“Male Enhancement” Dietary Supplement Distributor Gets Sentencing Enhancement — 25 Years for Fraud

August 28, 2008

According to the Associated Press, a federal court has sentenced Steven Warshak, founder of Berkeley Premium Nutraceuticals, to 25 years in prison for crimes including mail fraud, conspiracy to commit fraud, and money laundering.  In addition, Warshak and other defendants must forfeit money and assets in excess of $500 million.  Berkeley reportedly made hefty profits from the sale of Enzyte, a dietary supplement, which was claimed to promote “natural male enhancement.”

In our view, as a benchmark for a "standard" dietary supplement FDC Act prosecution, it is easy to read too much into Warshak’s conviction and sentencing.  It is true that dietary supplement distributors must have adequate substantiation for any claims that they make,  that false representations about Enzyte’s effectiveness are cited in the case, and that such violations can result in criminal prosecution, conviction, and sentencing.  However, given the facts of this case, from our perspective, the verdict and subsequent sentencing are based on a wide array of unlawful business practices, in which the use of unsubstantiated claims played a small, if essential, part in driving the prosecution and subsequent sentencing.  For example, central to Berkeley’s fraudulent scheme was the placement of unauthorized charges on customers’ credit cards.  Consequently, the fraud loss in this case–which drives sentencing in fraud cases–was significant.  Also worth bearing in mind is that the product at issue was at least implicitly positioned as an alternative to prescription medications – always a risky marketing strategy.  In light of these circumstances, we would be surprised to see similarly aggressive prosecutorial efforts aimed more broadly at the use of unsubstantiated claims within the dietary supplement industry, or that such cases –if prosecuted– would result in similar sentences.

By Ricardo Carvajal & J.P. Ellison