Central Coast Neutraceuticals to Pay $1.5 Million

Central Coast Nutraceuticals has agreed to pay $1.5 million to settle federal claims that it used fraudulent marketing, phony claims and bogus endorsements from Oprah Winfrey and Rachael Ray to peddle its acai berry supplements, "colon cleansers," and other products.

The settlement order bans the Phoenix company from so-called "negative-option" sales, such as continuity plans and free or introductory price trial offers, in which consumers pay nothing up front or only a small fee to receive a product, but are then automatically charged a higher price unless they take steps to cancel the shipments, or return the product before the end of the trial period.

That's what  happened to Almondo of Champaign, Ill., and hundreds of other consumers who wrote to ConsumerAffairs.com about their experience.

"I ordered the free trial of Acai Berry and Advanced Colon Cleanse. The company charged my credit card $200 and have charged $87 a month for the past two months. I have made numerous calls to the company and they said my subscription was canceled. But it hasn't stopped," Almondo said.

Loretta  of Falls Church, Va., had a similar experience. 

"I ordered the Acai capsules as part of a "free" trial. I foolishly gave them my Visa number," she said. "I got the order but was charged $59.00 for some other stuff I never ordered. For the next 2 months, I noticed money coming out of my account for something I never ordered. ... Altogether I was charged more than $100.00 for this 'free' trial."

The Federal Trade Commission's 2010 complaint alleged that two individuals and five related companies deceptively claimed that their Acai Pure supplement would cause rapid and substantial weight loss, and that their Colotox colon cleanser would prevent colon cancer.

Also, despite claiming to offer a "free" trial for a nominal fee and full refunds upon request, the defendants allegedly repeatedly made unauthorized charges to consumers' bank accounts, and made it all but impossible to avoid paying full price for the products, typically $39.95 to $59.95.

Court order

At the request of the FTC in August 2010, a federal court halted the allegedly illegal conduct of the Central Coast Nutraceuticals defendants, imposed an asset freeze, and appointed a receiver to oversee the corporate defendants.

The settlement order against the defendants includes an $80 million judgment, which represents the total amount of consumer injury caused by their scheme. The monetary judgment will be suspended when the FTC receives assets worth approximately $1.5 million from the defendants.

The settlement order requires defendant Graham D. Gibson to pay the FTC the balance of his investment account; transfer to the FTC $500,000 after mortgaging his home in Phoenix, Arizona, or transfer the property to a court-appointed liquidator if he cannot obtain the mortgage; and divest himself of his interest in a Hawaii vacation property.

It also requires the court-appointed receiver to transfer to the FTC the estimated $600,000 that will remain in the accounts of Central Coast Nutraceuticals and the affiliated corporate defendants after their outstanding expenses are paid. 

Victimized consumers flooded law enforcement agencies with thousands of complaints about the company.

The defendants' marketing traded on the rampant popularity of acai berry supplements, which are derived from acai palm trees that are native to Central and South America.