator Wyden. Thank you.
The Chairman. Thank you, Senator Wyden. We have been joined
by Senator Lincoln.
Any questions at this time, Blanche?
Senator Lincoln. No questions. I may have a few opening
remarks.
[The prepared statement of Senator Blanche Lincoln
follows:]
Prepared Statement of Senator Blanche Lincoln
Good Morning Mr. Chairman and thank you for holding this
timely and important hearing.
A recent Newsweek article said that, ``....in England, old
age is imminent, in Canada inevitable and in California
optional.'' In their day and age in America, are able to
replace practically anything that we want from hair to hips. So
it's no wonder that our expectations for health ``fix-er-
uppers'' are high.
As the Newsweek article that I'm referring to made clear,
most of us want to live as long as possible, but we also want
that life to be healthy.
We are blessed in our society to have access to some of the
most exhilarating types of activities; and just because we are
``a certain age'' doesn't mean we want to stop doing those
things. Americans want to remain as active and involved in
every aspect of our lives as possible. We don't even want to
retire until it is absolutely necessary. So, we all run the
risk of being ``victimized'' when it comes to products that
help hold at bay those aches and pains and essentially ``slow-
down'' the process of aging.
Our senior population is growing and Baby Boomers more than
anyone will be seeking the most effective health sustaining
products. This problem is of national concern, considering that
it is estimated that this is a $27 billion dollar a year
industry and 60 percent of those consumers in this industry are
senior citizens.
Given this set of circumstances I believe it is our
responsibility to be aware of companies that wish to prey upon
our vulnerabilities. We must arm our caregivers with yet one
more weapon with which to fight for and protect our seniors
from these abuses-knowledge.
I'm glad to be here today and look forward to the
testimonies of our witnesses.
Thank you Mr. Chairman.
The Chairman. OK. Good deal.
Gentlemen, we thank you very much. You all have been very
helpful to this committee. Perhaps we may have some future
discussions with you, and the best of luck to both of you.
Thank you very much.
We would like to now welcome up our next panel, the second
panel, which will consist of Mr. Glen Braswell, who is
president of Gero Vita International, and Mr. Ron Tepper, who
is editor of the Journal of Longevity. The gentlemen, I
understand, will be accompanied by their attorneys, and we
would be pleased to have them come before the committee. We
will, of course, ask them to take the same oath testifying to
their truthfulness as the first panel did, and would ask them
to please take their positions at the witness table.
Mr. Braswell and Mr. Tepper, I was saying while you were
entering the room that we would ask you to please stand and
swear to the truthfulness of your testimony, as we have had the
first panel do, and all the other panels, as well. Gentlemen,
would you please stand and raise your right hand? Do you
solemnly swear that the testimony you are about to give to the
Committee on Aging be the truth, the whole truth, and nothing
but the truth, so help you, God?
Mr. Tepper. I do.
Mr. Braswell. I do.
STATEMENT OF GLEN BRASWELL, PRESIDENT, GERO VITA INTERNATIONAL,
MARINA DEL RAY, CA; AND RON TEPPER, EDITOR, ``JOURNAL OF
LONGEVITY,'' HEALTH QUEST PUBLICATIONS, MARINA DEL RAY, CA
The Chairman. Please be seated. Gentlemen, we are glad that
you are here. I understand that you do not have any testimony
to present as a statement to the committee. Is that correct?
Mr. Tepper. That is correct.
Mr. Braswell. That is correct.
The Chairman. Well, then in that case, I think that it
would be appropriate if we would just, since you do not have a
printed statement to the committee, just to proceed to asking
you some questions about the subject matter of the hearing
today.
I would like to start by first asking Mr. Braswell if you
are the sole owner or stockholder for the GB Data Systems and
their subsidiary companies?
Mr. Braswell.
Mr. Braswell. On advice of counsel, I respectfully decline
to answer the question, based on my rights under the Fifth
Amendment.
The Chairman. Mr. Braswell, I know the answer, but if you
would make sure you have your mike as close to you as you
possibly can.
Mr. Tepper, you are identified as the editor of the Journal
of Longevity. My question is isn't it true that the
publication, Journal of Longevity, which you have seen
displayed here, is owned by GB Data and is not, by any
definition, an independent medical journal? Is that correct or
not correct?
Mr. Tepper. On advice of counsel, I respectfully decline to
answer the question, based on my rights under the Fifth
Amendment to the U.S. Constitution. On advice of counsel, I
assert the privilege.
The Chairman. Mr. Braswell, the address that we have noted
in the Journal of Longevity to order the products that are
advertised for distribution and sale is in Canada. Do you have,
in fact, any employees or offices or facilities or products
based anywhere in the country of Canada?
Mr. Braswell. On advice of counsel, I assert the privilege.
The Chairman. Mr. Tepper, the previous panel of witnesses,
one of the attorneys, talked in terms of litigation, that he
has proceeded to represent people who are allegedly endorsing
products in the Journal of Longevity without their permission.
The question is has the Journal of Longevity and you as the
editor ever utilized statements or likenesses of any
individuals without their permission to do so, that appeared
subsequently in the journal?
Mr. Tepper. On advice of counsel, I respectfully decline to
answer the question, based on my rights under the Fifth
Amendment to the U.S. Constitution. On advice of counsel, I
assert the privilege.
The Chairman. Mr. Tepper and Mr. Braswell, I think there is
a trend here. Mr. Braswell, I have just got to ask you, do you
really use any of these products that are advertised in that
Journal of Longevity yourself?
Mr. Braswell. On advice of counsel, I assert the privilege.
The Chairman. Gentlemen, certainly you have the
constitutional and legal right to do that. The assertion of the
Fifth Amendment right to not testify is a right that has been
long-recognized in this country, and we respect that right. It
is not an indication of guilt or innocence or anything of that
nature. You have that right and we respect your exercise of
that right, and obviously to continue a long line of
questioning with the same answers is not going to get us
anywhere, nor provide any additional information, and the
committee really needs to move on to other people who will be
testifying about this and other matters dealing with the
marketing of products, particularly to seniors.
With that, and your assertion of your rights, which again
you have the right to do, both Mr. Braswell and Mr. Tepper
would be excused at this time.
We now, as this panel is departing, have a third panel
which we will anxiously bring to the forefront. Ladies and
gentlemen of the third panel, we are pleased that you are here.
We would like to invite your testimony. I think it is a
distinguished panel, and we would like to introduce them. The
first member of our panel is Dr. Janet Heinrich, who is the
Associate Director of Health, Education and Human services at
the GAO. Welcome back. Next we have Dr. Joyce Lashof, of the
University of California at Berkeley, author of the Wellness
Letter, which we have looked at; Dr. Robert Baratz, pleased to
have you with us; and also Dr. Timothy Gorski. Dr. Gorski, we
are delighted to have you, as well. We will begin with Dr.
Heinrich and with the General Accounting Office.
Dr. Heinrich. Mr. Chairman and members----
The Chairman. Pull those mikes real close. Let me ask--
because of everybody's time constraints, we are going to ask
that you attempt to summarize your statements. Dr. Heinrich,
you have done this many times before, and all of our witnesses.
We are going to be fair. We have three Democratic Senators
here, and I expect others to be in attendance in the near
future. But I have read everything you have written, and I
think our colleagues have. I have read it, I have underlined
it, and I have re-underlined it. So I have already heard it. So
I would like very much for you to attempt, to the extent that
you can, summarize it for the record. It will appear in its
entirety in the official public record, and I want to get to
the questions and hopefully the dialog that would be most
helpful.
Dr. Heinrich.
STATEMENT OF JANET HEINRICH , D.Ph., R.N., ASSOCIATE
DIRECTOR, HEALTH, EDUCATION, AND HUMAN SERVICES DIVISION,
GENERAL ACCOUNTING OFFICE, WASHINGTON, DC
Dr. Heinrich. Mr. Chairman and members of the committee, we
are pleased to be here today as the committee considers risks
associated with anti-aging and alternative medicine products
marketed to senior citizens. These products are popular among
consumers, with as many as 40 percent of senior citizens
reporting some use. As you have stated, they include dietary
supplements, such as ginkgo biloba, used to improve memory, and
ginseng, used to relieve stress. Some products are promoted
with anti-aging and cure-all claims for which there is little
scientific evidence of either safety or effectiveness.
Because of your concerns about these anti-aging product
claims, you asked us to do a report on some of the potential
harms that are physical and economic, and to examine Federal
and State oversight.
The Chairman. Do you know when we asked for that request,
because I was trying to figure out when we asked for it? Do you
have that in your file?
Dr. Heinrich. Oh, yes, we do.
The Chairman. When would that be?
Dr. Heinrich. It was probably July--March, March.
The Chairman. March?
Dr. Heinrich. Yes.
The Chairman. Thank you. Please continue.
Dr. Heinrich. Although documented adverse effects for most
products are generally mild, potential harmful complications
from supplements can occur due to several factors. Research
shows that some supplements can have serious health
consequences for seniors, such as respiratory failure, kidney
damage. FDA has issued warnings that the herbal product,
comfrey, for example, used for colds and coughs, represent a
serious safety risk to consumers from liver toxicity. I was
able to purchase some comfrey this weekend that had a warning
that said should not be taken internally because there may be
some harmful alkaloids if taken over a long period of time.
Individuals with certain underlying medical conditions
should avoid some dietary supplements. For example, ginseng is
not recommended for persons with hypoglycemia, and kava kava,
thought to promote relaxation, may worsen symptoms from
Parkinson's disease. A variety of frequently used dietary
supplements can have dangerous interactions with prescription
and over-the-counter drugs. Several supplements, such as,
again, ginseng and ginkgo biloba, alter bleeding times and
should not be used with blood-thinning products like warfarin
or coumadin, and should not be used prior to surgery.
Other risks are associated with poor manufacturing
practices. Supplements have been found that were contaminated
by pesticides and heavy metals, some of which can be toxic.
Finally, dietary supplements may contain more active
ingredients than indicated on the product label. In a study of
DHEA, a dietary supplement that may increase hormone levels,
one product was shown to have as much as 150 percent of what
was indicated on the label, while other samples had none.
We do not have exact figures, but millions of dollars may
be spent on unproven products. For example, rife machines,
which emit electrical frequencies that manufacturers claim
kills viruses and parasites can cost up to $5,000. FTC
estimated that for 20 companies the subject of law-enforcement
activities, the average economic harm to consumers was about
$1.8 million per company. The potential for harm to seniors is
a concern of public health and law-enforcement officials, and
Federal and State agencies have some activities underway.
FDA has taken enforcement actions against firms selling
anti-aging products alleged to be dangerous or illegally
marketed. It has taken actions to remove from the market
products that the agency found were actually unproven new drugs
or medical devices, and it has taken some actions against firms
that promoted their dietary supplements for the cure or
treatment of disease. FDA has not prohibited the marketing of
any specific substances using its administrative authority
under the Dietary Supplement Health and Education Act.
The agency has issued warnings for ingredients it deems to
be unsafe and unlawful. However, many products remain on the
market despite the agency's warnings. An example of this is the
case of colloidal silver products. Some manufactures have
claimed efficacy in treating HIV and other diseases with these
products. Even though FDA banned colloidal silver products as
an over-the-counter drug in 1999, these products may still be
marketed as dietary supplements, as long as they are not
promoted with specific disease claims.
Despite FDA oversight activities, colloidal silver products
claiming natural antibiotic properties to address numerous
health conditions remain available. FDA can also monitor
dietary supplements by conducting inspections of manufacturing
facilities. However, the agency inspects less than 5 percent of
facilities annually. Publication of good manufacturing practice
regulations would improve FDA's enforcement capabilities, and a
proposal rule is awaiting approval. In conclusion, the risk of
harm to seniors from anti-aging and alternative health products
has not been identified as a top public health priority or
leading enforcement target. However, evidence demonstrates that
many senior citizens use anti-aging products, and that
consumers who suffer chronic conditions may be at risk of
physical and economic harm from some of these products.
Mr. Chairman, that concludes my remarks. I will be happy to
answer questions.
[The prepared statement of Ms. Heinrich follows:]
[GRAPHIC] [TIFF OMITTED] T6011.015
[GRAPHIC] [TIFF OMITTED] T6011.016
[GRAPHIC] [TIFF OMITTED] T6011.017
[GRAPHIC] [TIFF OMITTED] T6011.018
[GRAPHIC] [TIFF OMITTED] T6011.019
[GRAPHIC] [TIFF OMITTED] T6011.020
[GRAPHIC] [TIFF OMITTED] T6011.021
[GRAPHIC] [TIFF OMITTED] T6011.022
[GRAPHIC] [TIFF OMITTED] T6011.023
[GRAPHIC] [TIFF OMITTED] T6011.024
[GRAPHIC] [TIFF OMITTED] T6011.025
[GRAPHIC] [TIFF OMITTED] T6011.026
[GRAPHIC] [TIFF OMITTED] T6011.027
[GRAPHIC] [TIFF OMITTED] T6011.028
[GRAPHIC] [TIFF OMITTED] T6011.029
[GRAPHIC] [TIFF OMITTED] T6011.030
[GRAPHIC] [TIFF OMITTED] T6011.031
[GRAPHIC] [TIFF OMITTED] T6011.032
The Chairman. Thank you. We will have questions. That is
some good information.
Dr. Lashof, thank you for being with us from California. We
really appreciate it.
STATEMENT OF JOYCE C. LASHOF, M.D., ASSOCIATE CHAIR, EDITORIAL
BOARD, ``WELLNESS LETTER,'' UNIVERSITY OF CALIFORNIA SCHOOL OF
PUBLIC HEALTH, BERKELEY, CA
Dr. Lashof. Thank you very much, Senator. I appreciate this
committee holding this hearing and looking into the marketing
of nutritional supplements to the elderly. We at the University
of California-Berkeley Wellness Letter seek to provide the
public with an independent, reliable summary of available
scientific information regarding all aspects of health
promotion and disease prevention. Our criteria for evaluating
such information include clinical trials with adequate numbers,
double-blind controls, and good statistical techniques for
analyzing the data, followed by publication in an independent,
peer-reviewed scientific journal.
Following the passage of DSHEA, there was a burgeoning of
products purporting to prolong life, improve the immune system,
improve memory and relieve innumerable symptoms. Thus, over the
past years, a significant portion of our efforts and print
space has been devoted to carefully examining the claims,
debunking the ones that could not be substantiated, and helping
our readers navigate through the slick and mostly misleading
advertising for dietary supplements.
One of the very first that we tackled in 1992 was Gero
Vita. At that time, they were only marketing GH3 as an anti-
aging formula, and we were extremely forceful in recommending
that our readers disregard all claims for this product. Later,
we went on to warn our readers not to believe any of the claims
made in Gero Vita's Journal of Longevity. Today, Gero Vita's
web site features no less than 12 products which claim to have
anti-aging products. Those are displayed there. They include a
number--and I will not go through them, for the sake of
brevity.
I should point out that although the ingredients in dietary
supplements are required to be listed on the label, the amounts
of individual ingredients in so-called, ``proprietary blends,''
is not required. The lack of a system of good manufacturing
practices and more-stringent ingredient labeling regulations
make it impossible to know how much, if any, of the purported
active ingredient is actually in the products, and perhaps more
importantly, whether it is uncontaminated. The Wellness Letter
has now reviewed more than 70 dietary supplements, including
conventional vitamins and minerals. Our complete supplement
review is available on our web site, www.wellnessletter.com,
and a print of this material has been made available to the
committee, and I have our book with descriptions of 70 products
here.
While we have acknowledged that some of these supplements
appear to be useful in certain situations, such as St. John's
Wort and glucosamine, the only supplements we currently
recommend to our readers are Vitamin C, if dietary sources are
insufficient, Vitamin E, folic acid, and a multivitamin for
older adults whose diet may not be adequate. Our reasoning for
this is that whereas vitamin preparations are standardized and
regulated, other dietary supplements reside in a murky
netherworld, somewhere between drugs and food, exempt from all
but the most minor of labeling regulations, yet again thanks to
DSHEA, which we consider unfortunate legislation.
The manufacturers of these products have nonetheless been
allowed to make claims in their advertisements that are almost
completely unsupportable by scientific review. They are not
required to prove efficacy or safety before they bring them to
market. DSHEA has put the burden of proof on the FDA to show
that something is not safe, and the FDA must rely on the
reporting of adverse events, which in this case turns out to be
a voluntary, inefficient and unwieldy system, and one that GAO
has reported on.
The end result is a juggernaut industry that now
approaches--I think your figure was $26 billion, gone up quite
a bit from my figure of $17 billion. While dietary supplements
are legally precluded from making health claims on their
label--they cannot say they cure cancer, heart disease or even
acne--they are nonetheless being marketed as medical miracles.
But, in fact, these products have drug-like properties. They
are a drug and they should be regulated and controlled like
drugs. The common perception that so-called natural products
used in dietary supplements are always safe is completely
unfounded and dangerously misguided.
The rigorous scientific research that needs to be done in
this area is certainly doable, but it is expensive. The
manufacturers have very little incentive to carry it out. The
industry has grown exponentially without this kind of testing
and without standardization of ingredients, so it continues to
rely on practically nothing but anecdotal information to
support its claims. By and large, most young, healthy people
who take dietary supplements do so without adverse
consequences, except on their pocketbook. But the ill and the
elderly are a different issue.
Perhaps the most insidious aspect of marketing dietary
supplements to the elderly under the terms of DSHEA is that
companies like Gero Vita can knowingly exploit the hopes and
fears of a population for whom safety is extremely complicated
and which, by and large, has more reasons to be concerned about
the economic impact of useless substances.
One of the likely outcomes of aging is the slowing down of
the renal and hepatic systems, which means that drugs of any
kind, whether prescription or botanical, are not cleared as
quickly through the kidneys and not metabolized as efficiently
by the liver. This makes the elderly more susceptible to the
effects and side-effects of any drug. Because older people
typically take many forms of medication for chronic conditions,
the likelihood of adverse interaction is greatly heightened,
and I have listed on the next table some examples, and Dr.
Heinrich has given other examples, and I will not go through
them for the sake of the fact that the yellow light is on.
Let me put up another poster on DHEA--again, Dr. Heinrich
mentioned. DHEA is a hormone manufactured in the human adrenal
gland. This substance is being marketed as an anti-aging
formula that enhances mood, energy, memory, boosts sex drive,
reduces osteoporosis, improves fat loss, increases muscle mass
and improves the immune system, et cetera. It is not a natural
medicine and most certainly not a dietary supplements, and
should never have been classified as such. We do not understand
how FDA did that.
You can go on and talk about the expense to the pocketbook
of the elderly, whose income is limited, to see them spend
money on these kinds of dietary supplements when they do not
have enough money to spend for their prescription drugs, and we
know that is a real concern of yours. It is really disturbing.
Let me get specifically then to our recommendations. On the
last poster, I have listed them. We believe that DSHEA should
be repealed or at least amended to give FDA the power to
regulate nutritional supplements as they now do over-the-
counter drugs, and thus require scientific proof of efficacy
and safety. We recognize that that is not going to happen soon.
The forces against it are great. But until then, first we need
to make adequate resources available to FDA and the FTC to
enforce existing rules covering the claims made on labels and
claims made in other advertising. FTC requirements for what can
be used as an advertising claim, what it should be based on,
are really quite good. But they do not have the resources to
begin to enforce it, considering the size of the industry.
Finally, we believe that FDA should be required to finalize
the current good manufacturing practices rule, which I gather
has been put forward and is bottled up somewhere in the
bureaucracy, and finally require that the labels of dietary
supplements instruct consumers to report adverse events
directly to the FDA, provide toll-free numbers for them and web
site by which they can do that.
Thank you very much.
[The prepared statement of Dr. Lashof follows:]
[GRAPHIC] [TIFF OMITTED] T6011.033
[GRAPHIC] [TIFF OMITTED] T6011.034
[GRAPHIC] [TIFF OMITTED] T6011.035
[GRAPHIC] [TIFF OMITTED] T6011.036
[GRAPHIC] [TIFF OMITTED] T6011.037
[GRAPHIC] [TIFF OMITTED] T6011.038
[GRAPHIC] [TIFF OMITTED] T6011.039
[GRAPHIC] [TIFF OMITTED] T6011.040
[GRAPHIC] [TIFF OMITTED] T6011.041
[GRAPHIC] [TIFF OMITTED] T6011.042
[GRAPHIC] [TIFF OMITTED] T6011.043
[GRAPHIC] [TIFF OMITTED] T6011.044
The Chairman. Dr. Lashof, thank you for your testimony and
thank you for the good work that you do out at the university.
It is very informative and very helpful.
Next, we will hear from Dr. Robert Baratz. Dr. Baratz, glad
to have you before the committee.
STATEMENT OF ROBERT S. BARATZ, M.D., Ph.D., DDS,
NEWTON, MA
Dr. Baratz. Thank you, Senator Breaux. Health care is one
of the most important aspects of anyone's life. While we may
disagree on where and how to spend our resources, there has
been little disagreement on what standards we should have. The
rise of modern medicine over witchcraft, shamanism, vitalism,
folk tales, anecdotes, wishful thinking and snake oil has not
been by accident. While there is still a place for the art of
practice, a bedside manner and practical skills, the foundation
of the house is and should continue to be scientifically
gathered evidence.
In recent years there has been a movement to undo this
standard, advanced by those who wish to profit from being freed
from the requirements of evidence, and promoted by others who
claim that anything should be allowed, whether it has a
rational basis or not. So-called health freedom is claimed as
some kind of right under which charlatans, quacks, and
unscientific and unqualified practitioners can operate. Its
advocates want a system where anything goes, without any
standards for either safety or effectiveness, let alone the
truth.
Neo-snake-oil salespeople, pseudoscientific zealots and
profiteers have blurred the lines between science and nonsense,
and have begun to undermine the foundation of our excellent
system of care. They substitute pseudo science for science,
anecdote for evidence, and nonsense for substance. Quality,
scientifically based health care is currently at risk. I come
here today to speak with you about this problem. In the popular
media we are barraged by stories about secret herbal folk
remedies and tiny electrical devices which can cure all
diseases, and I brought one with me. If anyone needs to be
cured, I can do it. [Laughter.]
Accompanied by testimonials of how wearing refrigerator-
strength magnets will improve strength and endurance, we are
asked to believe that vast bodies of knowledge have somehow
been suppressed for years, allegedly to keep profits high in
the medical establishment. We even are being asked to accept as
legitimate primary care health practitioners, individuals who
have unsupported theories of disease based on life forces being
misaligned, imaginary parasites inhabiting our bodies,
derangements of our spines which cannot be demonstrated, and
unnamed toxins in our environment. We are being asked to
discard science for conjecture and fanciful notions.
Those who are most likely to be targeted and duped by these
purveying predators are the elderly. Given the limited amount
of time we have to speak together here, I urge you to read my
written remarks, which carry much more detail than I can
present here now.
The world of science is not a closed club. One must merely
put forward evidence of a claim and have it judged on the open
market of ideas. The process is simple, open and available.
Instead, we are seeing an increasing array of initiatives to
legitimize otherwise illegitimate practices. Lawmakers are
being asked to license practices that lack a scientific basis.
Agencies are being told they cannot regulate drug substances,
such as we have heard about today, if they are called something
else.
So-called supplements are being marketed and used as if
they were drugs, free of regulation. Words such as
complementary and alternative medicine have been reinterpreted
to cover any nonscientific idea and practice. The public is
separated from protection only by clever language, something
Congress never intended in DSHEA. We have seen numerous reports
of death and severe disability due to so-called supplements,
including Ephedra, Aristolochia, just to name two, and there
are many more. I noted, as the prior speakers were speaking,
dead people cannot report adverse events.
Let us not mince words. These substances are being promoted
as drugs in the common, everyday usage of that term, clever
language, creative terminology and nosological acrobatics not
withstanding.
To get to the National Institutes of Health from DuPont
Circle, I can take a cab or the metro. These are true
alternative methods of travel. No matter what I believe, I
cannot ride a magic carpet or self-levitate and fly to
Bethesda. The alternative to scientific, evidence-based medical
practices is non-evidence-based, non-scientific nonsense. It is
wrong and frankly ridiculous to place this collection of
anecdotes, pseudoscience and conjecture, called alternative
medicine, on the same stage as the real thing, but this is
precisely what is being done.
A woman named Hulda Clark, who wrote this book, ``The Cure
for All Diseases,'' and who promotes these zappers, says that
she has found that all diseases have simple explanations. Clark
has a mail-order naturopathic degree and claims that a rare
Asian liver fluke, triggered by toxins in the environment and
harboring mutant bacteria, cause all of our illnesses:
diabetes, Parkinson's, multiple sclerosis, and even AIDS.
Inherited genetic disorders such as muscular dystrophy, she
says, can be disinherited. She can cure you with a simple
electronic device such as this one, built with some parts from
an electronic store and some supplements, including the
dangerous substance, wormwood.
Outlets, including ones that just happen to be run by her
son and her brother, hawk her dangerous items and sell her
illegal devices. They are easy to find and readily available. I
ask you, why? Let me relate the story of a young woman who
followed the teachings of this Hulda Clark. This was written by
her friend, Pia Johansson: ``Hanna was diagnosed with severe
breast cancer. She got a full mastectomy and was treated with
chemo and radiation. An alternative practitioner who promotes
Hulda Clark's protocols, prescribed cleanses and zapping. The
practitioner told her that her pets carried parasites and were
the cause of her cancer. She placed all the animals with
others, except two dogs, which were also treated with the
zapper. Her pets were with her her whole life and they were her
heart.''
``She has a limited circle of friends, but she couldn't
visit them, nor ask them to visit her, because she was afraid
of being reinfected, which is what she was told. She paid him
more than $800 for these capsules, tinctures, and zappers, and
followed the protocol to the letter. She had a recurrence of
the cancer, now spread to her lungs and liver, and the
practitioner once again claimed he could cure her. He was her
only hope. Consuming those herbs and capsules--some are known
poisons--they made her vomit and spoiled her appetite. She was
taken to the hospital. I visited her and watched her zapping
both her and her dog as she wasted away, barely able to swallow
the Clark capsules. She died Monday night, January 15 of this
year.''
Do you honestly believe that this is harmless? Can you
properly call this health freedom? I call it healthy tyranny.
These supplements are being used as drugs. There are other
scans where other unapproved electrodiagnostical devices are
commonly used for diagnosis and treatment. In so-called
chelation therapy, illegitimate practitioners prey on the
elderly, claiming they can treat atherosclerosis. Millions of
dollars are collected for this bogus procedure. You can find
the ads in virtually every South Florida newspaper. Advertising
targets elderly individuals, suggesting this therapy is an
alternative to bypass and can prevent arteriosclerosis.
The elderly and others are also regularly victimized in
schemes for cancer cures, alleged heavy metal poisoning, heart
disease, and neurodegenerative disorders. Colorado dentist Hal
Huggins emptied the bank accounts of an elderly Kansas farm
couple, convincing them that he could treat the wife's breast
cancer and her husband's ALS. The husband nearly died during
treatment when he aspirated unnecessary pills, which were
allegedly to detoxify him from his dental fillings. The wife
wasted away after all her teeth were removed inappropriately.
Therapy which could have cured her was postponed. These are
examples of the dental amalgam scam. Stopping these thieves of
the professions is a task of licensing boards at the State
level. However, these crimes cannot typically transcend the
mandates of the boards--they typically do transcend the
mandates of the boards, excuse me. These crimes cross State
borders, use telephones, modems, the Internet and the mails
involving money laundering and hiding assets in offshore
accounts. After enriching themselves on the public, misbehaving
practitioners often have huge war chests, dwarfing the meager
budgets of State prosecutors, where a licensing board often
cannot recover the cost of prosecution, find the offender, or
mandate restitution.
The Chairman. Dr. Baratz, excuse me. We are going to have
to ask you to try and summarize.
Dr. Baratz. OK. I am just closer to the end, Senator. Thank
you.
We need model legislation to tighten the laws against
predatory practitioners. The smaller States need help in being
able to afford to enforce the rules. We also need to put teeth
into the punishment for offenses. Too often the guilty get a
slap on the wrist, write off the cost of their defense as a
cost of doing business, and go right back to bilking the
public.
Let me come to the summary--toward the end, please. The
problems I report transcend the mandates of any one entity. We
need Federal and State task forces to deal with these problems.
Millions, if not billions, of dollars are scammed each year.
Health fraud also causes considerably disability and death.
These are crimes against all of us, since society at-large is
typically the resource that has to repair the damage that these
criminals do. They truly steal from us all.
Let me quickly name some areas where Congress can act at
little cost with high impact: First, to assist the Mexican
government in closing illegitimate cross-border clinics. Recent
raids in Baja, CA, closed several illegal clinics, including
one by Hulda Clark. We need improved collaboration with the
Canadian authorities to help put an end to Toronto mail drops,
which we heard about earlier; 800 telephone numbers, referral
services and other cross-border scams which allow fraudsters to
elude regulators.
Multilevel marketing schemes are common vehicles for
promoting supplements and other dubious products. Full
disclosure of product efficacy and meager chances of financial
reward to any prospect, before they sign up, should be required
for any company that engages in multi-level marketing. These
simple steps may help dispatch the multi-level menace that we
have now in the health arena. Enabling legislation should be
enacted to deputize State attorneys general to get nationwide
injunctions against sale and distribution of illegitimately and
falsely advertised products. This would extend the reach of
Federal agencies markedly at very little cost.
The abuses I outlined above have gone on for simply too
long. This very Senate committee in 1983 said that quackery and
medically related fraud are No. 1 of the top-10-most-harmful
frauds directed against the elderly. After almost 20 years, is
it not time to act more decisively? We must level the playing
field so perpetrators lack any advantage over the regulators.
We must provide resources for quick and effective action, make
sure reparations are made, and make the penalties severe enough
so these crimes will not pay. We must keep science and evidence
as the framework of our medical system. We need a plan, a
timetable, and a designated leadership to make this happen. The
cost of not acting is too great.
The National Council Against Health Fraud, of which I am
the executive director, stands ready to work with all
interested parties to address the problems I have outlined.
Thank you very much, Senator.
[The prepared statement of Dr. Baratz follows:]
[GRAPHIC] [TIFF OMITTED] T6011.045
[GRAPHIC] [TIFF OMITTED] T6011.046
[GRAPHIC] [TIFF OMITTED] T6011.047
[GRAPHIC] [TIFF OMITTED] T6011.048
[GRAPHIC] [TIFF OMITTED] T6011.049
[GRAPHIC] [TIFF OMITTED] T6011.050
[GRAPHIC] [TIFF OMITTED] T6011.051
[GRAPHIC] [TIFF OMITTED] T6011.052
[GRAPHIC] [TIFF OMITTED] T6011.053
[GRAPHIC] [TIFF OMITTED] T6011.054
[GRAPHIC] [TIFF OMITTED] T6011.055
[GRAPHIC] [TIFF OMITTED] T6011.056
[GRAPHIC] [TIFF OMITTED] T6011.057
The Chairman. Thank you, Dr. Baratz.
Dr. Gorski, your testimony, please.
STATEMENT OF TIMOTHY GORSKI, M.D., ARLINGTON, TX
Dr. Gorski. Thanks very much, Senator. There was a time
when all of medicine was unproven and irrational, and it was
only our ability to understand and have the tools to collect,
analyze and properly interpret evidence that has made the
difference. So there was not any quackery, really, until we
were able to do that. This committee's counterpart in the
House, the Subcommittee on Health and Long-Term Care, Claude
Pepper's subcommittee, in 1984 issued a report. It was
entitled, ``Quackery: A $10 billion scandal,'' and it referred
very candidly to a vast array of pills, potions and devices
with the terms, ``worthless,'' ``no scientific evidence,'' ``no
physiological or pharmacologic basis,'' ``no rational
ability,'' and so on, and noted that many of these schemes and
scams were being perpetrated on America's elderly.
Now, in the 1980's, this was a cottage industry on the
fringe, and, of course, we have heard about how Mr. Braswell
spent some time behind bars for being engaged in these kind of
activities during those years. The advocates called it
``alternative medicine'' because they knew and they still know
that their claims are inconsistent with objective facts and
scientific principles. The Pepper report called it quackery and
defined it as promotion--that is a key word--promotion of
medical schemes or remedies known to be false or which are
unproven for a profit, and we have heard about profit today.
So how did this $10 billion scandal turn into a huge and
growing industry that is at once a media darling, a feeder at
the public trough and a threat to the public health? Well, in
1993 a report appeared in the New England Journal of Medicine,
the real New England Journal of Medicine, that claimed to
consider unconventional medicine. This was a survey that lumped
together every conceivable form of health-related behavior,
which it said was ``Not taught widely at U.S. medical schools
or generally available at U.S. hospitals.'' In fact, Senator,
this is the first survey where we get this information that
supposedly the use of alternative medicine has been exploding.
Consider what they counted amongst unconventional, later
called alternative, medicine: vitamin use of any kind--in fact,
at that time Niacin was being used to treat high cholesterol;
Physical therapy, as long as it was performed by a
chiropractor; imagery, that could be counting sheep for
insomnia; commercial weight loss products such as Jenny Craig
and Slim Fast; self-help groups; lifestyle diets, which could
be anything from keeping kosher to avoiding certain foods for
personal reasons; and even massage and relaxation. You get a
bonk on the head--I just used alternative medicine there. But
these same authors are the same ones that have gone around and
claimed that their studies show that a huge proportion of
Americans regularly use and demand unproven, disproven and
irrational forms of medical care. And this belief is what was
used to impose on the National Institutes of Health the Office
of Alternative Medicine, which subsequently became the National
Center for Complementary and Alternative Medicine, which from
the beginning has been staffed and controlled by ideological
advocates who are not seriously interested in protecting the
public.
Meanwhile, the DSHEA, as we heard, passed in 1994. And that
opened the floodgates for the promotion of a new class of drugs
outside of the FDA's regulatory jurisdiction and including all
those things mentioned in the Pepper report. They could contain
parts of animals, plants, minerals, even heavy metals such as
silver, chromium, lead, either intentionally or
unintentionally. As long as the substances are found somewhere
in the universe naturally, they are considered foods. I could
take my grass clippings, pack them into capsules, and sell them
virtually on any claims that I wished, with little expectation
that anything would be done about it.
We heard a little bit about the huge number of promotional
gimmicks that are common, television and radio ads, the fake
newspapers and journals, the things promoting growth hormone
releasers, DHEA and so forth. You have a card there, I think,
which gives an example. Mr. Braswell's operation is not the
only one that arrives in the mailbox, making extraordinary
claims. How about this? ``Is your doctor curing you or killing
you?''
These kinds of promotions make all kinds of idiotic
statements, claiming that you can self-diagnose, for example,
ulcers and heart disease by your forehead wrinkles and earlobe
creases, or that eating a balanced diet, the kind of thing
recommended by the USDA, ``contains poisons that are killing
you;'' that dairy products cause arthritis and osteoporosis--I
think the committee has two members from the State of
Wisconsin, the Dairy State--and that hormone replacement
therapy radically increases the risk of cancer.
Some of these ads are crafted to look like newspaper
articles that have been clipped, with a little sticky put on
it, saying, ``Hey,'' whatever the person's name is that they
are sending it to, ``try this,'' with some initials and, of
course, no return address. Friends, co-workers, neighbors and
family members can be involved in multi-level marketing
schemes. These are the kinds of things that are not going to
get reported. The Internet and e-mail makes fraud particularly
easy, cheap, and affords many protections for promoters of
these fraudulent products. One representative web site says,
``Before you try dangerous prescription drugs or risky, painful
surgery, discover my safer, more effective, all-natural,
miracle-healing program.'' Also, another page on that web site
says, ``Here is how to cure people with heart disease without
dangerous drugs or surgery,'' and so forth. And, of course,
right at the bottom of that long page is this disclaimer,
``This publication is not intended to provide medical advice,
and nothing in it should be construed as a therapeutic
recommendation or prescription for any disease or symptom.''
That is meaningless.
But these promotions exert a very strong psychological
appeal, especially to people who are sick, people who are
desperate. These promotions assert falsely that the claims are
based on solid science and they encourage people to think for
themselves and consider the evidence. We all would like to be
independent-minded that way. So they appeal to our normal,
human weaknesses, as it were. To deflect any doubts, it is
often said that these devices or products are little-known or
secret. To hear them tell it, these promoters are all modern-
day Galileo's, courageously battling an evil conspiracy of the
conventional medical doctors, the AMA, the pharmaceutical
industry, and the Food and Drug Administration, all supposedly
arrayed against the public for the sake of profit. Often, they
will cite the National Center for Complementary and Alternative
Medicine or the White House Commission on Complementary and
Alternative Medicine as some kind of proof that their claims
are legitimate.
There are five ways that the public is harmed by these kind
of things: direct harm from adverse effects; indirect harm from
the omission or delay of appropriate treatment; economic harm
when people are spending their money on worthless products;
psychological harm when people realize that they have been
duped or harmed; and also social harm, because Americans'
understanding of the facts and principles of health and disease
are corrupted, which impairs their ability to make wise choices
and also to help their country determine the direction of
policy in health-related issues.
There are some significant public health hazards that I
want to mention. I am going to skip over Ephedra. That is
mentioned in my written comments and it was brought up by Dr.
Lashof. There are different concerns raised about dietary
supplements promoted for anxiety, depression and relaxation.
Kava has been mentioned, and let me point out that just because
a culture somewhere has used an herb such as kava for a long
time ``safely,'' does not mean that it is safe. These kinds of
settings are not comparable to that of modern America, where
people are drinking alcoholic beverages, driving and flying
aircraft loaded with hundreds of passengers, perhaps. One might
as well say that drinking contaminated water is safe because
people once did it all the time, or that lead is safe because
the Romans piped their water through it, or that tobacco is
safe because Native Americans smoked it.
St. John's Wort, was already mentioned. I want to mention
something on glucosamine, which has been mentioned here. Widely
promoted for the treatment of arthritis, this medication
interferes with the action of insulin. So it tends to cause
diabetes. I hope that you, Senator Breaux, do not have any
family tendency to diabetes, but there are Americans, many
Americans, who do-or that are at risk because they are obese.
Glucosamine bears a striking chemical resemblance to a drug
called streptozotocin, which is used to make rats diabetic in
the lab. So it is all well and good to have this limited
scientific evidence over a few weeks or months, but what is
going to be the effect of passing this through the livers and
gastrointestinal tracts of Americans for years?
May we have the second card? Perhaps the most serious
public health threat in the making is the growing number of
dietary supplements being marketed as natural treatments for
menopause, generally soy, black cohosh, red clover and other
things. The promoters of these products imply or assert that
prescription hormone replacement therapy is suspect, dangerous
or causes cancer and other diseases. This is the most
outrageous example of that that I have come across, a mailing
from Medical Recall Notice from Health Notification Service of
Henderson, NV. The official-looking contents purport to be a
recall of all prescription estrogen and progestin products
because of severe and prolonged life-threatening side effects.
How many of our wives, mothers, sisters or grandmothers
received this mailing and threw their prescription medication
in the trash? According to this mailing, the indicated
treatment to be substituted is a natural progestin cream with
no harmful side-effects, with the order form conveniently
enclosed.
The promoters of dietary supplement products intended to
treat menopause often claim that HRT, the hormone replacements,
cause women to die from breast cancer, and we know that this is
not true. Menopausal women who could otherwise benefit from HRT
are participating in a vast, uncontrolled and unmonitored
experiment on the basis of false assertions. Many are them are
not going to know that they have been duped for 10, 20 years,
when they fall and they break their hip. There are over a
million fractures due to osteoporosis in this country every
year, a good number of which are hip fractures; 20 percent of
the people with those fractures are going to be dead within a
year.
Finally, it should not be forgotten that many Americans and
others living in this country whose primary language is not
English live in somewhat insulated communities. It is a big
problem in those communities, the kind of advertising that is
directed at them, and this is completely under the radar screen
of law-enforcement authorities for the most part. Let me just
summarize here that these dietary supplements are now really a
serious problem and it is time to review the insights of the
1984 Pepper report, taking note of the fact that promises to
the contrary, none of the forms of quackery mentioned in that
report, not one that were identified have been proven effective
or safe, despite hundreds of millions of dollars having been
given to advocates of these methods for, ``research.''
With regard to alternative medicine, about which there is
no agreement as to what it actually is besides an advertising
slogan, let me simply endorse what the editors of the country's
two foremost medical journals, the real journals, have to say.
The editors of the New England Journal said that there cannot
be two kinds of medicine, conventional and alternative, only
medicine that has been adequately tested and that which has
not. The editors of the Journal of the American Medical
Association said, also, there is no alternative medicine, only
scientifically proven, evidence-based medicine supported by
solid data or unproven medicine.
These principles should be applied uniformly and
consistently. There cannot be two kinds of drugs, those with a
known composition, potency, effects, hazards, interactions,
shelf life, and so on, and those about which all these things
are little more than a guess. There cannot be two standards in
promotional advertising, one that requires a competent,
scientific basis before it is disseminated, and one in which
for all practical purposes anything goes. To have it otherwise
ultimately is to have two kinds of law, one ruled by facts and
reason and the other that is not subject to such orthodox,
traditional and conventional considerations.
It is not going to be easy to start picking up these pieces
and setting things right, but further delay is not going to
make it any easier. The National Council Against Health Fraud
and other groups and individuals whose concerns are truly for
consumers, for science, for compassion, and for true freedom of
choice in the marketplace can be relied on to assist in this
task.
Thank you very much for your time and consideration.
[The prepared statement of Dr. Gorski.]
[GRAPHIC] [TIFF OMITTED] T6011.058
[GRAPHIC] [TIFF OMITTED] T6011.059
[GRAPHIC] [TIFF OMITTED] T6011.060
[GRAPHIC] [TIFF OMITTED] T6011.061
[GRAPHIC] [TIFF OMITTED] T6011.062
[GRAPHIC] [TIFF OMITTED] T6011.063
[GRAPHIC] [TIFF OMITTED] T6011.064
[GRAPHIC] [TIFF OMITTED] T6011.065
[GRAPHIC] [TIFF OMITTED] T6011.066
The Chairman. Thank you, Dr. Gorski and all the members of
the panel.
Dr. Baratz, halfway through your testimony I realized, my
God, I take all this stuff. I have taken DHEA. I have taken
glucosamine and chondrotin. I just had some in my pocket that I
was taking this morning, and I have got a back brace with
magnets in it. Here I am, Chairman of the Aging Committee and
having this hearing, and I have just found out or started
realizing that I, I guess, along with other millions of
Americans who are approaching senior status or are, in fact, in
that status, take this stuff--and the magnets do not help?
Dr. Lashof. No. No. No. No.
Dr. Baratz. No, rhymes with Breaux. [Laughter.]
I think the web site where you bought that was
www.xxx.con--C-O-N--not .com.
The Chairman. I have two of them. I have two back braces
with magnets in it, and it is supposed to help your back.
Dr. Lashof, the last publication here, which is the one,
the healing breakthrough of the century, when it listed
everything that can work for people with everything and that
you can live 26 percent longer, they have got some stuff in
here that, really, I need to ask you about, I guess. One of the
things is this ACF223. They say that this particular doctor did
the research by going to a former atomic testing site in the
Nevada desert, and examined plants that had survived a nuclear
blast and radiation, and they found a seed from one of these
native desert plants was found to have survived and actually
grown, and therefore the active ingredient in this simple plant
was this substance--and it is a very long name. The
abbreviations are NDGA. They say that clinical studies show
that this NDGA extends the life spans of animals and works
against premature skin wrinkling, and the same may be true for
humans.
They go on to say that this doctor put together this
formula, ACF223, and in rigidly controlled laboratory tests, it
was shown to increase life span by 19 to 26 percent. Another
thing they quoted here, and I ask you to comment on this, is
they quote another doctor, whose name I will not mention, who
they say was Director of the National Institutes of Aging, and
that is part of NIH, the National Institute of Health, and they
quote this person, being the Director of the National Institute
of Aging--has conducted countless experiments in clinical
trials with ACF 223 nutrients and concludes. ``Our life span is
directly proportional to the amount of ACF 223 nutrients that
we have in our bodies.''
That is a pretty strong statement. Do you have any
information that anything like this has ever been done at NIH
or the National Institutes of Health, or what are your comments
about the material I just read?
Dr. Lashof. I do not believe it, that is my first comment.
It is not a particular product that we have looked at. That had
not come to our attention, so I have not specifically examined
it. But every time we see that kind of statement, we try to
request the scientific data, and we never get it. One thing
they do, and I do not know whether that is what they have done
there, and you obviously have to talk to the director of the
National Institute of Aging, is that he may have done a study
of some nutrient which they now claim is in here, and they will
quote that out of context. We find that often, that they will
look at some scientific article that tells you something about
what a hormone does or what the function of growth hormone is
in the body, and then extrapolate from that and claim that
their product will now do all these things, and they take
scientific stuff out of context.
But we try always, when we get any product that comes to
our attention--and basically we are looking for those that are
most widely advertised and that are being used a great deal,
and then we start looking at all the literature. We ask the
company to supply us with data, and we do not get it.
The Chairman. You and Dr. Heinrich maybe can get in on
this--Dr. Heinrich talked about the Dietary Supplement Health
and Education Act that Congress passed, and we made a decision
at that time that we were not going to subject these supplement
products to the same rigorous enforcement that we do for other
prescription drugs, over-the-counter generic drugs, that have
to be approved by the Food and Drug Administration. This is a
new category. It is supposed to be like food products, and
therefore they do not have the same rigorous investigation
before they are sold to the public.
It seems to me, in my opinion, there is a difference
between products that are being targeted to people as a food
supplement that may make you lose weight or may make you get
rid of your wrinkles, for instance, as opposed to a supplement
that actually is supposed to prevent cholesterol problems or
diabetes or Alzheimer's, or actually cure aging or potentially
cure cancer. It seems to me that when these food-supplemental
products are put in various combinations, that that is a
difference from just trying to say that you are curing
wrinkles, that you are actually talking about curing diseases.
Do you think there would be a way for Congress to address that
particular issue, that would be helpful, Dr. Lashof?
Dr. Lashof. I think it is very difficult. You see, they
have tried to make the distinction between a cure and this
disclaimer, which is always in such tiny print that no consumer
can ever read it. They say that is really there as a test for
whether you should go to see your optometrist, but trying to
separate those two is very difficult, and so they have used the
term ``function,'' structure and function. You can make a
structure and function claim, and that was their effort, to try
to do that. Well, under structure and function, they just say
about everything. If it improves your body's ability to do
this, that becomes a function, and yet that is what a drug is
doing.
The Chairman. Mr. Braswell did not testify, obviously, this
morning--I cannot say what he might have said. But let's assume
for a moment that someone who makes these products comes before
the committee and says, ``Look, I did not say it cured
anything. I said it might, it could, it possibly might help,
this could help you,'' and all of these clarifying phrases that
keep them within the boundaries of not being sued. What is the
problem with that? If I came here and said, ``Look, I did not
say it was going to cure anything. I just said it might; it
might be helpful; it could be helpful; you ought to take it;
try it; besides, we give you your money back if it does not
work,'' what is wrong with that position with respect to this
particular problem we are looking at?
Anybody, Dr. Gorski, Dr. Baratz?
Dr. Gorski. I was going to jump in and say the Federal
Trade Commission has standards that they can apply in these
kinds of situations, because the standard is what would a
reasonable consumer think. When you put something up saying you
are going to support the cardiovascular system, people with
atherosclerosis can avoid bypass, et cetera, maybe you have not
said you can cure atherosclerosis, but the average, reasonable
man-in-the-street consumer is going to assume that.
The Chairman. I take it it is particularly a problem,
obviously, when it appears in a journal that closely resembles
a, ``legitimate medical journal,'' with doctor, pictures and
everything else.
Dr. Gorski. Sure. That is right, and they are inviting the
public--which, of course, we would all like to think that we
have some control and have some power over our lives to make
our own decisions, the self-validating kind of decision.
The Chairman. Dr. Heinrich, in a GAO investigation of this
issue--and I will get to Senator Wyden after this question, did
I hear correctly that you said that FDA has never taken a
product off the sales list, as a result of these type of
investigations of supplements?
Dr. Heinrich. You are correct. What I said, and we made
sure that we checked with FDA, of course, to reaffirm the
accuracy of this, but under DSHEA, they have not taken
administrative action to remove a particular substance. As I
said, they have taken actions, and in our report to you we do
list some of the FDA actions that have been taken to remove
products that have claimed treatment for a particular disease.
But, no, they have issued warning letters against substances
that they think are harmful, but they have not--they have
relied on----
The Chairman. But you have in your testimony a quote, ``The
FDA has not initiated any administrative rulemaking activities
to remove from the market certain substances that its
analysis--its analysis--suggests post health risk, but has
sought voluntary restrictions and attempted to warn
consumers.'' Do they have the authority to take these products
off the market?
Dr. Heinrich. FDA has the authority to claim that a product
is harmful. Then they have to take it to court for court
action. But, from FDA's perspective, the burden of proof then
of harm is on FDA and their legal counsel, as opposed to what
we have with drugs, where it is the responsibility of the
manufacturer to ensure that there is safety and efficacy.
The Chairman. One of the things--again, this is the concern
I think we have--you have also in your statement, the GAO,
``Although DSHEA allows FDA to remove from the market dietary
supplements that the agency can prove are dangerous, the agency
has not prohibited the marketing of any specific substances
using its administrative rulemaking authority.'' Dr. Heinrich.
That is correct.
The Chairman. Senator Wyden.
Senator Wyden. Thank you. Thank you, Mr. Chairman. It has
been an excellent panel.
Dr. Heinrich, one of the constants to me in the health-care
fraud area, and it has changed and we have talked about it, is
it seems that somehow the bad guys, after they perpetrate these
reprehensible, heinous offenses against seniors, somehow
invariably manage to get back in business and go out and
continue to prey on seniors. What we have seen this morning
raises again a question in my mind about how the government
deals with it.
Mr. Braswell apparently has been found to violate a number
of civil and criminal laws in the past, with respect to his
activities with seniors. He came here this morning and took the
Fifth Amendment with respect to a variety of issues we wanted
to explore, and again this is a product that is being marketed
to the public. I would like to get your sense of whether you
think that this is a problem of recidivism, that people who
prey on seniors--that there is a pattern that after they do it,
that somehow they can leap to another State, they can get
offshore, they can go to the Cayman Islands, as we had a
witness say this morning was taking place, set up shop and go
back to exploiting seniors. Do you think this is a serious
problem?
Dr. Heinrich. Oh, I think it is a serious problem. Part of
the issue, though, is it is hard to understand the magnitude of
it. But they probably do not have to go as far as offshore.
Certainly when we examined the work of the FTC and the FDA, we
were impressed by the work that they were doing jointly,
monitoring what was advertised on the Internet, and although
they do have a joint effort there to really find companies that
are making false claims, even after FTC has issued a warning
letter to them that they may be breaking the law, we found that
a very small percentage of companies actually took any action,
and over 60 percent of companies so notified took no action
whatsoever.
Dr. Lashof. If I can barge into that----
Senator Wyden. Oh, yes, please. Absolutely.
Dr. Lashof. In California, some of the local district
attorneys have been taking action against various companies
based on their laws, and they changed the name of the formula.
They will take action against one, argue about the
advertisement, and a few months later they are advertising
under a different name the same stuff that they were just
charged with. So it is not one company. It is much more
pervasive.
Senator Wyden. Dr. Heinrich, being a pretty devout reader
of your health materials, I have never seen an analysis you
have done with respect to this recidivism issue and those who
are taking advantage of seniors. Have you ever done something
that has taken six or seven, say, of these major health frauds
perpetrated against seniors and actually tracked what happens
to the offenders, and after they are found to have violated one
set of laws, what happens when they, perhaps as your colleague,
Dr. Lashof, just mentioned, go and set up somewhere else in a
different name? Have you ever done that?
Dr. Heinrich. I do not think so, not to my knowledge.
Senator Wyden. Do you think that would be productive if our
committee were to ask you to do that, because I will tell you--
and, again, this is a product of something I have seen. When I
was director of the Gray Panthers and I had a full head of hair
and rugged good looks, a number of years ago, you would see the
person who ripped seniors off selling shingles door-to-door
come back in a slightly different kind of area with a slightly
different name. My sense is that it is going on now with some
of the biggest health frauds that are perpetrated against
seniors, involving millions and millions of dollars. I do not
think you all have ever looked at this question of whether
there are a handful of recidivists who constantly keep coming
back at this and figuring out how to milk this cash cow and
exploit the elderly. Do you think it would be productive for
you look at that?
Dr. Heinrich. It certainly would be very, very interesting
to see what those cycles look like, of some of the groups that,
in fact, seem to reinvent themselves. We found examples of
that.
Senator Wyden. I am going to consult with the chairman and
the ranking minority member, because I would like you to do
that. I would like you to take six or seven of the major health
frauds perpetrated against seniors and I would like us to kind
of walk it through, say for 4 or 5 years afterwards, to see
what happens to those people, because my guess is just as sure
as the night follows the day, these people are coming back with
different names, different front organizations, going offshore,
as Dr. Lashof stated, slightly revising the product.
If we, for example, as we look at this next round of frauds
with the new technologies and look to the biology and genetics,
get to the point where we can isolate a handful of people, a
relative handful, that is in everybody's interest, because we
have already made it clear there are many lawful people in the
business. So I am going to talk with the chairman and the
ranking minority member about it, but I would like you to that.
We, having worked with you many times over the years, are
confident you would deal with it in a professional way.
Dr. Lashof, one question for you--and superb testimony, and
I have known of the good work that you all do at Berkeley, as
well. I went to the web site of several of the health sites
recently, and if you are a general person doing a search on a
particular health issue, you just get flooded now with
essentially the advertised material, and the advertised
material, almost invariably, look like authoritative articles
and it is pretty hard to distinguish. Are there areas that the
Congress should be looking at to try to do a better job of
separating out these articles where authoritative, constructive
information is imparted to people from areas that really are
just hype?
As you know, this is hard to do, because there are First
Amendment questions, free speech questions. But I can tell you,
having done some searches recently, it is pretty clear we are
getting flooded with advertisements that do not look much like
advertisements, and I wonder, at the public health school,
whether you all have looked at this and have some ideas on it.
Dr. Lashof. Well, I am afraid that it is a problem for FTC,
really, and the amount of resources they would need to police
all of the web sites--I would hate to try to make a guess. You
can ask them. We have tried very carefully, in the Wellness
Letter, to recommend the government sites as the sites people
should go to. The FDA has an excellent site. The FTC itself has
very good standards that you can read about on their site, and
then CDC and all of the government agencies at NIH. So we urge
our readers to consult those sites and, just as a rule, to
generally recognize that if is something sounds better than it
could be, it probably isn't true, and just to avoid those kinds
of sites.
Senator Wyden. My time is up. I would hope that we could
figure out more creative ways to deal with this, and I know you
are interested in that, than just sending people to government
sites, because, as you know, one of the reasons these
alternative products have been attractive to so many is people
are skeptical about the government's role in this area. If
we could do nothing else, for example, other than to
encourage people to look and see whether some of these articles
have some peer review, have some people who are authoritative
sticking up for them, those kinds of ideas are might prove
valuable. But we will be following up with you.
Gentlemen, I am only skipping you in the interest of time,
but I know of your organizations and the good work that you do.
Dr. Baratz. Senator, could we just add two sites that
people might want to look at that may help them in that jungle
out there? One is a site called www.quackwatch.com, which is an
appraisal of dubious claims, so that if someone has some
questions about something, they can go there for sort of an
objective appraisal of whether those claims hold up; and the
other is the National Council Against Health Fraud site, would
be ncahf.org, ncahf.org.
I would recommend to Senator Breaux that instead of wasting
his money on those magnets, he donate the money to us, because
we could use that money to get better consumer information out
there on these topics. [Laughter.]
Those magnets do not even penetrate your skin. They are a
complete waste of money.
The Chairman. I will tell you I could not get on an
airplane with them the other day. They make me stop and
undress.
Senator Wyden. I am going to get my friend, the chairman, a
brand-new Gray Panther card so that he can be working on those
things with us.
The Chairman. Thank you, Senator Wyden, very much.
I want to thank this panel. You have come from long
distances and I appreciate very much your help and look forward
to working with you. Keep up the good work.
We are delighted to excuse this panel now and delighted to
welcome up our last panel today. We are fortunate to have the
Attorney General for the State of Maryland as our lead-off
witness on this panel, Mr. Joseph Curran; Mr. John Taylor, who
is Director of the Office of Enforcement of the Food and Drug
Administration; Mr. Howard Beales, who is Director of the
Bureau of Consumer Protection of the Federal Trade Commission;
and from the Federal Bureau of Investigation, Mr. Dennis
Lormel, Chief of the Financial Crimes Section of the Criminal
Investigative Division of the FBI.
Gentlemen, we thank you very much. We appreciate your being
with us.
Mr. Attorney General, we are delighted you were here for
the whole morning hearing and we appreciate your patience. We
know your schedule is very busy and we look forward to your
testimony.
STATEMENT OF HON. JOSEPH CURRAN, ATTORNEY GENERAL, STATE OF
MARYLAND, BALTIMORE, MD
Mr. Curran. Well, thank you, Senator. Actually, I am
delighted that I had a chance to be here on time and to hear
the entire scope of the testimony. It was extremely impressive,
as I am sure that you have been impressed, as I have been. I
would invite the attention of the committee to some of the
testimony of the publisher of the Wellness document in
California. It makes a lot of sense to take a long, hard look
at the results of the 1994 act to determine ought there to be,
should there be, can there be some amendments to deal with what
we have heard about. In the alternative, beefing up FTC and FDA
certainly would make sense, as helping our own Consumer
Protection Division.
I am just going to take a few moments to tell you about one
of our experiences that will show you the depths of these types
of cases, and I might add, as the Maryland Attorney General, I
am able to enjoin a person who is doing business in Maryland. I
can stop him in Maryland. I can stop him from shipping out of
Maryland. But if he is in Louisiana and shipping into Maryland,
I cannot do that. So there are some limitations on those of us
who are attorney generals, and I am not sure--well, there is
nothing I can do about it, but I will tell you this. We do work
with other attorney generals when we learn of something, say in
another State.
In our own particular case, in which we cracked down on
people who were operating in Baltimore a company called Tee Up,
we later found out, after we stopped them, that they did, in
fact, move offshore to the Bahamas, and they also moved to
Pennsylvania. Happily, we were able to contact the health
authorities in the Bahamas and advise them of this particular
charlatan, and they stopped him there, and we also alerted the
attorney general, my friend Mike Fisher, in Pennsylvania and we
were able to stop them there. So that just gives you the scope
of what any individual attorney general can do.
What all consumers want, those of us who have reached my
age or even those who are much younger, want to make sure that
when we go to the supermarket or the health store, that when we
buy this particular vitamin, it is safe and it is effective and
the ingredients are there. We have heard about some of the
charts that talk about enhancing sexual functions or removing
wrinkles, and/or maybe helping with some pain, and that may
well be. Well, if that happens, and it is a phony thing, then
all you have done is lost some time and money. But in our case
involving two people in Baltimore, this involved a cure for
cancer, a cure for AIDS, 100-percent effective in breast cancer
cure, 100-percent effective as a colon-or lung-cancer cure.
I speak to you as a person who was told by a doctor some 10
years ago, ``We have bad news for you, you have cancer.'' So I
know what it means when they tell you that. I am happy to say,
because of medical treatment, I am 10 years operative and I am
OK. But when you first hear that, you are really concerned,
``Well, what am I going to do?'' So what I was concerned about
with these particular people who were selling this--it is an
aloe vera, the aloe vera plant. They crush it up and grind it
up in some way that it becomes liquid and they put it in a
pill, and then they take something cause cesium chloride and
grind it up in some way, and that is also a pill, and these two
particular pills will enhance your T-cell quality, they will
attack the cancer, and within weeks or months it will be gone.
Well, if you have been told you have cancer, you are
frightened, and unlike maybe some of these other drugs that get
rid of wrinkles, these are very expensive, about $600 a month
you have to take these two particular products that will get
rid of your lung cancer or colon cancer, or cure AIDS or take
care of the other conditions that you have. So you are talking
about a lot of money. To give you some idea, Senators, in our
investigation--I might add, I will compliment the FDA. They
alerted us in late 1997--they alerted our Physicians Quality
Assurance Board that they believed the publication indicated
one of our persons who held themselves out to be a doctor was,
in fact, practicing medicine improperly.
So we got the case from FDA, we got into it. We were in
court in early 1998, and now they have been shut down, although
the case is still on appeal. We found out that during an 18-
month period when they were operating they contacted about
3,700 persons across the Nation, just to give you some idea of
how many persons were suckered into this, and they spent about
$2.3 million. So it is big business, and I might add that did
not cover the money that was paid for intravenous injections.
There is some good news out of this, because the first
person said, ``Well, let's pick up the bad''--well, the doctor
who was administering against FDA regulations in Virginia
currently resides in the penitentiary in Virginia. So, that is
good news. He was prosecuted by the Federal attorneys in
Virginia. The good news is that our case in Maryland, our
Consumer Protection Division, we were able to stop them. We
have got a judgment of $3.7 million against them, trying to get
back the money they have gleaned from a lot of folks, and we
are also trying to recover a penalty. So we are doing that from
a standpoint of civil authorities.
The other good news is that the fellow who holds himself
out as a doctor will be tried in the Federal District Court in
Baltimore in November. He escaped before on an 11-1 hung jury,
but he is being tried again. So I thought I would tell you that
the Federal Government, the FDA and the attorney generals are
working together. But the point I am making is that there are
not only these supplements that take away wrinkles, you are
talking about a cure for cancer, and when you permit these
folks to--and these are across the Nation, not just in
Baltimore--when you permit them to make these advertisements to
people who have cancer or a family member--if you are a family
member and your loved one has been told they have cancer, you
are going to spend money--$20,000 of injections of this aloe
vera substance into your body, that is what they were costing.
So the staggering sums of money that a person who has a
life-threatening disease is going to pay--and so I would invite
you clearly to see to if that if there needs to be more pre-
marketing since 1994, more pre-marketing overview of these
kinds of advertisements, that may well be the way to go.
Happily, in this case, FDA found it early, got it to us; we
acted properly; the Virginia Federal authorities acting
properly; the Maryland, Baltimore Federal attorney is
prosecuting the guy. So we are putting them in jail. That is
fine, but I will tell you this. My experience, Senator Wyden,
in telemarketing and other fraud, these guys, they seem to have
learned how to do con work good. Telemarketing, you stop them
here, they pop up there. Travel clubs, we put them out of
business in Baltimore, they go to Topeka or somewhere.
So I do not know about the health guys, whether they are
the same ones, but my experience as attorney general for a
number of years now in Maryland is that these bad guys seem to
have learned how to make money and they continue to do it. So
if you are able to get from your survey what these fellows are
doing, that would be good information. The good news is that we
have swung the big bat and they are in jail and they had been
stopped, but they ought not to have been started. They preyed
on cancer victims and that is just outrageous, and I am glad
they are in jail and hope that the guy in November will go to
jail, too, and stay there for a good, long time.
[The prepared statement of Mr. Curran follows:]
[GRAPHIC] [TIFF OMITTED] T6011.067
[GRAPHIC] [TIFF OMITTED] T6011.068
[GRAPHIC] [TIFF OMITTED] T6011.069
[GRAPHIC] [TIFF OMITTED] T6011.070
[GRAPHIC] [TIFF OMITTED] T6011.071
[GRAPHIC] [TIFF OMITTED] T6011.072
[GRAPHIC] [TIFF OMITTED] T6011.073
[GRAPHIC] [TIFF OMITTED] T6011.074
[GRAPHIC] [TIFF OMITTED] T6011.075
[GRAPHIC] [TIFF OMITTED] T6011.076
[GRAPHIC] [TIFF OMITTED] T6011.077
[GRAPHIC] [TIFF OMITTED] T6011.078
[GRAPHIC] [TIFF OMITTED] T6011.079
[GRAPHIC] [TIFF OMITTED] T6011.080
[GRAPHIC] [TIFF OMITTED] T6011.081
[GRAPHIC] [TIFF OMITTED] T6011.082
[GRAPHIC] [TIFF OMITTED] T6011.083
[GRAPHIC] [TIFF OMITTED] T6011.084
[GRAPHIC] [TIFF OMITTED] T6011.085
[GRAPHIC] [TIFF OMITTED] T6011.086
[GRAPHIC] [TIFF OMITTED] T6011.087
[GRAPHIC] [TIFF OMITTED] T6011.088
[GRAPHIC] [TIFF OMITTED] T6011.089
[GRAPHIC] [TIFF OMITTED] T6011.090
[GRAPHIC] [TIFF OMITTED] T6011.091
The Chairman. Mr. Attorney General, thank you. Let me just
ask you a quick question before we get to the others. Not only
did you, I guess, show the product, aloe vera injections, did
not cure cancer, it also produced some adverse side effects;
didn't it?
Mr. Curran. We had testimony from our medical people that
the product itself caused heart arrhythmia in animals. Now,
they might say, ``Well, we didn't have it on humans,'' but we
know that the testing that was done on animals demonstrated it
was an adverse effect, and the cardiologist, I believe, in
California also testified for us that his patients, having
taken this cesium, likewise had a problem.
I might add, in one of the publications they said--and this
is very tricky--they said, ``Well, our product has been studied
by the FDA.'' The truth of the matter is--that is true. The FDA
did, in fact, authorize a Canadian clinic to study this aloe
impact on 12 AIDS patients, and they found out it did not work.
But they were able to say we have had a clinical study
permitted by FDA. It did not say, ``Comma, and it didn't
work.'' They just said, ``Period.'' So that is how they can
play with these ideas that FDA authorized a study. Sometimes
they do, but when they found out that it does not work, they do
not say that.
The Chairman. Thank you very much, Mr. Attorney General,
for being with us and being so patient. We appreciate your
testimony and the effort that you have made in this area. It
has been outstanding.
Next, we will hear from the FDA and Mr. John Taylor.
Mr. Taylor.
STATEMENT OF JOHN TAYLOR, DIRECTOR, OFFICE OF ENFORCEMENT,
FOOD AND DRUG ADMINISTRATION, DEPARTMENT OF HEALTH AND HUMAN
SERVICES, WASHINGTON, DC
Mr. Taylor. Good morning, Mr. Chairman, members of the
committee. I am pleased to be here this morning to participate
in this discussion of health fraud, specifically as it relates
to dietary supplements. You do not have to look far to find a
health product that is potentially fraudulent or a consumer who
is totally unsuspecting. Promotions for fraudulent products
appear daily in newspapers and magazine ads and television
infomercials. They accompany products sold in stores and
through mail-order catalogs. They are also passed along by
word-of-mouth.
The Internet is another method by which fraudulent products
can be promoted. As beneficial as this technology can be, it
also creates a new marketplace for activity that is already
illegal, such as the sale of unapproved new drugs, prescription
drugs dispensed without a prescription, and products that are
marketed with fraudulent claims about these health products'
benefit. As you have pointed out, consumers respond to these
promotions hoping to find a cure for their illness, to improve
their well-being, or even their appearance.
In general, these promotions are not specifically targeted
to one population, such as senior citizens, as the goal is to
quickly establish a broad consumer base and maximize sales
before being found out. Given the types of claims that these
products make, one could certainly extrapolate, however, that
some of these products are intended primarily for senior
citizens.
FDA is first and foremost a science-based public health
agency. However, we are also a law enforcement agency. It is in
both of these capacities that we strive to meet our mission of
protecting consumers against health fraud. Strong law
enforcement tools, coupled with a strong base of medical and
scientific expertise to evaluate marketed health products are
vital to the agency's ability to meet its mission in protecting
the public health.
When Congress passed the Dietary Supplement Health and
Education Act, it created a unique regulatory framework for
dietary supplements. Its purpose was to strike the right
balance between providing consumer access to and truthful
information about dietary supplements, while preserving
regulatory authority for FDA to take action against supplements
that present safety problems or that are labeled or promoted in
a false or misleading fashion.
As you know, the regulation of dietary supplements is, for
the most part, a post-marketing program, and they are regulated
by FDA's Center for Food Safety and Applied Nutrition, also
known as CFSAN. In dietary supplement enforcement cases, the
burden of proof is on FDA to show that a product or ingredient
presents a risk after they are on the market. CFSAN, however,
is not the only FDA center that plays a significant role in
combating health fraud relating to dietary supplements, as many
of the products the agency has successfully taken off the
market were products marketed as dietary supplements that
turned out to be drugs.
FDA's Center for Drug Evaluation and Research, or CDER, is
responsible for ensuring that safe and effective drugs are
available to the American public. They work to accomplish this
mission through a commitment that lasts for the lifetime of the
product, from the early stages of drug review and approval to
monitoring the products once they reach the marketplace. FDA
shares Federal oversight of dietary supplements with the
Federal Trade Commission. FDA regulates safety, product
monitoring and product labeling.
FTC has primary responsibility for regulating the
advertising of these products. When a problem arises with a
product regulated by FDA, the agency can take a number of
actions to protect the public health. For dietary supplements,
as with other products, initially the agency works with
marketer of the products to correct the problem voluntarily. If
that fails, we can ask the marketer to recall a product
voluntarily, seek through the courts seizure of the product
and/or injunctions against firms or individuals who market the
products.
We can also detain or refuse entry of products presented
for import at U.S. ports, and when warranted, criminal
penalties, including prison sentences, are also sought through
the courts. Health fraud can be brought to the agency's
attention in a variety of ways. For example, FDA's
investigators often identify violations while conducting
inspections. FDA may also identify a violation or suspected
fraudulent product through routine marketplace surveys,
searches, consumer complaints, informants or through referrals
from the FTC and other Federal, State or local government
authorities.
Despite the complexities involved in building and bringing
an enforcement action, the agency has been successful in
bringing cases against fraudulent products in all categories of
FDA-regulated products. There are several examples in my
written statement of successful cases that the agency has
brought in conjunction with the Department of Justice and, in
some cases, the FTC. I would be happy to discuss any of these
cases with the committee during questioning.
The agency has a number of other ongoing activities
directed at combating health fraud. Many of these activities
are the result of a strategy plan begun by FDA in 1992 to
improve its processes for targeting and coordinating regulatory
activities among its various components and Federal, State,
local regulatory and law enforcement agencies. This strategy
also focused on improving the agency's efforts to educate the
public about the importance of making wise choices concerning
their health care. The full range of activities is described in
my written statement, but let me give an example. In 1992, FDA
began sponsoring a national health fraud working group. The
working group is currently comprised of representatives from
the Association of Food and Drug Officials, the National
Association of State Attorney Generals, FTC, Health Canada and
FDA representatives from its various components.
This group meets on a regular basis to facilitate the
coordination of regulatory activities, information exchange and
leveraging of each member agency. In addition, the agency is
engaged in several consumer education efforts with the FTC,
including a facts-for-consumer brochure entitled, ``Miracle
Health Claims: Add a Dose of Skepticism,'' that is focused on
fraudulent claims and spotting quackery and health fraud.
FDA has also made Internet surveillance an enforcement
priority. The agency's partnership with the FTC and others in
Operation Cure-All further demonstrates FDA's commitment to
monitoring violative conduct on the Internet. Over the past 2
years, FDA has sharpened its focus on the issue of Internet
promotion and the sale of drugs as online activities have
expanded. While FDA tries to be vigilant against health fraud,
many fraudulent products escape regulatory scrutiny,
maintaining their hold on the marketplace for some time to lure
increasing numbers into their web of deceit. For every such
marketer that we put out of business, another or more appear.
As long as there are vulnerable populations to prey upon, there
will continue to be those unsavory and unscrupulous characters
who do so.
Mr. Chairman, combating health fraud is a challenge,
especially in light of the advent of the Internet, and one to
which the agency is committed to addressing. Our partnership
with our law enforcement, public health, State and local, and
international colleagues expands FDA's reach and impact. Good
enforcement strategies and enforcement actions, vigilant
oversight of the marketplace, and sufficient legal authority to
remove these products from the market is not enough.
Successfully combating health fraud must include educating our
citizens to recognize fraud when they see it and warning them
of the potential dangers that some of these products pose. Only
through these steps can we help the public make fully informed
decisions about their health care purchases, and thereby reduce
the number of people who may fall prey to these fraudulent
products.
Thank you for the opportunity to participate in this
hearing. We look forward to working with you as we grapple with
health fraud as a Nation. I would be happy to answer any
questions you might have.
[The prepared statement of Mr. Taylor follows:]
[GRAPHIC] [TIFF OMITTED] T6011.092
[GRAPHIC] [TIFF OMITTED] T6011.093
[GRAPHIC] [TIFF OMITTED] T6011.094
[GRAPHIC] [TIFF OMITTED] T6011.095
[GRAPHIC] [TIFF OMITTED] T6011.096
[GRAPHIC] [TIFF OMITTED] T6011.097
[GRAPHIC] [TIFF OMITTED] T6011.098
[GRAPHIC] [TIFF OMITTED] T6011.099
[GRAPHIC] [TIFF OMITTED] T6011.100
[GRAPHIC] [TIFF OMITTED] T6011.101
[GRAPHIC] [TIFF OMITTED] T6011.102
[GRAPHIC] [TIFF OMITTED] T6011.103
[GRAPHIC] [TIFF OMITTED] T6011.104
[GRAPHIC] [TIFF OMITTED] T6011.105
[GRAPHIC] [TIFF OMITTED] T6011.106
[GRAPHIC] [TIFF OMITTED] T6011.107
[GRAPHIC] [TIFF OMITTED] T6011.108
[GRAPHIC] [TIFF OMITTED] T6011.109
[GRAPHIC] [TIFF OMITTED] T6011.110
[GRAPHIC] [TIFF OMITTED] T6011.111
[GRAPHIC] [TIFF OMITTED] T6011.112
[GRAPHIC] [TIFF OMITTED] T6011.113
[GRAPHIC] [TIFF OMITTED] T6011.114
[GRAPHIC] [TIFF OMITTED] T6011.115
[GRAPHIC] [TIFF OMITTED] T6011.116
The Chairman. Thank you, Mr. Taylor. Right on time.
Mr. Beales, welcome.
STATEMENT OF HOWARD BEALES, DIRECTOR, BUREAU OF CONSUMER
PROTECTION, FEDERAL TRADE COMMISSION, WASHINGTON, DC
Mr. Beales. Thank you Mr. Chairman, members of the
committee. I am Howard Beales, Director of the Bureau of
Consumer Protection at the Federal Trade Commission. I am
pleased to have the opportunity to testify at this important
hearing. The Commission's full statement, which we have
submitted for the record, are the views of the Commission, but
my oral statement and my responses to questions are my own and
may not reflect the views of the Commission or any individual
commissioner.
The FTC is the nation's primary general jurisdiction
consumer protection agency. Protecting consumers from false,
deceptive or unsubstantiated health claims has long been an
essential part of our mission. We believe these efforts are
important, because health fraud often targets a very vulnerable
segment of our population, those suffering from serious or
incurable health conditions and diseases. In such
circumstances, even outrageous claims that ordinary consumers
would dismiss as fraudulent can be, and are, effective.
These false, misleading and unsubstantiated health claims
can injure consumers in a number of ways. First, they cause
economic injury, taking consumers' money in return for
ineffective products. Even more importantly, they may threaten
consumers' health if victims are deterred from seeking
effective treatment. Moreover, in some cases, the products
themselves are dangerous. To control these types of claims, the
Commission has filed numerous law-enforcement actions
challenging false or deceptive therapeutic claims for products
claiming to cure a broad range of chronic diseases, including
cancer, arthritis and heart disease.
Despite these efforts, deceptive health claims persist.
Over the past 5 years, the Internet has become the medium of
choice for many companies marketing unproven health products.
In response, the Commission initiated Operation Cure.All, a
comprehensive effort targeting health fraud on the Internet.
Operation Cure.All utilizes law enforcement, consumer education
and business education. In addition to the FTC, participants
include the FDA, several State attorneys general and Health
Canada. On June 14 of this year, the Commission announced the
most recent group of Operation Cure.All cases. Among the claims
the Commission challenged were claims for colloidal silver,
like this product here, which is basically distilled water
containing 3 to 20 parts-per-million of silver ions. These
products cost $15 to $25 a bottle.
Internet advertising for these products claimed they were
an effective treatment for 650 different diseases or ailments,
including cancer, arthritis and diabetes. Another product
involved in our recent Cure.All sweep was the so-called Black
Box, which you see in the poster over here. This was a device
that purportedly delivers an electric current to the body.
Promotional materials for the product claimed that it
neutralizes viruses and kills bacteria in the bloodstream and
organs. Together with something called the ``Magnetic Pulser,''
the Black Box was supposedly effective in treating cancer and
rheumatoid arthritis. The black box sold for $170; adding the
magnetic pulser pushed the cost to $355.
Still another product is this anti-aging product, called
Longevity Signal Formula, marketed to prevent or reverse aging,
significantly increase life expectancy, significantly reduce
the risk of atherosclerosis and cure arthritis. This product
cost $79 for a 30-day supply. Our law enforcement efforts play
an important role in our health fraud program, but law
enforcement is a means to an end. The primary goal of consumer
protection is to prevent consumer injury in the first place.
Consumer education is another critical tool in that effort.
Today, we are releasing a publication produced jointly with
FDA, called ``Miracle Health Claims: Add a Does of
Skepticism.'' This is an example of the brochure. It provides
specific information about the efficacy and safety of popular
products, as well as information similar to the Commission's
Tip-offs for Rip-offs, which you see on the poster over here,
that is advice to consumers about how to spot and avoid health
fraud.
The brochure, as well as our other educational materials,
provide consumers with both a toll-free number, 1-877-FTC-HELP,
and a web address, www.FTC.gov, to file consumer complaints. To
fight fire with fire, we have used the Internet to obtain broad
distribution of our consumer education messages. Our web-based,
health-related consumer education materials have been accessed
over 80,000 times since October 1 of last year.
In addition to law enforcement and consumer education, the
third prong of our efforts to combat health fraud has been an
extensive industry education campaign. We have published a
guide for small businesses on how to avoid making false or
substantiated health claims. We have sent e-mail advisories to
more than 1,000 web sites making questionable therapeutic
claims. Law enforcement, however, remains critical. Additional
non-public investigations are under way.
The Commission, in coordination with our law enforcement
partners, will continue its aggressive enforcement program to
combat health fraud. In addition, we will continue to expand
our consumer and industry education efforts, and to continue
our search for new ways to address problems in this important
area.
Thank you very much, and I look forward to your questions.
[The prepared statement of Mr. Beales follows:]
[GRAPHIC] [TIFF OMITTED] T6011.117
[GRAPHIC] [TIFF OMITTED] T6011.118
[GRAPHIC] [TIFF OMITTED] T6011.119
[GRAPHIC] [TIFF OMITTED] T6011.120
[GRAPHIC] [TIFF OMITTED] T6011.121
[GRAPHIC] [TIFF OMITTED] T6011.122
[GRAPHIC] [TIFF OMITTED] T6011.123
[GRAPHIC] [TIFF OMITTED] T6011.124
[GRAPHIC] [TIFF OMITTED] T6011.125
[GRAPHIC] [TIFF OMITTED] T6011.126
[GRAPHIC] [TIFF OMITTED] T6011.127
[GRAPHIC] [TIFF OMITTED] T6011.128
[GRAPHIC] [TIFF OMITTED] T6011.129
[GRAPHIC] [TIFF OMITTED] T6011.130
The Chairman. Thank you, Mr. Beales.
With the Federal Bureau of Investigation, Mr. Lormel?
STATEMENT OF DENNIS M. LORMEL, SECTION CHIEF OF FINANCIAL
CRIMES, CRIMINAL INVESTIGATIVE DIVISION, FEDERAL BUREAU OF
INVESTIGATION
Mr. Lormel. Thank you sir. We would like to thank the
committee for the opportunity to participate today, also to
commend the committee for the initiative to raise awareness as
to the vulnerability of the elderly and seriously ill to
falling prey to unscrupulous con artists and fraudsters
concerning dietary and nutritional supplements, as well as
other fraud schemes. The FBI views promoting awareness to the
vulnerability of the elderly and seriously ill to health care
and other fraud schemes as an important preventative component
in dealing with the crime problem.
True deterrence is a combination of proactive, preventive
measures and enforcement actions. I have submitted to you our
written statement, which also includes four anecdotal case
summaries, which unfortunately mirror some of the schemes you
have heard about. I would like to focus my comments this
morning to the response in your invitation as to what the
bureau is specifically doing. First off, health care fraud is
recognized within our white-collar crime program as the No. 1
investigative priority. Unfortunately, we deal pretty much in
insurance-related health care frauds. So the schemes you have
pretty well outlined here this morning we do not consider or
work as health care specific.
One of the things that I would ask the committee to
consider is expanding health care legislation to allow us more
jurisdiction in terms of other related health care criminal
conduct such, as what you have heard here this morning, because
many of the schemes, as I say, are outside the scope of
Medicaid or private insurance that we traditionally
investigate. With that, though, we do have a presence in this
area. We investigate these cases pretty much as fraud by wire
or mail fraud matters, and with specific reference, Senator, to
the invitation letter, you inquired as to the FBI's efforts in
the area of health care fraud, focusing on dietary and
nutritional supplements.
In that regard, we work closely with our companion
agencies, and as I said, we work the cases mostly as wire fraud
and mail fraud cases, and outside the scope of traditional
health care. We participate with other agencies--was one of
your inquiries--how do we participate. We have limited
investigative resources in this area, so the partnership with
other law enforcement agencies, particularly FDA, as it relates
to the dietary supplements and nutritional supplements, is
important. We partner with the Postal Inspection Service, with
the IRS, with State attorneys general and Medicaid officers in
pursuing these criminal investigations.
In a broader context, in the traditional health care arena,
we work with HHS and we work with DCIS and the above agencies
that I mentioned before. Also, we deal in partnering with
outside agencies such as AARP. As I mentioned earlier,
promoting awareness is very important to us. We have an
aggressive campaign where we use retired individuals to help us
promote awareness and to act in concert with us in an
undercover capacity in a lot of the investigations we conduct.
We have an initiative, in the traditional sense of
telemarketing fraud, which we call Canadian Eagle, in which we
deal extensively with Canadian officials and cross-border crime
schemes and issues. One example of the cooperation, I think,
between the bureau and FDA, in particular, is the ongoing case
in Kansas City involving the pharmacist who has now provided
short dosages of particularly cancer drugs, and obviously the
elderly is a component of the people there. The FBI and FDA are
working very closely in that case, in that regard.
You asked about programs in place to protect the general
population and, in particular, the elderly. We have joint
outreach and educational programs, as I mentioned, with AARP
and through vehicles such as our Internet Fraud Complaint
Center. As the FTC has Consumer Sentinel, we have the Internet
Fraud Complaint Center, and we are able to assess and analyze
Internet Fraud type of complaints, and we are hopefully--in
that process, we aggregate the complaints and we are able to
refer out cases, not only to the FBI, but to State and local
law enforcement entities throughout the country and, in fact,
around the world.
Types of proactive investigative techniques that we
undertake to ferret out these products and frauds include
short-term undercover operations targeting the fraudsters. We
use retired individuals, retired FBI agents, and we do so in
concert with AARP as we can identify cases. We conduct
assessments and analysis, as I mentioned, through the Internet
Fraud Complaint Center, and refer cases back out. We certainly
pursue traditional investigative techniques as appropriate, and
we look to initiate regional and national investigative
initiatives where we can really promote the high level of
visibility, and certainly in terms of the visibility, better
make people aware of the crime problems.
Senator Wyden, in your comments, I think you were right on
the mark in terms of tasking GAO. I would encourage you, sir,
if you would, to expand that beyond just the health care arena,
because these fraudsters are across the board in all areas. I
have been very general in terms of my comments, sir, and if you
have got some specific questions, I would be very happy to
pursue them and to follow up with any other additional
information you would like from us.
[The prepared statement of Mr. Lormel follows:]
[GRAPHIC] [TIFF OMITTED] T6011.131
[GRAPHIC] [TIFF OMITTED] T6011.132
[GRAPHIC] [TIFF OMITTED] T6011.133
[GRAPHIC] [TIFF OMITTED] T6011.134
[GRAPHIC] [TIFF OMITTED] T6011.135
[GRAPHIC] [TIFF OMITTED] T6011.136
[GRAPHIC] [TIFF OMITTED] T6011.137
[GRAPHIC] [TIFF OMITTED] T6011.138
[GRAPHIC] [TIFF OMITTED] T6011.139
[GRAPHIC] [TIFF OMITTED] T6011.140
[GRAPHIC] [TIFF OMITTED] T6011.141
[GRAPHIC] [TIFF OMITTED] T6011.142
[GRAPHIC] [TIFF OMITTED] T6011.143
The Chairman. Thank you very much, Mr. Lormel. Thank the
panel members, all of you, for this. I know we have got a
problem out there. We have got literally thousands of these
manufacturers out there that are manufacturing this, and it
seems to me that we are not doing, as a government, nearly
enough to eliminate the snake-oil salesmen, as I have termed
them, who operate in the 21st century, not on the street
corner, but by very sophisticated targeting of seniors through
mass-marketing efforts, and generate hundreds of millions of
dollars that we saw one company making annually. It is a $27
billion industry annually, all of it certainly is not
fraudulent. In fact, the vast majority of it, I think, is very
positive and very good.
But this is something that I think really deserves more
attention than we seem to be giving it as the government. I am
concerned that, in 1994, when we passed as Congress the Dietary
Supplement Health and Education Act, referred to as DSHEA, that
we did not help you folks in the enforcement area get to the
problem actors in this supplement business. Am I correct in
that observation? What, in general, is your opinion from an
enforcement standard that you are involved in, of the effect of
the Dietary Supplement Health and Education Act that Congress
passed? Did it help you get rid of the bad actors? Did it not
have any effect at all? Did it make it more difficult?
Mr. Curran. I can say anecdotally, in the case of Tee
Up, Senator, the rip-off was out there before we learned of
it. In other words, there was not any pre-market review.
Thirty-seven hundred persons spent a lot of money already. You
did not have a witness who was supposed to be here, Mrs. Crabb.
The other thing that we were concerned about is that, in our
case, folks who could have been helped in a legitimate area
chose to go to this snake oil person. Mrs. Crabb's husband had
esophagus cancer and was thought to be living another 18 months
or 2 years, took this snake oil stuff and died within 2 weeks.
That is the fellow over in Virginia who is in prison right now,
happily, that doctor.
So my concern as an AG is that--we catch them after they do
their deed. I wish that there was some way to make them be
prescreened or premarketed, and then if it is good stuff, like
I daresay there may well be, then fine.
The Chairman. There has been an explosion of these
supplement sales, a 380-percent increase between 1990 and 1997.
I am just wondering whether the actions by Congress contributed
to the explosion of the growth in this area.
Mr. Taylor, I want some comments from FDA on this.
Mr. Taylor. Well, I am not sure if the legislation
contributed to the growth of the industry, but I can tell you
that, from an enforcement or law enforcement standpoint, the
very fact that in dietary supplement enforcement cases, that
the burden is on the agency to prove that the product poses a
risk is a significant change and a significant difference from
how we handle other cases.
The Chairman. Let's just talk about this. That is
significant. We essentially changed the burden of proof on who
has to approve whether this stuff is good or bad. Is that
right?
Mr. Taylor. Well, there is no pre-approval, so it is just
sort of a post-market model. As a result, once the product is
on the market, if FDA has decided that they wish to remove a
product from the market because it poses a significant and
unreasonable risk to the consumer, the burden is on FDA to
establish scientifically that indeed the product does pose a
risk.
The Chairman. Obviously, just for the information of the
committee, what is the difference with regard to
pharmaceuticals, over-the-counter generics?
Mr. Taylor. Sure. In the context of drugs, the burden is on
the company to show that the product is safe and effective. So
if we were going to bring an enforcement action against a
pharmaceutical product, we could bring the enforcement action
and the burden is not on us to show that it is harmful. It is
on the manufacturer to show that indeed the product is safe and
effective.
The Chairman. So the question to FDA is how much has the
passage of the Dietary Supplemental Health and Education Act of
1984--how much of an effect has it had on the enforcement
ability of FDA?
Mr. Taylor. It makes it much more challenging to bring
enforcement actions.
The Chairman. I note that from GAO's testimony, that they
say that the act allows FDA to remove from the market dietary
supplements that the agency can prove are dangerous, but the
agency has not prohibited the marketing of any specific
substances using its administrative rulemaking authority. In
fact, they say that FDA has not initiated any administrative
rulemaking activities to remove from the market certain
substances that its analysis suggest pose health risks, but has
sought voluntary restrictions and attempted to warn consumers.
We had the first panel here talk about $200 million in
annual sales by a company that publishes the Journal of
Longevity, and we had other people come in and say that it does
not work, that it could potentially be harmful, and it targets
and preys on seniors. Has the FDA done anything in regard to
that particular activity by that particular enterprise?
Mr. Taylor. FDA is currently looking into that, those
activities and that enterprise, and I do not want to say
anything that would negatively impact on that inquiry. However,
I would like to address the GAO's statements. The GAO is
correct. There are two mechanisms that FDA could use to
administratively remove a dietary supplement product. One
avenue is a determination by the Secretary, and only the
Secretary, that the product poses an imminent harm. The other
mechanism is to use rulemaking to establish that a product
maybe should be removed from the market.
That is in the administrative context, and no, we have not
taken any products off the market through administrative
channels. However, we have used enforcement actions to remove
products marketed as dietary supplements that we felt actually
were drugs masquerading under that protection and we have used
injunctions in several instances to remove products that were
marketed as dietary supplements off the market, and as part of
the relief that we achieved in these injunctions, is language
that would allow us to bring contempt actions if we found later
on that these defendants were continuing to manufacture
unapproved drugs under the guise of dietary supplements.
The Chairman. That is going after them under the old drug
regulations and not under DSHEA?
Mr. Taylor. Yes. What happens is that--and you will note in
my written testimony that we have several cases where companies
have marketed products, claiming that these products are
dietary supplements even though the products make mitigation,
cure, and treatment claims. If you make mitigation and cure or
treatment claims, then under the act the product is a drug,
even if you market that product as a dietary supplement. That
is the theory and the argument that we have used in several of
the enforcement actions that are noted in the written
testimony.
The Chairman. It seems to me that the Dietary Supplement
Health and Education Act has greatly hamstrung and hand-tied
your ability to assure the American people that these
supplements that are increasing by huge amounts are, in fact,
safe. The GAO went on to say that FDA's adverse effect
reporting system for dietary supplements receives reports of
only a small portion of all adverse events, and the reports
that you receive are often incomplete, because no one has to
report. These are voluntary. People are embarrassed. I am not
going to report to the Federal Government that I was so stupid
I bought something that did not work. I did not want to tell
you about my magnets in my back, but I guess I did. [Laughter.]
So they do not want to report this stuff. In fact, for
something more serious than magnets in my back and my back
brace, GAO says that they found documents disclosed in a recent
court case showed that a manufacturer of a product containing
Ephedra had received more than 1,200 complaints of adverse
events related to the product but FDA told us that they were
aware of few, if any, of these reports before this lawsuit was
filed. Does that not indicate a real breakdown between the
amount of adverse reactions that are out there and the
information that you are getting? If not, why not?
Mr. Taylor. Well, certainly you are correct. The very fact
that it is a passive, voluntary system suggests that under-
reporting does occur. However, there have been some instances
where the adverse event reporting system has acted as a
sentinel or signal of a growing problem. One example is a drug
called gamma butyrolactone, which is a GHB precursor, and in
the winter or the fall of 1998 and the winter and spring of
1999, we noticed an unusual level of adverse events that led us
to bring actions against many of the manufacturers of these
products, and these products were marketed for a myriad of
claims, mostly energy enhancing, muscle enhancing, but they
were also marketed for the purpose of addressing wrinkling and
some other aging conditions.
So you are right that our adverse event reporting system,
because it is passive, because it is voluntary, does have some
weaknesses. But there have been instances where it has indeed
provided us a signal that a problem is on the horizon or is
already before us.
The Chairman. What about inspection of the manufacturing
facilities? You have the authority to do that, but the
information I have is that they are about--your own information
tells me that there are about 1,500 facilities that manufacture
this stuff, and that last year you all inspected 53.
Mr. Taylor. That is correct. The number of inspections in
the dietary supplement program are far fewer than in our other
programs.
The Chairman. Is that because of a congressional act of
Congress or because you do not have the resources to do it? Are
we telling you not to do it?
Mr. Taylor. Well, no. I think that the final promulgation
of the good manufacturing practice regulations will, first of
all, do two things. One, it will help us locate some of these
facilities, but more importantly it will set a standard that
will help ensure that the dietary supplements are safe and
properly labeled.
The Chairman. Right now you do not even know where they
are?
Mr. Taylor. We know where some are, but because there is no
registration requirement, it obviously is difficult to identify
some of the sources of these products. But if you look at all
of our other programs, the pharmaceutical program, the medical
device program, a vast majority of our inspections are geared
toward ensuring that companies are manufacturing their products
in conformance with the good manufacturing practice
regulations, because it is those regulations that set the
standards for quality assurance and quality control in an
industry.
The Chairman. I will tell you, if you are only doing 53 out
of 1,500, that is just barely touching the tip of this problem.
Mr. Taylor. You are correct.
The Chairman. I have gone too long.
Senator Wyden.
Senator Wyden. Thank you. Thank you, Mr. Chairman.
Gentlemen, thank you. Thank you very much for excellent,
excellent testimony, and I hope you walk away knowing that you
have seen Chairman Breaux, who has got a lot of responsibility,
be with you for 3 hours, because we are committed to turning
this situation around, and I just have a few questions I want
to ask of you before we wrap up.
The first is we had sworn testimony this morning that Mr.
Braswell's money finds its way to the Cayman Islands, is what
we were told this morning. If that is the case, how does the
government deal with that, and do you need additional tools to
deal with it? I have said repeatedly that one of the areas that
I think has changed most with respect to health care fraud is
how much of this moves quickly around the world. But, since we
had testimony with respect to the Cayman Islands this morning,
I would be interested in having your assessment about how you
would deal with that, if that, in fact, is what happened. May
we start with you, Mr. Lormel?
Mr. Lormel. Yes, certainly. I think without making specific
reference to that case, because it is an ongoing investigation
the IRS has, we conduct numerous investigations with a money
laundering nexus, and venues like the Caymans are very
attractive to somebody who is looking to park considerable
amounts of money. We certainly can use assistance with the
governments at play. We have worked very closely, I know from
the Department of Justice standpoint, through MLATs, mutual
legal assistance treaties, with the different municipalities to
try to get access and cooperation from the banking authorities
in those venues. But certainly, as long as the fraudsters know
that there is a safe haven for money, that money is going to
move in that direction.
Senator Wyden. So if that is where the money were to end
up, and I was trying to characterize it as you did. It has been
an assertion, but that was an assertion under oath that the
money found its way there. In this particular case, where we
are talking about a potential recidivist, as of now there is
nothing the government can do about it?
Mr. Lormel. Yes, sir. That is correct. What we would have
to do is come into a situation where we had an indictment or
some type of legal action, so that we could freeze monies and
hopefully, through the Federal court system, we would forfeit
the money back to the government.
Senator Wyden. Does it require a change in Federal law to
bring about those forfeitures?
Mr. Lormel. I don't know that it requires a change in
Federal law, as much as obtaining the cooperation of the
foreign governments involved. I think, in that regard, we are
making inroads, particularly in a place like the Caymans. That
individual is going to be surprised to find out that there are
cooperative initiatives underway in the law enforcement realm.
Senator Wyden. For you other three, before I move onto
other topics, in the international area, are there additional
steps that you would favor the Congress pursuing?
Mr. Curran. The one example that we had in Maryland--I
called to the authorities in the Bahamas, who were very
receptive, so, one-to-one, they understood the problem, knew it
was a fraud, and they stopped it. So that is a good news story
and did not need anything other than a phone call, actually.
That worked out well.
Mr. Taylor. I think my answer would be similar to the FBI
and the State of Maryland. We have contacts in other countries
overseas, and without commenting on the set of facts that are
before us, we certainly have had other instances where money
has moved offshore and we have been able to address a situation
after indictments or some other judicial steps have been taken.
So I think we do have the tools. We just have to look at the
facts and formulate a strategy.
Mr. Beales. At the FTC, we have been involved in trying to
work out judgment recognition agreements in various
international fora, in order to be able to collect on our
judgments. We have also, in some cases, been successful in
obtaining an order requiring someone to bring money back into
the United States that was then available to satisfy a
judgment.
Senator Wyden. Mr. O'Neil did not think the system worked
for him. Mr. O'Neil, at considerable exposure to himself, went
to government agencies, went to, apparently, some of the people
who work for all of you, and did not feel that people made the
kind of effort that was necessary to deal with it. It is not a
particularly encouraging account. In your view, how should the
system have worked? Again, let's divorce it from this case,
because this is a case under investigation. These are charges.
They were made under oath, so they are particularly
significant. But how should the system have worked for Mr.
O'Neil, again, because he is bringing to the attention of the
government an instance that was already one that should have
set off some red light, given the previous history?
Mr. Lormel.
Mr. Lormel. Yes, if I may. We are dealing with Mr. O'Neil's
perception and sensitivity there. The IRS does have an
investigation and it is ongoing, but by the nature of these
cases, they are so complex and they do not come to some type of
closure or action in a relatively short frame. The frustration
in going to numerous agencies, as apparently he did--and, sir,
I would be very interested, as an aside, to find out if they
came to the bureau and sit with you, and we could weigh what
exactly happened or should have happened. I think perhaps, from
the enforcement standpoint, there needs to be better
sensitivity in dealing with the Mr. O'Neils who bring these
complaints in, because certainly you are dealing with a case
here that is outside the norm, and as he indicated, which is
somewhat intimidating to him individually.
I hope that--and I know from the bureau's perspective, and
I would have to think my colleagues' likewise--would not have
been intimidated to take a case like that on, although that is
the perception that is given because of, perhaps, the lack of
communication back or dialog that he was looking for.
Particularly, when you look again at a complaint of that
magnitude, he sees it, he lives it firsthand, certainly when
they bring us those facts, there are so many variables that go
into whether or not we have jurisdiction, so there are
jurisdictional concerns.
I think you guys have pointed to the fact that a case like
this, there is so much wiggle room in terms of does the bureau
have jurisdiction or does one of the other agencies have
jurisdiction? So there are so many considerations at play, I
would like to know what all the dynamics were in the dealings
that Mr. O'Neil had, because I think that we could allay some
of his concerns when you go point-by-point. However, there is a
perception. It is a significant problem. We need to address it.
Mr. Taylor. Senator Wyden, since FDA was one of the
agencies that was specifically cited, I find it unfortunate
that his experience with FDA was not to his liking. I think it,
quite frankly, is our responsibility to listen to his
complaints. We have set up a web site that specifically deals
with complaints about violative sites and violative conduct,
and there is a connection on our Internet site. That does not
always mean that we will be able to build a case. Obviously,
there are complexities involved in building a case, but I think
it certainly is our duty to listen to what he has to say, and
if the information is useful, weigh that against a decision
whether not to take some type of regulatory action.
Senator Wyden. Let me ask it this way. When I asked Mr.
Glen essentially about that, Mr. Glen said that the people who
were contacted should have immediately brought together a sort
of interagency kind of effort. He said we should have had the
various consumer protection agencies, the various law
enforcement agencies, invited several of the international
bodies--I think you mentioned Canadian authorities and others--
and we should have moved quickly in a concerted kind of way. My
sense is that, for instances, again, where we are talking about
potential recidivists, people who have already been found to
have violated laws that prevent preying on the elderly, that
that would be a practical way to do it in the future. Is that
what happens now? Is there an interagency effort where FBI,
FTC, the FDA, the relevant State authorities come together and
say, ``Look, we are all people who care about following up
here. Let's divide up the task.'' Is that done today?
Mr. Taylor. Well, I can tell you all the law enforcement
agencies represented at this table were part of a law
enforcement symposium that was held in San Antonio in July, and
we discussed many of these issues. I think one of the things
that the advent of the Internet did was, I think, highlight for
all of us our limitations, and I think has reawakened the need
to make sure that if it is something that jurisdictionally we
cannot handle, that there is a mechanism for sharing that
information with another agency, whether it be on a State or
Federal level, that can work the matter.
That is why many of the working groups that I talked about
earlier comprise members from all of these groups. There really
is a need to ensure that enforcement is more seamless, so that
we do not see some of the gaps that we have seen in the past.
Senator Wyden. Well, I am going to explore this with you
some more, because that seems to me what should have been done
here, is when Mr. O'Neil came to your various agencies, there
should have been some way to bring all of you who work in this
area together, divide up the task, see who would have
information, and clearly that was not done. It is always easy
to Monday morning quarterback, but I think that needs to be
done in the future.
Mr. Lormel. Senator, if I may, just to follow on to that,
that certainly would be the optimum situation. We deal more on
a case-by-case dynamic, and it makes it somewhat difficult in
terms of resources to be able to ideally deal with that. But
you are right, we need to take a look. There are a number of
working groups at the national and regional levels that do meet
and deal with those cases. Again, I think we need to look at
the specific dynamics at play here and then weigh it against
the national picture.
Senator Wyden. Well, that really leads me to my last point,
Mr. Lormel, for you, and you are absolutely right. This is a
case-by-case situation, and that is why I asked earlier about
people who are repeat offenders, and I appreciate the kind
words you had to say. What I would like to do in this area is I
think there needs to be a way to set off some red lights, a
kind of warning signal through the Federal Government when you
are talking about people with a track record of exploiting
older people. We do this in other law enforcement areas.
One of the things I am proudest of is I worked with all of
you and Arlen Specter on the armed career criminal law, where
we say when you are talking about repeaters, we are, in effect,
going to have some warning lights that go off so we really
target them and, of course, there are enhanced penalties. Tell
us a little bit more then, since you were kind enough to say
you liked it when I suggested it earlier, how you think it
would be useful to target the recidivists and these repeat
offenders? Clearly, case-by-case discretion has to be a part of
it. But if you were going about trying to laser in on people
with a track record of preying on older people, how would you
do it?
Mr. Lormel. Starting from within, just internally, from the
bureau's perspective, before taking it to the other agencies,
because clearly we need to have a joint operational initiative,
and I would clearly call it that. We would have some type of
operational initiative, and we would set up the parameters,
basically, of the fraudsters we are looking at. We are looking
at repeat offenders. You are talking significant dollar
amounts, so you are talking cases that have a history.
So the first step is going to be to study our indices and
do an analysis, and target proactively those offenders that are
out there, bring in the other jurisdictional agencies with an
interest. Again, as I would in a response to a crisis situation
with an operational plan, put together an operational strategy
and then proceed, and call it a national initiative. Perhaps
this is an area that warrants such.
Senator Wyden. I have imposed on the chairman's time. This
has been an excellent, excellent panel. You all are on the
front lines, and it is our job to get you the tools to do your
work. So we will be working closely with you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Wyden, and thank you for
your attendance throughout the hearing today. We really
appreciate it and look forward to working with you, as well. I
have one question and some closing comments.
Mr. Beales, I asked Mr. Taylor the question about whether,
in his opinion--and I will ask you the same--of the Dietary
Supplement Health and Education Act that was passed in 1994.
Has it made your job as an FTC employee easier or more
difficult in trying to find fraudulent bad actors in the area
of dietary supplements?
Mr. Beales. I think from the FTC's perspective it has not
made any difference at all. The basic standard that claims have
to be substantiated is the law enforcement standard that we
would apply to any other product and that we have applied in
other areas with a great deal of success.
The Chairman. So you are looking at advertising claims. You
were doing that before this. You will do the same after?
Mr. Beales. That is right. It really is not different. If I
could just add one comment about recidivism, at the FTC we have
a project called Project Scofflaw that actively looks for
potential recidivists in violation of our past orders and then
looks to see what kinds of steps are appropriate or remedy
these recurrent violations. Some are referred for criminal
prosecution. We have been successful in getting criminal
contempt for violations of our orders, and some we pursue
ourselves.
The Chairman. I want to thank this panel. I want to thank
the previous witnesses, some who came and testified, which was
a difficult task for them. We appreciate them and their
traveling long distances to provide the testimony, and for our
enforcement people for being with us today.
Mr. Attorney General, thank you for your good work in
Maryland. I am disturbed by one of the conclusions in the GAO
study that we asked them to do, which concludes, ``At the risk
of harm to seniors from anti-aging and alternative health
products, it has not been specifically identified as a top
public health priority or a leading enforcement target for
Federal and State regulators.'' I know there are exceptions.
I think we have heard one today from the attorney general,
but when you have an industry that has increased in sales by
380 percent between 1990 and 1997, that is a $27 billion annual
industry, marketing products, particularly to seniors--products
who, in many cases, claim to be cures for everything from
cancer to high cholesterol, to heart problems, to diabetes, to
Alzheimer's, that is still basically self-regulated, it seems
to me that we have a very serious problem that needs to be
addressed.
It seems to me that the Dietary Supplement Health and
Education Act that Congress passed in 1994 has essentially
changed the burden of proof on products that are being sold
that guarantee health benefits to our citizens--was a very
significant act. It seems to me that this is a huge business
that is growing every day. I will also point out that many of
the products are good, solid, do a great deal of good for the
people that take them, but at the same time we have seen today
that there is a concentrated effort through modern-day, 21st-
century marketing efforts to market these products aggressively
and specifically to the most vulnerable people among us. Not
only do they cost a great deal of money that many of the people
in the category that buy them do not have, they also present
potential medical problems for the people who take them because
of their interaction with other drugs, because they sometimes
take the supplements instead of the prescribed drugs from their
doctors, and we are seeing some of the results of these
efforts.
I would hope that this committee would be able to look at
making some recommendations in this area. At the very least, I
think that this committee will continue to be involved in
changing the attitude that this, in fact, should be a top
public health priority for this government. We intend to see
that it is made such. This hearing has been very helpful, and
this will conclude the hearing.
[Whereupon, at 1:19 p.m., the committee was adjourned.]
A P P E N D I X
----------
[GRAPHIC] [TIFF OMITTED] T6011.144
[GRAPHIC] [TIFF OMITTED] T6011.145
[GRAPHIC] [TIFF OMITTED] T6011.146
[GRAPHIC] [TIFF OMITTED] T6011.147
[GRAPHIC] [TIFF OMITTED] T6011.148
[GRAPHIC] [TIFF OMITTED] T6011.149
[GRAPHIC] [TIFF OMITTED] T6011.150
[GRAPHIC] [TIFF OMITTED] T6011.151
[GRAPHIC] [TIFF OMITTED] T6011.152
[GRAPHIC] [TIFF OMITTED] T6011.153
[GRAPHIC] [TIFF OMITTED] T6011.154
[GRAPHIC] [TIFF OMITTED] T6011.155
[GRAPHIC] [TIFF OMITTED] T6011.156
[GRAPHIC] [TIFF OMITTED] T6011.157
[GRAPHIC] [TIFF OMITTED] T6011.158
[GRAPHIC] [TIFF OMITTED] T6011.159
[GRAPHIC] [TIFF OMITTED] T6011.160
[GRAPHIC] [TIFF OMITTED] T6011.161
[GRAPHIC] [TIFF OMITTED] T6011.162
[GRAPHIC] [TIFF OMITTED] T6011.163
[GRAPHIC] [TIFF OMITTED] T6011.164
[GRAPHIC] [TIFF OMITTED] T6011.165
[GRAPHIC] [TIFF OMITTED] T6011.166
[GRAPHIC] [TIFF OMITTED] T6011.167
[GRAPHIC] [TIFF OMITTED] T6011.168
[GRAPHIC] [TIFF OMITTED] T6011.169
[GRAPHIC] [TIFF OMITTED] T6011.170
[GRAPHIC] [TIFF OMITTED] T6011.171
[GRAPHIC] [TIFF OMITTED] T6011.172
[GRAPHIC] [TIFF OMITTED] T6011.173
[GRAPHIC] [TIFF OMITTED] T6011.174
[GRAPHIC] [TIFF OMITTED] T6011.175
[GRAPHIC] [TIFF OMITTED] T6011.176
[GRAPHIC] [TIFF OMITTED] T6011.177
[GRAPHIC] [TIFF OMITTED] T6011.178
[GRAPHIC] [TIFF OMITTED] T6011.179
[GRAPHIC] [TIFF OMITTED] T6011.180
[GRAPHIC] [TIFF OMITTED] T6011.181
[GRAPHIC] [TIFF OMITTED] T6011.182
[GRAPHIC] [TIFF OMITTED] T6011.183
[GRAPHIC] [TIFF OMITTED] T6011.184
[GRAPHIC] [TIFF OMITTED] T6011.185
[GRAPHIC] [TIFF OMITTED] T6011.186
[GRAPHIC] [TIFF OMITTED] T6011.187
[GRAPHIC] [TIFF OMITTED] T6011.188
[GRAPHIC] [TIFF OMITTED] T6011.189
[GRAPHIC] [TIFF OMITTED] T6011.190
[GRAPHIC] [TIFF OMITTED] T6011.191
[GRAPHIC] [TIFF OMITTED] T6011.192
[GRAPHIC] [TIFF OMITTED] T6011.193
[GRAPHIC] [TIFF OMITTED] T6011.194
[GRAPHIC] [TIFF OMITTED] T6011.195
[GRAPHIC] [TIFF OMITTED] T6011.196
[GRAPHIC] [TIFF OMITTED] T6011.197
[GRAPHIC] [TIFF OMITTED] T6011.198
[GRAPHIC] [TIFF OMITTED] T6011.199
[GRAPHIC] [TIFF OMITTED] T6011.200
[GRAPHIC] [TIFF OMITTED] T6011.201
[GRAPHIC] [TIFF OMITTED] T6011.202
[GRAPHIC] [TIFF OMITTED] T6011.203
[GRAPHIC] [TIFF OMITTED] T6011.204
[GRAPHIC] [TIFF OMITTED] T6011.205
[GRAPHIC] [TIFF OMITTED] T6011.206
[GRAPHIC] [TIFF OMITTED] T6011.207
[GRAPHIC] [TIFF OMITTED] T6011.208
[GRAPHIC] [TIFF OMITTED] T6011.209
[GRAPHIC] [TIFF OMITTED] T6011.210
[GRAPHIC] [TIFF OMITTED] T6011.211
[GRAPHIC] [TIFF OMITTED] T6011.212
[GRAPHIC] [TIFF OMITTED] T6011.213
[GRAPHIC] [TIFF OMITTED] T6011.214
[GRAPHIC] [TIFF OMITTED] T6011.215
[GRAPHIC] [TIFF OMITTED] T6011.216
[GRAPHIC] [TIFF OMITTED] T6011.217
[GRAPHIC] [TIFF OMITTED] T6011.218
[GRAPHIC] [TIFF OMITTED] T6011.219
[GRAPHIC] [TIFF OMITTED] T6011.220
[GRAPHIC] [TIFF OMITTED] T6011.221
[GRAPHIC] [TIFF OMITTED] T6011.222
[GRAPHIC] [TIFF OMITTED] T6011.223
[GRAPHIC] [TIFF OMITTED] T6011.224
[GRAPHIC] [TIFF OMITTED] T6011.225
[GRAPHIC] [TIFF OMITTED] T6011.226
[GRAPHIC] [TIFF OMITTED] T6011.227
[GRAPHIC] [TIFF OMITTED] T6011.228
[GRAPHIC] [TIFF OMITTED] T6011.229
[GRAPHIC] [TIFF OMITTED] T6011.230
[GRAPHIC] [TIFF OMITTED] T6011.231
[GRAPHIC] [TIFF OMITTED] T6011.232
[GRAPHIC] [TIFF OMITTED] T6011.233
[GRAPHIC] [TIFF OMITTED] T6011.234
[GRAPHIC] [TIFF OMITTED] T6011.235
[GRAPHIC] [TIFF OMITTED] T6011.236
[GRAPHIC] [TIFF OMITTED] T6011.237
[GRAPHIC] [TIFF OMITTED] T6011.238
[GRAPHIC] [TIFF OMITTED] T6011.239
[GRAPHIC] [TIFF OMITTED] T6011.240
[GRAPHIC] [TIFF OMITTED] T6011.241
[GRAPHIC] [TIFF OMITTED] T6011.242
[GRAPHIC] [TIFF OMITTED] T6011.243
[GRAPHIC] [TIFF OMITTED] T6011.244
[GRAPHIC] [TIFF OMITTED] T6011.245
[GRAPHIC] [TIFF OMITTED] T6011.246
[GRAPHIC] [TIFF OMITTED] T6011.247
[GRAPHIC] [TIFF OMITTED] T6011.248
[GRAPHIC] [TIFF OMITTED] T6011.249
[GRAPHIC] [TIFF OMITTED] T6011.250
[GRAPHIC] [TIFF OMITTED] T6011.251