| DEBRA VALENTINE General Counsel JEFFERY A. KLURFELD DAVID P. FRANKEL BARBARA CHUN ATTORNEYS FOR PLAINTIFF UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, Plaintiff, v. ENFORMA NATURAL PRODUCTS, INC., Civil Number Plaintiff, the Federal Trade Commission (the "Commission"), filed a complaint for a permanent injunction and other equitable relief against Enforma Natural Products, Inc., Andrew Grey, and Fred Zinos, pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), alleging violations of Sections 5 and 12 of the FTC Act, 15 U.S.C. §§ 45 and 52. The Commission and defendants Enforma Natural Products, Inc. ("Enforma Natural") and Andrew Grey ("Grey"), hereinafter referred to collectively as "defendants," have stipulated to the entry of the following Stipulated Final Order for Permanent Injunction and Settlement of Claims for Monetary Relief as to Defendants Enforma Natural Products, Inc. and Andrew Grey ("Order") in settlement of the Commission's complaint against them. The Court, being duly advised in the premises, finds: FINDINGS 1. This Court has jurisdiction of the subject matter of this action and of the defendants. Venue in the Central District of California is proper. 2. The Complaint states a claim upon which relief can be granted, and the Commission has authority to seek the relief it has requested under Sections 5, 12 and 13(b) of the FTC Act, 15 U.S.C. §§ 45, 52, and 53(b). 3. The acts and practices of the defendants were or are in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. 4. Defendants waive all rights to seek judicial review of, or otherwise challenge or contest the validity of, this Order. Defendants also waive any claim that they may have held under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. 5. This action and the relief awarded herein are in addition to, and not in lieu of, other remedies as may be provided by law. 6. Each party shall bear its own costs and attorneys' fees. 7. Defendants, without admitting or denying the allegations of wrongdoing set forth in the Commission's Complaint, stipulate and agree to entry of this Order under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b). 8. Entry of this Order is in the public interest. DEFINITIONS For the purposes of this Order, the following definitions shall apply:
CONDUCT PROHIBITIONS I. IT IS HEREBY ORDERED that defendants, directly or through any corporation, partnership, subsidiary, division, or other device, and their officers, agents, servants, employees and attorneys, and all other persons or entities in active concert or participation with them who receive actual notice of this Order, by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale or distribution of the Enforma System, Fat Trapper, Fat Trapper Plus, or Exercise In A Bottle, or any other product, service or program in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, including through the use of the names "Fat Trapper," "Fat Trapper Plus," and "Exercise In A Bottle," that such product, service or program:
unless at the time the representation is made, defendants possess and rely upon competent and reliable scientific evidence that substantiates the representation. II. IT IS FURTHER ORDERED that defendants, directly or through any corporation, partnership, subsidiary, division, or other device, and their officers, agents, servants, employees, and attorneys, and all other persons or entities in active concert or participation with them who receive actual notice of this Order, by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any product, service or program in or affecting commerce, are hereby enjoined from representing, in any manner, expressly or by implication, including through use of the names "Fat Trapper," "Fat Trapper Plus," and "Exercise In A Bottle," that any such product, service or program enables consumers to lose weight, avoid gaining weight, or maintain weight loss, unless defendants disclose, clearly and prominently, that reducing caloric intake and/or increasing exercise is required to lose weight;
III. IT IS FURTHER ORDERED that defendants, directly or through any corporation, partnership, subsidiary, division, or other device, and their officers, agents, servants, employees, and attorneys, and all other persons or entities in active concert or participation with them who receive actual notice of this Order, by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of the Enforma System, Fat Trapper, Fat Trapper Plus, or Exercise In A Bottle; or any other food, dietary supplement, drug, device; or weight loss product, service, or program; in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, about the health or weight loss benefits, performance, safety, or efficacy of such product, service or program, unless, at the time the representation is made, defendants possess and rely upon competent and reliable scientific evidence that substantiates the representation. IV. IT IS FURTHER ORDERED that defendants, directly or through any corporation, partnership, subsidiary, division, or other device, and their officers, agents, servants, employees, and attorneys, and all other persons or entities in active concert or participation with them who receive actual notice of this Order, by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any product, service or program, in or affecting commerce, shall not misrepresent, in any manner, expressly or by implication, the existence, contents, validity, results, conclusions or interpretations of any test, study, or research. V. Nothing in this Order shall prohibit defendants from making any representation for any drug that is permitted in the labeling for such drug under any tentative final or final standard promulgated by the Food and Drug Administration, or under any new drug application approved by the Food and Drug Administration. Nothing in this Order shall prohibit defendants from making any representation for any product that is specifically permitted in labeling for such product by regulations promulgated by the Food and Drug Administration pursuant to the Nutrition Labeling and Education Act of 1990. VI. IT IS FURTHER ORDERED that the provisions of this Order shall not apply to any label or labeling printed prior to April 11, 2000, and shipped by defendants to purchasers, distributors or retailers prior to June 9, 2000. Provided however, that with respect to all packaging and labeling for the Enforma System not otherwise complying with all other provisions of this Order and shipped to individual purchasers, defendants shall place the following clear and prominent statement either:
"Dieting or exercise is required to lose weight." MONETARY RELIEF VII. IT IS FURTHER ORDERED that:
RECORD KEEPING VIII. IT IS FURTHER ORDERED that defendants, for a period of five (5) years after the last date of dissemination of any representation covered by this Order, shall maintain and upon request make available to the Commission for inspection and copying:
MONITORING IX. IT IS FURTHER ORDERED that defendants, for a period of five (5) years after the date of service of this Order, shall deliver a copy of this Order to all current and future officers, directors, and managers, and to all current and future employees, agents, and representatives having responsibilities with respect to the subject matter of this Order, and shall secure from each such person a signed and dated statement acknowledging receipt of the Order. Defendants shall deliver this Order to current personnel within thirty (30) calendar days after the date of service of this Order, and to future personnel within thirty (30) calendar days after the person assumes such position or responsibilities. Defendants shall maintain and upon request make available to the Commission for inspection and copying each such signed and dated statement for a period of five (5) years after such statement is signed. X. IT IS FURTHER ORDERED that corporate defendant Enforma Natural shall notify the Commission at least thirty (30) calendar days prior to any change in the corporation that may affect compliance obligations arising under this Order, including but not limited to a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the proposed filing of a bankruptcy petition; or a change in the corporate name or address. Provided, however, that, with respect to any proposed change in the corporation about which Enforma Natural learns less than thirty (30) calendar days prior to the date such action is to take place, it shall notify the Commission as soon as is practicable after obtaining such knowledge. XI. IT IS FURTHER ORDERED that individual defendant Andrew Grey, within five (5) business days of service of this Order, shall notify the Commission of (1) his residence address and mailing address; (2) the name, address, and telephone number of his employer; (3) if applicable, the names of his supervisors, and (4) a description of his employer's activities, and his duties and responsibilities. XII. IT IS FURTHER ORDERED that individual defendant Andrew Grey, for a period of five (5) years after the date of service of this Order, shall notify the Commission of any changes in his residence or mailing address or employment status. Notice of changes in employment status shall include: (1) the new employer's name, address and telephone number; (2) if applicable, the full names of his supervisors and the people to whom he reports; and, (3) a description of the employer's activities, and defendant Grey's duties and responsibilities. XIII. IT IS FURTHER ORDERED that defendants shall, within sixty (60) calendar days after the date of service of this Order, and at such other times as the Commission may require, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this Order. XIV. IT IS FURTHER ORDERED that the Commission is authorized to monitor the compliance of defendants with this Order by all lawful means, including but not limited to the following means:
ACKNOWLEDGMENT OF RECEIPT OF ORDER XV. IT IS FURTHER STIPULATED AND ORDERED that, within fifteen days after service of this Order, defendant Grey, individually and on behalf of Enforma Natural, shall submit to the Commission a truthful sworn statement, in the form shown on Appendix A, that shall acknowledge receipt of this Order on behalf of defendants and shall reaffirm and swear to the truthfulness, accuracy and completeness of the financial statements previously submitted to the Commission by defendant Enforma Natural. The Commission's agreement to this Order is expressly premised on the truthfulness, accuracy and completeness of such financial statements. If, upon motion by the Commission, the Court finds that the such financial statements contain any material misrepresentation or omission, the Commission may request that this Order be reopened to allow the Commission to modify the monetary liability of the defendants; provided, however, that in all other respect this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision would be in addition to, and not in lieu of, any other civil or criminal remedies as may be provided by law, including any other proceedings that the Commission may initiate to enforce this Order. For purposes of this Paragraph XV, defendants waive any right to contest any of the allegations in the Complaint. RETENTION OF JURISDICTION XVI. IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order. SO STIPULATED:
SO ORDERED DATED: UNITED STATES DISTRICT JUDGE APPENDIX A UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, Plaintiff, v. ENFORMA NATURAL PRODUCTS, INC., Civil Number AFFIDAVIT OF ANDREW GREY Andrew Grey, being duly sworn, hereby states and affirms: 1. My name is Andrew Grey. I am a citizen of the United States and am over the age of eighteen. I have personal knowledge of the matters discussed in this declaration, and if called as a witness, I could and would competently testify as to the matters stated herein. I am a defendant in the above-captioned action individually and on behalf of defendant Enforma Natural Products, Inc.. 2. My current business address is ___________. My current business telephone number is __________. 3. On (date) __________ , I received a copy of the Stipulated Final Order and Settlement of Claims for Monetary Relief as to Defendants Enforma Natural Products, Inc. and Andrew Grey, which was signed by the Honorable __________, United States District Court Judge for the Central District of California. A true and correct copy of the Order that I received is appended to this Affidavit. 4. I reaffirm and swear to the truthfulness, accuracy and completeness of the financial statements that I submitted on behalf of defendant Enforma Natural Products, Inc. to the Federal Trade Commission on or about ___________ . I hereby declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on (date) __________ , at (city, state) __________, __________ . Andrew Grey STATE OF CALIFORNIA COUNTY OF __________ BEFORE ME this day personally appeared Andrew Grey, who being first duly sworn, deposes and says that he has read and understands the foregoing statement and that he has executed the same for the purposes contained therein. SUBSCRIBED AND SWORN TO before me this ___ day of ___________, 2000, by Andrew Grey. He is personally known to me or has presented (state identification) __________ as identification. ____________ NOTARY PUBLIC Commission Number APPENDIX B Promissory Note Date: Five Million Dollars FOR VALUE RECEIVED, the undersigned, Enforma Natural Products, Inc. ("Enforma Natural") and Andrew Grey ("Grey"), jointly and severally, promise to pay to the Federal Trade Commission together with its assigns ("Holder") at such place as the Holder may designate in writing, in lawful money of the United States of America, the principal sum of Five Million Dollars ($5,000,000.00). This Note shall be paid in three installments as follows: (1) within 60 days of the date of entry of the Stipulated Final Order and Settlement of Claims for Monetary Relief as to Defendants Enforma Natural Products, Inc. and Andrew Grey (the "Order"), Enforma Natural and Grey, jointly and severally, shall pay One Million Dollars ($1,000,000.00); (2) within 120 days of the date of entry of the Order, Enforma Natural and Grey, jointly and severally, shall pay One Million Dollars ($1,000,000.00); and (3) within 180 days of the date of entry of the Order, Enforma Natural and Grey, jointly and severally, shall pay Three Million Dollars ($3,000,000.00). In the event of any default on any obligation to make payment under this Note, interest, computed pursuant to 28 U.S.C. § 1961(a), shall accrue from the date of default to the date of payment. In the event such default continues for ten (10) calendar days beyond the date the payment is due, the entire unpaid amount shall immediately become due and payable. The Maker and any endorser or guarantor hereof shall have the right to prepay this Note at any time in whole or in part without premium or penalty. The Maker and any endorsers waive presentment, notice of dishonor and protest; and agree that any extension of the time of payment of all or any part of this Note may be made before, at, or after maturity by agreement with the Holder without notice to and without releasing the liability of any other party to this Note. This Note is secured by all assets of Enforma Natural subject only to the pre-existing security interest in favor of City National Bank filed of record in the public records of the County of Los Angeles, California. Such assets shall include, but are not necessarily limited to those listed in Appendix C, attached hereto. WITNESS the following signatures and seals: Enforma Natural Products, Inc. Andrew Grey APPENDIX C LIST OF ASSETS
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