Mail-order Drug Seller Charged with Fraud

The company that sells Enzyte, the male-enhancement drug, and a host of other herbal supplements via mail order has been indicted by federal officials on charges of fraud, conspiracy and money laundering.

The charges were brought last week against Forest Park OH-based Berkeley Premium Nutraceuticals, its president Steven Warshak, his mother and five other people. According to U.S. Attorney Gregory Lockhart of the Southern district of Ohio, those charged made millions of dollars over five years by charging buyers drawn by a 30-day free trial offer for a second month's supply of pills without their authorization. Lockhart said that 60% to 80% of the company's weekly revenue came from this kind of scam.

When customers called to complain, they were instructed to write to a fictitious director of customer care named "Michael Johnson". Some customers apparently received responses from "Mr. Johnson"; those letters are the basis for 12 counts of mail fraud against Warshak and the company.

The indictments also allege that Berkeley used several tactics to minimize the ratio of chargebacks from disputed credit card charges, such as splitting sales into multiple transactions. This let the company stay within the maximum chargeback ratio permitted by its merchant bank accounts, permitting it to continue charging to the credit card accounts on its records.

Warshak and two others are also named with three counts relating to repackaging a prostate health product called Rovicid as a heart-healthy dietary supplement for both sexes.

Ads for Berkeley's Enzyte have been a staple of late-night cable TV for several years. They feature a smiling character called "Bob" who is reportedly "living large and laughing easy" as a result of greater sexual prowess from the product.

Lockhart said in a conference after the indictments that Berkeley had made many false claims in its product advertising, including fabricating a study that found proportion benefits among Enzyte users and creating fictional doctors who endorsed its supplements.

If convicted, Warshak and Berkeley could be made to pay as much as $100 million, representing the loss caused by the fraud, and to forfeit six real estate properties, two vehicles, the contents of 23 bank and investment accounts, and an insurance policy, Lockhart said. Trial is set for Sept. 28 in the case.

Five former Berkeley executives have already pleaded guilty to previous fraud charges and await sentencing.

The company itself could continue to do business even if convicted of the 14 counts of fraud and conspiracy against it. Earlier this month, Berkeley ran a series of full-page ads in the Cincinnati Enquirer touting its changed business practices and a continued commitment to provide local jobs. "The future of Berkeley looks bright as we hope to work through our setbacks," a Sept. 5 ad read.