9523235
B241973

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION

In the Matter of

BOGDANA CORPORATION, a corporation, and

JOSEPH L. GRUBER and BOGDA GRUBER, individually and as officers of Bogdana Corporation.

DOCKET NO. C-3820

COMPLAINT

The Federal Trade Commission, having reason to believe that Bogdana Corporation, a corporation, and Joseph L. Gruber and Bogda Gruber, individually and as officers of Bogdana Corporation ("respondents"), have violated the provisions of the Federal Trade Commission Act, and it appearing to the Commission that this proceeding is in the public interest, alleges:

1. Respondent Bogdana Corporation is a California corporation with its principal office or place of business at 8929 Wilshire Boulevard, Third Floor, Beverly Hills, California 90211.

2. Respondent Joseph L. Gruber is an officer of Bogdana Corporation. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of Bogdana Corporation, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of Bogdana Corporation.

3. Respondent Bogda Gruber is an officer of Bogdana Corporation. Individually or in concert with others, she formulates, directs, or controls the policies, acts, or practices of Bogdana Corporation, including the acts or practices alleged in this complaint. Her principal office or place of business is the same as that of Bogdana Corporation.

4. Respondents Bogdana Corporation, Joseph L. Gruber and Bogda Gruber have advertised, labeled, offered for sale, sold and distributed products to the public, including Cholestaway wafers and capsules, and Flora Source. Cholestaway is a "food" and/or "drug," and Flora Source is a "drug," within the meaning of Sections 12 and 15 of the Federal Trade Commission Act.

5. The acts and practices of respondents alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act.

CHOLESTAWAY

6. Respondents have disseminated or have caused to be disseminated advertisements and labeling for Cholestaway, including but not necessarily limited to the attached Exhibits A through E. These advertisements and labeling contain the following statements:

A. Consumer One: "My cholesterol level was 230 and now it's 179. That's great."

Consumer Two:"My cholesterol at this point is down more than a hundred points."

Consumer Three: "My cholesterol was 220. After three months, my cholesterol went down to 190."

Host One: "Just what is it that lowered these people's cholesterol levels so dramatically? This is it. (He puts two Cholestaway tablets in his hand) A new, completely safe scientifically proven method that is as simple as chewing two flavorful wafers with every meal. It is called Cholestaway. (Graphic: ?Guarantees to Lower Your Blood Cholesterol Level') It is not a prescription drug, not a chemical, but a simple all natural dietary supplement that guarantees to lower your blood cholesterol level or your money back. That is right. It guarantees to lower your cholesterol." (Exhibit A, Cholestaway Television Infomercial 2, p. 1).....

Host One: "This is a cross-section of an artery. When there is too much cholesterol present in the bloodstream, it begins building up fatty deposits on the artery wall narrowing the opening, sort of like rust builds up on an old water pipe. When this opening becomes clogged, the blood flow to the heart is interrupted, causing a heart attack." (Exhibit A, p. 3).....

Host One: "With all natural Cholestaway, you get proven results without drugs, and without side effects. Studies were done at several prestigious research institutes on the effects of adding dietary calcium and magnesium, the ingredients found in Cholestaway, to the diet. Although not every study was created to determine the effect on blood serum cholesterol, it was noted that cholesterol levels were reduced, and in one study, by as much as 25%. One study even measured a weight loss, while another reported no loss at all.

(Graphic: "PROVEN TO LOWER BLOOD CHOLESTEROL BY SCIENTIFIC RESEARCH STUDIES.")

It was concluded, however, that, taken in sufficient dosages, these dietary supplements will lower cholesterol levels. The results by users, while anecdotal, is [sic] proof positive." (Exhibit A, p. 4).....

(A bottle of Cholestaway is shown on a table next to the Physician's Desk Reference. Host Two picks up the bottle and holds it.)

Host Two: "And that is the beauty of Cholestaway. It lets you eat like you normally would. Of course, when I say normal, I don't mean pizza every night, or ice cream and cake with every meal. What you normally eat." (Exhibit A, pp. 4, 5).....

Host 1:"Now, I would like to introduce you to the man who discovered Cholestaway, Dr. DeLamar Gibbons, former Director of Clinical Research for the Saturday Evening Post, and author of several books on cholesterol and diets."....

Gibbons: "This is what I did. I ate a pound, I weighed it out, I had little scales, and I weighed out a pound of Kentucky Fried Chicken. I didn't peel the skin off or anything -- as fat as I could. And I took the same amount of Cholestaway that this inmate was taking. And for 60 days in a row, I ate a pound of Kentucky Fried Chicken.”

Host Two: "You ate a pound of Kentucky Fried Chicken for sixty days?"

Gibbons: "Every day."

Host Two: "Every day?"

Gibbons: "Every day. And at the end of the sixty days, I checked, and my cholesterol had dropped remarkably. And my blood fat had gone down. And to my surprise, I had lost 25 pounds." (Exhibit A, p. 8).....

Consumer 5: "I’ve been on Cholestaway for about two months now. And in the process of getting my cholesterol tested, my cholesterol has come down. At this point, my cholesterol is down over a hundred points. The pluses to this have been that I can eat almost whatever I want, within reason, eggs, corned beef sandwich for lunch occasionally, and I’m still showing improvement, plus I’ve lost weight."

(Graphic: "The results of using Cholestaway will vary from individual to individual.")

(Graphic: "If you maintain your present level of food consumption while taking Cholestaway, our experience and knowledge of body chemistry indicates that there is a possibility that weight loss will occur.") (Exhibit A, p. 10).....

Dr. Dalton: "Dr. Gibbons and I were working together in the state correctional system in Virginia. And I was under the care of some physicians who were taking care of my health. I had a diabetic condition, which seemed to get out of hand. And my triglycerides as well as my cholesterol went so high, that it was very threatening. As a matter of fact, the triglycerides should only be around 200 as the cholesterol should. And my triglycerides were over 1600, and the cholesterol was over 500.....

Dr. Dalton:So we started on Cholestaway. And within several weeks, my chemistry concerning the triglycerides and cholesterol had dropped to near normal. By one month, they were both within normal range. And it was one of the best things that had ever happened to me."

(Graphic: "The results of using Cholestaway will vary from individual to individual.") (Exhibit A, p. 13).....

Consumer Three: "Yes, I had a side effect, an unusual side effect and a happy one. I lost 30 pounds."

Host Two: "You lost 30 pounds."

Dr. Dalton: "That’s interesting Barbara, because I had the same experience. I lost 50 pounds over the past five years."

(Graphic: "If you maintain your present level of food consumption while taking Cholestaway, our experience and knowledge of body chemistry indicates that there is a possibility that weight loss will occur.")

Host Two: "Fifty pounds?"

Consumer Three: "That's wonderful."

Dr. Dalton: "Exactly."

Host Two: "Just what in Cholestaway causes one to lose the weight?"

Dr. Dalton: "Again, as Dr. Gibbons explains, it's the calcium combining with the fat in food and it simply never goes into the system. It's a very simple, but very effective mechanism." (Exhibit A, pp. 14, 15).....

Gibbons: "Cholestaway is perfectly safe for high blood pressure. In fact, there have been studies in the last year or two employing the ingredients of Cholestaway to treat high blood pressure. Some people with high blood pressure are found to be low on their calcium. And Cholestaway is an excellent source of calcium. And it would probably be very favorable to people with high blood pressure." (Exhibit A, p. 18).....

Gibbons: "They put cholesterol in a machine that’s like a cream separator. And it’s the high density that stays in the milk part, and the low density that comes out of the cream part. The low density is thought to be the bad one and the high density is felt to be the good one. The ratio of one to the other is currently regarded as important. The Cholestaway seems to be getting rid of primarily the low density cholesterol and improving the ratio." ....

Host Two: "Yes, there is one major side effect while on Cholestaway. You will probably lose weight." (Exhibit A, p. 19).

B. Anderson: "Hello ladies and gentlemen. This is your host Robert Anderson and we’re on 'Let’s Talk About Health.' We have a very interesting guest today...[A] lot of you would probably picture a body where you were trim and in shape and then you might say to yourself: "Well, but in order to achieve that I'd really have to starve myself and I enjoy eating food so much, I enjoy eating a pizza and sitting down to Kentucky Fried Chicken, and I just couldn't give up that entirely. These are foods that really help me to get through tough experiences and a tough work week looking forward to this now."

But, I got news for you. That's possible now. It’s possible to sit down and have your pizza and eat it, too. And have your cake and eat it too. Because Dr. Gibbons has come up with a product that really is a combination of nutrients. They're in the form of very tasty wafers and when you take these wafers during your meal, very little fat gets into the body. And we call that product Cholestaway. Dr. Gibbons has given it that name, because really when you take that product, you don't have to be a prophet to predict that if you're not getting very much fat into your body, what would result would be a lower, a much lower level of cholesterol." (Exhibit B, Cholestaway Radio Infomercial #24, pp. 1, 2).....

Gibbons: "And so for two months I took the 12 Cholestaway tablets that this inmate was taking and I ate a pound of Kentucky Fried Chicken every day. The skin, the bones, the grease -- all of it."

Anderson: "How much weight did you gain?"

Gibbons: "I lost 25 pounds."

Anderson: "...[H]ere we have a product that's a combination of nutrients that, when taken in the form of these tasty wafers, and I've tried it, then very little fat gets into the body. Some fat does get into the body, though, isn't that true?"

Gibbons: "Small amounts, sure."

Anderson: "Very small amounts, and of course we need small amounts of fat so that's important to have some fat in our body."

Gibbons: "Of course. But you don't have to go on a Spartan diet to achieve weight loss and reduction of the fat in your blood and your body."

Anderson: "So it's conceivable with these Cholestaway wafers that are taken during each meal, people can eat pretty much what they like in the way of fattening foods and they could still lose weight."

Gibbons: "Right. I'm kind of a pig. I like pizza, I like lasagna."

Anderson: "Well, let's take pizza for example. My wife and I, every Friday night, we like to sit down and have a pizza. Let's take the most caloric type of pizza, let's say pizza smothered with pepperoni and sausage and you have, now, how much Cholestaway would you take with something like that?"

Gibbons: "I would ordinarily take maybe four tablets." ....

Anderson: "O.K. But what kind of, back to that pizza because I think we've got everybody listening to what would happen to that pizza, or ice cream, or anything like that. What would happen to the fat in that pizza as it came into the stomach when, as Cholestaway was taken? What would happen to it?"

Gibbons: "It would go right through you."

Anderson: "It would actually become part of the stools and it would be eliminated then."

Gibbons: "That's correct." (Exhibit B, pp. 3-5).....

Gibbons: "...it will combine with the fat in your diet and it will make it so it will not dissolve in water and can’t be absorbed. It does the same thing with Cholesterol. It combines with it. One molecule of Cholestaway will bind two molecules of fat or two molecules of cholesterol."

Anderson: "So basically as a result of taking the wafers, it’s conceivable that not only weight loss will occur, but also cholesterol levels within the body will go down which is extremely important when one considers heart problems and hardening of the arteries and all of those negative health problems that so many people have. Am I correct in that?"

Gibbons: "I’ve used it on a great number of patients."

Anderson: "Now, what has been the result as far as using Cholestaway on them? Giving them Cholestaway, what has happened to their cholesterol levels?"

Gibbons: "Cholesterol falls, and also the blood fat or triglycerides fall...." (Exhibit B, pp. 5, 6).....

Anderson: "...[Y]ou take two of these tasty wafers which are a combination of nutrients and what they do is they prevent fat from getting into the body, so... you can enjoy a tasty meal that has a lot of fat in it, not get very much fat, if any, into your body and then also in addition to losing weight, not getting fat into the body, cholesterol levels go down as well." (Exhibit B, p. 7).....

Anderson: If we take Cholestaway on a steady basis, we may actually, not may, we will lose weight. I’ve been taking it more or less experimentally on myself and I’ve lost weight and I haven’t really been trying. In fact, I’ve been making an effort to offset the product by eating more fat than I’d usually eat and ironically I’ve actually lost weight." (Exhibit B, p. 9).....

Gibbons: "My experience has been that it has a great deal more effect on those with a very high cholesterol than the ones borderline. And those with very high cholesterol are people who are re-absorbing their cholesterol excessively. So the higher the cholesterol initially, the better it appears to be working." (Exhibit B, p. 11).

C. "Simple and safe, just two small vanilla flavored wafers with each meal reduce the amount of fat absorbed from the diet."

"CHOLESTAWAY is both safe and effective. Because it greatly lowers the amount of fat absorbed from the diet, many individuals may lose 4 - 9 pounds a month." ....

"...CHOLESTAWAY reduces the body’s cholesterol pool." (Exhibit C, Bogdana Catalog).

D. "... reduces the amount of fat absorbed from the diet."....

"Because it greatly lowers the amount of fat absorbed from the diet, many individuals may lose four-to-nine pounds a month." ....

"...CHOLESTAWAY reduces the body’s cholesterol pool." (Exhibit D, Bogdana Internet Advertisement, August 22, 1996, p. 2).

E. Bogdana CHOLESTAWAY

Dr. DeLamar Gibbons, M.D.....

Safe and effective

May help lower levels of cholesterol and triglycerides Many individuals may lose 4 to 9 pounds a month

(Exhibit E, Cholestaway Label).

7. Through the use of the trade name "Cholestaway," and through the means described in Paragraph 6, respondents have represented, expressly or by implication, that:

A. Cholestaway significantly lowers serum cholesterol levels.
 
B. Cholestaway significantly lowers serum cholesterol levels without changes in diet.
 
C. Cholestaway significantly lowers serum cholesterol levels and causes significant weight loss even if users eat foods high in fat, including fried chicken and pizza.
 
D. Cholestaway substantially reduces or eliminates the body’s absorption of dietary fat.
 
E. Cholestaway lowers low density lipoprotein cholesterol and improves the high density lipoprotein cholesterol to low density lipoprotein cholesterol ratio.
 
F. Cholestaway is effective in the treatment of hardening of the arteries and heart disease.
 
G. Cholestaway causes significant weight loss.
 
H. Cholestaway causes significant weight loss without changes in diet.
 
I. Cholestaway significantly reduces blood triglyceride levels.
 
J. Cholestaway significantly reduces elevated blood pressure.
 
K. Testimonials from consumers appearing in the advertisements for Cholestaway reflect the typical or ordinary experience of members of the public who use the product.

8. Through the use of the trade name "Cholestaway," and through the means described in Paragraph 6, respondents have represented, expressly or by implication, that they possessed and relied upon a reasonable basis that substantiated the representations set forth in Paragraph 7, at the time the representations were made.

9. In truth and in fact, respondents did not possess and rely upon a reasonable basis that substantiated the representations set forth in Paragraph 7, at the time the representations were made. Therefore, the representation set forth in Paragraph 8 was, and is, false or misleading.

10. Through the means described in Paragraph 6, respondents have represented, expressly or by implication, that:

A. Scientific studies prove that Cholestaway significantly lowers serum cholesterol levels.
 
B. Scientific studies prove that Cholestaway significantly reduces elevated blood pressure.

11. In truth and in fact:

A. Scientific studies do not prove that Cholestaway significantly lowers serum cholesterol levels.
 
B. Scientific studies do not prove that Cholestaway significantly reduces elevated blood pressure.

Therefore, the representations set forth in Paragraph 10 were, and are, false or misleading.

FLORA SOURCE

12. Respondents have disseminated or have caused to be disseminated advertisements for Flora Source, including but not necessarily limited to the attached Exhibits F and G. These advertisements contain the following statements:

A. [Announcer's Voice:] "The Bogdana Corporation is proud to present ?Let's Talk About Health’ with your host, Robert Anderson. He'll talk about all aspects of health -- physical, mental, emotional and spiritual. Now here's your host, Robert Anderson."

Robert W. Anderson: "This is host Robert Anderson.... We have an interesting show today. We have Dr. Scott, Scott Gregory with us and we, he's been on our show before. And he's an expert in diseases that affect the immune system where people have a weak immune system, they may have HIV-positive or full-blown AIDS or diseases, for example, like multiple sclerosis or chronic fatigue, that is the Epstein-Barr Syndrome, which is often accompanied by candida, that is yeast infection." (Exhibit F, Flora Source Radio Infomercial #23, p. 1).....

Anderson: "Now, of course, what really impresses me about Dr. Scott is that, uh, Dr. Scott Gregory is that he has really had a lot, a high degree of success rate with HIV-positive and some cases full-blown AIDS. Actually turning them around and making them HIV, causing them to become HIV-negative through his protocol. And he's had a remarkable, almost lightning- speed effect on people with chronic fatigue and I wish I had met him several years ago and fortunately I got well by using Bogdana. (Exhibit F, p. 5).....

Anderson: "But I wish that I had Flora Source at a time, because I think my achieving wellness and getting rid of chronic fatigue perhaps would have accelerated. Could you tell us something about Flora Source doctor?"

Dr. Gregory: "Yes, yes, it's a culture, it's many cultures actually. It's bio-active. It replaces the natural intestinal flora. In approximately, oh I'd say at least 90 to 98 percent of all individuals that are immunosuppressed, they have definitely digestive dysfunction of some kind, malabsorption. So in other words, it's bad enough to be sick, but the worst end of the scenario is that you're suffering also from malnutrition, because the body is not manufacturing what it needs to heal. So the Flora Source in its process of adding to it these special nutrients that allow the flora in the digestive tract to function normally actually assist in the healing process by, for example, increasing more B vitamins, actually helping the body to manufacture more B vitamins, 'cause that's one thing the digestive flora does [sic].

Another thing the Flora Source does is it helps rid the body of different microorganisms that would in fact endanger, in the sense that they're pathogenic. So it has the principle of detoxification. I believe that the Flora Source in terms of my protocol would probably fit in all four categories. Kill whatever it is that's in the digestive tract. Detoxify the digestive tract.

And then it has, of course, the Flora Source has the ability to help the immune system work better also. It's been known that specific types of cultures do enhance the immune response. So it's a very good product. I've gotten very good results with it, with immunosuppressive disorders and I do add it as an adjunct. I [inaudible] most of my patients who are immunosuppressed need this product to get their digestive tract in proper function so that they can process these different microorganisms naturally and allow the body to detoxify them."....

Anderson: "Of course, so many doctors don't tell us that when they give us prescription drugs that those prescription drugs are antibiotics, that they kill off the good bacteria as well as the bad bacteria. And although we may feel relief from symptoms we're suffering from at the moment, down the line three, four, five years later we develop, we could develop illnesses such as chronic fatigue or other immunosuppressed diseases. So it's important to reestablish the positive bacteria colonies within the body.

And I've also found out that one of the, of course the bacteria in that particular item, the product called Flora Source that is very interesting is the B. Laterosporus bacteria that should be in people's intestine but often is not because of prescription drugs. And from the way I understand it is that that kills candida or yeast within the body and of course that's how a lot of our problems with immunosuppressed or weak immune systems start is the good bacteria is no longer there as a result of being killed off by the prescription drugs. And candida or "yeast infection" which is -- yeast is a living organism -- it's allowed to run rampant through our body and cause a lot of problems. And also another interesting bacteria is in there, and that is a bacteria that is responsible for the metabolism and assisting in the metabolism of carbohydrates, sugar starches and without it could mean that people might gain weight." ....

B. [Large Print Heading in Catalog] "FLORA SOURCE"

[Large and Bold Print Sub-Heading, slightly smaller than the Heading] "Scientific Health Enhancement Effects Of: Bacillus Laterosporus - Bacillus Subtilis - Lactobacillus Sporogenes"

[Smaller print in main body of text] "The classic use of antibiotics and chemotherapeutics seems to have reached limitations, in light of the chronic and persistent infections that plague mankind.

Flora Source is a pro-biotic or special class of bacteria, consisting of Bacillus Laterosporus, Bacillus Subtilis and Lactobacillus Sporogenes.

Bacillus Laterosporus is a friendly, non-lactic- acid producing bacteria, and is found in the human intestines in very small quantities, but will aid in creating an intestinal environment that is conducive to rapid colonization of any beneficial flora.

Bacillus Laterosporus has been clinically tested and found to be safe and effective, both topically and as intestinal flora. Taken internally, this product has shown positive results in relieving many of the gastrointestinal symptoms related to candida. Improvements in symptoms, such as food sensitivities, constipation, diarrhea, abdominal pain, bloating and gas." ....

Lactobacillous Sporogenes: The rapid colonization enables it to control the growth of infectious organisms in the intestines much more rapidly than do the non-spore-producing Lactobacilli by reducing the amount of bile salt in the gut. Also an intestinal aid for: putrefication, auto-intoxication, dyspepsia, anorexia, vomiting, flatulence, green stools, white diarrhea (Pseudocholera infantum)." (Exhibit G, Bogdana Catalog).

13. Through the means described in Paragraph 12, respondents have represented, expressly or by implication, that:

A. Flora Source replaces the natural intestinal flora that are lost due to illness, prescription drugs or antibiotics, thereby reducing the risk of developing illnesses such as chronic fatigue syndrome (Epstein- Barr syndrome) and other immunosuppression diseases, including AIDS.
 
B. Flora Source improves the body's absorption of nutrients, including B vitamins.
 
C. Flora Source enhances the body's immune response and is effective in the treatment of immunosuppression diseases, including AIDS.
 
D. Flora Source prevents weight gain.
 
E. Flora Source is effective in the prevention or treatment of anorexia.
 
F. Flora Source is effective in the prevention or treatment of gastrointestinal disorders and symptoms including food sensitivities, constipation, diarrhea, dyspepsia, abdominal pain, bloating and gas.

14. Through the means described in Paragraph 12, respondents have represented, expressly or by implication, that they possessed and relied upon a reasonable basis that substantiated the representations set forth in Paragraph 13, at the time the representations were made.

15. In truth and in fact, respondents did not possess and rely upon a reasonable basis that substantiated the representations set forth in Paragraph 13, at the time the representations were made. Therefore, the representation set forth in Paragraph 14 was, and is, false or misleading.

DECEPTIVE FORMAT

16. Through the means described in Paragraphs 6 and 12, respondents have represented, expressly or by implication, that certain of their advertisements for Cholestaway and Flora Source, including but not necessarily limited to Cholestaway Radio Infomercial #24 (Exhibit B) and Flora Source Radio Infomercial #23 (Exhibit F), are independent radio programs and are not paid commercial advertisements.

17. In truth and in fact, the advertisements for Cholestaway and Flora Source referred to in Paragraph 16 are paid commercial advertisements and not independent radio programs. Therefore, the representation set forth in Paragraph 16 was, and is, false or misleading.

18. The acts and practices of respondents as alleged in this complaint constitute unfair or deceptive acts or practices, and the making of false advertisements, in or affecting commerce in violation of Sections 5(a) and 12 of the Federal Trade Commission Act.

THEREFORE, the Federal Trade Commission this twenty-eighth day of July, 1998, has issued this complaint against respondents.

By the Commission.

Donald S. Clark
Secretary

SEAL: