Judge OKs Ex-Berkeley Execs Plea Deals

Judge OKs Ex-Berkeley Execs Plea Deals

CINCINNATIFour former executives for Berkeley Nutraceuticals haveagreed to provide substantial assistance to the Federal Trade Commission(FTC) investigation into the companys allegedly fraudulent advertising andillegal credit card billing activities that may have bilked consumers out of asmuch as $100 million. The plea deal, which was tentatively approved in federalcourt Feb. 16 by Senior U.S.

District Judge S. Arthur Spiegel, appears to put the focus of the agencysinvestigation on Steve Warshak, Berkeleys top executive.

Last year, the government seized $23 million in Berkeley-related accountsmaintained by Warshak, his wife Carrie and his mother Harriet. Then, on Feb. 2,FTC filed a lawsuit against Berkeley for misleading claims in advertisements forits Avlimil and Rogisen products, as well as for billing consumer credit cardswithout the cardholders permission (see related story, page 22).

As conditions of the plea agreement, Greg J. Cossman, former Berkeleypresident, and his wife Susan, a former division manager whose responsibilitiesincluded customer service, agreed to pay the government $1 million, about thesame amount they formerly received as a bonus from Berkeley. In addition,Shirley B. Kinmon, former vice president of sales, agreed to forfeit a 2002Jaguar paid for with a past Berkeley bonus. James G. Teegarden Jr., former vicepresident of operations, was the fourth executive named in the plea deal.

During the hearing, postal inspector Alejandro Almaguer testified theBerkeley executives instructed sales staff to make false and fraudulentrepresentations about the products, money-back guarantees, payment proceduresand return policies. He further accused them of tampering with consumerscredit card numbers and expiration dates to facilitate unauthorized billing, aswell as using the process of double and triple dinging, by whichunauthorized billing amounts are split into two or three payments, improving theratio of complaints-to-overall transactions in the eyes of bank chargebackguidelines. The four executives are free on their own recognizance but facecriminal sentencing following completion of pre-sentencing reports.