[Senate Hearing 107-190] [From the U.S. Government Publishing Office] S. Hrg. 107-190 SWINDLERS, HUCKSTERS AND SNAKE OIL SALESMAN: HYPE AND HOPE MARKETING ANTI-AGING PRODUCTS TO SENIORS ======================================================================= HEARING before the SPECIAL COMMITTEE ON AGING UNITED STATES SENATE ONE HUNDRED SEVENTH CONGRESS FIRST SESSION __________ WASHINGTON, DC __________ SEPTEMBER 10, 2001 __________ Serial No. 107-14 Printed for the use of the Special Committee on Aging U.S. GOVERNMENT PRINTING OFFICE 76-011 WASHINGTON : 2001 ____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512�091800 Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001 SPECIAL COMMITTEE ON AGING JOHN B. BREAUX, Louisiana, Chairman HARRY REID, Nevada LARRY CRAIG, Idaho, Ranking Member HERB KOHL, Wisconsin CONRAD BURNS, Montana JAMES M. JEFFORDS, Vermont RICHARD SHELBY, Alabama RUSSELL D. FEINGOLD, Wisconsin RICK SANTORUM, Pennsylvania RON WYDEN, Oregon SUSAN COLLINS, Maine BLANCHE L. LINCOLN, Arkansas MIKE ENZI, Wyoming EVAN BAYH, Indiana TIM HUTCHINSON, Arkansas THOMAS R. CARPER, Delaware PETER G. FITZGERALD, Illinois DEBBIE STABENOW, Michigan JOHN ENSIGN, Nevada JEAN CARNAHAN, Missouri CHUCK HAGEL, Nebraska Michelle Easton, Staff Director Lupe Wissel, Ranking Member Staff Director (ii) ? C O N T E N T S ---------- Page Opening Statement of Senator John Breaux......................... 1 Statement of Senator Larry E. Craig.............................. 4 Statement of Senator Ron Wyden................................... 5 Prepared statement of Senator Blanche Lincoln.................... 36 Panel I Mike O'Neil, former chief financial officer, GB Data Systems, O'Neals, CA.................................................... 6 E. Vernon F. Glenn, Law Offices of E. Vernon F. Glenn, Mt. Pleasant, SC................................................... 22 Panel II Glen Braswell, president, Gero Vita International, Marina Del Ray, CA; and Ron Tepper, Editor, ``Journal of Longevity,'' Health Quest Publications, Marina Del Ray, CA.................. 37 Panel III Janet Heinrich, D.Ph., R.N., Associate Director, Health, Education, and Human Services Division, General Accounting Office, Washington, DC......................................... 38 Joyce C. Lashof, M.D., associate chair, Editorial Board, ``Wellness Letter,'' University of California School of Public Health, Berkeley, CA........................................... 59 Robert S. Baratz, M.D., Ph.D., D.D.S., Newton, MA................ 74 Timothy Gorski, M.D., Arlington, TX.............................. 91 Panel IV Hon. Joseph Curran, Attorney General, State of Maryland, Baltimore, MD.................................................. 111 John Taylor, Director, Office of Enforcement, Food and Drug Administration, Department of Health and Human Services, Washington, DC................................................. 139 Howard Beales, Director, Bureau of Consumer Protection, Federal Trade Commission, Washington, DC............................... 168 Dennis M. Lormel, Section Chief of Financial Crimes, Criminal Investigative Division, Federal Bureau of Investigation, Washington, DC................................................. 184 APPENDIX Letter from Nature's Life........................................ 209 Testimony of David Seckman, Executive Director, CEO of the National Nutritional Foods Association......................... 211 Letter from Born Preventive Health Care Clinic................... 221 Letter from Total Health for Longevity........................... 222 Written submission of Rep. Dan Burton............................ 223 Response to the Statement of the Hon. Dan Burton................. 230 Letter from University of North Texas, Health Science Center..... 253 Letter from Texas College of Osteopathic Medicine................ 254 Letter from Senator Larry Craig.................................. 255 Letter from Senator John Breaux.................................. 256 Letter from University of North Texas, Health Science Center..... 258 Testimony of Michael McGuffin, American Herbal Products Association.................................................... 259 Statement from American Academy of Anti-Aging Medicine........... 311 (iii) SWINDLERS, HUCKSTERS AND SNAKE OIL SALESMEN: HYPE AND HOPE OF MARKETING ANTI-AGING PRODUCTS TO SENIORS ---------- MONDAY, SEPTEMBER 10, 2001 U.S. Senate, Special Committee on Aging, Washington, DC. The committee met, pursuant to notice, at 10 a.m., in room SD-215, Dirksen Senate Office Building, Hon. John Breaux (Chairman of the Committee) presiding. Present: Senators Breaux, Wyden, Lincoln, and Craig. OPENING STATEMENT OF SENATOR JOHN BREAUX, CHAIRMAN The Chairman. The Committee on Aging will please come to order. Good morning, everyone. I would like to thank all of our guests who are here this morning, and also my colleague, Senator Wyden. We expect other members of the Aging Committee to join us in a very short amount of time. This is a very important hearing of the Senate Aging Committee, and we will use this hearing as an opportunity to examine the marketing of dietary and specialty supplements that particularly target our Nation's elderly and senior citizens. I want to thank Senator Larry Craig, who will be with us momentarily as the ranking Republican member of the committee, for his cooperation and support throughout this investigation. I want to particularly thank our witnesses who will be testifying before us this morning for their testimony and their assistance and cooperation. People have been searching for the fountain of youth ever since Ponce DeLeon, and they will probably continue to do so for decades and generations into the future. Our job in this hearing is not to kill that hope and desire to remain youthful and healthy as long as possible, but rather the role of the committee is to try and help protect American citizens, particularly our elderly, who are preyed upon by modern-day snake oil salesmen. I would like to say up front that this hearing will focus on companies that mislead consumers with regard to dietary and specialty supplements. As with any industry, the vast majority of manufacturers and marketers of supplements are reputable and law-abiding. It is the bad actors in this industry that we are concerned about today. Supplements are becoming increasingly popular. I take them myself and I will continue to do so in the future. Individuals who are both healthy and ill take supplements for a variety of reasons. Some take supplements to increase energy, to build muscles, or to lose weight. Others have begun taking supplements as alternatives to traditional medicine and escalating prescription drug cost. More and more, our Nation's seniors are turning to these supplements. Today, it is estimated that $27 billion annually or more is spent on supplements and that 60 percent of these consumers are older senior citizens. These products are marketed to our seniors in a variety of ways. Not long ago, my wife and I, at our home, received in the mail the Journal of Longevity. At first glance, it appeared to me, as the example on the chart shows, that this was a scientific journal, extolling the virtues of supplements, focusing on those that have alleged anti-aging effects. To me, it resembled the New England Journal of Medicine, and I was very impressed with the way it was structured and the way it was presented. I actually wanted to start ordering everything in the magazine, and the more I read, the more I came to the conclusion that if it sounds too good to be true, it probably is. I was drawn in, until I finally concluded, after consulting with my staff, that the mailer was simply a very fancy advertisement for one company's products. The Journal of Longevity appears to me to simply be a series of articles that discuss health issues that seniors face, and then provides a very simple solution, the solution being the dietary supplements developed and distributed by the same parent company that publishes the magazine. Some of the articles and advertisements simply prey on the fears of the elderly, while others counsel the reader to take a particular supplement in place of traditional medicine. It really made me start thinking about the marketing tactics of some of these companies and the products that they promote. The dietary supplement industry in this country is largely self- regulated. Unlike new prescription and over-the-counter drugs, the law does not require supplements to undergo pre-market approval for safety and effectiveness. The current United States regulatory system provides little assurance that commercial supplements have predictable pharmacological effects or that the product labels provide accurate information; and furthermore, the manufacturers of the supplements are not required to register with any government agency. This is of great concern to me, and I know to this committee. Surveys have shown that the use of complementary and alternative medicine in the United States has increased an amazing 380 percent between the years 1990 and 1997, and this trend will almost certainly continue as the baby boom generation draws closer to retirement age and seeks out new and different ways to maintain and improve their health and retain their youth. We need to know that the products our seniors and all of us are taking are safe and effective. I want to make it clear one more time that we are not here today to talk about the science of complementary and alternative medicine; rather, we are only looking at the bad apples in the supplement industry, those folks who market misleading and/or ineffective products. In an effort to convey the nature of and the methods used by the companies that mislead the elderly, this morning we are going to examine the operation of one of the largest companies that sells the so-called anti-aging and other dietary supplements. GB Data Systems, Inc. is the holding company for at least 10 businesses selling dietary supplements. A. Glen Braswell is the president and owner of GB Data Systems. Gero Vita International and Health Quest Publications, which publishes the Journal of Longevity, are both controlled by GB Data Systems. As I stated earlier, the Journal of Longevity that my wife and I received at our home in the mail is simply, in my opinion, an elaborate, misleading advertising tool that markets several of the Gero Vita International products. I had the cover of the one issue of the journal enlarged, and you can see it to my right. Again, it looks to me to be a medical journal such as the New England Journal of Medicine when it is received in your home. I actually asked my staff to order some of the Gero Vita International products for me. After two attempts, we have still not received them. I do have enlargements for some of the advertisements of some of these products. First of all, I have an ad for a product named ACF 223, that claims it is the healing breakthrough of the century. You can note from the cover that one of the assertions is, ``Live 26 percent longer.'' Maybe the doctors here can tell us whether this is true. One of the amazing things is the bottom section of it that talks about it can work for people with--and it names a whole series of very serious illnesses: arthritis; heart disease; high cholesterol; prostate problems; high blood pressure; and also can work for people with wrinkles and with pain, with low sex drive, memory loss and age spots. Next, I have a copy of the cover of the magazine that was actually sent to my home. Who would not want to be able to turn back the hands of time, as apparently this woman appears to have done on the cover? As I stated earlier, some of these ads, I think, simply try to scare people into buying the product. The next chart describes the aging process, as, ``being murdered from within, one cell at a time.'' It happens to also be for ACF223. The next poster describes a ``brown slime,'' developing on the brain neurons. The associated article in the magazine suggests that this brown slime is a precursor to Alzheimer's disease. My staff contacted the National Institute on Aging and were told by the National Institute on Aging that no such studies have ever, or are currently underway that support such a claim. The next poster, No. 6--is an ad for Prostata, and it suggests that if you do not take the Prostata supplement, you could end up in a hospital bed. Finally, we have posters of products that allegedly actually slow the aging process. Gero Vita, GH3, poster No. 7. The longevity caps is poster No. 8. The HGH activator, poster No. 9. Teston 6, poster number 10. I think the question before the committee and I think the question for many Americans are do these products actually do what these ads suggest that they do, or do they do anything at all, for that matter? I am hoping today's hearing can possibly give us some of the answers to these very important questions. We have invited several witnesses to testify. We will hear first from Mr. Mike O'Neil, who is the former chief financial officer of GB Data Systems, Inc. He can explain to us the inner-workings of the company and its marketing tactics. Will also hear from Mr. E. Vernon Glenn, who is a private-practice attorney, who will tell us about some of his clients' dealings with GB Data Systems, Inc. Our second panel, we will have Mr. A. Glen Braswell, who is president of GB Data Systems, Inc. and Gero Vita International, and Mr. Ron Tepper, who is editor of the Journal of Longevity. Both gentlemen are here with their attorneys in compliance with subpoenas issued by this committee. The General Accounting Office is here today to release the findings of a report that I requested several months ago. The report is entitled, ``Health Products for Seniors, Anti-Aging Products Pose Potential for Physical and Economic Harm.'' I am looking forward to hearing what GAO has to say. We have also invited some experts with extensive background in the areas of complementary and alternative medicine, and particularly dietary and nutritional supplements to testify as to the impact, both physically and financially, on our Nation's elderly citizens. We will also hear from Dr. Joyce Lashof of the University of California at Berkeley School of Public Health, Wellness Letter, along with Dr. Robert Baratz and Dr. Timothy Gorski. Finally, we have asked the government agencies that are tasked with monitoring dietary and nutritional supplements and protecting consumers from fraud to be here today to tell us about their efforts and their concerns in this area. We have a representative from the Food and Drug Administration, the Federal Trade Commission, the Federal Bureau of Investigation, and the Attorney General of the State of Maryland. Before we get to our witnesses, I would like to ask our colleagues if they have any comments they would like to make, and first we would like to recognize the ranking member of this Aging Committee, Senator Larry Craig. Senator Craig. STATEMENT OF SENATOR LARRY CRAIG Senator Craig. Well, thank you very much, Mr. Chairman. Mr. Chairman, first of all let me thank you and your staff for putting today's hearing together. I agree that it is important to not only raise the awareness of the potential of scams and products in the market that are simply not what they are led to be by their advertisements. That is our job and our role, especially when the consumer that is preyed upon may be the most vulnerable of our population. Clearly, we must enforce the law, remove the threat of dangerous products from the market and bring to justice criminals who prey on the frightened and the hopeless. I look forward to the hearing and to the government witnesses and their efforts in this area. But having said that, I will also say that it is important that we remain wary of calls for expensive regulation that may restrict an individual's freedom to make his or her own health decisions. It is a balance, and that balance should always be adhered to, and that is something that I think this committee has served well in its role over the last good number of years. So it is with that that I approach this hearing with great interest. I have seen the Journal of Longevity. I have thumbed through it on many occasions, and having been fairly aware of what good health and nutrition is all about, I think, oh, my, if it were only true, because in most instances the claims argued I believe to be, at best, not true. With that, let me turn this hearing back to you, Mr. Chairman, and I will be in and out intermittently. But I do want to attend some of it, and I thank you. The Chairman. Thank you, Senator Craig. Senator Wyden. STATEMENT OF SENATOR RON WYDEN Senator Wyden. Thank you, Mr. Chairman. I want to commend you for your leadership in putting together an extremely important hearing. This is an issue that I have followed very closely since the days when I was director of the Oregon Gray Panthers. I think it is very important now to take a fresh look at this issue and how it has changed. The fact is that those who prey on seniors constantly seem to be getting sleazier and more creative, and what has really changed in the last few years is that they now have at their disposal tremendous new technologies, and as a result of worldwide mobility, can essentially set up offshore overnight. One of the things that I want us to look at, and we have not looked at in the past, is international cooperation in this area, because it is very clear that some of these snake oil-- these information-age snake oil merchants will just look to set up very close to the United States and then figure out how to run a worldwide operations, and there have been problems with the postal laws and other laws in terms of trying to get these individuals who are preying on seniors and stop their conduct. I will tell you going into this discussion that I largely share Senator Craig's view that we do not need a whole lot of new laws and new programs. What we need is a way to make sure that the cops on the beat here in the United States and worldwide have the tools that they need, and we need to look at some new ways, for example, to try to draw some lines between what constitutes an authoritative medical article and what constitutes hype and essentially deception. I think that is why it has been so helpful that you have taken the committee through this exercise of looking at some of these articles that, clearly to those of us who focused on gerontology over the years, look over the line. But what is important about this and why we ought to be taking a comprehensive look at this is that the rip-off artists, who were once people who would sell stuff door-to- door, for example, like questionable roofing deals and maybe they focused in the health field, like selling Medigap policies that were not worth the paper they were written on, have now moved into the areas that this committee is looking at; claims that people will naturally been attracted to, because we have seen such a health revolution in biology and genetics, that people will be drawn to these kinds of programs unless they get the facts. That is what is so important about this hearing, is your helping to get the facts out. It is putting a hot light on some of these new and very significant ways in which older people, both in this country and around the world, are getting fleeced. I want to make it clear that I think this is just about the most important work this committee could be doing, and as usual I will look forward to working with you. The Chairman. Thank you, Senator Wyden. We want to welcome our first two witnesses, Mr. Mike O'Neil and Mr. Vernon Glenn, for their testimony. Because of the sensitive nature of the testimony and the subject matter that we are dealing with today, we are going to be asking all of our witnesses to please be sworn in and promise to tell the truth. I would just note to all the members that they should be aware that under Title 18, Section 1621 of the U.S. Code, that lying before Congress is certainly subject to being prosecuted by law, and I think that we understand that. So I would ask the witnesses to please stand and raise your right hand. Do you promise that the testimony you are about to give will be the truth, the whole truth, and nothing but the truth, so help you, God? Mr. O'Neil. I do. Mr. Glenn. I do. The Chairman. Please be seated, and we will be happy to receive the testimony first of Mr. Mike O'Neil. STATEMENT OF MIKE O'NEIL, FORMER CHIEF FINANCIAL OFFICER, GB DATA SYSTEMS, O'NEALS, CA Mr. O'Neil. Good morning. I would like to begin by giving you some personal background. The Chairman. Get that mike, Mr. O'Neil. Get it a little bit closer to you, so we can all pick it up. Mr. O'Neil. Is that better? OK. Let me begin by giving you some personal background so you will have some perspective on how it is I happen to be appearing before you today. My education and working career has always been the financial arena. I spent 20 years in both commercial banking and worked for companies, but my primary focus has been on financial reporting and analysis. I have lived in California since 1983, but consider myself to have New England roots. I am married to a doctor, have two children. As a rule, my career and life have been based in logic and fact. On the surface, this may make me appear to be a poor candidate to discuss advertising practices of any company. However, in my capacity as the chief financial officer for the Glen Braswell Company, I attended and had input in most meetings of senior staff; included in these were weekly advertising discussions of content, scheduling, production, along with senior management meetings to discuss product development and company direction. A description of the associated companies of Glen Braswell, GB Data, et cetera, would list some 13 companies that are primarily involved in the sales and distribution of what have become known as nutriceuticals. Combined, these companies have annual revenues of approximately $200 million. The targeted age market for these products is 45-to 60-plus-year-olds. As the CFO from August 1998 to January 1999, I was effectively third in command at the company, behind the chief operating officer and Glen Braswell. With the knowledge gained from that position, I have been asked to come before you to discuss the focus and intent of the company's advertising practices and why they should demand any attention at all from this committee. If the name Glen Braswell sounds somewhat familiar to you, it should. Mr. Braswell was the subject of a lot of attention back in January and February of this past year as a result of a last-minute Presidential pardon, which was arranged through the former First Lady's brother and which the press referred to as a pardon-for-money scandal. At the time, Glen Braswell was reported in the press to be, ``a convicted felon who was under investigation by the Internal Revenue Service for a massive offshore tax evasion scheme.'' Because of the pardon, he no longer has a felony conviction on his record. However, I can tell you that the IRS investigation is ongoing. As you might imagine, as the former CFO, I am involved in that investigation. As such, I have been asked and request from you that we do not place the ongoing investigation in harm's way by discussing it in this hearing. The Braswell companies operate as direct-mail marketing companies; that is, they sell directly to the consumer without going through retail outlets. This is accomplished by sending marketing information to consumers through the mail. Consumer names and addresses are bought and sold by the millions via brokers who categorize names according to whatever demographic requirements are required. Gero Vita, Life Force, Theraceuticals and other Braswell companies rent these lists and mail four-to 16-page solicitations to people on the list, touting the benefits of nutritional supplements. Again, the target market is 40-to 60-year-olds--I'm sorry, 65-year-olds--who have good credit and have been willing to buy through the mail. These practices, in one form or another, are virtually identical to all direct mail businesses in the industry. What makes the Braswell companies unique to a handful of marketers is the predatory nature of the advertising message. The primary vehicle for the sale of products is a 50-page advertisement that has been referred to here and noted as the Journal of Longevity, published monthly. The magazine claims to be a journal of medical research reviews in the preventive medicine fields. The fact is that it is neither a journal, nor does it present any reviews of any preventative medicine. Every word in the magazine is composed by Braswell staff, and furthermore every word is designed to do one thing, sell Braswell products. The magazine is presented in such a manner so as to suggest that it is a legitimate medical journal with articles written by various medical professionals. In the articles, they described a variety of medical situations that are painful, debilitating or life-threatening. These articles run three to four pages with medical detail and facts. In these articles, they describe various nontraditional herbal supplements that can solve these medical situations and restore health to whatever you apparently are bothered by. Then, as luck would have it, there is an ad in the journal for nutritional supplements sold by a seemingly unrelated company that contains the ingredients just described in the previous article, and an 800-number where you can order that product. It is a nice, clean process, except that nowhere in the journal does it tell anyone that this is an advertisement. Further, the articles are not written by medical professionals, but rather by Braswell staff. They are reviewed by medical professionals, but written in-house. Finally, the ads contain outright false statements. The ads and articles routinely toss phrases around such as, ``Thousands of doctors have praised,'' whatever product, and, ``Millions of men use whatever product,'' which is blatantly false. One product claims to improve memory, sex drive, and reduces the chance of a heart attack by 83 percent. The article routinely described medical problems as life- threatening, potentially deadly, causing severe illness or death. They are described to scare or threaten the reader into purchasing the antidote, or at least try the product for $29.95. The products sold by the Braswell companies are rotated through the journals, with new product names and articles concocted as necessary; that is, if a product does not do well, it is renewed and given life in treating some other malady. New products were introduced at marketing meetings, with Mr. Braswell retaining the right to override any conclusions from any meetings. On more than one occasion, products were deemed to be ineffective and ads too outspoken or provocative for publication in marketing meetings, only to be overwritten by Mr. Braswell, many times to the disbelief of the staff involved. What makes this inappropriate is the nature of the articles and the advertisement. What makes the activity inexcusable is it takes advantage of people with legitimate medical needs who are susceptible to a message of miracle remedies and cures. What needs to be considered here, in my opinion, is not what the person who is in pain is thinking when they read the ads, because they want to believe--they almost need to believe what is in the story. But, rather what needs to be considered is what the person writing the ad knows to be true, and to the extent that there is a difference, there is fraud. I cannot say that all the products do not work or the people who take them do not feel better. I am not a doctor, I am not a research scientist, and I have no basis to have an opinion on that portion of the product. What I am saying is that the process that is used to recruit customers is flawed, laden with lies and deception, and that the product could not possibly deliver what is promised in the advertising. I am not the first person to come to this conclusion. A Washington Post story of the companies quote the editors of Consumer Reports as saying in 1988, ``We see a lot of misleading marketing, but what spews out of Gero Vita Industry rivals the worst.'' ``Consumer Reports,'' continues the Post, ``characterize the company's literature as masquerading as science.'' The booklets cite actual studies, but twist the findings to support the company's own unsubstantiated claims. In South Carolina, three sports figures, Richard Petty, Stan Musial, and Len Dawson, filed suit in Federal court against Braswell and Gero Vita for misusing their names in advertisements for Prostata, a claimed prostate cancer-preventing supplement. The lawsuits, filed in 1997 by Mr. Glenn here and Gedmiem Howe III involved a series of advertisements that identify the three sports figures among a group of men who, ``waited too long and are suffering from prostate problems.'' Finally if you look at the company itself, there is an underlying commitment to deception. All the advertisements by the company contain a return in Canada, thus suggesting the company is either located or headquartered in Canada. I recently placed a call to customer service at the company that I used to work for and was told that the company chiefs were in Canada, but that she was in Maryland. Braswell companies have no employees of an executive or any other kind in Canada, but have what amounts to a Mailboxes, Etc. address in Toronto. The reason is simple: The United States Postal Service cannot easily interrupt mail going outside the company--outside the country, I am sorry. If you look at the Journal of Longevity, the return address is Reno, NV. There are no employees in Reno. These are two of the list of attempts to confuse both the general public and the government agencies. When I was there, and I do not believe things have changed, Braswell companies had employees in Marina Del Ray, CA, a shipping warehouse in Las Vegas, NV. The reasons the companies wish to have the appearance of foreign ownership and ghost locations is to create a delay for any individual or government agency seeking to locate the company. To the best of my knowledge, all of these employees are legal if you pay the appropriate taxes and file appropriate documentation. However, the elaborate tactical maneuvering of the company suggests it is aware of its own deception and has taken preventive measures to delay and confuse what it must have known would be eventual government investigation. One of the reasons I was brought to the company was to help clean up the company for potential sale. Financial reporting and operational procedures were improving, but still compartmentalized and fragmented. During my time with the company, we had discussions with a number of buyers, and every one of them had concerns with Braswell advertising practices. While the potential buyers did not like his style, they wanted to know the financial effects of reducing the fabrications in advertising practices, clearly realizing the two are interdependent. When I came to work for the company, Mr. Braswell had been described to me as an advertising genius who had the ability to build a company to $200 million in annual revenues. As I came to know the insides of the companies, a different story became very clear. He is not an advertising genius. He is simply willing to advertisements outside conventional industrial boundaries. To me, this is not a genius. It is a liar. In my position as a chief financial officer, I was able to obtain answers to questions on advertising and work with the chief operating officer, Mr. Ted Ponich, to determine the hows and whys of the company's operating principles and practices. When he was hired in 1996 and I was hired in August 1998, we were advertised by senior outside consultants that the company wanted to improve its image and to convert from a clandestine operation to a traditional company. By November 1998, it was clear there was no desire to improve the company, but rather the desire to appear to be making changes at the company by hiring persons such as Ted and myself and other department heads with traditional business backgrounds, while Mr. Braswell and senior advisors continued to manipulate the advertising and financial performance of the company. The goal was to sell the company to an unsuspecting investor or competitor. Just after Thanksgiving of that year, Mr. Ponich and I met, where he informed me he was convinced Mr. Braswell recognized he could not change the company without senior staff, and he intended to use this leverage to approach him with his concerns as to the direction of the company. Things did not go the way Ted had planned. The meeting ended with Mr. Braswell telling Mr. Ponich he wanted the company to go back to the old way of doing business. Mr. Ponich was a man of great integrity, and he told Mr. Braswell either the company gets cleaned up or I will personally turn you into every government authority I can find. In January 1999, four department heads, including Mr. Ponich and I, were terminated for the stated reason that the company was going in a different direction. True to his word, shortly after we were terminated, Mr. Ponich met with myself to discuss going to the appropriate governmental agencies. While part of me just wanted to get on with my life, two things occurred which would not let me. No. 1, I would not let my friend take this process on by himself. More importantly and fundamentally, people should not be allowed to get away with what was going on. We had been insiders. We knew the strategy. We knew the practices of the company. We knew its professional advisors and could best ensure that the efforts of the various agencies were beneficial and productive, and, in fact, contacted the IRS, Federal Trade Commission, State Franchise Tax Boards, the Post Office, Food and Drug Administration, various other government agencies, including the offices of the two Senators from California. We expected retaliation from Mr. Braswell. We were not disappointed. I was sued for a number of issues, as was Mr. Ponich. The suit against me was ultimately withdrawn. Ponich's suit has been pending the outcome of a continuing IRS investigation against the company. However, I am certain that it is fraudulent and it will be settled in his favor at the appropriate time. The lawsuits were a not-so-thinly veiled message of power and money by the Braswell companies against those who would dare to help us. Suits were no surprise to us, as it was consistent with the Braswell strategy of overwhelming any opponent with expensive and extensive litigation brought by very reputable law firms. Besides the expensive defense, the strategy is to ruin the reputation and credibility of individuals and to ensure that it is near-impossible for them to be employable in the future. As you may imagine, working in the financial field and having been sued by your last employer for financial transgressions is not helpful to a career. Mr. Ponich was tragically killed in an automobile accident last October. I will tell you I gave up his cause of trying to expose the Braswell companies, and the companies continue to publish the Journal of Longevity, mail out weekly advertisements to millions, and continue to thrive. However, at the beginning of this year, after the Presidential pardon debacle, people began to notice the Braswell companies again. I read a number of articles on Braswell companies by leading newspapers and periodicals which describe Braswell as scam artists, convicted felons, supplement fraudster, huckster, swindler, con artist, and as a man convicted of mail fraud and perjury. Even with all of this notoriety, the company still continued to be allowed to go on. The fundamental reason I am here today is to discuss why a company headed by a man as described above can remain in business and continue to prey on the elderly and infirm. We all know there are Federal and State agencies designed to protect the public from these activities and there are a suitcase-full of laws already in place to make sure that what I have just described does not occur. In my opinion, we do not need any laws or agencies in addition to what we already have. What we do need is to have the laws already in place enforced, and the agencies charged with monitoring these types of companies do their job. The challenge is Mr. Braswell's senior advisers are not going to make it easy for anyone or any agency to impact their ongoing business. I have had many discussions with Mr. Braswell. The thing he fears most of all is going back to jail. He has a substantial amount of money and he will use it. The first thing he will do is out-lawyer whomever he goes against, even if that is the government. His current legal team is a Who's Who of the law profession. They have a client list which starts at the former President and Vice President and moves to major companies and influential people. His financial and technical advisers are the best money can buy. They know the law and they know what is massage able within the law. The second thing you face when dealing with companies such as these are both simple and yet difficult to overcome. They play fast and very loose with the truth. The company has elevated deception to an art form. He already knows the advertising and return policies within the company are fraudulent. Why should we believe that they are all of a sudden honest when it comes to dealing with government investigators or, for that matter, anyone who is a perceived threat to the ongoing operation? The United States Postal Service, which was responsible for shutting down the 1983 Braswell operation by stopping its mail, cannot easily interrupt mail destined to Canada. So they go get a Canadian address. The FDA, after reviewing some of Gero Vita and other Braswell products, issued an import alert for product coming from Canada. The agency believes it did its job. However, the fact is there is product coming from Canada because the company is headquartered in Marina Del Rye, CA. The products are encapsulated at various labs on the West Coast and product is shipped from a company warehouse in Las Vegas. The company maintains its primary banking relationships--the Royal Bank of Canada. All funds are wired there on a daily basis. While the money in Canada is not beyond the reach of U.S. officials, it will delay by 2 or 3 days any seizing process and allow the company to move funds offshore. Over the past 2 years, almost all of the agencies that were contacted by us have come back to say that their initial investigation revealed the Braswell companies to be foreign- based, beyond their jurisdiction, even after we advised them of who Mr. Ponich and I were and what we knew, the best we would receive was a promise from a few agencies to look into the matter. For the record, over half-a-dozen calls to each of our State's Senators yielded zero response. The Braswell strategy has been effective, and to stop the predatory nature of the advertising and fraud, in my opinion, you have to defeat the strategy. In a nutshell, this strategy is simple--first, remain anonymous. No one knows who you are or where you are--compartmentalize the company so even employees do not know exactly what goes on. Contract out much of the company's activities. Stay off government radar screens and stay out of the limelight. Mr. Braswell believes that government agencies love to go after big fish. A legitimate concern of Braswell is that his company was getting too big, one of the reasons for sale is that it would begin to attract attention. The second strategy is to hire the best attorneys and accountants that are available, feed them a tale of misery, accented with deception. These people know the government, they know the people within the government and they know the attending weaknesses within any agency. The reputations and credentials of the professionals representing Mr. Braswell are known and respected by most agencies and various government attorneys. This is intimidation, but it works. Third, delay the process; provide no information or overwhelm an agency with useless information; ask for extensions; plead ignorance; mistakes of intent. Most agencies are very forgiving. Use the bureaucratic nature of government investigating agencies against them; that is, most bureaucrats do not want to draw attention to themselves or other agencies by investing government resources in a losing effort. These people who work for government agencies do not want attention any more than Mr. Braswell does, but for different reasons. If they know that going against Mr. Braswell will be long, expensive and may yield nothing, they are inclined to look for a reason to avoid confrontation. Last, strategic settlement; if there is a chance that the loss is unavoidable, settle the issue, seal the results, maintain your anonymity. That is the basis of the company and provides the freedom from which they operate. The company, policies and procedures that I have just described exist. It is real, operates in California, but how do you know that? This committee has the opportunity to view what I have just told you as either the truth or the ramblings of a disgruntled former employee. I would suggest to you that there are consequences to either avenue. If you ignore me, you take the chance I was telling the truth and that the company preys on the elderly and people who are infirm and in need of hope. These people need a collective voice, and this committee can be that voice. If you take me at my word, you are going to be taking on a man who has money, therefore can buy power and influence, both of which are the non-negotiable currency of many governmental endeavors. Let's not forget, he just received a Presidential pardon. Ultimately, if we are successful in changing or eliminating Gero Vita, GB Data and the Braswell companies, another will step up and fill the void, as long as there are people in pain and getting older, when older brings pain and illness, there will be people who believe that there is an herb in India or a plant in China that holds the secret to pain-free existence that our government does not want them to know about it. The fact is most Chinese and Indians do not live near as long as Americans, but packaged and presented in the proper format, there are millions of people, perhaps tens of millions in this country, that are willing to ignore this fact and buy into the fraud sponsored by companies such as Gero Vita, Theraceutical, and other Braswell-type companies and enrich the owners in the process. The job of this government and this committee, as I see it, is to simply make sure there is a level playing field, that citizens have all the information they need to make an informed decision, and the information is founded in fact. Fraud and deceit, wherever it exists, unlevels the playing field and clouds the facts. Thank you. [The prepared statement of Mr. O'Neil follows:] [GRAPHIC] [TIFF OMITTED] T6011.001 [GRAPHIC] [TIFF OMITTED] T6011.002 [GRAPHIC] [TIFF OMITTED] T6011.003 [GRAPHIC] [TIFF OMITTED] T6011.004 [GRAPHIC] [TIFF OMITTED] T6011.005 [GRAPHIC] [TIFF OMITTED] T6011.006 [GRAPHIC] [TIFF OMITTED] T6011.007 [GRAPHIC] [TIFF OMITTED] T6011.008 The Chairman. Well, Mr. O'Neil, thank you very, very much for a very detailed and very elaborate tale. I think the information that you provided in your testimony is extremely important to this committee. We thank you for being with us. I know it has not been particularly easy for you to do so. We will next hear from Mr. Vernon Glenn, who is an attorney from Mt. Pleasant, SC. Mr. Glenn, we welcome you to the Aging Committee. STATEMENT OF E. VERNON R. GLENN, ESQ., LAW OFFICES OF E. VERNON F. GLENN, MT. PLEASANT, SC Mr. Glenn. Thank you, Senator Breaux. I appreciate the committee's invitation to testify and I hope what I have to say is helpful. My biography has already been provided to the committee. I am a trial lawyer and I live across the river from Charleston, SC. I would be remiss if I did not extend the salutations and good greetings from Mrs. Virginia Kyle Hine and Mr. Edwin Kyle. Ms. Hine's son, Johnny, is my best friend from college, and they sent their best to Senator Breaux. I was taught as a child that if it quacks like a duck, walks like a duck, waddles like a duck and has white feathers like a duck and has got an orange bill like a duck, then in all likelihood it is a duck. I am here to tell you now that what Mr. O'Neil has told you is not only a story of some significant tragedy for our seniors in this country, but it is a duck. This fellow, Braswell, whose deposition I took this time last year down in Miami, I would submit to this committee is a recidivist of the highest and most chronic nature. Let us not forget that Mr. Braswell was sent to jail, to Federal prison, by Federal Judge Marvin Shoob back in the early 1980's. Now, why was he sent to prison? Let us review: Mr. Braswell was sent to prison for lying about breast-enhancing and hair-growth products, and false marketing, and lying before a grand jury, and income tax fraud. All of it was related to his marketing. I have with me an excerpt from the Atlanta Journal Constitution, 1983: ``Glen Braswell, once a reputed multimillionaire who lived in an Atlanta mansion and ruled a mail-order empire was sentenced to prison Monday in Federal court here. 'He can't even pay his phone bill now, they say,' said Assistant U.S. Attorney Robert Stubbs, who handled the Braswell prosecution. The picture painted in court testimony was that Braswell has little left to show for his years of business and will be lucky to keep one of the three homes that he owned in better days. He received a 3-year sentence for filing false tax returns and a perjury conviction, and when he is released he has 5 years on probation, and he is also to have Federal alcohol and drug rehabilitation while he is in the Federal pen in Kentucky.'' Ladies and gentleman, I am here to tell you the more things change, the more they stay the same, and we are now at another moment of critical mass. Mr. Braswell is absolutely making money hand-over-fist on the backs of aging and scared and fearful Americans. There are two ways to stop this, I would submit, and I bet somebody else up there has got another idea, but my two ways are this: One, we have got to educate our seniors, and that seems to be an ongoing process, because hope and hopefulness always triumphs education. It just does. We want to believe. I am 51 now. I have gotten very creaky, and old, and grumpy about it, and I would love it if somebody would give me something to make me feel better every morning. Having said that, I also am old enough and experienced enough and educated enough to understand that there is no magic cure in a bottle. I wish that there was, but there is not. So the ongoing educational process, a little bit, is not going to be that effective. The other part of it is somebody has got to start swinging a great big bat at these people. I know about Braswell because I represented a bunch of people that ended up--and we ended up suing him, and we sued him in a very unlikely place. We sued him in Federal court in South Carolina, and Mr. Braswell did not want to come down to the low country of South Carolina and sit and face a jury of his peers. Mr. O'Neil and I were chatting earlier and he told us we were just a flea on a dog's back. They paid us some money--we are not allowed to disclose how much and it was a goodly sum, but I am not going to tell you how much--but it did not mean anything to Glen Braswell, and his insurance company paid some of it and Mr. Braswell paid some of it. Isn't that about right? And Mr. Braswell went on, and that is the reason, when I sent my remarks up to this committee, ``Sin in haste and repent at leisure.'' That is something my mother always said to me and I now say it to my children. Mr. Braswell has a great time sinning and it takes him a long time to repent, and until you all get your big stick out and all these nice law-enforcement agencies sitting back here, Mr. Braswell is going to continue to get a free pass. He wants to sell these companies, ladies and gentlemen. He has got a passport. He is going to leave the building. He is going to come in here with a phalanx of lawyers. He is going to leave with a phalanx of lawyers, and we will all throw our hands up in the air. I submit we can do better than that. John Cheever, one of the great American authors, once said that, ``America is a Nation haunted by a dream of excellence.'' I always loved that. He said that at the Bicentennial. Walter Cronkite interviewed him. What he was saying was we are always stumbling and staggering and trying to figure out what is the right thing to do, and we mess it up all the time and we get it wrong a lot, but we keep trying. So our plea to this committee is please keep trying, please let's sort of put on our armor now. Let's tell the big-dog, white-collar law firms no, no more, we are not going to let you stand in the way here. We are going to do our job for our senior citizens and for our people who are sick and scared. It is the right thing to do. Last, I would draw your attention to three quick things, and then I will be quiet. My children would look at me when I say that and say, ``Daddy is lying again,'' so I want to make full disclosure. There is a poster over here that we pulled up off the Gero Vita web site, and I would commend this to you. I know the Braswell people will love it because it is free advertising. You know that old thing, ``I don't care what you say about me, as long as you get my name right.'' But it is www.gvi.com. You can go there and I mean you can buy it all, and I wish you would look at the bottom. This is the Prostata. This was the company, the product that GVI sells, that we got into these lawsuits with, with Jim Ferree and these other sports celebrities. They have a disclaimer on the bottom, and I want to read it to you real quickly: ``Gero Vita products are dietary supplements--that is it--and as such are not intended to treat, cure or prevent any disease. Those seeking treatment for specific disease should consult a physician or other qualified health care professional prior to take a Gero Vita product or any dietary supplement.'' The message is: Buy our stuff, but before you put it in your mouth, go on and see your doctor. Well, your doctor is going to tell you that it is not worth a tinker's damn, none of it is. It is junk. It is all junk. I consulted with one of the finest gerontologists in the country, Dr. Walter Ettinger, then of Wake Forest University Medical School. Walter Ettinger knows more about dealing with the aging issues with elderly Americans than just about anybody I know. Walter Ettinger said this stuff is not medically efficacious. My time is up. I have one last comment. In the web site they have a special section, and I do not mean for this to be salacious. This is sad. Sexual enhancers, they sell--they list 10 of them, with such fascinating names as Sexativa Plus, Teston cream and Intamax. I conclude my formal comments to this committee by giving you a brief description of the so-called claimed medical efficacy of Teston cream and Intamax, which they sell, by the way, in a combo-pack. Teston cream--now, you all tell me if the Federal Trade Commission does not believe this is false advertising: ``Teston cream is a hormonal supplement,'' which, by the way, nobody knows how much hormone is in it or if any is in it because it is not vetted by anybody. It is only distributed by GB Data Systems through their operations in Canada, Reno, and all parts of the globe. But what you do with Teston cream--and this is fabulous-- you rub it on your clean, dry abdomen, and then your sex life is going to take off. Now, I am going to tell you now if I can rub some cream on my clean, dry abdomen--I guess if you had a sweaty or dirty abdomen, you are out of business. The other part of it is the Intamax. Now, this is even better. Here is the double-barrel. If you get both--if you can get both, first, I guess, you put the Teston cream on your clean, dry abdomen, but then you spray Intamax with its six prosexual nutrients into your mouth. I do not know when you do this, because they are not telling us, but I am sure that would really kind of lighten the mood. ``Can elevate your sexual vigor to new heights of passionate lovemaking.'' Folks, this is garbage. This is junk. These people walking in here today, they can dress it up any way they want, but the truth of the matter is this is real wrong, and you all--and you all have the power to put the brakes on these people. I have always felt that during the course of my life, that from time to time things achieve a critical mass, things evolve. They kind of come to a point where things are going to happen. Well, golly, the country is getting older. I am getting older. We are all getting older, and these people are out there just preying on us. Stop them. Thank you. [The prepared statement of Mr. Glenn follows:] [GRAPHIC] [TIFF OMITTED] T6011.009 [GRAPHIC] [TIFF OMITTED] T6011.010 [GRAPHIC] [TIFF OMITTED] T6011.011 [GRAPHIC] [TIFF OMITTED] T6011.012 [GRAPHIC] [TIFF OMITTED] T6011.013 [GRAPHIC] [TIFF OMITTED] T6011.014 The Chairman. Mr. Glenn, thank you very much, and Mr. O'Neil, thank you very much. A couple of questions, Mr. Glenn has just indicated, in his opinion, that the products are garbage and junk. But, Mr. O'Neil, can you give us an idea of how much the company was making selling the products that Mr. Glenn just described as garbage and junk? Mr. O'Neil. Sure. The company has a profit--pure profit percentage of between 18 and 20 percent. As he so effectively described the product, which I would not even try to do again, they sell typically for $29.95. Of that $29.95, the majority of the expense going into that $29.95 is advertising. The product itself is probably bottled and put in a box for $4, $5 dollars. So advertising is clearly the No. 1 expense of the company. The Chairman. Do you have any idea what the gross revenues were? Mr. O'Neil. I have no idea what it was for the last couple of years, but I know they were on target for $200-plus million. The Chairman. I am sorry. How much? Mr. O'Neil. They were on target for $200-plus million when I left the company. The Chairman. $200-plus million? Was that--over what period of time? Mr. O'Neil. A year. The Chairman. A year? Mr. O'Neil. Yes. Mr. Glenn. Let me put it in further perspective. When Mr. Braswell went to prison in 1983, 1984, he was broke. So in about 17 years, he has gotten way past back to even. They advertised last year, after Mr. O'Neil and Mr. Ponich and the others were summarily kicked out the door for trying to tell the truth, they advertised in a number of trade journals that they wanted a director of marketing for a $250 million-a-year gross sales company. We know that in the cases that we were involved in, that they mailed out almost 12 million brochures, and these are expensive brochures. They used one of the biggest and finest printing outfits in the world, Quebecor, Magog out of Canada, and they mailed out about 12 million of these glossy, slick brochures. They were just four-fold, but they made about $7, $8 million in sales off those brochures. They track by zipcode a personal note--and I have seen the document. Mr. Braswell owns all this stuff lock, stock and barrel. If there is any minority ownership, it is very, very minority. Just to put it in perspective, this was a man who was broke 17, 16 years ago, when he got out of prison. He just settled with one of his wives for $42 million, and he is paying her. That is a lot of cash. The Chairman. Mr. O'Neil, we got one of the copies of the Journal of Longevity at my house. How did I get on the mailing list? Mr. O'Neil. Mailing lists are an industry unto themselves. There are brokers out there who, if you buy something, you order something, ask for information on something, any time you give your name and address out somebody is capturing it. It is a very elaborate industry, because obviously you do not want to pay for names that are already your customers. But essentially somebody in your family made a request, ordered something, got a Visa card, got a TRW report. There are 1,000 different ways of getting on a list, and these lists are traded, these lists are sold. They are rented--essentially, you rent them for four cents a name or thereabout. The Chairman. Was there a conscious effort to get names of people who are seniors? Mr. O'Neil. Absolutely. As Mr. Glenn pointed out, you want to sell your product to the target market, and the more you can refine that, the advertising is very expensive. If you look at the quality of the advertising, not what is contained within the issue, but just at the quality of the journal itself, the reason it looks like, as you referred to, the American Journal of Medicine or the New England Journal of Medicine is because it is equally well-prepared, probably better prepared, if you truly wanted to go into the details of it. It is very well done, it looks legitimate, and that is very expensive to do. So you do not wish to put that advertising piece, as it truly should be referred to, in the hands of a 20-year-old who would not know their prostate if they had to. The Chairman. Do you have any information or knowledge as to how--I was impressed with the pictures of the doctors and all their little initials behind their names, M.D.s, Ph.D.s, et al., behind each one of their pictures and their names. I am just wondering, do you have any idea of how the company got doctors to associate with the articles and did, in fact, the doctors write the articles, to your information? Mr. O'Neil. The articles were written at the Journal of Longevity, which are--the offices of the Journal of Longevity, the offices of GB Data, the offices of Gero Vita, are all on one floor, in one building, literately across from each other. So to presume that there is a distance between them would be an overexagerration. What happens with the doctors--and as you know, I am not a doctor--but there are many doctors that believe that this stuff is valuable to you, as some would say it is not valuable to you. So they seek out doctors who are willing to have their names associated, they write the article, they ship it to the doctor for their review. The Chairman. Who would write the article? Mr. O'Neil. Writers. If you flip to the front of that book, you will see a bunch of budget writers. The people will write the article, do the research--and they include a bibliography in there, and the research is from wherever--and then ship the article off to the doctor to be reviewed for--you know, to see if they were wiling to come on board with it. There is a list of doctors, and from within the company, I can tell you that there are certain doctors that you can ship whatever to and they will sign off on it, and other doctors are more critical. The Chairman. My final question--thank you. Was there any discussion at any time as to whether the word ``advertisement'' should appear in this journal at any time, and if so, what was the conclusion? Mr. O'Neil. That would defeat the purpose, simply put. That is a short answer to a long question, but that would defeat the purpose. The purpose in not to have that considered as an advertisement. The purpose in presenting that whole process--if you look through that journal, there is virtually no other product, other than the Braswell products, advertised in there, and yet it presents itself to be a journal, and if you read under the title, of medical review. So to call that an advertisement is to put a stake in the heart of it. The Chairman. Thank you both, gentlemen, very much. Senator Wyden Senator Wyden. Thank you, Mr. Chairman. Mr. O'Neil, a special thanks to you. It takes tremendous guts to do what you are doing, and not just walking through that door and talking casually. There is real exposure for somebody like yourself who does this, and I appreciate it. I think you heard me say that what I think really has changed over the years, in terms of how you fleece seniors, is that you use these new technologies, No. 1, and with modern transportation you have got worldwide mobility, and I think what you have documented in your testimony, particularly at the top of page four, is especially troubling, in terms of the relationship between California and Las Vegas and Canada. I want to ask you just a couple of questions about that. You mentioned that the company's money is sent to Canada so that if anybody goes after it, there is a delay so it can be transferred again quickly. Do you have a sense of where the money ultimately ends up? Mr. O'Neil. Yes, I do. I imagine you will probably want me to elaborate on that. As one might imagine, this is a $200-plus million operation and there are expenses that need to be paid. The money is collected either through credit card receipts or through the actual through-the-mail receipts, and starts in the Royal Bank of Canada. From there, it goes to--or at least it formerly went to, when I was there--Bermuda, to accounts controlled by Mr. Braswell directly, and then from then on I have my suspicions, but I cannot quote exactly where it goes. But it does not end up back here, and the purpose behind that is very simple. In 1983, it was the United States Post Office that shut him down simply by interrupting his stream of cash. If you take the mail, you take the receipts. Now, credit cards were not as prevalent back then, but you interrupt his mail, you interrupt his receipts, you interrupt his cash-flow. Senator Wyden. Does the money move through multiple jurisdictions overseas, in your opinion? Mr. O'Neil. Define multiple jurisdictions. Senator Wyden. I am trying to be helpful to you. As I say, I think what you are doing is extraordinarily gutsy, and I obviously want you to tell me where it is going to end up, but I realize this is a very sensitive point. As I say, this is a field I have worked in for 20 years now, since I was director of the Gray Panthers, and I think there is clearly a new approach that allows this money to be moved literately all over the globe virtually overnight, and I want, consistent with what you feel comfortable saying, for you to tell me a little more about that. Mr. O'Neil. Sure. The money flows, as you said, quickly. The money flows effortlessly, as simply as wire transfers and the money is in California this morning, this afternoon it is in Canada, and tomorrow morning it is wherever it needs to be. As to whether it takes guts to come up here and say something, I would just like to say one thing on that, and that is that my friend, Ted Ponich, who passed away, made a promise to this man of what he was going to do if he did not clean up his act. I am just fulfilling a promise. I am not--this is not--trust me, I got other places I would rather be. Senator Wyden. I got that drift. Mr. O'Neil. I am not the best person to do this. He was a gregarious person that would be better served here, but he said what he was going to do. I agreed with it, so I am here. So whatever you want to know, less what is going on with the IRS, I am more than willing to tell you. Senator Wyden. You also mentioned that you had gone to several agencies to ask them to work with you on this. Can you tell us a little bit more about how you were treated by those agencies? Mr. O'Neil. Are you sure you want to know? Yeah, all right. Not well--courteously, but not well. There is a sense among the agencies of do you really want to take on this man? Do you really want to face the lawyers that you are going to be facing in a couple of seconds and go head-to-head with them, and potentially lose? When you go to the FTC or you go to the FDA, there is no Mr. FDA or Mr. FTC. It is not one person. You are talking to a person who works for the agency--I am sure very well-intentioned--but they work for an agency. They do not represent the agency. They do not have ownership in the agency. They want to make their job appear as easy as possible. Included in that was our two Senators from California, and they were very courteous--I mean, their staff. You do not talk to them, naturally. But the staffs of every agency we went to were very courteous. Some did some investigations and came back and said Canadian company. And we flat told them--Mr. Ponich was with me at the time, ``Look, you are looking at the chief financial officer and the chief operating officer of the company. We know they are in Marina Del Ray. We know there are no--'' And then they would say, ``Well, let us look into it further,'' and it just rolls on down the road. So it was a frustrating experience at best, and functionally, as I said, I gave it up. It just was not--it was not worthy my time to just be told there is nothing here or there is nothing worth it, in the agency, to go after him, or there is nothing we can latch our hands on to, or there is some agency and we are going to subordinate our investigation to the IRS and wait till it--and they do not have to be--they can mutually exclusive, I guess is what I am saying. Senator Wyden. If you could get to me the names of the people in some of these agencies that you met with, I would very much like to go over that with them, and I share your view. I do not think they get up in the morning and say, ``Look, I want to let some people off the book.'' I think that clearly these are issues that take a whole lot of effort and whole lot of commitment, and my sense is sometimes that is not forthcoming, and I want to follow this up. Mr. O'Neil. Senator Wyden, you are right. Essentially, there is an investment that they have to make in their own credibility, their own time, and agency resources, and I am sure they kind of do a return on investment at their own level, and say, ``This is what we are going to go up against,'' and frankly there are not five people in this room that could tell where O'Neals, CA really is. I am one man from O'Neals, CA. Who am I going to talk to? Who am I? Senator Wyden. That really leads to the last question I want to ask for you, Mr. Glenn, because your testimony was very good, and I obviously share your concerns. The point about the agencies and the investment goes right to the heart of what you need to do in this area. I am not convinced, for example, you need to bring hundreds and hundreds of cases. What you need to do is send a very strong message in instances where it is clear that the conduct is over the line, because if you send a really strong message, that has real deterrence value, and then all of a sudden those who prey on seniors are going to have to be a little more cautious. That goes to the point that you made with respect to swinging the bat and swinging the bat hard, which is again something I have been very committed to in my years, working with older people. What is being missed as of now when people swing the bat? Let's say you are at the plate, you hold the election certificate, you sit where Chairman Breaux is and a couple of other members of U.S. Senate, and so you have got an opportunity now to make sure that when the bat is swung, you are not just flailing around out there, but you are really swinging it so has to have the maximum effect when you really need to send a deterrent, which is what I was trying to elicit from Mr. O'Neil. So tell us, if you would, how you swing that bat. Mr. Glenn. I would have a real brief meeting with the following people in attendance, and I would ask them for their full and total corporation. I would invite the head of the Federal Trade Commission, the head of the Food and Drug Administration, the United States Postal Inspector, the Canadian ambassador, the Ambassador from the Grand Cayman Islands, where one of the big offshore holding companies is DeLeon Holdings, I believe it is. I am saying it, he ain't. And I would also have the U.S. Attorney from California, who is in charge of the ongoing, pending criminal tax fraud investigation. I would say, ``Gentlemen, ladies, we are going to get on the same page, we are going to get on the same page now, and in 10 days I want you back in my office telling me exactly what we are going to do, and we are going to shut this scam artist down and we are going to shut down now,'' And I believe that is probably already in the works. This is part of my critical mass theory. But I think that is the easiest way. You get everybody that has an opportunity to take a shot at this guy, legitimately, and get them all on the same page at one time, and then run it. Senator Wyden. We are going to try to--and under Chairman Breaux's leadership--we are going to try to bring that kind of meeting about. Mr. Glenn. I do not think there is any question there is. Senator Wyden. Thank you. The Chairman. Thank you, Senator Wyden. We have been joined by Senator Lincoln. Any questions at this time, Blanche? Senator Lincoln. No questions. I may have a few opening remarks. [The prepared statement of Senator Blanche Lincoln follows:] Prepared Statement of Senator Blanche Lincoln Good Morning Mr. Chairman and thank you for holding this timely and important hearing. A recent Newsweek article said that, ``....in England, old age is imminent, in Canada inevitable and in California optional.'' In their day and age in America, are able to replace practically anything that we want from hair to hips. So it's no wonder that our expectations for health ``fix-er- uppers'' are high. As the Newsweek article that I'm referring to made clear, most of us want to live as long as possible, but we also want that life to be healthy. We are blessed in our society to have access to some of the most exhilarating types of activities; and just because we are ``a certain age'' doesn't mean we want to stop doing those things. Americans want to remain as active and involved in every aspect of our lives as possible. We don't even want to retire until it is absolutely necessary. So, we all run the risk of being ``victimized'' when it comes to products that help hold at bay those aches and pains and essentially ``slow- down'' the process of aging. Our senior population is growing and Baby Boomers more than anyone will be seeking the most effective health sustaining products. This problem is of national concern, considering that it is estimated that this is a $27 billion dollar a year industry and 60 percent of those consumers in this industry are senior citizens. Given this set of circumstances I believe it is our responsibility to be aware of companies that wish to prey upon our vulnerabilities. We must arm our caregivers with yet one more weapon with which to fight for and protect our seniors from these abuses-knowledge. I'm glad to be here today and look forward to the testimonies of our witnesses. Thank you Mr. Chairman. The Chairman. OK. Good deal. Gentlemen, we thank you very much. You all have been very helpful to this committee. Perhaps we may have some future discussions with you, and the best of luck to both of you. Thank you very much. We would like to now welcome up our next panel, the second panel, which will consist of Mr. Glen Braswell, who is president of Gero Vita International, and Mr. Ron Tepper, who is editor of the Journal of Longevity. The gentlemen, I understand, will be accompanied by their attorneys, and we would be pleased to have them come before the committee. We will, of course, ask them to take the same oath testifying to their truthfulness as the first panel did, and would ask them to please take their positions at the witness table. Mr. Braswell and Mr. Tepper, I was saying while you were entering the room that we would ask you to please stand and swear to the truthfulness of your testimony, as we have had the first panel do, and all the other panels, as well. Gentlemen, would you please stand and raise your right hand? Do you solemnly swear that the testimony you are about to give to the Committee on Aging be the truth, the whole truth, and nothing but the truth, so help you, God? Mr. Tepper. I do. Mr. Braswell. I do. STATEMENT OF GLEN BRASWELL, PRESIDENT, GERO VITA INTERNATIONAL, MARINA DEL RAY, CA; AND RON TEPPER, EDITOR, ``JOURNAL OF LONGEVITY,'' HEALTH QUEST PUBLICATIONS, MARINA DEL RAY, CA The Chairman. Please be seated. Gentlemen, we are glad that you are here. I understand that you do not have any testimony to present as a statement to the committee. Is that correct? Mr. Tepper. That is correct. Mr. Braswell. That is correct. The Chairman. Well, then in that case, I think that it would be appropriate if we would just, since you do not have a printed statement to the committee, just to proceed to asking you some questions about the subject matter of the hearing today. I would like to start by first asking Mr. Braswell if you are the sole owner or stockholder for the GB Data Systems and their subsidiary companies? Mr. Braswell. Mr. Braswell. On advice of counsel, I respectfully decline to answer the question, based on my rights under the Fifth Amendment. The Chairman. Mr. Braswell, I know the answer, but if you would make sure you have your mike as close to you as you possibly can. Mr. Tepper, you are identified as the editor of the Journal of Longevity. My question is isn't it true that the publication, Journal of Longevity, which you have seen displayed here, is owned by GB Data and is not, by any definition, an independent medical journal? Is that correct or not correct? Mr. Tepper. On advice of counsel, I respectfully decline to answer the question, based on my rights under the Fifth Amendment to the U.S. Constitution. On advice of counsel, I assert the privilege. The Chairman. Mr. Braswell, the address that we have noted in the Journal of Longevity to order the products that are advertised for distribution and sale is in Canada. Do you have, in fact, any employees or offices or facilities or products based anywhere in the country of Canada? Mr. Braswell. On advice of counsel, I assert the privilege. The Chairman. Mr. Tepper, the previous panel of witnesses, one of the attorneys, talked in terms of litigation, that he has proceeded to represent people who are allegedly endorsing products in the Journal of Longevity without their permission. The question is has the Journal of Longevity and you as the editor ever utilized statements or likenesses of any individuals without their permission to do so, that appeared subsequently in the journal? Mr. Tepper. On advice of counsel, I respectfully decline to answer the question, based on my rights under the Fifth Amendment to the U.S. Constitution. On advice of counsel, I assert the privilege. The Chairman. Mr. Tepper and Mr. Braswell, I think there is a trend here. Mr. Braswell, I have just got to ask you, do you really use any of these products that are advertised in that Journal of Longevity yourself? Mr. Braswell. On advice of counsel, I assert the privilege. The Chairman. Gentlemen, certainly you have the constitutional and legal right to do that. The assertion of the Fifth Amendment right to not testify is a right that has been long-recognized in this country, and we respect that right. It is not an indication of guilt or innocence or anything of that nature. You have that right and we respect your exercise of that right, and obviously to continue a long line of questioning with the same answers is not going to get us anywhere, nor provide any additional information, and the committee really needs to move on to other people who will be testifying about this and other matters dealing with the marketing of products, particularly to seniors. With that, and your assertion of your rights, which again you have the right to do, both Mr. Braswell and Mr. Tepper would be excused at this time. We now, as this panel is departing, have a third panel which we will anxiously bring to the forefront. Ladies and gentlemen of the third panel, we are pleased that you are here. We would like to invite your testimony. I think it is a distinguished panel, and we would like to introduce them. The first member of our panel is Dr. Janet Heinrich, who is the Associate Director of Health, Education and Human services at the GAO. Welcome back. Next we have Dr. Joyce Lashof, of the University of California at Berkeley, author of the Wellness Letter, which we have looked at; Dr. Robert Baratz, pleased to have you with us; and also Dr. Timothy Gorski. Dr. Gorski, we are delighted to have you, as well. We will begin with Dr. Heinrich and with the General Accounting Office. Dr. Heinrich. Mr. Chairman and members---- The Chairman. Pull those mikes real close. Let me ask-- because of everybody's time constraints, we are going to ask that you attempt to summarize your statements. Dr. Heinrich, you have done this many times before, and all of our witnesses. We are going to be fair. We have three Democratic Senators here, and I expect others to be in attendance in the near future. But I have read everything you have written, and I think our colleagues have. I have read it, I have underlined it, and I have re-underlined it. So I have already heard it. So I would like very much for you to attempt, to the extent that you can, summarize it for the record. It will appear in its entirety in the official public record, and I want to get to the questions and hopefully the dialog that would be most helpful. Dr. Heinrich. STATEMENT OF JANET HEINRICH , D.Ph., R.N., ASSOCIATE DIRECTOR, HEALTH, EDUCATION, AND HUMAN SERVICES DIVISION, GENERAL ACCOUNTING OFFICE, WASHINGTON, DC Dr. Heinrich. Mr. Chairman and members of the committee, we are pleased to be here today as the committee considers risks associated with anti-aging and alternative medicine products marketed to senior citizens. These products are popular among consumers, with as many as 40 percent of senior citizens reporting some use. As you have stated, they include dietary supplements, such as ginkgo biloba, used to improve memory, and ginseng, used to relieve stress. Some products are promoted with anti-aging and cure-all claims for which there is little scientific evidence of either safety or effectiveness. Because of your concerns about these anti-aging product claims, you asked us to do a report on some of the potential harms that are physical and economic, and to examine Federal and State oversight. The Chairman. Do you know when we asked for that request, because I was trying to figure out when we asked for it? Do you have that in your file? Dr. Heinrich. Oh, yes, we do. The Chairman. When would that be? Dr. Heinrich. It was probably July--March, March. The Chairman. March? Dr. Heinrich. Yes. The Chairman. Thank you. Please continue. Dr. Heinrich. Although documented adverse effects for most products are generally mild, potential harmful complications from supplements can occur due to several factors. Research shows that some supplements can have serious health consequences for seniors, such as respiratory failure, kidney damage. FDA has issued warnings that the herbal product, comfrey, for example, used for colds and coughs, represent a serious safety risk to consumers from liver toxicity. I was able to purchase some comfrey this weekend that had a warning that said should not be taken internally because there may be some harmful alkaloids if taken over a long period of time. Individuals with certain underlying medical conditions should avoid some dietary supplements. For example, ginseng is not recommended for persons with hypoglycemia, and kava kava, thought to promote relaxation, may worsen symptoms from Parkinson's disease. A variety of frequently used dietary supplements can have dangerous interactions with prescription and over-the-counter drugs. Several supplements, such as, again, ginseng and ginkgo biloba, alter bleeding times and should not be used with blood-thinning products like warfarin or coumadin, and should not be used prior to surgery. Other risks are associated with poor manufacturing practices. Supplements have been found that were contaminated by pesticides and heavy metals, some of which can be toxic. Finally, dietary supplements may contain more active ingredients than indicated on the product label. In a study of DHEA, a dietary supplement that may increase hormone levels, one product was shown to have as much as 150 percent of what was indicated on the label, while other samples had none. We do not have exact figures, but millions of dollars may be spent on unproven products. For example, rife machines, which emit electrical frequencies that manufacturers claim kills viruses and parasites can cost up to $5,000. FTC estimated that for 20 companies the subject of law-enforcement activities, the average economic harm to consumers was about $1.8 million per company. The potential for harm to seniors is a concern of public health and law-enforcement officials, and Federal and State agencies have some activities underway. FDA has taken enforcement actions against firms selling anti-aging products alleged to be dangerous or illegally marketed. It has taken actions to remove from the market products that the agency found were actually unproven new drugs or medical devices, and it has taken some actions against firms that promoted their dietary supplements for the cure or treatment of disease. FDA has not prohibited the marketing of any specific substances using its administrative authority under the Dietary Supplement Health and Education Act. The agency has issued warnings for ingredients it deems to be unsafe and unlawful. However, many products remain on the market despite the agency's warnings. An example of this is the case of colloidal silver products. Some manufactures have claimed efficacy in treating HIV and other diseases with these products. Even though FDA banned colloidal silver products as an over-the-counter drug in 1999, these products may still be marketed as dietary supplements, as long as they are not promoted with specific disease claims. Despite FDA oversight activities, colloidal silver products claiming natural antibiotic properties to address numerous health conditions remain available. FDA can also monitor dietary supplements by conducting inspections of manufacturing facilities. However, the agency inspects less than 5 percent of facilities annually. Publication of good manufacturing practice regulations would improve FDA's enforcement capabilities, and a proposal rule is awaiting approval. In conclusion, the risk of harm to seniors from anti-aging and alternative health products has not been identified as a top public health priority or leading enforcement target. However, evidence demonstrates that many senior citizens use anti-aging products, and that consumers who suffer chronic conditions may be at risk of physical and economic harm from some of these products. Mr. Chairman, that concludes my remarks. I will be happy to answer questions. [The prepared statement of Ms. Heinrich follows:] [GRAPHIC] [TIFF OMITTED] T6011.015 [GRAPHIC] [TIFF OMITTED] T6011.016 [GRAPHIC] [TIFF OMITTED] T6011.017 [GRAPHIC] [TIFF OMITTED] T6011.018 [GRAPHIC] [TIFF OMITTED] T6011.019 [GRAPHIC] [TIFF OMITTED] T6011.020 [GRAPHIC] [TIFF OMITTED] T6011.021 [GRAPHIC] [TIFF OMITTED] T6011.022 [GRAPHIC] [TIFF OMITTED] T6011.023 [GRAPHIC] [TIFF OMITTED] T6011.024 [GRAPHIC] [TIFF OMITTED] T6011.025 [GRAPHIC] [TIFF OMITTED] T6011.026 [GRAPHIC] [TIFF OMITTED] T6011.027 [GRAPHIC] [TIFF OMITTED] T6011.028 [GRAPHIC] [TIFF OMITTED] T6011.029 [GRAPHIC] [TIFF OMITTED] T6011.030 [GRAPHIC] [TIFF OMITTED] T6011.031 [GRAPHIC] [TIFF OMITTED] T6011.032 The Chairman. Thank you. We will have questions. That is some good information. Dr. Lashof, thank you for being with us from California. We really appreciate it. STATEMENT OF JOYCE C. LASHOF, M.D., ASSOCIATE CHAIR, EDITORIAL BOARD, ``WELLNESS LETTER,'' UNIVERSITY OF CALIFORNIA SCHOOL OF PUBLIC HEALTH, BERKELEY, CA Dr. Lashof. Thank you very much, Senator. I appreciate this committee holding this hearing and looking into the marketing of nutritional supplements to the elderly. We at the University of California-Berkeley Wellness Letter seek to provide the public with an independent, reliable summary of available scientific information regarding all aspects of health promotion and disease prevention. Our criteria for evaluating such information include clinical trials with adequate numbers, double-blind controls, and good statistical techniques for analyzing the data, followed by publication in an independent, peer-reviewed scientific journal. Following the passage of DSHEA, there was a burgeoning of products purporting to prolong life, improve the immune system, improve memory and relieve innumerable symptoms. Thus, over the past years, a significant portion of our efforts and print space has been devoted to carefully examining the claims, debunking the ones that could not be substantiated, and helping our readers navigate through the slick and mostly misleading advertising for dietary supplements. One of the very first that we tackled in 1992 was Gero Vita. At that time, they were only marketing GH3 as an anti- aging formula, and we were extremely forceful in recommending that our readers disregard all claims for this product. Later, we went on to warn our readers not to believe any of the claims made in Gero Vita's Journal of Longevity. Today, Gero Vita's web site features no less than 12 products which claim to have anti-aging products. Those are displayed there. They include a number--and I will not go through them, for the sake of brevity. I should point out that although the ingredients in dietary supplements are required to be listed on the label, the amounts of individual ingredients in so-called, ``proprietary blends,'' is not required. The lack of a system of good manufacturing practices and more-stringent ingredient labeling regulations make it impossible to know how much, if any, of the purported active ingredient is actually in the products, and perhaps more importantly, whether it is uncontaminated. The Wellness Letter has now reviewed more than 70 dietary supplements, including conventional vitamins and minerals. Our complete supplement review is available on our web site, www.wellnessletter.com, and a print of this material has been made available to the committee, and I have our book with descriptions of 70 products here. While we have acknowledged that some of these supplements appear to be useful in certain situations, such as St. John's Wort and glucosamine, the only supplements we currently recommend to our readers are Vitamin C, if dietary sources are insufficient, Vitamin E, folic acid, and a multivitamin for older adults whose diet may not be adequate. Our reasoning for this is that whereas vitamin preparations are standardized and regulated, other dietary supplements reside in a murky netherworld, somewhere between drugs and food, exempt from all but the most minor of labeling regulations, yet again thanks to DSHEA, which we consider unfortunate legislation. The manufacturers of these products have nonetheless been allowed to make claims in their advertisements that are almost completely unsupportable by scientific review. They are not required to prove efficacy or safety before they bring them to market. DSHEA has put the burden of proof on the FDA to show that something is not safe, and the FDA must rely on the reporting of adverse events, which in this case turns out to be a voluntary, inefficient and unwieldy system, and one that GAO has reported on. The end result is a juggernaut industry that now approaches--I think your figure was $26 billion, gone up quite a bit from my figure of $17 billion. While dietary supplements are legally precluded from making health claims on their label--they cannot say they cure cancer, heart disease or even acne--they are nonetheless being marketed as medical miracles. But, in fact, these products have drug-like properties. They are a drug and they should be regulated and controlled like drugs. The common perception that so-called natural products used in dietary supplements are always safe is completely unfounded and dangerously misguided. The rigorous scientific research that needs to be done in this area is certainly doable, but it is expensive. The manufacturers have very little incentive to carry it out. The industry has grown exponentially without this kind of testing and without standardization of ingredients, so it continues to rely on practically nothing but anecdotal information to support its claims. By and large, most young, healthy people who take dietary supplements do so without adverse consequences, except on their pocketbook. But the ill and the elderly are a different issue. Perhaps the most insidious aspect of marketing dietary supplements to the elderly under the terms of DSHEA is that companies like Gero Vita can knowingly exploit the hopes and fears of a population for whom safety is extremely complicated and which, by and large, has more reasons to be concerned about the economic impact of useless substances. One of the likely outcomes of aging is the slowing down of the renal and hepatic systems, which means that drugs of any kind, whether prescription or botanical, are not cleared as quickly through the kidneys and not metabolized as efficiently by the liver. This makes the elderly more susceptible to the effects and side-effects of any drug. Because older people typically take many forms of medication for chronic conditions, the likelihood of adverse interaction is greatly heightened, and I have listed on the next table some examples, and Dr. Heinrich has given other examples, and I will not go through them for the sake of the fact that the yellow light is on. Let me put up another poster on DHEA--again, Dr. Heinrich mentioned. DHEA is a hormone manufactured in the human adrenal gland. This substance is being marketed as an anti-aging formula that enhances mood, energy, memory, boosts sex drive, reduces osteoporosis, improves fat loss, increases muscle mass and improves the immune system, et cetera. It is not a natural medicine and most certainly not a dietary supplements, and should never have been classified as such. We do not understand how FDA did that. You can go on and talk about the expense to the pocketbook of the elderly, whose income is limited, to see them spend money on these kinds of dietary supplements when they do not have enough money to spend for their prescription drugs, and we know that is a real concern of yours. It is really disturbing. Let me get specifically then to our recommendations. On the last poster, I have listed them. We believe that DSHEA should be repealed or at least amended to give FDA the power to regulate nutritional supplements as they now do over-the- counter drugs, and thus require scientific proof of efficacy and safety. We recognize that that is not going to happen soon. The forces against it are great. But until then, first we need to make adequate resources available to FDA and the FTC to enforce existing rules covering the claims made on labels and claims made in other advertising. FTC requirements for what can be used as an advertising claim, what it should be based on, are really quite good. But they do not have the resources to begin to enforce it, considering the size of the industry. Finally, we believe that FDA should be required to finalize the current good manufacturing practices rule, which I gather has been put forward and is bottled up somewhere in the bureaucracy, and finally require that the labels of dietary supplements instruct consumers to report adverse events directly to the FDA, provide toll-free numbers for them and web site by which they can do that. Thank you very much. [The prepared statement of Dr. Lashof follows:] [GRAPHIC] [TIFF OMITTED] T6011.033 [GRAPHIC] [TIFF OMITTED] T6011.034 [GRAPHIC] [TIFF OMITTED] T6011.035 [GRAPHIC] [TIFF OMITTED] T6011.036 [GRAPHIC] [TIFF OMITTED] T6011.037 [GRAPHIC] [TIFF OMITTED] T6011.038 [GRAPHIC] [TIFF OMITTED] T6011.039 [GRAPHIC] [TIFF OMITTED] T6011.040 [GRAPHIC] [TIFF OMITTED] T6011.041 [GRAPHIC] [TIFF OMITTED] T6011.042 [GRAPHIC] [TIFF OMITTED] T6011.043 [GRAPHIC] [TIFF OMITTED] T6011.044 The Chairman. Dr. Lashof, thank you for your testimony and thank you for the good work that you do out at the university. It is very informative and very helpful. Next, we will hear from Dr. Robert Baratz. Dr. Baratz, glad to have you before the committee. STATEMENT OF ROBERT S. BARATZ, M.D., Ph.D., DDS, NEWTON, MA Dr. Baratz. Thank you, Senator Breaux. Health care is one of the most important aspects of anyone's life. While we may disagree on where and how to spend our resources, there has been little disagreement on what standards we should have. The rise of modern medicine over witchcraft, shamanism, vitalism, folk tales, anecdotes, wishful thinking and snake oil has not been by accident. While there is still a place for the art of practice, a bedside manner and practical skills, the foundation of the house is and should continue to be scientifically gathered evidence. In recent years there has been a movement to undo this standard, advanced by those who wish to profit from being freed from the requirements of evidence, and promoted by others who claim that anything should be allowed, whether it has a rational basis or not. So-called health freedom is claimed as some kind of right under which charlatans, quacks, and unscientific and unqualified practitioners can operate. Its advocates want a system where anything goes, without any standards for either safety or effectiveness, let alone the truth. Neo-snake-oil salespeople, pseudoscientific zealots and profiteers have blurred the lines between science and nonsense, and have begun to undermine the foundation of our excellent system of care. They substitute pseudo science for science, anecdote for evidence, and nonsense for substance. Quality, scientifically based health care is currently at risk. I come here today to speak with you about this problem. In the popular media we are barraged by stories about secret herbal folk remedies and tiny electrical devices which can cure all diseases, and I brought one with me. If anyone needs to be cured, I can do it. [Laughter.] Accompanied by testimonials of how wearing refrigerator- strength magnets will improve strength and endurance, we are asked to believe that vast bodies of knowledge have somehow been suppressed for years, allegedly to keep profits high in the medical establishment. We even are being asked to accept as legitimate primary care health practitioners, individuals who have unsupported theories of disease based on life forces being misaligned, imaginary parasites inhabiting our bodies, derangements of our spines which cannot be demonstrated, and unnamed toxins in our environment. We are being asked to discard science for conjecture and fanciful notions. Those who are most likely to be targeted and duped by these purveying predators are the elderly. Given the limited amount of time we have to speak together here, I urge you to read my written remarks, which carry much more detail than I can present here now. The world of science is not a closed club. One must merely put forward evidence of a claim and have it judged on the open market of ideas. The process is simple, open and available. Instead, we are seeing an increasing array of initiatives to legitimize otherwise illegitimate practices. Lawmakers are being asked to license practices that lack a scientific basis. Agencies are being told they cannot regulate drug substances, such as we have heard about today, if they are called something else. So-called supplements are being marketed and used as if they were drugs, free of regulation. Words such as complementary and alternative medicine have been reinterpreted to cover any nonscientific idea and practice. The public is separated from protection only by clever language, something Congress never intended in DSHEA. We have seen numerous reports of death and severe disability due to so-called supplements, including Ephedra, Aristolochia, just to name two, and there are many more. I noted, as the prior speakers were speaking, dead people cannot report adverse events. Let us not mince words. These substances are being promoted as drugs in the common, everyday usage of that term, clever language, creative terminology and nosological acrobatics not withstanding. To get to the National Institutes of Health from DuPont Circle, I can take a cab or the metro. These are true alternative methods of travel. No matter what I believe, I cannot ride a magic carpet or self-levitate and fly to Bethesda. The alternative to scientific, evidence-based medical practices is non-evidence-based, non-scientific nonsense. It is wrong and frankly ridiculous to place this collection of anecdotes, pseudoscience and conjecture, called alternative medicine, on the same stage as the real thing, but this is precisely what is being done. A woman named Hulda Clark, who wrote this book, ``The Cure for All Diseases,'' and who promotes these zappers, says that she has found that all diseases have simple explanations. Clark has a mail-order naturopathic degree and claims that a rare Asian liver fluke, triggered by toxins in the environment and harboring mutant bacteria, cause all of our illnesses: diabetes, Parkinson's, multiple sclerosis, and even AIDS. Inherited genetic disorders such as muscular dystrophy, she says, can be disinherited. She can cure you with a simple electronic device such as this one, built with some parts from an electronic store and some supplements, including the dangerous substance, wormwood. Outlets, including ones that just happen to be run by her son and her brother, hawk her dangerous items and sell her illegal devices. They are easy to find and readily available. I ask you, why? Let me relate the story of a young woman who followed the teachings of this Hulda Clark. This was written by her friend, Pia Johansson: ``Hanna was diagnosed with severe breast cancer. She got a full mastectomy and was treated with chemo and radiation. An alternative practitioner who promotes Hulda Clark's protocols, prescribed cleanses and zapping. The practitioner told her that her pets carried parasites and were the cause of her cancer. She placed all the animals with others, except two dogs, which were also treated with the zapper. Her pets were with her her whole life and they were her heart.'' ``She has a limited circle of friends, but she couldn't visit them, nor ask them to visit her, because she was afraid of being reinfected, which is what she was told. She paid him more than $800 for these capsules, tinctures, and zappers, and followed the protocol to the letter. She had a recurrence of the cancer, now spread to her lungs and liver, and the practitioner once again claimed he could cure her. He was her only hope. Consuming those herbs and capsules--some are known poisons--they made her vomit and spoiled her appetite. She was taken to the hospital. I visited her and watched her zapping both her and her dog as she wasted away, barely able to swallow the Clark capsules. She died Monday night, January 15 of this year.'' Do you honestly believe that this is harmless? Can you properly call this health freedom? I call it healthy tyranny. These supplements are being used as drugs. There are other scans where other unapproved electrodiagnostical devices are commonly used for diagnosis and treatment. In so-called chelation therapy, illegitimate practitioners prey on the elderly, claiming they can treat atherosclerosis. Millions of dollars are collected for this bogus procedure. You can find the ads in virtually every South Florida newspaper. Advertising targets elderly individuals, suggesting this therapy is an alternative to bypass and can prevent arteriosclerosis. The elderly and others are also regularly victimized in schemes for cancer cures, alleged heavy metal poisoning, heart disease, and neurodegenerative disorders. Colorado dentist Hal Huggins emptied the bank accounts of an elderly Kansas farm couple, convincing them that he could treat the wife's breast cancer and her husband's ALS. The husband nearly died during treatment when he aspirated unnecessary pills, which were allegedly to detoxify him from his dental fillings. The wife wasted away after all her teeth were removed inappropriately. Therapy which could have cured her was postponed. These are examples of the dental amalgam scam. Stopping these thieves of the professions is a task of licensing boards at the State level. However, these crimes cannot typically transcend the mandates of the boards--they typically do transcend the mandates of the boards, excuse me. These crimes cross State borders, use telephones, modems, the Internet and the mails involving money laundering and hiding assets in offshore accounts. After enriching themselves on the public, misbehaving practitioners often have huge war chests, dwarfing the meager budgets of State prosecutors, where a licensing board often cannot recover the cost of prosecution, find the offender, or mandate restitution. The Chairman. Dr. Baratz, excuse me. We are going to have to ask you to try and summarize. Dr. Baratz. OK. I am just closer to the end, Senator. Thank you. We need model legislation to tighten the laws against predatory practitioners. The smaller States need help in being able to afford to enforce the rules. We also need to put teeth into the punishment for offenses. Too often the guilty get a slap on the wrist, write off the cost of their defense as a cost of doing business, and go right back to bilking the public. Let me come to the summary--toward the end, please. The problems I report transcend the mandates of any one entity. We need Federal and State task forces to deal with these problems. Millions, if not billions, of dollars are scammed each year. Health fraud also causes considerably disability and death. These are crimes against all of us, since society at-large is typically the resource that has to repair the damage that these criminals do. They truly steal from us all. Let me quickly name some areas where Congress can act at little cost with high impact: First, to assist the Mexican government in closing illegitimate cross-border clinics. Recent raids in Baja, CA, closed several illegal clinics, including one by Hulda Clark. We need improved collaboration with the Canadian authorities to help put an end to Toronto mail drops, which we heard about earlier; 800 telephone numbers, referral services and other cross-border scams which allow fraudsters to elude regulators. Multilevel marketing schemes are common vehicles for promoting supplements and other dubious products. Full disclosure of product efficacy and meager chances of financial reward to any prospect, before they sign up, should be required for any company that engages in multi-level marketing. These simple steps may help dispatch the multi-level menace that we have now in the health arena. Enabling legislation should be enacted to deputize State attorneys general to get nationwide injunctions against sale and distribution of illegitimately and falsely advertised products. This would extend the reach of Federal agencies markedly at very little cost. The abuses I outlined above have gone on for simply too long. This very Senate committee in 1983 said that quackery and medically related fraud are No. 1 of the top-10-most-harmful frauds directed against the elderly. After almost 20 years, is it not time to act more decisively? We must level the playing field so perpetrators lack any advantage over the regulators. We must provide resources for quick and effective action, make sure reparations are made, and make the penalties severe enough so these crimes will not pay. We must keep science and evidence as the framework of our medical system. We need a plan, a timetable, and a designated leadership to make this happen. The cost of not acting is too great. The National Council Against Health Fraud, of which I am the executive director, stands ready to work with all interested parties to address the problems I have outlined. Thank you very much, Senator. [The prepared statement of Dr. Baratz follows:] [GRAPHIC] [TIFF OMITTED] T6011.045 [GRAPHIC] [TIFF OMITTED] T6011.046 [GRAPHIC] [TIFF OMITTED] T6011.047 [GRAPHIC] [TIFF OMITTED] T6011.048 [GRAPHIC] [TIFF OMITTED] T6011.049 [GRAPHIC] [TIFF OMITTED] T6011.050 [GRAPHIC] [TIFF OMITTED] T6011.051 [GRAPHIC] [TIFF OMITTED] T6011.052 [GRAPHIC] [TIFF OMITTED] T6011.053 [GRAPHIC] [TIFF OMITTED] T6011.054 [GRAPHIC] [TIFF OMITTED] T6011.055 [GRAPHIC] [TIFF OMITTED] T6011.056 [GRAPHIC] [TIFF OMITTED] T6011.057 The Chairman. Thank you, Dr. Baratz. Dr. Gorski, your testimony, please. STATEMENT OF TIMOTHY GORSKI, M.D., ARLINGTON, TX Dr. Gorski. Thanks very much, Senator. There was a time when all of medicine was unproven and irrational, and it was only our ability to understand and have the tools to collect, analyze and properly interpret evidence that has made the difference. So there was not any quackery, really, until we were able to do that. This committee's counterpart in the House, the Subcommittee on Health and Long-Term Care, Claude Pepper's subcommittee, in 1984 issued a report. It was entitled, ``Quackery: A $10 billion scandal,'' and it referred very candidly to a vast array of pills, potions and devices with the terms, ``worthless,'' ``no scientific evidence,'' ``no physiological or pharmacologic basis,'' ``no rational ability,'' and so on, and noted that many of these schemes and scams were being perpetrated on America's elderly. Now, in the 1980's, this was a cottage industry on the fringe, and, of course, we have heard about how Mr. Braswell spent some time behind bars for being engaged in these kind of activities during those years. The advocates called it ``alternative medicine'' because they knew and they still know that their claims are inconsistent with objective facts and scientific principles. The Pepper report called it quackery and defined it as promotion--that is a key word--promotion of medical schemes or remedies known to be false or which are unproven for a profit, and we have heard about profit today. So how did this $10 billion scandal turn into a huge and growing industry that is at once a media darling, a feeder at the public trough and a threat to the public health? Well, in 1993 a report appeared in the New England Journal of Medicine, the real New England Journal of Medicine, that claimed to consider unconventional medicine. This was a survey that lumped together every conceivable form of health-related behavior, which it said was ``Not taught widely at U.S. medical schools or generally available at U.S. hospitals.'' In fact, Senator, this is the first survey where we get this information that supposedly the use of alternative medicine has been exploding. Consider what they counted amongst unconventional, later called alternative, medicine: vitamin use of any kind--in fact, at that time Niacin was being used to treat high cholesterol; Physical therapy, as long as it was performed by a chiropractor; imagery, that could be counting sheep for insomnia; commercial weight loss products such as Jenny Craig and Slim Fast; self-help groups; lifestyle diets, which could be anything from keeping kosher to avoiding certain foods for personal reasons; and even massage and relaxation. You get a bonk on the head--I just used alternative medicine there. But these same authors are the same ones that have gone around and claimed that their studies show that a huge proportion of Americans regularly use and demand unproven, disproven and irrational forms of medical care. And this belief is what was used to impose on the National Institutes of Health the Office of Alternative Medicine, which subsequently became the National Center for Complementary and Alternative Medicine, which from the beginning has been staffed and controlled by ideological advocates who are not seriously interested in protecting the public. Meanwhile, the DSHEA, as we heard, passed in 1994. And that opened the floodgates for the promotion of a new class of drugs outside of the FDA's regulatory jurisdiction and including all those things mentioned in the Pepper report. They could contain parts of animals, plants, minerals, even heavy metals such as silver, chromium, lead, either intentionally or unintentionally. As long as the substances are found somewhere in the universe naturally, they are considered foods. I could take my grass clippings, pack them into capsules, and sell them virtually on any claims that I wished, with little expectation that anything would be done about it. We heard a little bit about the huge number of promotional gimmicks that are common, television and radio ads, the fake newspapers and journals, the things promoting growth hormone releasers, DHEA and so forth. You have a card there, I think, which gives an example. Mr. Braswell's operation is not the only one that arrives in the mailbox, making extraordinary claims. How about this? ``Is your doctor curing you or killing you?'' These kinds of promotions make all kinds of idiotic statements, claiming that you can self-diagnose, for example, ulcers and heart disease by your forehead wrinkles and earlobe creases, or that eating a balanced diet, the kind of thing recommended by the USDA, ``contains poisons that are killing you;'' that dairy products cause arthritis and osteoporosis--I think the committee has two members from the State of Wisconsin, the Dairy State--and that hormone replacement therapy radically increases the risk of cancer. Some of these ads are crafted to look like newspaper articles that have been clipped, with a little sticky put on it, saying, ``Hey,'' whatever the person's name is that they are sending it to, ``try this,'' with some initials and, of course, no return address. Friends, co-workers, neighbors and family members can be involved in multi-level marketing schemes. These are the kinds of things that are not going to get reported. The Internet and e-mail makes fraud particularly easy, cheap, and affords many protections for promoters of these fraudulent products. One representative web site says, ``Before you try dangerous prescription drugs or risky, painful surgery, discover my safer, more effective, all-natural, miracle-healing program.'' Also, another page on that web site says, ``Here is how to cure people with heart disease without dangerous drugs or surgery,'' and so forth. And, of course, right at the bottom of that long page is this disclaimer, ``This publication is not intended to provide medical advice, and nothing in it should be construed as a therapeutic recommendation or prescription for any disease or symptom.'' That is meaningless. But these promotions exert a very strong psychological appeal, especially to people who are sick, people who are desperate. These promotions assert falsely that the claims are based on solid science and they encourage people to think for themselves and consider the evidence. We all would like to be independent-minded that way. So they appeal to our normal, human weaknesses, as it were. To deflect any doubts, it is often said that these devices or products are little-known or secret. To hear them tell it, these promoters are all modern- day Galileo's, courageously battling an evil conspiracy of the conventional medical doctors, the AMA, the pharmaceutical industry, and the Food and Drug Administration, all supposedly arrayed against the public for the sake of profit. Often, they will cite the National Center for Complementary and Alternative Medicine or the White House Commission on Complementary and Alternative Medicine as some kind of proof that their claims are legitimate. There are five ways that the public is harmed by these kind of things: direct harm from adverse effects; indirect harm from the omission or delay of appropriate treatment; economic harm when people are spending their money on worthless products; psychological harm when people realize that they have been duped or harmed; and also social harm, because Americans' understanding of the facts and principles of health and disease are corrupted, which impairs their ability to make wise choices and also to help their country determine the direction of policy in health-related issues. There are some significant public health hazards that I want to mention. I am going to skip over Ephedra. That is mentioned in my written comments and it was brought up by Dr. Lashof. There are different concerns raised about dietary supplements promoted for anxiety, depression and relaxation. Kava has been mentioned, and let me point out that just because a culture somewhere has used an herb such as kava for a long time ``safely,'' does not mean that it is safe. These kinds of settings are not comparable to that of modern America, where people are drinking alcoholic beverages, driving and flying aircraft loaded with hundreds of passengers, perhaps. One might as well say that drinking contaminated water is safe because people once did it all the time, or that lead is safe because the Romans piped their water through it, or that tobacco is safe because Native Americans smoked it. St. John's Wort, was already mentioned. I want to mention something on glucosamine, which has been mentioned here. Widely promoted for the treatment of arthritis, this medication interferes with the action of insulin. So it tends to cause diabetes. I hope that you, Senator Breaux, do not have any family tendency to diabetes, but there are Americans, many Americans, who do-or that are at risk because they are obese. Glucosamine bears a striking chemical resemblance to a drug called streptozotocin, which is used to make rats diabetic in the lab. So it is all well and good to have this limited scientific evidence over a few weeks or months, but what is going to be the effect of passing this through the livers and gastrointestinal tracts of Americans for years? May we have the second card? Perhaps the most serious public health threat in the making is the growing number of dietary supplements being marketed as natural treatments for menopause, generally soy, black cohosh, red clover and other things. The promoters of these products imply or assert that prescription hormone replacement therapy is suspect, dangerous or causes cancer and other diseases. This is the most outrageous example of that that I have come across, a mailing from Medical Recall Notice from Health Notification Service of Henderson, NV. The official-looking contents purport to be a recall of all prescription estrogen and progestin products because of severe and prolonged life-threatening side effects. How many of our wives, mothers, sisters or grandmothers received this mailing and threw their prescription medication in the trash? According to this mailing, the indicated treatment to be substituted is a natural progestin cream with no harmful side-effects, with the order form conveniently enclosed. The promoters of dietary supplement products intended to treat menopause often claim that HRT, the hormone replacements, cause women to die from breast cancer, and we know that this is not true. Menopausal women who could otherwise benefit from HRT are participating in a vast, uncontrolled and unmonitored experiment on the basis of false assertions. Many are them are not going to know that they have been duped for 10, 20 years, when they fall and they break their hip. There are over a million fractures due to osteoporosis in this country every year, a good number of which are hip fractures; 20 percent of the people with those fractures are going to be dead within a year. Finally, it should not be forgotten that many Americans and others living in this country whose primary language is not English live in somewhat insulated communities. It is a big problem in those communities, the kind of advertising that is directed at them, and this is completely under the radar screen of law-enforcement authorities for the most part. Let me just summarize here that these dietary supplements are now really a serious problem and it is time to review the insights of the 1984 Pepper report, taking note of the fact that promises to the contrary, none of the forms of quackery mentioned in that report, not one that were identified have been proven effective or safe, despite hundreds of millions of dollars having been given to advocates of these methods for, ``research.'' With regard to alternative medicine, about which there is no agreement as to what it actually is besides an advertising slogan, let me simply endorse what the editors of the country's two foremost medical journals, the real journals, have to say. The editors of the New England Journal said that there cannot be two kinds of medicine, conventional and alternative, only medicine that has been adequately tested and that which has not. The editors of the Journal of the American Medical Association said, also, there is no alternative medicine, only scientifically proven, evidence-based medicine supported by solid data or unproven medicine. These principles should be applied uniformly and consistently. There cannot be two kinds of drugs, those with a known composition, potency, effects, hazards, interactions, shelf life, and so on, and those about which all these things are little more than a guess. There cannot be two standards in promotional advertising, one that requires a competent, scientific basis before it is disseminated, and one in which for all practical purposes anything goes. To have it otherwise ultimately is to have two kinds of law, one ruled by facts and reason and the other that is not subject to such orthodox, traditional and conventional considerations. It is not going to be easy to start picking up these pieces and setting things right, but further delay is not going to make it any easier. The National Council Against Health Fraud and other groups and individuals whose concerns are truly for consumers, for science, for compassion, and for true freedom of choice in the marketplace can be relied on to assist in this task. Thank you very much for your time and consideration. [The prepared statement of Dr. Gorski.] [GRAPHIC] [TIFF OMITTED] T6011.058 [GRAPHIC] [TIFF OMITTED] T6011.059 [GRAPHIC] [TIFF OMITTED] T6011.060 [GRAPHIC] [TIFF OMITTED] T6011.061 [GRAPHIC] [TIFF OMITTED] T6011.062 [GRAPHIC] [TIFF OMITTED] T6011.063 [GRAPHIC] [TIFF OMITTED] T6011.064 [GRAPHIC] [TIFF OMITTED] T6011.065 [GRAPHIC] [TIFF OMITTED] T6011.066 The Chairman. Thank you, Dr. Gorski and all the members of the panel. Dr. Baratz, halfway through your testimony I realized, my God, I take all this stuff. I have taken DHEA. I have taken glucosamine and chondrotin. I just had some in my pocket that I was taking this morning, and I have got a back brace with magnets in it. Here I am, Chairman of the Aging Committee and having this hearing, and I have just found out or started realizing that I, I guess, along with other millions of Americans who are approaching senior status or are, in fact, in that status, take this stuff--and the magnets do not help? Dr. Lashof. No. No. No. No. Dr. Baratz. No, rhymes with Breaux. [Laughter.] I think the web site where you bought that was www.xxx.con--C-O-N--not .com. The Chairman. I have two of them. I have two back braces with magnets in it, and it is supposed to help your back. Dr. Lashof, the last publication here, which is the one, the healing breakthrough of the century, when it listed everything that can work for people with everything and that you can live 26 percent longer, they have got some stuff in here that, really, I need to ask you about, I guess. One of the things is this ACF223. They say that this particular doctor did the research by going to a former atomic testing site in the Nevada desert, and examined plants that had survived a nuclear blast and radiation, and they found a seed from one of these native desert plants was found to have survived and actually grown, and therefore the active ingredient in this simple plant was this substance--and it is a very long name. The abbreviations are NDGA. They say that clinical studies show that this NDGA extends the life spans of animals and works against premature skin wrinkling, and the same may be true for humans. They go on to say that this doctor put together this formula, ACF223, and in rigidly controlled laboratory tests, it was shown to increase life span by 19 to 26 percent. Another thing they quoted here, and I ask you to comment on this, is they quote another doctor, whose name I will not mention, who they say was Director of the National Institutes of Aging, and that is part of NIH, the National Institute of Health, and they quote this person, being the Director of the National Institute of Aging--has conducted countless experiments in clinical trials with ACF 223 nutrients and concludes. ``Our life span is directly proportional to the amount of ACF 223 nutrients that we have in our bodies.'' That is a pretty strong statement. Do you have any information that anything like this has ever been done at NIH or the National Institutes of Health, or what are your comments about the material I just read? Dr. Lashof. I do not believe it, that is my first comment. It is not a particular product that we have looked at. That had not come to our attention, so I have not specifically examined it. But every time we see that kind of statement, we try to request the scientific data, and we never get it. One thing they do, and I do not know whether that is what they have done there, and you obviously have to talk to the director of the National Institute of Aging, is that he may have done a study of some nutrient which they now claim is in here, and they will quote that out of context. We find that often, that they will look at some scientific article that tells you something about what a hormone does or what the function of growth hormone is in the body, and then extrapolate from that and claim that their product will now do all these things, and they take scientific stuff out of context. But we try always, when we get any product that comes to our attention--and basically we are looking for those that are most widely advertised and that are being used a great deal, and then we start looking at all the literature. We ask the company to supply us with data, and we do not get it. The Chairman. You and Dr. Heinrich maybe can get in on this--Dr. Heinrich talked about the Dietary Supplement Health and Education Act that Congress passed, and we made a decision at that time that we were not going to subject these supplement products to the same rigorous enforcement that we do for other prescription drugs, over-the-counter generic drugs, that have to be approved by the Food and Drug Administration. This is a new category. It is supposed to be like food products, and therefore they do not have the same rigorous investigation before they are sold to the public. It seems to me, in my opinion, there is a difference between products that are being targeted to people as a food supplement that may make you lose weight or may make you get rid of your wrinkles, for instance, as opposed to a supplement that actually is supposed to prevent cholesterol problems or diabetes or Alzheimer's, or actually cure aging or potentially cure cancer. It seems to me that when these food-supplemental products are put in various combinations, that that is a difference from just trying to say that you are curing wrinkles, that you are actually talking about curing diseases. Do you think there would be a way for Congress to address that particular issue, that would be helpful, Dr. Lashof? Dr. Lashof. I think it is very difficult. You see, they have tried to make the distinction between a cure and this disclaimer, which is always in such tiny print that no consumer can ever read it. They say that is really there as a test for whether you should go to see your optometrist, but trying to separate those two is very difficult, and so they have used the term ``function,'' structure and function. You can make a structure and function claim, and that was their effort, to try to do that. Well, under structure and function, they just say about everything. If it improves your body's ability to do this, that becomes a function, and yet that is what a drug is doing. The Chairman. Mr. Braswell did not testify, obviously, this morning--I cannot say what he might have said. But let's assume for a moment that someone who makes these products comes before the committee and says, ``Look, I did not say it cured anything. I said it might, it could, it possibly might help, this could help you,'' and all of these clarifying phrases that keep them within the boundaries of not being sued. What is the problem with that? If I came here and said, ``Look, I did not say it was going to cure anything. I just said it might; it might be helpful; it could be helpful; you ought to take it; try it; besides, we give you your money back if it does not work,'' what is wrong with that position with respect to this particular problem we are looking at? Anybody, Dr. Gorski, Dr. Baratz? Dr. Gorski. I was going to jump in and say the Federal Trade Commission has standards that they can apply in these kinds of situations, because the standard is what would a reasonable consumer think. When you put something up saying you are going to support the cardiovascular system, people with atherosclerosis can avoid bypass, et cetera, maybe you have not said you can cure atherosclerosis, but the average, reasonable man-in-the-street consumer is going to assume that. The Chairman. I take it it is particularly a problem, obviously, when it appears in a journal that closely resembles a, ``legitimate medical journal,'' with doctor, pictures and everything else. Dr. Gorski. Sure. That is right, and they are inviting the public--which, of course, we would all like to think that we have some control and have some power over our lives to make our own decisions, the self-validating kind of decision. The Chairman. Dr. Heinrich, in a GAO investigation of this issue--and I will get to Senator Wyden after this question, did I hear correctly that you said that FDA has never taken a product off the sales list, as a result of these type of investigations of supplements? Dr. Heinrich. You are correct. What I said, and we made sure that we checked with FDA, of course, to reaffirm the accuracy of this, but under DSHEA, they have not taken administrative action to remove a particular substance. As I said, they have taken actions, and in our report to you we do list some of the FDA actions that have been taken to remove products that have claimed treatment for a particular disease. But, no, they have issued warning letters against substances that they think are harmful, but they have not--they have relied on---- The Chairman. But you have in your testimony a quote, ``The FDA has not initiated any administrative rulemaking activities to remove from the market certain substances that its analysis--its analysis--suggests post health risk, but has sought voluntary restrictions and attempted to warn consumers.'' Do they have the authority to take these products off the market? Dr. Heinrich. FDA has the authority to claim that a product is harmful. Then they have to take it to court for court action. But, from FDA's perspective, the burden of proof then of harm is on FDA and their legal counsel, as opposed to what we have with drugs, where it is the responsibility of the manufacturer to ensure that there is safety and efficacy. The Chairman. One of the things--again, this is the concern I think we have--you have also in your statement, the GAO, ``Although DSHEA allows FDA to remove from the market dietary supplements that the agency can prove are dangerous, the agency has not prohibited the marketing of any specific substances using its administrative rulemaking authority.'' Dr. Heinrich. That is correct. The Chairman. Senator Wyden. Senator Wyden. Thank you. Thank you, Mr. Chairman. It has been an excellent panel. Dr. Heinrich, one of the constants to me in the health-care fraud area, and it has changed and we have talked about it, is it seems that somehow the bad guys, after they perpetrate these reprehensible, heinous offenses against seniors, somehow invariably manage to get back in business and go out and continue to prey on seniors. What we have seen this morning raises again a question in my mind about how the government deals with it. Mr. Braswell apparently has been found to violate a number of civil and criminal laws in the past, with respect to his activities with seniors. He came here this morning and took the Fifth Amendment with respect to a variety of issues we wanted to explore, and again this is a product that is being marketed to the public. I would like to get your sense of whether you think that this is a problem of recidivism, that people who prey on seniors--that there is a pattern that after they do it, that somehow they can leap to another State, they can get offshore, they can go to the Cayman Islands, as we had a witness say this morning was taking place, set up shop and go back to exploiting seniors. Do you think this is a serious problem? Dr. Heinrich. Oh, I think it is a serious problem. Part of the issue, though, is it is hard to understand the magnitude of it. But they probably do not have to go as far as offshore. Certainly when we examined the work of the FTC and the FDA, we were impressed by the work that they were doing jointly, monitoring what was advertised on the Internet, and although they do have a joint effort there to really find companies that are making false claims, even after FTC has issued a warning letter to them that they may be breaking the law, we found that a very small percentage of companies actually took any action, and over 60 percent of companies so notified took no action whatsoever. Dr. Lashof. If I can barge into that---- Senator Wyden. Oh, yes, please. Absolutely. Dr. Lashof. In California, some of the local district attorneys have been taking action against various companies based on their laws, and they changed the name of the formula. They will take action against one, argue about the advertisement, and a few months later they are advertising under a different name the same stuff that they were just charged with. So it is not one company. It is much more pervasive. Senator Wyden. Dr. Heinrich, being a pretty devout reader of your health materials, I have never seen an analysis you have done with respect to this recidivism issue and those who are taking advantage of seniors. Have you ever done something that has taken six or seven, say, of these major health frauds perpetrated against seniors and actually tracked what happens to the offenders, and after they are found to have violated one set of laws, what happens when they, perhaps as your colleague, Dr. Lashof, just mentioned, go and set up somewhere else in a different name? Have you ever done that? Dr. Heinrich. I do not think so, not to my knowledge. Senator Wyden. Do you think that would be productive if our committee were to ask you to do that, because I will tell you-- and, again, this is a product of something I have seen. When I was director of the Gray Panthers and I had a full head of hair and rugged good looks, a number of years ago, you would see the person who ripped seniors off selling shingles door-to-door come back in a slightly different kind of area with a slightly different name. My sense is that it is going on now with some of the biggest health frauds that are perpetrated against seniors, involving millions and millions of dollars. I do not think you all have ever looked at this question of whether there are a handful of recidivists who constantly keep coming back at this and figuring out how to milk this cash cow and exploit the elderly. Do you think it would be productive for you look at that? Dr. Heinrich. It certainly would be very, very interesting to see what those cycles look like, of some of the groups that, in fact, seem to reinvent themselves. We found examples of that. Senator Wyden. I am going to consult with the chairman and the ranking minority member, because I would like you to do that. I would like you to take six or seven of the major health frauds perpetrated against seniors and I would like us to kind of walk it through, say for 4 or 5 years afterwards, to see what happens to those people, because my guess is just as sure as the night follows the day, these people are coming back with different names, different front organizations, going offshore, as Dr. Lashof stated, slightly revising the product. If we, for example, as we look at this next round of frauds with the new technologies and look to the biology and genetics, get to the point where we can isolate a handful of people, a relative handful, that is in everybody's interest, because we have already made it clear there are many lawful people in the business. So I am going to talk with the chairman and the ranking minority member about it, but I would like you to that. We, having worked with you many times over the years, are confident you would deal with it in a professional way. Dr. Lashof, one question for you--and superb testimony, and I have known of the good work that you all do at Berkeley, as well. I went to the web site of several of the health sites recently, and if you are a general person doing a search on a particular health issue, you just get flooded now with essentially the advertised material, and the advertised material, almost invariably, look like authoritative articles and it is pretty hard to distinguish. Are there areas that the Congress should be looking at to try to do a better job of separating out these articles where authoritative, constructive information is imparted to people from areas that really are just hype? As you know, this is hard to do, because there are First Amendment questions, free speech questions. But I can tell you, having done some searches recently, it is pretty clear we are getting flooded with advertisements that do not look much like advertisements, and I wonder, at the public health school, whether you all have looked at this and have some ideas on it. Dr. Lashof. Well, I am afraid that it is a problem for FTC, really, and the amount of resources they would need to police all of the web sites--I would hate to try to make a guess. You can ask them. We have tried very carefully, in the Wellness Letter, to recommend the government sites as the sites people should go to. The FDA has an excellent site. The FTC itself has very good standards that you can read about on their site, and then CDC and all of the government agencies at NIH. So we urge our readers to consult those sites and, just as a rule, to generally recognize that if is something sounds better than it could be, it probably isn't true, and just to avoid those kinds of sites. Senator Wyden. My time is up. I would hope that we could figure out more creative ways to deal with this, and I know you are interested in that, than just sending people to government sites, because, as you know, one of the reasons these alternative products have been attractive to so many is people are skeptical about the government's role in this area. If we could do nothing else, for example, other than to encourage people to look and see whether some of these articles have some peer review, have some people who are authoritative sticking up for them, those kinds of ideas are might prove valuable. But we will be following up with you. Gentlemen, I am only skipping you in the interest of time, but I know of your organizations and the good work that you do. Dr. Baratz. Senator, could we just add two sites that people might want to look at that may help them in that jungle out there? One is a site called www.quackwatch.com, which is an appraisal of dubious claims, so that if someone has some questions about something, they can go there for sort of an objective appraisal of whether those claims hold up; and the other is the National Council Against Health Fraud site, would be ncahf.org, ncahf.org. I would recommend to Senator Breaux that instead of wasting his money on those magnets, he donate the money to us, because we could use that money to get better consumer information out there on these topics. [Laughter.] Those magnets do not even penetrate your skin. They are a complete waste of money. The Chairman. I will tell you I could not get on an airplane with them the other day. They make me stop and undress. Senator Wyden. I am going to get my friend, the chairman, a brand-new Gray Panther card so that he can be working on those things with us. The Chairman. Thank you, Senator Wyden, very much. I want to thank this panel. You have come from long distances and I appreciate very much your help and look forward to working with you. Keep up the good work. We are delighted to excuse this panel now and delighted to welcome up our last panel today. We are fortunate to have the Attorney General for the State of Maryland as our lead-off witness on this panel, Mr. Joseph Curran; Mr. John Taylor, who is Director of the Office of Enforcement of the Food and Drug Administration; Mr. Howard Beales, who is Director of the Bureau of Consumer Protection of the Federal Trade Commission; and from the Federal Bureau of Investigation, Mr. Dennis Lormel, Chief of the Financial Crimes Section of the Criminal Investigative Division of the FBI. Gentlemen, we thank you very much. We appreciate your being with us. Mr. Attorney General, we are delighted you were here for the whole morning hearing and we appreciate your patience. We know your schedule is very busy and we look forward to your testimony. STATEMENT OF HON. JOSEPH CURRAN, ATTORNEY GENERAL, STATE OF MARYLAND, BALTIMORE, MD Mr. Curran. Well, thank you, Senator. Actually, I am delighted that I had a chance to be here on time and to hear the entire scope of the testimony. It was extremely impressive, as I am sure that you have been impressed, as I have been. I would invite the attention of the committee to some of the testimony of the publisher of the Wellness document in California. It makes a lot of sense to take a long, hard look at the results of the 1994 act to determine ought there to be, should there be, can there be some amendments to deal with what we have heard about. In the alternative, beefing up FTC and FDA certainly would make sense, as helping our own Consumer Protection Division. I am just going to take a few moments to tell you about one of our experiences that will show you the depths of these types of cases, and I might add, as the Maryland Attorney General, I am able to enjoin a person who is doing business in Maryland. I can stop him in Maryland. I can stop him from shipping out of Maryland. But if he is in Louisiana and shipping into Maryland, I cannot do that. So there are some limitations on those of us who are attorney generals, and I am not sure--well, there is nothing I can do about it, but I will tell you this. We do work with other attorney generals when we learn of something, say in another State. In our own particular case, in which we cracked down on people who were operating in Baltimore a company called Tee Up, we later found out, after we stopped them, that they did, in fact, move offshore to the Bahamas, and they also moved to Pennsylvania. Happily, we were able to contact the health authorities in the Bahamas and advise them of this particular charlatan, and they stopped him there, and we also alerted the attorney general, my friend Mike Fisher, in Pennsylvania and we were able to stop them there. So that just gives you the scope of what any individual attorney general can do. What all consumers want, those of us who have reached my age or even those who are much younger, want to make sure that when we go to the supermarket or the health store, that when we buy this particular vitamin, it is safe and it is effective and the ingredients are there. We have heard about some of the charts that talk about enhancing sexual functions or removing wrinkles, and/or maybe helping with some pain, and that may well be. Well, if that happens, and it is a phony thing, then all you have done is lost some time and money. But in our case involving two people in Baltimore, this involved a cure for cancer, a cure for AIDS, 100-percent effective in breast cancer cure, 100-percent effective as a colon-or lung-cancer cure. I speak to you as a person who was told by a doctor some 10 years ago, ``We have bad news for you, you have cancer.'' So I know what it means when they tell you that. I am happy to say, because of medical treatment, I am 10 years operative and I am OK. But when you first hear that, you are really concerned, ``Well, what am I going to do?'' So what I was concerned about with these particular people who were selling this--it is an aloe vera, the aloe vera plant. They crush it up and grind it up in some way that it becomes liquid and they put it in a pill, and then they take something cause cesium chloride and grind it up in some way, and that is also a pill, and these two particular pills will enhance your T-cell quality, they will attack the cancer, and within weeks or months it will be gone. Well, if you have been told you have cancer, you are frightened, and unlike maybe some of these other drugs that get rid of wrinkles, these are very expensive, about $600 a month you have to take these two particular products that will get rid of your lung cancer or colon cancer, or cure AIDS or take care of the other conditions that you have. So you are talking about a lot of money. To give you some idea, Senators, in our investigation--I might add, I will compliment the FDA. They alerted us in late 1997--they alerted our Physicians Quality Assurance Board that they believed the publication indicated one of our persons who held themselves out to be a doctor was, in fact, practicing medicine improperly. So we got the case from FDA, we got into it. We were in court in early 1998, and now they have been shut down, although the case is still on appeal. We found out that during an 18- month period when they were operating they contacted about 3,700 persons across the Nation, just to give you some idea of how many persons were suckered into this, and they spent about $2.3 million. So it is big business, and I might add that did not cover the money that was paid for intravenous injections. There is some good news out of this, because the first person said, ``Well, let's pick up the bad''--well, the doctor who was administering against FDA regulations in Virginia currently resides in the penitentiary in Virginia. So, that is good news. He was prosecuted by the Federal attorneys in Virginia. The good news is that our case in Maryland, our Consumer Protection Division, we were able to stop them. We have got a judgment of $3.7 million against them, trying to get back the money they have gleaned from a lot of folks, and we are also trying to recover a penalty. So we are doing that from a standpoint of civil authorities. The other good news is that the fellow who holds himself out as a doctor will be tried in the Federal District Court in Baltimore in November. He escaped before on an 11-1 hung jury, but he is being tried again. So I thought I would tell you that the Federal Government, the FDA and the attorney generals are working together. But the point I am making is that there are not only these supplements that take away wrinkles, you are talking about a cure for cancer, and when you permit these folks to--and these are across the Nation, not just in Baltimore--when you permit them to make these advertisements to people who have cancer or a family member--if you are a family member and your loved one has been told they have cancer, you are going to spend money--$20,000 of injections of this aloe vera substance into your body, that is what they were costing. So the staggering sums of money that a person who has a life-threatening disease is going to pay--and so I would invite you clearly to see to if that if there needs to be more pre- marketing since 1994, more pre-marketing overview of these kinds of advertisements, that may well be the way to go. Happily, in this case, FDA found it early, got it to us; we acted properly; the Virginia Federal authorities acting properly; the Maryland, Baltimore Federal attorney is prosecuting the guy. So we are putting them in jail. That is fine, but I will tell you this. My experience, Senator Wyden, in telemarketing and other fraud, these guys, they seem to have learned how to do con work good. Telemarketing, you stop them here, they pop up there. Travel clubs, we put them out of business in Baltimore, they go to Topeka or somewhere. So I do not know about the health guys, whether they are the same ones, but my experience as attorney general for a number of years now in Maryland is that these bad guys seem to have learned how to make money and they continue to do it. So if you are able to get from your survey what these fellows are doing, that would be good information. The good news is that we have swung the big bat and they are in jail and they had been stopped, but they ought not to have been started. They preyed on cancer victims and that is just outrageous, and I am glad they are in jail and hope that the guy in November will go to jail, too, and stay there for a good, long time. [The prepared statement of Mr. Curran follows:] [GRAPHIC] [TIFF OMITTED] T6011.067 [GRAPHIC] [TIFF OMITTED] T6011.068 [GRAPHIC] [TIFF OMITTED] T6011.069 [GRAPHIC] [TIFF OMITTED] T6011.070 [GRAPHIC] [TIFF OMITTED] T6011.071 [GRAPHIC] [TIFF OMITTED] T6011.072 [GRAPHIC] [TIFF OMITTED] T6011.073 [GRAPHIC] [TIFF OMITTED] T6011.074 [GRAPHIC] [TIFF OMITTED] T6011.075 [GRAPHIC] [TIFF OMITTED] T6011.076 [GRAPHIC] [TIFF OMITTED] T6011.077 [GRAPHIC] [TIFF OMITTED] T6011.078 [GRAPHIC] [TIFF OMITTED] T6011.079 [GRAPHIC] [TIFF OMITTED] T6011.080 [GRAPHIC] [TIFF OMITTED] T6011.081 [GRAPHIC] [TIFF OMITTED] T6011.082 [GRAPHIC] [TIFF OMITTED] T6011.083 [GRAPHIC] [TIFF OMITTED] T6011.084 [GRAPHIC] [TIFF OMITTED] T6011.085 [GRAPHIC] [TIFF OMITTED] T6011.086 [GRAPHIC] [TIFF OMITTED] T6011.087 [GRAPHIC] [TIFF OMITTED] T6011.088 [GRAPHIC] [TIFF OMITTED] T6011.089 [GRAPHIC] [TIFF OMITTED] T6011.090 [GRAPHIC] [TIFF OMITTED] T6011.091 The Chairman. Mr. Attorney General, thank you. Let me just ask you a quick question before we get to the others. Not only did you, I guess, show the product, aloe vera injections, did not cure cancer, it also produced some adverse side effects; didn't it? Mr. Curran. We had testimony from our medical people that the product itself caused heart arrhythmia in animals. Now, they might say, ``Well, we didn't have it on humans,'' but we know that the testing that was done on animals demonstrated it was an adverse effect, and the cardiologist, I believe, in California also testified for us that his patients, having taken this cesium, likewise had a problem. I might add, in one of the publications they said--and this is very tricky--they said, ``Well, our product has been studied by the FDA.'' The truth of the matter is--that is true. The FDA did, in fact, authorize a Canadian clinic to study this aloe impact on 12 AIDS patients, and they found out it did not work. But they were able to say we have had a clinical study permitted by FDA. It did not say, ``Comma, and it didn't work.'' They just said, ``Period.'' So that is how they can play with these ideas that FDA authorized a study. Sometimes they do, but when they found out that it does not work, they do not say that. The Chairman. Thank you very much, Mr. Attorney General, for being with us and being so patient. We appreciate your testimony and the effort that you have made in this area. It has been outstanding. Next, we will hear from the FDA and Mr. John Taylor. Mr. Taylor. STATEMENT OF JOHN TAYLOR, DIRECTOR, OFFICE OF ENFORCEMENT, FOOD AND DRUG ADMINISTRATION, DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC Mr. Taylor. Good morning, Mr. Chairman, members of the committee. I am pleased to be here this morning to participate in this discussion of health fraud, specifically as it relates to dietary supplements. You do not have to look far to find a health product that is potentially fraudulent or a consumer who is totally unsuspecting. Promotions for fraudulent products appear daily in newspapers and magazine ads and television infomercials. They accompany products sold in stores and through mail-order catalogs. They are also passed along by word-of-mouth. The Internet is another method by which fraudulent products can be promoted. As beneficial as this technology can be, it also creates a new marketplace for activity that is already illegal, such as the sale of unapproved new drugs, prescription drugs dispensed without a prescription, and products that are marketed with fraudulent claims about these health products' benefit. As you have pointed out, consumers respond to these promotions hoping to find a cure for their illness, to improve their well-being, or even their appearance. In general, these promotions are not specifically targeted to one population, such as senior citizens, as the goal is to quickly establish a broad consumer base and maximize sales before being found out. Given the types of claims that these products make, one could certainly extrapolate, however, that some of these products are intended primarily for senior citizens. FDA is first and foremost a science-based public health agency. However, we are also a law enforcement agency. It is in both of these capacities that we strive to meet our mission of protecting consumers against health fraud. Strong law enforcement tools, coupled with a strong base of medical and scientific expertise to evaluate marketed health products are vital to the agency's ability to meet its mission in protecting the public health. When Congress passed the Dietary Supplement Health and Education Act, it created a unique regulatory framework for dietary supplements. Its purpose was to strike the right balance between providing consumer access to and truthful information about dietary supplements, while preserving regulatory authority for FDA to take action against supplements that present safety problems or that are labeled or promoted in a false or misleading fashion. As you know, the regulation of dietary supplements is, for the most part, a post-marketing program, and they are regulated by FDA's Center for Food Safety and Applied Nutrition, also known as CFSAN. In dietary supplement enforcement cases, the burden of proof is on FDA to show that a product or ingredient presents a risk after they are on the market. CFSAN, however, is not the only FDA center that plays a significant role in combating health fraud relating to dietary supplements, as many of the products the agency has successfully taken off the market were products marketed as dietary supplements that turned out to be drugs. FDA's Center for Drug Evaluation and Research, or CDER, is responsible for ensuring that safe and effective drugs are available to the American public. They work to accomplish this mission through a commitment that lasts for the lifetime of the product, from the early stages of drug review and approval to monitoring the products once they reach the marketplace. FDA shares Federal oversight of dietary supplements with the Federal Trade Commission. FDA regulates safety, product monitoring and product labeling. FTC has primary responsibility for regulating the advertising of these products. When a problem arises with a product regulated by FDA, the agency can take a number of actions to protect the public health. For dietary supplements, as with other products, initially the agency works with marketer of the products to correct the problem voluntarily. If that fails, we can ask the marketer to recall a product voluntarily, seek through the courts seizure of the product and/or injunctions against firms or individuals who market the products. We can also detain or refuse entry of products presented for import at U.S. ports, and when warranted, criminal penalties, including prison sentences, are also sought through the courts. Health fraud can be brought to the agency's attention in a variety of ways. For example, FDA's investigators often identify violations while conducting inspections. FDA may also identify a violation or suspected fraudulent product through routine marketplace surveys, searches, consumer complaints, informants or through referrals from the FTC and other Federal, State or local government authorities. Despite the complexities involved in building and bringing an enforcement action, the agency has been successful in bringing cases against fraudulent products in all categories of FDA-regulated products. There are several examples in my written statement of successful cases that the agency has brought in conjunction with the Department of Justice and, in some cases, the FTC. I would be happy to discuss any of these cases with the committee during questioning. The agency has a number of other ongoing activities directed at combating health fraud. Many of these activities are the result of a strategy plan begun by FDA in 1992 to improve its processes for targeting and coordinating regulatory activities among its various components and Federal, State, local regulatory and law enforcement agencies. This strategy also focused on improving the agency's efforts to educate the public about the importance of making wise choices concerning their health care. The full range of activities is described in my written statement, but let me give an example. In 1992, FDA began sponsoring a national health fraud working group. The working group is currently comprised of representatives from the Association of Food and Drug Officials, the National Association of State Attorney Generals, FTC, Health Canada and FDA representatives from its various components. This group meets on a regular basis to facilitate the coordination of regulatory activities, information exchange and leveraging of each member agency. In addition, the agency is engaged in several consumer education efforts with the FTC, including a facts-for-consumer brochure entitled, ``Miracle Health Claims: Add a Dose of Skepticism,'' that is focused on fraudulent claims and spotting quackery and health fraud. FDA has also made Internet surveillance an enforcement priority. The agency's partnership with the FTC and others in Operation Cure-All further demonstrates FDA's commitment to monitoring violative conduct on the Internet. Over the past 2 years, FDA has sharpened its focus on the issue of Internet promotion and the sale of drugs as online activities have expanded. While FDA tries to be vigilant against health fraud, many fraudulent products escape regulatory scrutiny, maintaining their hold on the marketplace for some time to lure increasing numbers into their web of deceit. For every such marketer that we put out of business, another or more appear. As long as there are vulnerable populations to prey upon, there will continue to be those unsavory and unscrupulous characters who do so. Mr. Chairman, combating health fraud is a challenge, especially in light of the advent of the Internet, and one to which the agency is committed to addressing. Our partnership with our law enforcement, public health, State and local, and international colleagues expands FDA's reach and impact. Good enforcement strategies and enforcement actions, vigilant oversight of the marketplace, and sufficient legal authority to remove these products from the market is not enough. Successfully combating health fraud must include educating our citizens to recognize fraud when they see it and warning them of the potential dangers that some of these products pose. Only through these steps can we help the public make fully informed decisions about their health care purchases, and thereby reduce the number of people who may fall prey to these fraudulent products. Thank you for the opportunity to participate in this hearing. We look forward to working with you as we grapple with health fraud as a Nation. I would be happy to answer any questions you might have. [The prepared statement of Mr. Taylor follows:] [GRAPHIC] [TIFF OMITTED] T6011.092 [GRAPHIC] [TIFF OMITTED] T6011.093 [GRAPHIC] [TIFF OMITTED] T6011.094 [GRAPHIC] [TIFF OMITTED] T6011.095 [GRAPHIC] [TIFF OMITTED] T6011.096 [GRAPHIC] [TIFF OMITTED] T6011.097 [GRAPHIC] [TIFF OMITTED] T6011.098 [GRAPHIC] [TIFF OMITTED] T6011.099 [GRAPHIC] [TIFF OMITTED] T6011.100 [GRAPHIC] [TIFF OMITTED] T6011.101 [GRAPHIC] [TIFF OMITTED] T6011.102 [GRAPHIC] [TIFF OMITTED] T6011.103 [GRAPHIC] [TIFF OMITTED] T6011.104 [GRAPHIC] [TIFF OMITTED] T6011.105 [GRAPHIC] [TIFF OMITTED] T6011.106 [GRAPHIC] [TIFF OMITTED] T6011.107 [GRAPHIC] [TIFF OMITTED] T6011.108 [GRAPHIC] [TIFF OMITTED] T6011.109 [GRAPHIC] [TIFF OMITTED] T6011.110 [GRAPHIC] [TIFF OMITTED] T6011.111 [GRAPHIC] [TIFF OMITTED] T6011.112 [GRAPHIC] [TIFF OMITTED] T6011.113 [GRAPHIC] [TIFF OMITTED] T6011.114 [GRAPHIC] [TIFF OMITTED] T6011.115 [GRAPHIC] [TIFF OMITTED] T6011.116 The Chairman. Thank you, Mr. Taylor. Right on time. Mr. Beales, welcome. STATEMENT OF HOWARD BEALES, DIRECTOR, BUREAU OF CONSUMER PROTECTION, FEDERAL TRADE COMMISSION, WASHINGTON, DC Mr. Beales. Thank you Mr. Chairman, members of the committee. I am Howard Beales, Director of the Bureau of Consumer Protection at the Federal Trade Commission. I am pleased to have the opportunity to testify at this important hearing. The Commission's full statement, which we have submitted for the record, are the views of the Commission, but my oral statement and my responses to questions are my own and may not reflect the views of the Commission or any individual commissioner. The FTC is the nation's primary general jurisdiction consumer protection agency. Protecting consumers from false, deceptive or unsubstantiated health claims has long been an essential part of our mission. We believe these efforts are important, because health fraud often targets a very vulnerable segment of our population, those suffering from serious or incurable health conditions and diseases. In such circumstances, even outrageous claims that ordinary consumers would dismiss as fraudulent can be, and are, effective. These false, misleading and unsubstantiated health claims can injure consumers in a number of ways. First, they cause economic injury, taking consumers' money in return for ineffective products. Even more importantly, they may threaten consumers' health if victims are deterred from seeking effective treatment. Moreover, in some cases, the products themselves are dangerous. To control these types of claims, the Commission has filed numerous law-enforcement actions challenging false or deceptive therapeutic claims for products claiming to cure a broad range of chronic diseases, including cancer, arthritis and heart disease. Despite these efforts, deceptive health claims persist. Over the past 5 years, the Internet has become the medium of choice for many companies marketing unproven health products. In response, the Commission initiated Operation Cure.All, a comprehensive effort targeting health fraud on the Internet. Operation Cure.All utilizes law enforcement, consumer education and business education. In addition to the FTC, participants include the FDA, several State attorneys general and Health Canada. On June 14 of this year, the Commission announced the most recent group of Operation Cure.All cases. Among the claims the Commission challenged were claims for colloidal silver, like this product here, which is basically distilled water containing 3 to 20 parts-per-million of silver ions. These products cost $15 to $25 a bottle. Internet advertising for these products claimed they were an effective treatment for 650 different diseases or ailments, including cancer, arthritis and diabetes. Another product involved in our recent Cure.All sweep was the so-called Black Box, which you see in the poster over here. This was a device that purportedly delivers an electric current to the body. Promotional materials for the product claimed that it neutralizes viruses and kills bacteria in the bloodstream and organs. Together with something called the ``Magnetic Pulser,'' the Black Box was supposedly effective in treating cancer and rheumatoid arthritis. The black box sold for $170; adding the magnetic pulser pushed the cost to $355. Still another product is this anti-aging product, called Longevity Signal Formula, marketed to prevent or reverse aging, significantly increase life expectancy, significantly reduce the risk of atherosclerosis and cure arthritis. This product cost $79 for a 30-day supply. Our law enforcement efforts play an important role in our health fraud program, but law enforcement is a means to an end. The primary goal of consumer protection is to prevent consumer injury in the first place. Consumer education is another critical tool in that effort. Today, we are releasing a publication produced jointly with FDA, called ``Miracle Health Claims: Add a Does of Skepticism.'' This is an example of the brochure. It provides specific information about the efficacy and safety of popular products, as well as information similar to the Commission's Tip-offs for Rip-offs, which you see on the poster over here, that is advice to consumers about how to spot and avoid health fraud. The brochure, as well as our other educational materials, provide consumers with both a toll-free number, 1-877-FTC-HELP, and a web address, www.FTC.gov, to file consumer complaints. To fight fire with fire, we have used the Internet to obtain broad distribution of our consumer education messages. Our web-based, health-related consumer education materials have been accessed over 80,000 times since October 1 of last year. In addition to law enforcement and consumer education, the third prong of our efforts to combat health fraud has been an extensive industry education campaign. We have published a guide for small businesses on how to avoid making false or substantiated health claims. We have sent e-mail advisories to more than 1,000 web sites making questionable therapeutic claims. Law enforcement, however, remains critical. Additional non-public investigations are under way. The Commission, in coordination with our law enforcement partners, will continue its aggressive enforcement program to combat health fraud. In addition, we will continue to expand our consumer and industry education efforts, and to continue our search for new ways to address problems in this important area. Thank you very much, and I look forward to your questions. [The prepared statement of Mr. Beales follows:] [GRAPHIC] [TIFF OMITTED] T6011.117 [GRAPHIC] [TIFF OMITTED] T6011.118 [GRAPHIC] [TIFF OMITTED] T6011.119 [GRAPHIC] [TIFF OMITTED] T6011.120 [GRAPHIC] [TIFF OMITTED] T6011.121 [GRAPHIC] [TIFF OMITTED] T6011.122 [GRAPHIC] [TIFF OMITTED] T6011.123 [GRAPHIC] [TIFF OMITTED] T6011.124 [GRAPHIC] [TIFF OMITTED] T6011.125 [GRAPHIC] [TIFF OMITTED] T6011.126 [GRAPHIC] [TIFF OMITTED] T6011.127 [GRAPHIC] [TIFF OMITTED] T6011.128 [GRAPHIC] [TIFF OMITTED] T6011.129 [GRAPHIC] [TIFF OMITTED] T6011.130 The Chairman. Thank you, Mr. Beales. With the Federal Bureau of Investigation, Mr. Lormel? STATEMENT OF DENNIS M. LORMEL, SECTION CHIEF OF FINANCIAL CRIMES, CRIMINAL INVESTIGATIVE DIVISION, FEDERAL BUREAU OF INVESTIGATION Mr. Lormel. Thank you sir. We would like to thank the committee for the opportunity to participate today, also to commend the committee for the initiative to raise awareness as to the vulnerability of the elderly and seriously ill to falling prey to unscrupulous con artists and fraudsters concerning dietary and nutritional supplements, as well as other fraud schemes. The FBI views promoting awareness to the vulnerability of the elderly and seriously ill to health care and other fraud schemes as an important preventative component in dealing with the crime problem. True deterrence is a combination of proactive, preventive measures and enforcement actions. I have submitted to you our written statement, which also includes four anecdotal case summaries, which unfortunately mirror some of the schemes you have heard about. I would like to focus my comments this morning to the response in your invitation as to what the bureau is specifically doing. First off, health care fraud is recognized within our white-collar crime program as the No. 1 investigative priority. Unfortunately, we deal pretty much in insurance-related health care frauds. So the schemes you have pretty well outlined here this morning we do not consider or work as health care specific. One of the things that I would ask the committee to consider is expanding health care legislation to allow us more jurisdiction in terms of other related health care criminal conduct such, as what you have heard here this morning, because many of the schemes, as I say, are outside the scope of Medicaid or private insurance that we traditionally investigate. With that, though, we do have a presence in this area. We investigate these cases pretty much as fraud by wire or mail fraud matters, and with specific reference, Senator, to the invitation letter, you inquired as to the FBI's efforts in the area of health care fraud, focusing on dietary and nutritional supplements. In that regard, we work closely with our companion agencies, and as I said, we work the cases mostly as wire fraud and mail fraud cases, and outside the scope of traditional health care. We participate with other agencies--was one of your inquiries--how do we participate. We have limited investigative resources in this area, so the partnership with other law enforcement agencies, particularly FDA, as it relates to the dietary supplements and nutritional supplements, is important. We partner with the Postal Inspection Service, with the IRS, with State attorneys general and Medicaid officers in pursuing these criminal investigations. In a broader context, in the traditional health care arena, we work with HHS and we work with DCIS and the above agencies that I mentioned before. Also, we deal in partnering with outside agencies such as AARP. As I mentioned earlier, promoting awareness is very important to us. We have an aggressive campaign where we use retired individuals to help us promote awareness and to act in concert with us in an undercover capacity in a lot of the investigations we conduct. We have an initiative, in the traditional sense of telemarketing fraud, which we call Canadian Eagle, in which we deal extensively with Canadian officials and cross-border crime schemes and issues. One example of the cooperation, I think, between the bureau and FDA, in particular, is the ongoing case in Kansas City involving the pharmacist who has now provided short dosages of particularly cancer drugs, and obviously the elderly is a component of the people there. The FBI and FDA are working very closely in that case, in that regard. You asked about programs in place to protect the general population and, in particular, the elderly. We have joint outreach and educational programs, as I mentioned, with AARP and through vehicles such as our Internet Fraud Complaint Center. As the FTC has Consumer Sentinel, we have the Internet Fraud Complaint Center, and we are able to assess and analyze Internet Fraud type of complaints, and we are hopefully--in that process, we aggregate the complaints and we are able to refer out cases, not only to the FBI, but to State and local law enforcement entities throughout the country and, in fact, around the world. Types of proactive investigative techniques that we undertake to ferret out these products and frauds include short-term undercover operations targeting the fraudsters. We use retired individuals, retired FBI agents, and we do so in concert with AARP as we can identify cases. We conduct assessments and analysis, as I mentioned, through the Internet Fraud Complaint Center, and refer cases back out. We certainly pursue traditional investigative techniques as appropriate, and we look to initiate regional and national investigative initiatives where we can really promote the high level of visibility, and certainly in terms of the visibility, better make people aware of the crime problems. Senator Wyden, in your comments, I think you were right on the mark in terms of tasking GAO. I would encourage you, sir, if you would, to expand that beyond just the health care arena, because these fraudsters are across the board in all areas. I have been very general in terms of my comments, sir, and if you have got some specific questions, I would be very happy to pursue them and to follow up with any other additional information you would like from us. [The prepared statement of Mr. Lormel follows:] [GRAPHIC] [TIFF OMITTED] T6011.131 [GRAPHIC] [TIFF OMITTED] T6011.132 [GRAPHIC] [TIFF OMITTED] T6011.133 [GRAPHIC] [TIFF OMITTED] T6011.134 [GRAPHIC] [TIFF OMITTED] T6011.135 [GRAPHIC] [TIFF OMITTED] T6011.136 [GRAPHIC] [TIFF OMITTED] T6011.137 [GRAPHIC] [TIFF OMITTED] T6011.138 [GRAPHIC] [TIFF OMITTED] T6011.139 [GRAPHIC] [TIFF OMITTED] T6011.140 [GRAPHIC] [TIFF OMITTED] T6011.141 [GRAPHIC] [TIFF OMITTED] T6011.142 [GRAPHIC] [TIFF OMITTED] T6011.143 The Chairman. Thank you very much, Mr. Lormel. Thank the panel members, all of you, for this. I know we have got a problem out there. We have got literally thousands of these manufacturers out there that are manufacturing this, and it seems to me that we are not doing, as a government, nearly enough to eliminate the snake-oil salesmen, as I have termed them, who operate in the 21st century, not on the street corner, but by very sophisticated targeting of seniors through mass-marketing efforts, and generate hundreds of millions of dollars that we saw one company making annually. It is a $27 billion industry annually, all of it certainly is not fraudulent. In fact, the vast majority of it, I think, is very positive and very good. But this is something that I think really deserves more attention than we seem to be giving it as the government. I am concerned that, in 1994, when we passed as Congress the Dietary Supplement Health and Education Act, referred to as DSHEA, that we did not help you folks in the enforcement area get to the problem actors in this supplement business. Am I correct in that observation? What, in general, is your opinion from an enforcement standard that you are involved in, of the effect of the Dietary Supplement Health and Education Act that Congress passed? Did it help you get rid of the bad actors? Did it not have any effect at all? Did it make it more difficult? Mr. Curran. I can say anecdotally, in the case of Tee Up, Senator, the rip-off was out there before we learned of it. In other words, there was not any pre-market review. Thirty-seven hundred persons spent a lot of money already. You did not have a witness who was supposed to be here, Mrs. Crabb. The other thing that we were concerned about is that, in our case, folks who could have been helped in a legitimate area chose to go to this snake oil person. Mrs. Crabb's husband had esophagus cancer and was thought to be living another 18 months or 2 years, took this snake oil stuff and died within 2 weeks. That is the fellow over in Virginia who is in prison right now, happily, that doctor. So my concern as an AG is that--we catch them after they do their deed. I wish that there was some way to make them be prescreened or premarketed, and then if it is good stuff, like I daresay there may well be, then fine. The Chairman. There has been an explosion of these supplement sales, a 380-percent increase between 1990 and 1997. I am just wondering whether the actions by Congress contributed to the explosion of the growth in this area. Mr. Taylor, I want some comments from FDA on this. Mr. Taylor. Well, I am not sure if the legislation contributed to the growth of the industry, but I can tell you that, from an enforcement or law enforcement standpoint, the very fact that in dietary supplement enforcement cases, that the burden is on the agency to prove that the product poses a risk is a significant change and a significant difference from how we handle other cases. The Chairman. Let's just talk about this. That is significant. We essentially changed the burden of proof on who has to approve whether this stuff is good or bad. Is that right? Mr. Taylor. Well, there is no pre-approval, so it is just sort of a post-market model. As a result, once the product is on the market, if FDA has decided that they wish to remove a product from the market because it poses a significant and unreasonable risk to the consumer, the burden is on FDA to establish scientifically that indeed the product does pose a risk. The Chairman. Obviously, just for the information of the committee, what is the difference with regard to pharmaceuticals, over-the-counter generics? Mr. Taylor. Sure. In the context of drugs, the burden is on the company to show that the product is safe and effective. So if we were going to bring an enforcement action against a pharmaceutical product, we could bring the enforcement action and the burden is not on us to show that it is harmful. It is on the manufacturer to show that indeed the product is safe and effective. The Chairman. So the question to FDA is how much has the passage of the Dietary Supplemental Health and Education Act of 1984--how much of an effect has it had on the enforcement ability of FDA? Mr. Taylor. It makes it much more challenging to bring enforcement actions. The Chairman. I note that from GAO's testimony, that they say that the act allows FDA to remove from the market dietary supplements that the agency can prove are dangerous, but the agency has not prohibited the marketing of any specific substances using its administrative rulemaking authority. In fact, they say that FDA has not initiated any administrative rulemaking activities to remove from the market certain substances that its analysis suggest pose health risks, but has sought voluntary restrictions and attempted to warn consumers. We had the first panel here talk about $200 million in annual sales by a company that publishes the Journal of Longevity, and we had other people come in and say that it does not work, that it could potentially be harmful, and it targets and preys on seniors. Has the FDA done anything in regard to that particular activity by that particular enterprise? Mr. Taylor. FDA is currently looking into that, those activities and that enterprise, and I do not want to say anything that would negatively impact on that inquiry. However, I would like to address the GAO's statements. The GAO is correct. There are two mechanisms that FDA could use to administratively remove a dietary supplement product. One avenue is a determination by the Secretary, and only the Secretary, that the product poses an imminent harm. The other mechanism is to use rulemaking to establish that a product maybe should be removed from the market. That is in the administrative context, and no, we have not taken any products off the market through administrative channels. However, we have used enforcement actions to remove products marketed as dietary supplements that we felt actually were drugs masquerading under that protection and we have used injunctions in several instances to remove products that were marketed as dietary supplements off the market, and as part of the relief that we achieved in these injunctions, is language that would allow us to bring contempt actions if we found later on that these defendants were continuing to manufacture unapproved drugs under the guise of dietary supplements. The Chairman. That is going after them under the old drug regulations and not under DSHEA? Mr. Taylor. Yes. What happens is that--and you will note in my written testimony that we have several cases where companies have marketed products, claiming that these products are dietary supplements even though the products make mitigation, cure, and treatment claims. If you make mitigation and cure or treatment claims, then under the act the product is a drug, even if you market that product as a dietary supplement. That is the theory and the argument that we have used in several of the enforcement actions that are noted in the written testimony. The Chairman. It seems to me that the Dietary Supplement Health and Education Act has greatly hamstrung and hand-tied your ability to assure the American people that these supplements that are increasing by huge amounts are, in fact, safe. The GAO went on to say that FDA's adverse effect reporting system for dietary supplements receives reports of only a small portion of all adverse events, and the reports that you receive are often incomplete, because no one has to report. These are voluntary. People are embarrassed. I am not going to report to the Federal Government that I was so stupid I bought something that did not work. I did not want to tell you about my magnets in my back, but I guess I did. [Laughter.] So they do not want to report this stuff. In fact, for something more serious than magnets in my back and my back brace, GAO says that they found documents disclosed in a recent court case showed that a manufacturer of a product containing Ephedra had received more than 1,200 complaints of adverse events related to the product but FDA told us that they were aware of few, if any, of these reports before this lawsuit was filed. Does that not indicate a real breakdown between the amount of adverse reactions that are out there and the information that you are getting? If not, why not? Mr. Taylor. Well, certainly you are correct. The very fact that it is a passive, voluntary system suggests that under- reporting does occur. However, there have been some instances where the adverse event reporting system has acted as a sentinel or signal of a growing problem. One example is a drug called gamma butyrolactone, which is a GHB precursor, and in the winter or the fall of 1998 and the winter and spring of 1999, we noticed an unusual level of adverse events that led us to bring actions against many of the manufacturers of these products, and these products were marketed for a myriad of claims, mostly energy enhancing, muscle enhancing, but they were also marketed for the purpose of addressing wrinkling and some other aging conditions. So you are right that our adverse event reporting system, because it is passive, because it is voluntary, does have some weaknesses. But there have been instances where it has indeed provided us a signal that a problem is on the horizon or is already before us. The Chairman. What about inspection of the manufacturing facilities? You have the authority to do that, but the information I have is that they are about--your own information tells me that there are about 1,500 facilities that manufacture this stuff, and that last year you all inspected 53. Mr. Taylor. That is correct. The number of inspections in the dietary supplement program are far fewer than in our other programs. The Chairman. Is that because of a congressional act of Congress or because you do not have the resources to do it? Are we telling you not to do it? Mr. Taylor. Well, no. I think that the final promulgation of the good manufacturing practice regulations will, first of all, do two things. One, it will help us locate some of these facilities, but more importantly it will set a standard that will help ensure that the dietary supplements are safe and properly labeled. The Chairman. Right now you do not even know where they are? Mr. Taylor. We know where some are, but because there is no registration requirement, it obviously is difficult to identify some of the sources of these products. But if you look at all of our other programs, the pharmaceutical program, the medical device program, a vast majority of our inspections are geared toward ensuring that companies are manufacturing their products in conformance with the good manufacturing practice regulations, because it is those regulations that set the standards for quality assurance and quality control in an industry. The Chairman. I will tell you, if you are only doing 53 out of 1,500, that is just barely touching the tip of this problem. Mr. Taylor. You are correct. The Chairman. I have gone too long. Senator Wyden. Senator Wyden. Thank you. Thank you, Mr. Chairman. Gentlemen, thank you. Thank you very much for excellent, excellent testimony, and I hope you walk away knowing that you have seen Chairman Breaux, who has got a lot of responsibility, be with you for 3 hours, because we are committed to turning this situation around, and I just have a few questions I want to ask of you before we wrap up. The first is we had sworn testimony this morning that Mr. Braswell's money finds its way to the Cayman Islands, is what we were told this morning. If that is the case, how does the government deal with that, and do you need additional tools to deal with it? I have said repeatedly that one of the areas that I think has changed most with respect to health care fraud is how much of this moves quickly around the world. But, since we had testimony with respect to the Cayman Islands this morning, I would be interested in having your assessment about how you would deal with that, if that, in fact, is what happened. May we start with you, Mr. Lormel? Mr. Lormel. Yes, certainly. I think without making specific reference to that case, because it is an ongoing investigation the IRS has, we conduct numerous investigations with a money laundering nexus, and venues like the Caymans are very attractive to somebody who is looking to park considerable amounts of money. We certainly can use assistance with the governments at play. We have worked very closely, I know from the Department of Justice standpoint, through MLATs, mutual legal assistance treaties, with the different municipalities to try to get access and cooperation from the banking authorities in those venues. But certainly, as long as the fraudsters know that there is a safe haven for money, that money is going to move in that direction. Senator Wyden. So if that is where the money were to end up, and I was trying to characterize it as you did. It has been an assertion, but that was an assertion under oath that the money found its way there. In this particular case, where we are talking about a potential recidivist, as of now there is nothing the government can do about it? Mr. Lormel. Yes, sir. That is correct. What we would have to do is come into a situation where we had an indictment or some type of legal action, so that we could freeze monies and hopefully, through the Federal court system, we would forfeit the money back to the government. Senator Wyden. Does it require a change in Federal law to bring about those forfeitures? Mr. Lormel. I don't know that it requires a change in Federal law, as much as obtaining the cooperation of the foreign governments involved. I think, in that regard, we are making inroads, particularly in a place like the Caymans. That individual is going to be surprised to find out that there are cooperative initiatives underway in the law enforcement realm. Senator Wyden. For you other three, before I move onto other topics, in the international area, are there additional steps that you would favor the Congress pursuing? Mr. Curran. The one example that we had in Maryland--I called to the authorities in the Bahamas, who were very receptive, so, one-to-one, they understood the problem, knew it was a fraud, and they stopped it. So that is a good news story and did not need anything other than a phone call, actually. That worked out well. Mr. Taylor. I think my answer would be similar to the FBI and the State of Maryland. We have contacts in other countries overseas, and without commenting on the set of facts that are before us, we certainly have had other instances where money has moved offshore and we have been able to address a situation after indictments or some other judicial steps have been taken. So I think we do have the tools. We just have to look at the facts and formulate a strategy. Mr. Beales. At the FTC, we have been involved in trying to work out judgment recognition agreements in various international fora, in order to be able to collect on our judgments. We have also, in some cases, been successful in obtaining an order requiring someone to bring money back into the United States that was then available to satisfy a judgment. Senator Wyden. Mr. O'Neil did not think the system worked for him. Mr. O'Neil, at considerable exposure to himself, went to government agencies, went to, apparently, some of the people who work for all of you, and did not feel that people made the kind of effort that was necessary to deal with it. It is not a particularly encouraging account. In your view, how should the system have worked? Again, let's divorce it from this case, because this is a case under investigation. These are charges. They were made under oath, so they are particularly significant. But how should the system have worked for Mr. O'Neil, again, because he is bringing to the attention of the government an instance that was already one that should have set off some red light, given the previous history? Mr. Lormel. Mr. Lormel. Yes, if I may. We are dealing with Mr. O'Neil's perception and sensitivity there. The IRS does have an investigation and it is ongoing, but by the nature of these cases, they are so complex and they do not come to some type of closure or action in a relatively short frame. The frustration in going to numerous agencies, as apparently he did--and, sir, I would be very interested, as an aside, to find out if they came to the bureau and sit with you, and we could weigh what exactly happened or should have happened. I think perhaps, from the enforcement standpoint, there needs to be better sensitivity in dealing with the Mr. O'Neils who bring these complaints in, because certainly you are dealing with a case here that is outside the norm, and as he indicated, which is somewhat intimidating to him individually. I hope that--and I know from the bureau's perspective, and I would have to think my colleagues' likewise--would not have been intimidated to take a case like that on, although that is the perception that is given because of, perhaps, the lack of communication back or dialog that he was looking for. Particularly, when you look again at a complaint of that magnitude, he sees it, he lives it firsthand, certainly when they bring us those facts, there are so many variables that go into whether or not we have jurisdiction, so there are jurisdictional concerns. I think you guys have pointed to the fact that a case like this, there is so much wiggle room in terms of does the bureau have jurisdiction or does one of the other agencies have jurisdiction? So there are so many considerations at play, I would like to know what all the dynamics were in the dealings that Mr. O'Neil had, because I think that we could allay some of his concerns when you go point-by-point. However, there is a perception. It is a significant problem. We need to address it. Mr. Taylor. Senator Wyden, since FDA was one of the agencies that was specifically cited, I find it unfortunate that his experience with FDA was not to his liking. I think it, quite frankly, is our responsibility to listen to his complaints. We have set up a web site that specifically deals with complaints about violative sites and violative conduct, and there is a connection on our Internet site. That does not always mean that we will be able to build a case. Obviously, there are complexities involved in building a case, but I think it certainly is our duty to listen to what he has to say, and if the information is useful, weigh that against a decision whether not to take some type of regulatory action. Senator Wyden. Let me ask it this way. When I asked Mr. Glen essentially about that, Mr. Glen said that the people who were contacted should have immediately brought together a sort of interagency kind of effort. He said we should have had the various consumer protection agencies, the various law enforcement agencies, invited several of the international bodies--I think you mentioned Canadian authorities and others-- and we should have moved quickly in a concerted kind of way. My sense is that, for instances, again, where we are talking about potential recidivists, people who have already been found to have violated laws that prevent preying on the elderly, that that would be a practical way to do it in the future. Is that what happens now? Is there an interagency effort where FBI, FTC, the FDA, the relevant State authorities come together and say, ``Look, we are all people who care about following up here. Let's divide up the task.'' Is that done today? Mr. Taylor. Well, I can tell you all the law enforcement agencies represented at this table were part of a law enforcement symposium that was held in San Antonio in July, and we discussed many of these issues. I think one of the things that the advent of the Internet did was, I think, highlight for all of us our limitations, and I think has reawakened the need to make sure that if it is something that jurisdictionally we cannot handle, that there is a mechanism for sharing that information with another agency, whether it be on a State or Federal level, that can work the matter. That is why many of the working groups that I talked about earlier comprise members from all of these groups. There really is a need to ensure that enforcement is more seamless, so that we do not see some of the gaps that we have seen in the past. Senator Wyden. Well, I am going to explore this with you some more, because that seems to me what should have been done here, is when Mr. O'Neil came to your various agencies, there should have been some way to bring all of you who work in this area together, divide up the task, see who would have information, and clearly that was not done. It is always easy to Monday morning quarterback, but I think that needs to be done in the future. Mr. Lormel. Senator, if I may, just to follow on to that, that certainly would be the optimum situation. We deal more on a case-by-case dynamic, and it makes it somewhat difficult in terms of resources to be able to ideally deal with that. But you are right, we need to take a look. There are a number of working groups at the national and regional levels that do meet and deal with those cases. Again, I think we need to look at the specific dynamics at play here and then weigh it against the national picture. Senator Wyden. Well, that really leads me to my last point, Mr. Lormel, for you, and you are absolutely right. This is a case-by-case situation, and that is why I asked earlier about people who are repeat offenders, and I appreciate the kind words you had to say. What I would like to do in this area is I think there needs to be a way to set off some red lights, a kind of warning signal through the Federal Government when you are talking about people with a track record of exploiting older people. We do this in other law enforcement areas. One of the things I am proudest of is I worked with all of you and Arlen Specter on the armed career criminal law, where we say when you are talking about repeaters, we are, in effect, going to have some warning lights that go off so we really target them and, of course, there are enhanced penalties. Tell us a little bit more then, since you were kind enough to say you liked it when I suggested it earlier, how you think it would be useful to target the recidivists and these repeat offenders? Clearly, case-by-case discretion has to be a part of it. But if you were going about trying to laser in on people with a track record of preying on older people, how would you do it? Mr. Lormel. Starting from within, just internally, from the bureau's perspective, before taking it to the other agencies, because clearly we need to have a joint operational initiative, and I would clearly call it that. We would have some type of operational initiative, and we would set up the parameters, basically, of the fraudsters we are looking at. We are looking at repeat offenders. You are talking significant dollar amounts, so you are talking cases that have a history. So the first step is going to be to study our indices and do an analysis, and target proactively those offenders that are out there, bring in the other jurisdictional agencies with an interest. Again, as I would in a response to a crisis situation with an operational plan, put together an operational strategy and then proceed, and call it a national initiative. Perhaps this is an area that warrants such. Senator Wyden. I have imposed on the chairman's time. This has been an excellent, excellent panel. You all are on the front lines, and it is our job to get you the tools to do your work. So we will be working closely with you. Thank you, Mr. Chairman. The Chairman. Thank you, Senator Wyden, and thank you for your attendance throughout the hearing today. We really appreciate it and look forward to working with you, as well. I have one question and some closing comments. Mr. Beales, I asked Mr. Taylor the question about whether, in his opinion--and I will ask you the same--of the Dietary Supplement Health and Education Act that was passed in 1994. Has it made your job as an FTC employee easier or more difficult in trying to find fraudulent bad actors in the area of dietary supplements? Mr. Beales. I think from the FTC's perspective it has not made any difference at all. The basic standard that claims have to be substantiated is the law enforcement standard that we would apply to any other product and that we have applied in other areas with a great deal of success. The Chairman. So you are looking at advertising claims. You were doing that before this. You will do the same after? Mr. Beales. That is right. It really is not different. If I could just add one comment about recidivism, at the FTC we have a project called Project Scofflaw that actively looks for potential recidivists in violation of our past orders and then looks to see what kinds of steps are appropriate or remedy these recurrent violations. Some are referred for criminal prosecution. We have been successful in getting criminal contempt for violations of our orders, and some we pursue ourselves. The Chairman. I want to thank this panel. I want to thank the previous witnesses, some who came and testified, which was a difficult task for them. We appreciate them and their traveling long distances to provide the testimony, and for our enforcement people for being with us today. Mr. Attorney General, thank you for your good work in Maryland. I am disturbed by one of the conclusions in the GAO study that we asked them to do, which concludes, ``At the risk of harm to seniors from anti-aging and alternative health products, it has not been specifically identified as a top public health priority or a leading enforcement target for Federal and State regulators.'' I know there are exceptions. I think we have heard one today from the attorney general, but when you have an industry that has increased in sales by 380 percent between 1990 and 1997, that is a $27 billion annual industry, marketing products, particularly to seniors--products who, in many cases, claim to be cures for everything from cancer to high cholesterol, to heart problems, to diabetes, to Alzheimer's, that is still basically self-regulated, it seems to me that we have a very serious problem that needs to be addressed. It seems to me that the Dietary Supplement Health and Education Act that Congress passed in 1994 has essentially changed the burden of proof on products that are being sold that guarantee health benefits to our citizens--was a very significant act. It seems to me that this is a huge business that is growing every day. I will also point out that many of the products are good, solid, do a great deal of good for the people that take them, but at the same time we have seen today that there is a concentrated effort through modern-day, 21st- century marketing efforts to market these products aggressively and specifically to the most vulnerable people among us. Not only do they cost a great deal of money that many of the people in the category that buy them do not have, they also present potential medical problems for the people who take them because of their interaction with other drugs, because they sometimes take the supplements instead of the prescribed drugs from their doctors, and we are seeing some of the results of these efforts. I would hope that this committee would be able to look at making some recommendations in this area. At the very least, I think that this committee will continue to be involved in changing the attitude that this, in fact, should be a top public health priority for this government. We intend to see that it is made such. This hearing has been very helpful, and this will conclude the hearing. 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