False claims and lawsuits
The company came to be known for unproven claims that its products could be used to treat many diseases and conditions, including cancer, diabetes, autism and AIDS.[11][12] There is no evidence that any of these claims were or are true.[13][14][15][16][17][18][19][20]
In May 2005 an article was published in Barron's questioning the company's business practices.[21] In September 2005, a class-action lawsuit was filed against Mannatech for alleged violations of the Securities Exchange Act; it was prompted by the Barron's article.[22]
In 2006, Mannatech distributor Vivienne Balonwu, a U.K. general practitioner, was found by the U.K. General Medical Council panel to have "abused her power as a doctor" after it was determined that she had illegally promoted and sold the company's products to people as a treatment for medical conditions such as chronic obstructive pulmonary disease and stroke-related complications. Following patient complaints about her marketing of the products in 2006, Balonwu was dismissed by her employer, Harmoni, a medical services company, and the GMC panel imposed a 15-month penalty period during which she was "to avoid private or short term locum work" and "to complete a supervised personal development plan to tackle shortcomings in her practice".[23]
Also in 2006, Mannatech was named #5 on Forbes’ list of America's 200 Best Small Companies.[24][25] At the same time, the company came under investigation by the Texas Attorney General in October 2006 for alleged violations of that state's Deceptive Trade Practices Act.[26] In July 2006, Texas Attorney General Greg Abbott formally charged Mannatech, MannaRelief, Sam Caster, and Reginald McDaniel, the company's medical director, with operating an illegal marketing scheme in violation of state law.[27][28]
A 20/20 undercover investigation that aired June 1, 2007 on ABC Television showed Mannatech's sales associates teaching sales recruits how to target Mannatech products to people with specific illnesses in a manner that purportedly does not violate U.S. federal law, including U.S. Food and Drug Administration regulations, by avoiding direct claims that the products cure any particular diseases.[16]
In August 2007, Caster resigned as CEO of Mannatech. In October 2007, it was reported that the company had fired Grant Thornton LLP as its auditor after the accounting firm demanded that Mannatech remove Caster from all responsibilities[29][30] to be replaced by Wayne Badovinus as the new chief executive. Several corporate initiatives were undertaken, but after 17 months on the job Badovinus resigned in December 2009.[31] Another member of the board resigned shortly after.[32] Mannatech's Chief Science Officer Robert Sinnott and Mannatech's chief financial officer Steve Fenstermacher were named Co-CEOs.[33] Fenstermacher later resigned.[34]
Publicity over the company's lawsuits began to damage the balance sheets and stock performance.[31] After profits of $32 million in 2006 and $6.6 million in 2007, Mannatech reported a $12.6 million loss in 2008 and a $17.3 million loss in 2009.[35]
Mannatech settled the civil complaint with the State of Texas in February 2009; Mannatech did not admit wrongdoing but agreed to pay $4 million in restitution to clients who purchased products and $2 million to the state to cover its costs in the case. In addition, Sam Caster agreed to pay a $1 million civil penalty and steer clear of any type of leadership position or employment relationship with Mannatech for five years.[36][37][38]
In March 2008, Mannatech settled the class-action lawsuit by agreeing to pay $11.25 million to the plaintiff class. As part of the settlement, Mannatech admitted no wrongdoing.[39]
2010 losses were $10.6 million.[40] As the company's market capitalizations continued to fall, S&P Indices dropped it from the S&P 600 Index, stating "They are no longer representative of the small cap market space."[41] Recruiting efforts continued dropping in 2011, widening company losses to $20.6 million.[42] For 2012, the company's net loss narrowed to around $1 million from the about $21 million loss the year before.[43] In 2013, it had around $3 million in net income, and in 2014, it reported profits of $6.5 million and total revenue of $190.1 million.[44]
In November 2017, Mannatech received an FDA warning letter for illegally marketing several of its supplement products as medicinal agents and for selling adulterated and misbranded products in violation of Title 21 of the Code of Federal Regulations and Good Manufacturing Practice regulations for dietary supplements.[45] In December 2017, Mannatech reached an agreement with the Town Council of Flower Mound, Texas, to relocate its headquarters to an existing facility in the city.[46]
