3,044 Victims of Weight-Loss Clinics Fraud Case To Get Partial Refunds

The Federal Trade Commission today announced that on May 1, 1997, it will begin distributing refunds totalling $381,659 to 3,044 consumers nationwide who were victimized by Pacific Medical Clinics Management, Inc. ("Medical Clinics") and its officers. According to the FTC, the defendants falsely represented to consumers that through the Medical Clinics' "medically-safe" program, consumers could adjust their metabolism and lose up to one and one-half pounds a day without exercise or strict dieting. Consumers will receive prorated refunds based on the amount of their verified claims.

The FTC first announced the case in September 1990, when it filed a complaint detailing alleged law violations in federal district court. The FTC's complaint named James Norman Wells, Karin Lynn Norred, and Pacific Medical Clinics Management, Inc. According to the complaint, Medical Clinics operated a chain of weight-loss clinics in California, Nevada, Texas, Georgia and Virginia. Through television, radio and print advertisement, the defendants claimed that their weight-loss programs would produce safe and rapid weight loss with little discomfort to the participant. Medical Clinics' weight-loss programs typically use an amino acid tablet supplement known as Growth Hormone Releaser ("GHR"), protein supplements in the form of powdered puddings and drinks, a potassium supplement, a daily multi-vitamin and a 1200-1300 calorie daily diet. In July 1992, a federal district court found that defendants James Norman Wells and Medical Clinics had violated the FTC Act and ordered them to pay approximately $21.5 million in consumer redress. Defendant Norred entered into a separate settlement with the FTC.

Defendants Wells and Medical Clinics offered no funds to satisfy the judgment and, in fact, transferred and concealed assets that had been frozen by the court. To secure the funds now being distributed to consumers, the FTC initiated two civil contempt proceedings to compel Wells to turn over the frozen assets to the Redress Fund. The Commission's ability to distribute refunds to consumers was further impeded when Wells, again in violation of the court's orders, removed and concealed the corporate records containing the information needed to identify consumers and calculate their individual losses. Wells was subsequently arrested and charged with nine counts of criminal contempt in connection with his repeated violations of the court's orders. Wells pled guilty to these charges and, in October 1994, was sentenced to one year in prison.

Copies of news releases and legal documents in this case are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(Civil Action No. 90-1277-GT (CM))