Last Defendant in the "Fat-Magnet" Case Agrees
to Settle FTC Charges and to Pay Consumer Redress

FTC News Release
April 11, 1991

Dr William Shell has agreed to settle Federal Trade Commission charges for alleged deceptive practices in connection with the sale of "Fat-Magnet" diet pills, the FTC announced today. Under the settlement, Shell has agreed to a permanent injunction and to pay $20,000 in consumer redress.

The FTC's final judgment and consent order permanently prohibits Shell from making claims about the performance, efficacy or safety of any weight-control food, drug or device that he markets to consumers, unless he has competent and reliable evidence to substantiate such claims. Shell is also prohibited from misrepresenting any weight-control program or service that he markets.

In addition, under the final judgment and order, Shell is required to pay $20,000 into an escrow account established and managed by the FTC to provide refunds to purchasers of Fat-Magnet diet pills.

The settlement stems from a January 1990 complaint in which the FTC alleged that Fat-Magnet falsely advertised that its diet pills would help users lose weight without dieting or exercise. The complaint said these claims were unsubstantiated. The FTC's complaint named Allied International Corporation, doing business as Fat-Magnet, Harold Martino, Linder Ad-Vantage Inc., Milton Linder, Eric Linder, and William E. Shell, MD, all of California.

Last November a final judgment and consent order was approved in federal court against the corporate defendants and Harold Martino, Milton Linder and Eric Linder. The order required them to pay $750,000 into an escrow account established by the Commission to provide redress to purchasers of Fat-Magnet diet pills.

The Commission vote to approve the final judgment against Shell was 3-1, with Commissioner Andrew J. Strenio, Jr. dissenting and Commissioner Roscoe B. Starek III not participating.

In a separate dissenting statement, Commissioner Strenio said the proposed settlement is seriously deficient in two regards. First, Strenio said, the $20,000 redress amount is insufficient in light of both the extent of Shell's involvement in the marketing of Fat Magnet diet pills, and Shell's financial circumstances.

Second, Strenio said, the proposed order provision only requires Shell to give copies of Part I of the order — not the entire order — to those involved in any business owned, controlled, or directed, wholly or in part, directly or indirectly, by Shell. According to Strenio, "If Dr. Shell already had been under this order provision at the time he hooked up with the other defendants in this matter, he would not have been required to give them a copy of the order."

The Commission submitted the final judgment and order to the US District Court for the Central District of California, and it was entered on April 8.

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