Judge Denies Maxam's Request to Release Seized Funds in Forfeiture Cases

PORTLAND A federal judge in Oregon has dealt a financial blow to Maxam Nutraceutics, denying a request to release funds that could have kept the dietary supplement business alive.

The owner of Maxam, Jim Cole, had requested that U.S. District Judge Michael Simon release $25,000 each month for operating expenses to support his businesses, including Hood River-based Maxam. In December, Cole's lawyers advised the judge that Maxam and an exercise machine company, TurboSonic, "are on the brink of extinction."

In a nine-page opinion and order dated Jan. 8, Simon denied Cole's motion to release the funds and rejected an alternative request to immediately hold an evidentiary hearing on the merits of the civil forfeiture cases. 

The federal government seized assets in 2011, including $520,000 in gold bars from Cole's home safe. The U.S. Attorney's Office alleges the property can be forfeited because it derives from proceeds traceable to mail and wire fraud.

The judge ruled the property couldn't be returned to Cole, because even though he alleges his businesses face hardship, he failed to establish three other requirements under the Civil Asset Forfeiture Reform Act of 2000. Prosecutors expressed concern that the assets could vanish before trial, and the court agreed.

Michael Cox and John Markham, Cole's lawyers, acknowledged last month in a motion that neither a return of the funds nor an evidentiary hearing are contemplated under the forfeiture statute. But they stated the law is subject to the U.S. Constitution's Due Process Clause and claimed the government has a weak case.

In July, Simon granted prosecutors leave to put the civil cases on hold for six months pending the resolution of a criminal investigation involving Cole and tax issues. The government subsequently asked for and was granted an additional stay until April 1, 2013.

"As the Court has previously noted, it takes seriously Claimants' due process concerns. The nine-month stay the Court has granted in this case, however, is supported by detailed and concrete showings by the Government of the need for confidentiality in a related criminal investigation," Simon wrote in the order. "The delay has not been so lengthy as to impinge on Claimants' due process rights."

The problems for Cole likely started in October 2010 when FDA advised him Maxam's marketing violated federal law because its products labeling was "intended to affect the structure or function of the body of man or other animals and/or intended to cure, mitigate, treat, or prevent disease conditions."

Only government-approved drugs can be marketed to treat diseases, and regulators were alarmed by glowing reviews that described the benefits of Maxam's dietary supplements. Cole has said 47 government agents raided his home and businesses even though he removed the testimonials within the government-allotted time.