Wednesday, February 11, 2004

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Attorney General Abbott Wins Over $1 Million In Refunds For Customers Of Dietary Supplements Company

AUSTIN - A San Antonio federal bankruptcy judge today agreed with Texas Attorney General Greg Abbott and signed an order for settlement that will result in $1.1 million in refunds to thousands of consumers who bought falsely advertised weight-loss products from Mark Nutritionals Inc. of San Antonio. The refunds apply to consumers who bought certain products after the company filed for bankruptcy.

The settlement between Attorney General Abbott and the court-appointed trustee of the failed dietary supplement manufacturer closes the book on a scheme to mass-market products with the trade name Body Solutions Evening Weight Loss Formula. The company falsely advertised that by using the product, consumers could burn fat and lose weight during sleep, without diet or exercise.

“This should send a warning that my office will vigorously pursue unscrupulous businesses that violate the public trust and break consumer laws, whether they’re in bankruptcy or not,” Abbott noted. “I am pleased the judge agreed with our assessment that bankruptcy court is no place for unlawful businesses to hide.”

About 11,400 customers nationwide – 2,000 of them in Texas – purchased products directly from Mark Nutritionals while it sought to reorganize its business under Chapter 11 bankruptcy. Under the terms of the settlement, these consumers will receive 100 percent of their purchase price back as restitution.

Customers who purchased products while a company is in bankruptcy must be paid prior to customers who did business with the company before it filed for protection. Although other consumers nationwide may be owed as much as $190 million for purchases they made, the bankruptcy estate will not have sufficient funds to make these refunds.

The settlement also secures an important privacy protections for consumers. The company’s database listing of confidential personal information about its customers must be destroyed, including all credit card and other financial information. In addition, the company’s Internet domain name will not be sold and may be transferred to the state to be used, at its discretion, as a government site for consumer health information and education.

Abbott’s Consumer Protection Division sued the company in December 2002, following Mark Nutritionals’ filing for Chapter 11 bankruptcy protection. Then in April 2003, Abbott’s office helped persuade the bankruptcy court to place the company in Chapter 7 liquidation.

Last fall, the Attorney General obtained a settlement with two original owners, Harry Siskind and Edward D’Alessandro Jr. and Siskind’s wife, Patti. They were placed under injunction and ordered to pay $475,000 in fees and penalties to the state of Texas.

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