X-Message-Number: 1519
From:
Subject: CRYONICS LEF civil case
Date: Mon, 28 Dec 92 01:10:55 PST
Appologies for posting this, but my unease with respect to recent
postings is hard to fathom without some background. Keith
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Mail-order vitamin companies wage trade war
Broward, Nevada firms fight FDA and each other
by Lisa Gibbs, Review Staff
[From the Broward Review, Friday, December 4, 1992
reproduced without permission (yet)--for private use only]
The month before they were charged with importing
unapproved drugs, Saul Kent and William Faloon brought a
series of full-page newspaper ads in South Florida
trumpeting their Hollywood company's battle with the U.S.
Food and Drug Administration over its crackdown on
distributors of nutritional supplements. "The FDA is a
criminal agency," the ads declared. "The Life Extension
Foundation is fighting back."
Positioning themselves as martyrs fighting big
government over health-care freedom has been a key element
of Kent's and Faloon's defense against a November, 1991
Federal indictment. They are accused of setting up an
international network of shell companies to sell
unapproved drugs in the United States.
Kent and Faloon, whose Life Extension Foundation raises
money for anti-aging research and who sell vitamin
products through an affiliate, have challenged a variety
of FDA policies in court. They claim the FDA is
prosecuting them because they are vocal critics of the
agency. They deny involvement in the import business and
say the FDA has misbranded vitamins as drugs.
That argument wins support from colleagues who question
the wisdom of the FDA's increasingly aggressive regulatory
posture toward vitamins. The strategy also has paid off
with the public; membership in the Life Extension
Foundation has doubled since it publicized its troubles
with the FDA.
But beneath those trendy issues cloaking Kent and
Faloon's plight is another struggle that's decidedly more
capitalistic. That battle is over money, specifically a
fight for market share in a closely knit subculture of
those who believe heavy doses of vitamins can prolong
life.
The struggle is between the two major competitors who
specialize in mixing mega-dose vitamin cocktails and
selling them by direct mail, the Life Extension
Foundation, and the Carson City, Nev.-based Vitamin
Research Products Inc.
Kent and Faloon say VRP executives caused the FDA to
indict them as part of a scheme to put them out of
business.
The FDA defends itself and its aggressive stance against
so-called longevity products, saying in one report, "These
are fraudulent and potentially dangerous products. When
we learn of substantial commercial sources of these
products, we will take legal actions against the promoters
and their products."
** Dominating a niche **
Life Extension and VRP may be small players in the
billion-dollar mainstream vitamin industry, but they're
the biggest in their niche. According to their own
estimates they gross $6 million a year between them,
competing for the business of a core group of about 100,000
enthusiasts.
"The [longevity] market is growing dramatically," says
Steven W. Fowkes, who follows the industry as head of the
California groups MegaHealth Society and Cognitive
Enhancement Research Institute. "If the FDA pulled out of
the picture, it would grow twice as fast as it is now
because people will be able to talk about the benefits of
supplements."
Fowkes says Life Extension, VRP, and other mail-order
companies have the most to gain from market growth because
their manufacturing and distribution systems can get
products to consumers much faster than retailers. In this
business, faster means fresher.
In the past five years, the Foundation's gross revenues
from product sales and membership have increased from $1.7
million in 1986 to an estimated $4 million.
When VRP open in 1980, it was the first to specialize in
mail order longevity products. Kent, a supporter of
cryonics who gained notoriety in 1987 when he froze his
mother's head, founded the Life Extension Foundation a
year later and began selling products in 1983. Kent is
president of the company and Faloon is vice president.
VRP and Life Extension feuded from the start.
VRP executives say Faloon sent forged letters from the
American Aging Association and the Federal Trade
Commission asking for mailing list and other confidential
documents so Life Extension could steal VRP customers.
Faloon says VRP conspired with a fired Life Extension
employee to get him and Kent indicted. The two companies
have been trading suits since 1987.
In the latest salvos, Life Extension sued VRP's chief
executive Robert Watson for libel in Broward Circuit Court
after he mailed letters to customers questioning the
quality of Life Extension products.
In September, VRP sued Life Extension and Faloon for
extortion, libel, and interference with business
relationships. Faloon, the suit says, threatened to mail
damaging letters to VRP customers unless VRP paid $5,000 a
month into a Life Extension research fund. VRP refused to
pay, and Faloon mailed out letters bearing the heading,
"VRP exposed as an FDA informant."
Faloon also mailed letters to VRP's creditors -- VRP is
reorganizing in California bankruptcy court under new
owners -- stating that "VRP is on the verge of total
disintegration" and proposing to take over and "save" VRP.
"We were just bringing out the truth," Faloon said in an
interview.
"I'm appalled at how these people do business," said
Watson, who took over VRP 18 months ago. "They're not
your normal business people. This childish name-calling
or rock-throwing just doesn't happen in other companies."
** A big file **
Kent and Faloon say that VRP's desire for a monopoly
landed them in federal court. An ex-VRP employee
testified for Faloon and Kent that a former VRP president
bragged in 1986 that he had turned over to the FDA a thick
file of information to "destroy the Life Extension
Foundation." The ex-president allegedly compiled the file
with the help of a fired Life Extension employee, Dave
Shelhamer, who Faloon says also sold his mailing list to
competitors.
Watson said he wasn't around then and doesn't know the
details, but Fowkes, who followed the events and reported
on them in industry newsletters, said Kent and Faloon's
story is true -- almost.
When VRP executives turned over a file to the FTC and
the FDA, Fowkes said, they didn't know that the source was
Life Extension.
Faloon and Kent in 1984 begun "a campaign to harm
[VRP]," according to a 1987 suit filed in Broward Circuit
Court. This included: sending two change of address
forms to the Post Office so they would receive VRP's mail;
forging the letter from the American Aging Association;
and setting up a company called Vitamin Factory, which
sent letters denigrating VRP's products.
Faloon said those letters were sent by disgruntled VRP
employees, and that he believes VRP executives knew exactly
what they were doing when they turned the file over to
regulators. "Nobody believes it, but it's all true,"
Faloon said. "It's not unheard-of for competitors in
businesses regulated by the FDA to run to the FDA to do
their dirty work for them.
** Alias allegation **
VRP also accused Faloon of orchestrating a phoney
buy-out attempt of VRP using the alias John Steinmark and
a fake Swiss company to get confidential information.
Company investigations exposed the connection between
Steinmark and Life Extension, Fowkes said.
According to the indictment, Faloon used the Steinmark
alias to set up the Hauptmann Institute in Vienna. The
Institute, which the FDA says sold and delivered
unapproved drugs to the United States, was nothing more
than a mail drop.
Kent and Faloon created promotional literature for the
Hauptmann Institute, the indictment says, using a model
with a lab coat and a stethoscope to create photographs of
"Dr. Karl Gustav-Hauptmann." the literature claimed that
certain drugs could be used to treat or prevent disease
including AIDS, cancer, heart disease and Alzheimer's.
The unapproved drugs included Gerovital H3, which
extensionists claim helps senility and heart disease.
GH3's active ingredient is procaine hydrochloride, an
anesthetic.
Kent and Faloon allegedly routed the drugs through
England to Miami. They routed the money from the mail drop
in Austria to two mail boxes in Hollywood rented in
Steinmark's name.
Faloon denies that Steinmark is his alias and says Life
Extension's involvement is the creation of VRP and a
disgruntled former Life Extension employees. Faloon says
he worked with Steinmark when Steinmark was the managing
partner for the Vitamin Factory, and that explains why the
FDA found his fingerprints on correspondence mailed by
Steinmark.
"And he was apparently doing some work with the
Hauptmann Institute," Faloon said. "I never looked at his
identification. As far as I know he exists. He's not
around, we are, and so we're easy targets for the FDA.
The indictment of Kent and Faloon is one of two such
criminal cases in the country, said FDA spokesman Michael
Schaffer.
The warfare between the two companies has others in the
industry feeling more than a bit awkward. While they
disapprove of Kent's and Faloon's tactics, they disapprove
of the FDA even more.
"I've been following this with mixed feelings," said
Ward Dean, a physician, author and editor for *Experimental
Gerontology*. Dean was on the Life Extension Foundation
board until he fell out with Kent over his refusal to
recommend its products exclusively to his patients.
"I personally believe the FDA is a rogue government
organization that is out of control," Dean said.
Fowkes, who wrote a book called "Stop the FDA," says the
FDA shouldn't be prosecuting companies for importing drugs
that are approved in other countries.
"What they're charging them with, I think, is not a
crime," he said. " I hope they win, even though I think
they're unethical."
[end]
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