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Judge Orders Enzyte Parent to Forfeit $500 Million

Company founder also faces 20 years in prison
Judge Orders Enzyte Parent to Forfeit $500 Million
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Jul 16, 2008 5:00 PM PDT    Text size: 
CINCINATTI — U.S. District Judge S. Arthur Spiegel has ordered the maker of the Enzyte male enhancement pill to forfeit more than $500 million after being convicted of massive fraud earlier this year.

Berkeley Premium Nutraceuticals founder Steven Warshak said the judgment could put his company out of business if the order stands. Warshak’s lawyers have asked the judge to delay the forfeiture order so they can appeal the ruling. The order is preliminary until Warshak’s sentencing in August.

Also incorporated in the forfeiture order is some of Warshak’s personal property including homes, cash, a $10,500 spa membership, a Segway, two grand pianos and his 5 percent stake in Fathead, a sports memorabilia manufacturer.

Judge Spiegel maintained that Warshak and other chief executives engaged in fraud, money laundering and deceptively promoted bogus claims about the product’s effectiveness. The fraud was so widespread that it “tainted almost every dollar the company earned during its most profitable years” so federal prosecutors believe the company should have to give up almost all of its revenue.

Berkeley attorney John Phillips contends that the total amount of the forfeiture order represents the company’s gross revenue across all its product lines — not just Enzyte — which was the main thrust of the criminal case. He claims profits were a fraction of the $500 million.

Phillips said that Berkeley’s learned from its mistakes and has restructured its operations.

“Berkeley has made a real turnaround,” Phillips said. “The question is, is the jury’s verdict going to keep it from operating in the future?”

In other news related to the case, Warshak challenged the Stored Communications Act of 1986 in the U.S. 6th Circuit Court of Appeals in which he claimed his conviction should be thrown out because the government unlawfully read his emails without first obtaining a warrant. The court ruled 9-5 on July 11, upholding the law.

The majority ruled that Warshak would have to wait to appeal the ruling until after his sentencing. The dissenting minority claims the government acted unconstitutionally by reading Warshak’s email.

The law allows law enforcement to get permission from a magistrate or judge to read someone’s emails, instead of obtaining a search warrant.

Warshak faces 20 years in prison.

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