Suvarna Garge (Editor)

Mannatech

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Type
  
Public

Key people
  
Alfredo Bala, CEO

Traded as
  
NASDAQ: MTEXam

Founder
  
Samuel L. Caster

Mannatech httpslh4googleusercontentcom3R6p9ZWirbcAAA

Industry
  
Wellness, Personal care, Multi-level marketing

Revenue
  
US$ 173.447 million (2013)

Operating income
  
US$ -980 thousand (2013)

Headquarters
  
Coppell, Texas, United States

CEO
  
Alfredo Bala (11 Aug 2015–)

Founded
  
November 1993, Coppell, Texas, United States

Subsidiaries
  
Mannatech Japan, Inc, Mannatech Korea, Ltd

Profiles

Mannatech, Incorporated, is a multinational multi-level marketing firm engaged in research, development, and distribution of "glyconutrients," the company's name for blends of plant-sourced saccharides. Mannatech was founded in November 1993 by Samuel L. Caster and is headquartered in Coppell, Texas. It operates in 24 countries, including the United States, Canada, Australia, countries in Asia, Africa, and within the EU. The company's stock is traded on the NASDAQ exchange under the symbol MTEX. Mannatech employs 310 people and sells its products through approximately 229,000 active independent sales associates.

Contents

In 2006, Forbes magazine named Mannatech the No. 5 company on its annual list of the "200 Best Small Companies" and in 2007 Mannatech was ranked 12th in BusinessWeek magazine's 2007 list of America's "Top 100 Hot Growth Small Companies." The scientific validity of Mannatech's key product Ambrotose has been called into question by several researchers, and the company was the focus of a 2005 class action lawsuit (settled in 2008) for alleged violations of the Securities Exchange Act, and a 2007 investigation (settled in 2009) by the Texas attorney general for alleged violations of that state's Deceptive Trade Practices Act.

Products

As of July 2016, the company offered 28 nutritional supplement products, two topical products, nine skin care products, and eleven weight management/physical fitness products. Mannatech is most widely known for Ambrotose, its glyconutritional dietary supplement, which is a patented blend of plant-sourced saccharides used in its line of Ambrotose products. Glyconutritionals were formulated to support cellular communication by positively impacting human glycoforms, a claim that has generated controversy among some members of the scientific community. In an SEC filing, the company stated that its products "are formulated with predominately [sic] naturally-occurring, plant-derived, carbohydrate-based ingredients that are designed to use nutrients working through normal physiology to help achieve and maintain optimal health and wellness, rather than developing synthetic, carbohydrate-based products, as other companies are doing."

Independent commentary

The opinion of independent glycobiologists is that the body cannot digest Ambrotose, as it lacks the enzymes needed.

Prominent glycobiologist Ronald Schnaar told 20/20 in a June 1, 2007 interview, "All of the sugar building blocks that we need in our body are made from the most common foods we eat." Hudson Freeze, a leading glycobiologist, said this about glyconutrients: "There are authentic, scientific studies that have looked at people drinking these kinds of materials, and it doesn't really do anything except increase flatulence." Freeze is a member of the editorial board of Glycobiology, and Schnaar serves as editor-in-chief. Schnaar and Freeze published a critique of Mannatech's products in Glycobiology in 2008, describing the lack of published clinical benefits of the "partially purified polydisperse plant polysaccharides" found in "Ambrotose Complex."

An article in Glycobiology described the potential for the public to be misled about the science of glycobiology by the nebulous "glyconutrient" term. The author expressed concern that the public could be susceptible to the "scientific-sounding label" of glyconutrient, which may "generate a feeling of security and credibility ... despite the lack of acceptance among many glycobiologists of the term." In November 2007, Science published an article in its "News Focus" section detailing the scientific controversy surrounding Mannatech. It included criticisms and comments from glycobiologists, including Ajit Varki, Raymond Dwek, Freeze, and Schnaar.

According to the Memorial Sloan–Kettering Cancer Center, "Mannatech and its founder have been charged by the Texas Attorney General for deceptive trade practices that exaggerated the products' health benefits." Ambrotose has been "promoted aggressively to cancer patients" on the basis that it can help cellular health and boost the immune system, but that "strong scientific evidence to support these claims is lacking".

Company-funded studies

Mannatech has sponsored pre-clinical and clinical research on their products. The company states that these studies indicate that the products can be broken down into smaller, absorbable fragments by GI tract bacteria and can modify human serum glycosylation profiles. Additional studies sponsored by the company have indicated that the products also exert positive prebiotic effects and induce positive effects on human brain wave activity, cognition, mood, and memory.

Marzorati and Possemiers employed human gastrointestinal tract simulations and microbiological analysis to show that Ambrotose complex and Advanced Ambrotose powder exerted positive prebiotic effects. Both products exhibited selective fermentability throughout the entire colon with a positive and selective bifidus factor. They also demonstrated the possibility of enhancing species belonging to Bacteroidetes, a phylum recently associated with body weight management.

A five-week combined Phase 1 and 2 open label, forced titration dose response study of 21 healthy adults suggested that the Ambrotose AO dietary supplement was safe and raised serum Oxygen Radical Absorbance Capacity (ORAC) by 36.6%. In a subsequent 21-day randomized, double-blind, placebo-controlled crossover trial of 25 healthy adults, Ambrotose AO capsules increased two measures of antioxidant capacity in the blood: ORAC and Trolox Equivalent Antioxidant Capacity (TEAC).

Two clinical trials (one conducted in the U.S. and one in Australia) investigated the effect of Ambrotose complex on brain function. Stancil and Hicks conducted a randomized, double-blind, placebo-controlled study of Ambrotose in 62 healthy young adults, and reported that a single one-tablespoon serving of Ambrotose complex significantly improved visual discrimination and working memory. A trial in 109 healthy middle-aged adults conducted by Best (a Mannatech-funded researcher) and colleagues showed that Ambrotose complex powder (4 grams/day for 12 weeks) significantly improved memory and psychological well-being.

Securities Exchange Act class-action lawsuit

The company has been known for its literature, websites, and multi-level marketing with claims of scientific links to cellular glycobiology long disputed by relevant individual Nobel prize winners. On March 1, 2005 a jury trial was demanded and on September 9, 2005 a class-action lawsuit was filed against Mannatech for alleged violations of the Securities Exchange Act. The plaintiff class accused Mannatech of violating the act by "issuing a series of material misrepresentations"; specifically: failing to control its sales associates and allowing them to make false claims concerning the efficacy of Mannatech products. This caused a misleading price inflation of the company's stock. The plaintiffs consisted of the purchasers of Mannatech stock during the period August 10, 2004 through July 30, 2007. On March 20, 2008, Mannatech settled the class-action lawsuit by agreeing to pay $11.25 million to the plaintiff class. As part of the settlement, Mannatech admitted no wrongdoing.

Texas Attorney General civil complaint

Mannatech came under investigation by the Texas Attorney General on October 27, 2006 for alleged violations of that state's Deceptive Trade Practices Act. Samuel L. Caster, Mannatech's founder and chief executive officer at the time, stated: "We walk the fine line of always stating our case appropriately and always training our people: We're not into the treatment, cure or mitigation of disease. We're into the improvement of quality of life. Now, who can benefit from good nutrition? Sick people, well people, everybody. Everybody benefits from good nutrition."

On July 5, 2007, Texas Attorney General Greg Abbott formally charged Mannatech, MannaRelief, Sam Caster, and Reginald McDaniel, the company's medical director, with operating an illegal marketing scheme in violation of state law. A press release stated, "Today's enforcement action stems from a large-scale investigation by state authorities, who examined Mannatech's dubious claims about the health benefits of its products." In response to the civil complaint, Mannatech expanded its compliance department and began to provide periodic reports to the Attorney General's office to ensure that the marketing efforts of its affiliate network adhere to appropriate guidelines.

Mannatech settled the civil complaint on February 26, 2009 by agreeing to pay $4 million in restitution to clients who purchased products and $2 million to the state to cover its costs in the case. In addition, Sam Caster agreed to pay a $1 million civil penalty and steer clear of any type of leadership position or employment relationship with Mannatech for five years. When discussing the settlement at a news conference, Abbot stated, "Bottom line, this is a warning to the general public: Be wary of phony claims of magic cure-all pills or false hope in a bottle. You could be duped into purchasing something that has no real effect and no real value." Mannatech did not admit wrongdoing; settling was easier than debating Abbott, according to then-CEO Wayne Badovinus. "If they do it again, we will ensure they get put out of business," Abbott said.

One year later, Mannatech Co-CEO Robert Sinnott reflected on the ramifications of the legal action, saying, "The civil action related mainly to some actions by our salesforce. We were embarrassed and also financially impacted by the attorney general suit. We learned from that chapter and it is closed. We've reached a settlement and we've paid the fees associated with it. We've done everything in our power to correct that and make sure we're in compliance in the future."

ABC investigation

A 20/20 undercover investigation that aired June 1, 2007 on ABC Television showed Mannatech's sales associates teaching sales recruits how to target Mannatech products to patients with specific illnesses in a manner that purportedly does not violate U.S. federal law, including U.S. Food and Drug Administration regulations, by avoiding direct claims that the products cure any particular diseases. Mannatech CEO Sam Caster was interviewed for the show and told 20/20 that Mannatech makes no specific health claims about its products. "I don't think dietary supplements treat, cure, mitigate anything. It is not meant to substitute a doctor's oversight, but it plays an important role in the whole health equation."

Company losses

Mannatech announced in August 2007 that company founder Sam Caster was stepping down as CEO of Mannatech, to be replaced by Wayne Badovinus as the new chief executive. Several corporate initiatives were undertaken, but after 17 months on the job Badovinus resigned in December 2009.

Another member of the board resigned shortly after. Mannatech's Chief Science Officer Robert Sinnott and Mannatech's chief financial officer Steve Fenstermacher were named Co-CEOs. Fenstermacher later resigned.

Publicity over the company's lawsuits began to damage the balance sheets and stock performance. After profits of $32 million in 2006 and $6.6 million in 2007, Mannatech reported a $12.6 million loss in 2008 and a $17.3 million loss in 2009. By mid-year 2010, one quarter of Mannatech's sales were gone. 2010 losses were $10.6 million. As the company's market capitalizations continued to fall, S&P Indices dropped it from the S&P 600 Index, stating "They are no longer representative of the small cap market space." Recruiting efforts continued dropping in 2011, widening company losses to $20.6 million.

Illegal marketing by U.K. physician

As reported by the British Medical Journal, Mannatech distributor Vivienne Balonwu, a U.K. general practitioner, was found by the U.K. General Medical Council panel to have "abused her power as a doctor" after it was determined that she had illegally promoted and sold the company's glyconutrients to patients as a treatment for medical conditions such as chronic obstructive pulmonary disease and stroke-related complications. Following patient complaints about her marketing of the products in 2006, Balonwu was dismissed by her employer Harmoni, a medical services company, and the GMC panel imposed a 15-month penalty period during which she was "to avoid private or short term locum work" and "to complete a supervised personal development plan to tackle shortcomings in her practice.

Ben Carson

From 2004 until early 2014, neurosurgeon and conservative speaker Ben Carson made videos and spoke at company events promoting Mannatech and its products.

After undergoing surgery for prostate cancer on August 7, 2002 Carson claimed in an interview the following November that the surgery had successfully removed all cancerous tissue and that he was completely cured of the disease. However, in 2004, in a speech at a Mannatech event, he credited the company's products with the disappearance of his cancer symptoms.

His most recent paid speech for the company was in 2013, for which he was paid $42,000. His image appeared on the corporation's website in 2014, and in the same year he praised their "glyconutrient" supplements in a PBS special ("The Missing Link – The Science of Brain Health"), sponsored by a group of Mannatech distributors, that was subsequently featured on the site.

Carson delivered the keynote address at a Mannatech distributor convention in 2011 during which he said that the company had donated funds to help him obtain a coveted endowed chair post at Johns Hopkins Medicine: ". . . three years ago I had an endowed chair bestowed upon me and uh, it requires $2.5 million to do an endowed chair and I'm proud to say that part of that $2.5 million came from Mannatech." In October 2015, Carson's campaign team said that "there was no contribution from Mannatech to Johns Hopkins", and that his statement had been "a legitimate mistake on his part. Confusion. He had been doing some fundraising for the hospital and some other chairs about that time, and he simply got things mixed up."

During the CNBC GOP debate on October 28, 2015, Carson was asked about his relationship with Mannatech. He replied, "That's easy to answer. I didn't have any involvement with Mannatech. Total propaganda. I did a couple speeches for them. I did speeches for other people—they were paid speeches. It is absolutely absurd to say I had any kind of relation with them. Do I take the product? Yes. I think it is a good product." Politifact rated Carson's denial of any involvement as "false", pointing to his paid speeches for Mannatech and his appearances in promotional videos in which he gave favorable reviews to its products, despite not being "an official spokesman or sales associate". When the CNBC moderator commented that Carson was on Mannatech's website, he replied that he had not given his permission. Earlier, he had said that he was unaware of the company's legal history.

On November 3, 2015, Mannatech said on its website that for compliance with Federal campaign finance regulations the company had removed all references to Carson before he announced his bid for the presidency.

Rafael Cruz

From 1993 to 2009, Rafael Bienvenido Cruz, father of presidential candidate Rafael Edward "Ted" Cruz, was a top salesman for Mannatech.

Prior to Mannatech

Samuel L. Caster is the founder and former Chairman of the board of directors of Mannatech. His first major business venture, Eagle Shield, was an insulation product that claimed to utilize new technology developed by NASA and could reduce heating and cooling costs by up to 40%. In May 1988, the Attorney General of Texas concluded that the product's technology long predated NASA and did not reduce consumers' bills in the amounts advertised. Caster agreed to cease the misleading claims made about Eagle Shield. Caster's second product, the "Electracat," was sold as a pest control device. The Electracat reportedly emitted pulsed vibrations that repelled rats, crickets, snakes, ticks, spiders, mosquitoes, and scorpions. However, in January 1991, the Attorney General of Texas investigated the product and found that the Electracat emitted no vibrations whatsoever. The Attorney General declared, "The device is a hoax, and stands on the same scientific footing as a perpetual motion machine." Caster was ordered to stop selling the Electracat and to reimburse the state $125,000 in investigative costs.

Mannatech's inception

Caster then started Mannatech in 1993, as Congress prepared to pass the Dietary Supplement Health and Education Act of 1994, which made feasible the profitable marketing of a wider spectrum of dietary supplements.

Consultant to Mannatech

On August 22, 2007, Sam Caster resigned as CEO of Mannatech. On October 19, 2007, it was reported that the company had fired Grant Thornton LLP as its auditor after the accounting firm demanded that Mannatech remove Sam Caster from all responsibilities. Sam Caster was barred by the attorney general of Texas from serving as a director, officer, or employee of Mannatech for five years—from February 2009 until February 2014. Caster was also barred from taking a role in any other multi-level marketing programs during that time. Despite this, then-CEO Wayne Badovinus stated Caster would work as a consultant answering directly to him. The attorney general's office agreed Caster could serve as an outside consultant to the company.

In March 2014, Caster appeared as main speaker at a Mannatech videoconference event with sales associates for the company's new skin rejuvenation product. Introduced as the company's founder and "visionary," he explained the company's new product and his role in its creation. "Oh my gosh, This stuff really works." he said, of the product. "No one could have predicted it would have that immediate an impact."

In august 2016 Mannatech resolved its differences with Sam Caster and his consulting company, Wonder Enterprises, LLC. Caster, who left Mannatech in 2014, and Mannatech have ended arbitration proceedings. Mannatech has agreed to not pursue its rights to enforce certain covenants under the prior consulting agreements with Caster and Wonder Enterprises.

MannaRelief Ministries

MannaRelief Ministries is a 501(c)(3) non-profit organization founded in 1999 by Sam Caster. William A. Mullens, Caster's brother-in-law, serves as MannaRelief's Executive Director, and Caster's wife, Linda, serves as chairman of the board. MannaRelief receives a portion of the proceeds from Mannatech products purchased on "automatic order", and in turn distributes PhytoBlend powder (a dietary supplement purchased at cost from Mannatech) to various unidentified orphanages and international relief organizations. From 2009 to 2011, Manntech provided a total of $1.5 million in cash donations to MannaRelief, and MannaRelief purchased $1.6 million worth of products from Mannatech.

References

Mannatech Wikipedia