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[Senate Hearing 107-190]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 107-190

                   SWINDLERS, HUCKSTERS AND SNAKE OIL
    SALESMAN: HYPE AND HOPE MARKETING ANTI-AGING PRODUCTS TO SENIORS

=======================================================================

                                HEARING

                               before the

                       SPECIAL COMMITTEE ON AGING
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             WASHINGTON, DC

                               __________

                           SEPTEMBER 10, 2001

                               __________

                           Serial No. 107-14

         Printed for the use of the Special Committee on Aging

                  U.S. GOVERNMENT PRINTING OFFICE
76-011                     WASHINGTON : 2001

____________________________________________________________________________
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                       SPECIAL COMMITTEE ON AGING

                  JOHN B. BREAUX, Louisiana, Chairman
HARRY REID, Nevada                   LARRY CRAIG, Idaho, Ranking Member
HERB KOHL, Wisconsin                 CONRAD BURNS, Montana
JAMES M. JEFFORDS, Vermont           RICHARD SHELBY, Alabama
RUSSELL D. FEINGOLD, Wisconsin       RICK SANTORUM, Pennsylvania
RON WYDEN, Oregon                    SUSAN COLLINS, Maine
BLANCHE L. LINCOLN, Arkansas         MIKE ENZI, Wyoming
EVAN BAYH, Indiana                   TIM HUTCHINSON, Arkansas
THOMAS R. CARPER, Delaware           PETER G. FITZGERALD, Illinois
DEBBIE STABENOW, Michigan            JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri              CHUCK HAGEL, Nebraska
                    Michelle Easton, Staff Director
               Lupe Wissel, Ranking Member Staff Director

                                  (ii)

  
?

                            C O N T E N T S

                              ----------                              
                                                                   Page
Opening Statement of Senator John Breaux.........................     1
Statement of Senator Larry E. Craig..............................     4
Statement of Senator Ron Wyden...................................     5
Prepared statement of Senator Blanche Lincoln....................    36

                                Panel I

Mike O'Neil, former chief financial officer, GB Data Systems, 
  O'Neals, CA....................................................     6
E. Vernon F. Glenn, Law Offices of E. Vernon F. Glenn, Mt. 
  Pleasant, SC...................................................    22

                                Panel II

Glen Braswell, president, Gero Vita International, Marina Del 
  Ray, CA; and Ron Tepper, Editor, ``Journal of Longevity,'' 
  Health Quest Publications, Marina Del Ray, CA..................    37

                               Panel III

Janet Heinrich, D.Ph., R.N., Associate Director, Health, 
  Education, and Human Services Division, General Accounting 
  Office, Washington, DC.........................................    38
Joyce C. Lashof, M.D., associate chair, Editorial Board, 
  ``Wellness Letter,'' University of California School of Public 
  Health, Berkeley, CA...........................................    59
Robert S. Baratz, M.D., Ph.D., D.D.S., Newton, MA................    74
Timothy Gorski, M.D., Arlington, TX..............................    91

                                Panel IV

Hon. Joseph Curran, Attorney General, State of Maryland, 
  Baltimore, MD..................................................   111
John Taylor, Director, Office of Enforcement, Food and Drug 
  Administration, Department of Health and Human Services, 
  Washington, DC.................................................   139
Howard Beales, Director, Bureau of Consumer Protection, Federal 
  Trade Commission, Washington, DC...............................   168
Dennis M. Lormel, Section Chief of Financial Crimes, Criminal 
  Investigative Division, Federal Bureau of Investigation, 
  Washington, DC.................................................   184

                                APPENDIX

Letter from Nature's Life........................................   209
Testimony of David Seckman, Executive Director, CEO of the 
  National Nutritional Foods Association.........................   211
Letter from Born Preventive Health Care Clinic...................   221
Letter from Total Health for Longevity...........................   222
Written submission of Rep. Dan Burton............................   223
Response to the Statement of the Hon. Dan Burton.................   230
Letter from University of North Texas, Health Science Center.....   253
Letter from Texas College of Osteopathic Medicine................   254
Letter from Senator Larry Craig..................................   255
Letter from Senator John Breaux..................................   256
Letter from University of North Texas, Health Science Center.....   258
Testimony of Michael McGuffin, American Herbal Products 
  Association....................................................   259
Statement from American Academy of Anti-Aging Medicine...........   311

                                 (iii)

  

 
SWINDLERS, HUCKSTERS AND SNAKE OIL SALESMEN: HYPE AND HOPE OF MARKETING 
                     ANTI-AGING PRODUCTS TO SENIORS

                              ----------                              

                       MONDAY, SEPTEMBER 10, 2001

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m., in room 
SD-215, Dirksen Senate Office Building, Hon. John Breaux 
(Chairman of the Committee) presiding.
    Present: Senators Breaux, Wyden, Lincoln, and Craig.

       OPENING STATEMENT OF SENATOR JOHN BREAUX, CHAIRMAN

    The Chairman. The Committee on Aging will please come to 
order. Good morning, everyone. I would like to thank all of our 
guests who are here this morning, and also my colleague, 
Senator Wyden. We expect other members of the Aging Committee 
to join us in a very short amount of time. This is a very 
important hearing of the Senate Aging Committee, and we will 
use this hearing as an opportunity to examine the marketing of 
dietary and specialty supplements that particularly target our 
Nation's elderly and senior citizens. I want to thank Senator 
Larry Craig, who will be with us momentarily as the ranking 
Republican member of the committee, for his cooperation and 
support throughout this investigation. I want to particularly 
thank our witnesses who will be testifying before us this 
morning for their testimony and their assistance and 
cooperation.
    People have been searching for the fountain of youth ever 
since Ponce DeLeon, and they will probably continue to do so 
for decades and generations into the future. Our job in this 
hearing is not to kill that hope and desire to remain youthful 
and healthy as long as possible, but rather the role of the 
committee is to try and help protect American citizens, 
particularly our elderly, who are preyed upon by modern-day 
snake oil salesmen. I would like to say up front that this 
hearing will focus on companies that mislead consumers with 
regard to dietary and specialty supplements.
    As with any industry, the vast majority of manufacturers 
and marketers of supplements are reputable and law-abiding. It 
is the bad actors in this industry that we are concerned about 
today. Supplements are becoming increasingly popular. I take 
them myself and I will continue to do so in the future. 
Individuals who are both healthy and ill take supplements for a 
variety of reasons. Some take supplements to increase energy, 
to build muscles, or to lose weight. Others have begun taking 
supplements as alternatives to traditional medicine and 
escalating prescription drug cost. More and more, our Nation's 
seniors are turning to these supplements.
    Today, it is estimated that $27 billion annually or more is 
spent on supplements and that 60 percent of these consumers are 
older senior citizens. These products are marketed to our 
seniors in a variety of ways. Not long ago, my wife and I, at 
our home, received in the mail the Journal of Longevity. At 
first glance, it appeared to me, as the example on the chart 
shows, that this was a scientific journal, extolling the 
virtues of supplements, focusing on those that have alleged 
anti-aging effects. To me, it resembled the New England Journal 
of Medicine, and I was very impressed with the way it was 
structured and the way it was presented.
    I actually wanted to start ordering everything in the 
magazine, and the more I read, the more I came to the 
conclusion that if it sounds too good to be true, it probably 
is. I was drawn in, until I finally concluded, after consulting 
with my staff, that the mailer was simply a very fancy 
advertisement for one company's products. The Journal of 
Longevity appears to me to simply be a series of articles that 
discuss health issues that seniors face, and then provides a 
very simple solution, the solution being the dietary 
supplements developed and distributed by the same parent 
company that publishes the magazine.
    Some of the articles and advertisements simply prey on the 
fears of the elderly, while others counsel the reader to take a 
particular supplement in place of traditional medicine. It 
really made me start thinking about the marketing tactics of 
some of these companies and the products that they promote. The 
dietary supplement industry in this country is largely self-
regulated. Unlike new prescription and over-the-counter drugs, 
the law does not require supplements to undergo pre-market 
approval for safety and effectiveness.
    The current United States regulatory system provides little 
assurance that commercial supplements have predictable 
pharmacological effects or that the product labels provide 
accurate information; and furthermore, the manufacturers of the 
supplements are not required to register with any government 
agency. This is of great concern to me, and I know to this 
committee. Surveys have shown that the use of complementary and 
alternative medicine in the United States has increased an 
amazing 380 percent between the years 1990 and 1997, and this 
trend will almost certainly continue as the baby boom 
generation draws closer to retirement age and seeks out new and 
different ways to maintain and improve their health and retain 
their youth.
    We need to know that the products our seniors and all of us 
are taking are safe and effective. I want to make it clear one 
more time that we are not here today to talk about the science 
of complementary and alternative medicine; rather, we are only 
looking at the bad apples in the supplement industry, those 
folks who market misleading and/or ineffective products.
    In an effort to convey the nature of and the methods used 
by the companies that mislead the elderly, this morning we are 
going to examine the operation of one of the largest companies 
that sells the so-called anti-aging and other dietary 
supplements. GB Data Systems, Inc. is the holding company for 
at least 10 businesses selling dietary supplements. A. Glen 
Braswell is the president and owner of GB Data Systems. Gero 
Vita International and Health Quest Publications, which 
publishes the Journal of Longevity, are both controlled by GB 
Data Systems.
    As I stated earlier, the Journal of Longevity that my wife 
and I received at our home in the mail is simply, in my 
opinion, an elaborate, misleading advertising tool that markets 
several of the Gero Vita International products. I had the 
cover of the one issue of the journal enlarged, and you can see 
it to my right. Again, it looks to me to be a medical journal 
such as the New England Journal of Medicine when it is received 
in your home. I actually asked my staff to order some of the 
Gero Vita International products for me. After two attempts, we 
have still not received them. I do have enlargements for some 
of the advertisements of some of these products.
    First of all, I have an ad for a product named ACF 223, 
that claims it is the healing breakthrough of the century. You 
can note from the cover that one of the assertions is, ``Live 
26 percent longer.'' Maybe the doctors here can tell us whether 
this is true. One of the amazing things is the bottom section 
of it that talks about it can work for people with--and it 
names a whole series of very serious illnesses: arthritis; 
heart disease; high cholesterol; prostate problems; high blood 
pressure; and also can work for people with wrinkles and with 
pain, with low sex drive, memory loss and age spots.
    Next, I have a copy of the cover of the magazine that was 
actually sent to my home. Who would not want to be able to turn 
back the hands of time, as apparently this woman appears to 
have done on the cover? As I stated earlier, some of these ads, 
I think, simply try to scare people into buying the product.
    The next chart describes the aging process, as, ``being 
murdered from within, one cell at a time.'' It happens to also 
be for ACF223.
    The next poster describes a ``brown slime,'' developing on 
the brain neurons. The associated article in the magazine 
suggests that this brown slime is a precursor to Alzheimer's 
disease. My staff contacted the National Institute on Aging and 
were told by the National Institute on Aging that no such 
studies have ever, or are currently underway that support such 
a claim.
    The next poster, No. 6--is an ad for Prostata, and it 
suggests that if you do not take the Prostata supplement, you 
could end up in a hospital bed.
    Finally, we have posters of products that allegedly 
actually slow the aging process. Gero Vita, GH3, poster No. 7.
    The longevity caps is poster No. 8.
    The HGH activator, poster No. 9.
    Teston 6, poster number 10.
    I think the question before the committee and I think the 
question for many Americans are do these products actually do 
what these ads suggest that they do, or do they do anything at 
all, for that matter? I am hoping today's hearing can possibly 
give us some of the answers to these very important questions.
    We have invited several witnesses to testify. We will hear 
first from Mr. Mike O'Neil, who is the former chief financial 
officer of GB Data Systems, Inc. He can explain to us the 
inner-workings of the company and its marketing tactics. Will 
also hear from Mr. E. Vernon Glenn, who is a private-practice 
attorney, who will tell us about some of his clients' dealings 
with GB Data Systems, Inc.
    Our second panel, we will have Mr. A. Glen Braswell, who is 
president of GB Data Systems, Inc. and Gero Vita International, 
and Mr. Ron Tepper, who is editor of the Journal of Longevity. 
Both gentlemen are here with their attorneys in compliance with 
subpoenas issued by this committee.
    The General Accounting Office is here today to release the 
findings of a report that I requested several months ago. The 
report is entitled, ``Health Products for Seniors, Anti-Aging 
Products Pose Potential for Physical and Economic Harm.'' I am 
looking forward to hearing what GAO has to say. We have also 
invited some experts with extensive background in the areas of 
complementary and alternative medicine, and particularly 
dietary and nutritional supplements to testify as to the 
impact, both physically and financially, on our Nation's 
elderly citizens. We will also hear from Dr. Joyce Lashof of 
the University of California at Berkeley School of Public 
Health, Wellness Letter, along with Dr. Robert Baratz and Dr. 
Timothy Gorski.
    Finally, we have asked the government agencies that are 
tasked with monitoring dietary and nutritional supplements and 
protecting consumers from fraud to be here today to tell us 
about their efforts and their concerns in this area. We have a 
representative from the Food and Drug Administration, the 
Federal Trade Commission, the Federal Bureau of Investigation, 
and the Attorney General of the State of Maryland.
    Before we get to our witnesses, I would like to ask our 
colleagues if they have any comments they would like to make, 
and first we would like to recognize the ranking member of this 
Aging Committee, Senator Larry Craig.
    Senator Craig.

                STATEMENT OF SENATOR LARRY CRAIG

    Senator Craig. Well, thank you very much, Mr. Chairman. Mr. 
Chairman, first of all let me thank you and your staff for 
putting today's hearing together. I agree that it is important 
to not only raise the awareness of the potential of scams and 
products in the market that are simply not what they are led to 
be by their advertisements. That is our job and our role, 
especially when the consumer that is preyed upon may be the 
most vulnerable of our population. Clearly, we must enforce the 
law, remove the threat of dangerous products from the market 
and bring to justice criminals who prey on the frightened and 
the hopeless.
    I look forward to the hearing and to the government 
witnesses and their efforts in this area. But having said that, 
I will also say that it is important that we remain wary of 
calls for expensive regulation that may restrict an 
individual's freedom to make his or her own health decisions. 
It is a balance, and that balance should always be adhered to, 
and that is something that I think this committee has served 
well in its role over the last good number of years. So it is 
with that that I approach this hearing with great interest. I 
have seen the Journal of Longevity. I have thumbed through it 
on many occasions, and having been fairly aware of what good 
health and nutrition is all about, I think, oh, my, if it were 
only true, because in most instances the claims argued I 
believe to be, at best, not true.
    With that, let me turn this hearing back to you, Mr. 
Chairman, and I will be in and out intermittently. But I do 
want to attend some of it, and I thank you.
    The Chairman. Thank you, Senator Craig.
    Senator Wyden.

                 STATEMENT OF SENATOR RON WYDEN

    Senator Wyden. Thank you, Mr. Chairman. I want to commend 
you for your leadership in putting together an extremely 
important hearing. This is an issue that I have followed very 
closely since the days when I was director of the Oregon Gray 
Panthers. I think it is very important now to take a fresh look 
at this issue and how it has changed. The fact is that those 
who prey on seniors constantly seem to be getting sleazier and 
more creative, and what has really changed in the last few 
years is that they now have at their disposal tremendous new 
technologies, and as a result of worldwide mobility, can 
essentially set up offshore overnight.
    One of the things that I want us to look at, and we have 
not looked at in the past, is international cooperation in this 
area, because it is very clear that some of these snake oil--
these information-age snake oil merchants will just look to set 
up very close to the United States and then figure out how to 
run a worldwide operations, and there have been problems with 
the postal laws and other laws in terms of trying to get these 
individuals who are preying on seniors and stop their conduct.
    I will tell you going into this discussion that I largely 
share Senator Craig's view that we do not need a whole lot of 
new laws and new programs. What we need is a way to make sure 
that the cops on the beat here in the United States and 
worldwide have the tools that they need, and we need to look at 
some new ways, for example, to try to draw some lines between 
what constitutes an authoritative medical article and what 
constitutes hype and essentially deception. I think that is why 
it has been so helpful that you have taken the committee 
through this exercise of looking at some of these articles 
that, clearly to those of us who focused on gerontology over 
the years, look over the line.
    But what is important about this and why we ought to be 
taking a comprehensive look at this is that the rip-off 
artists, who were once people who would sell stuff door-to-
door, for example, like questionable roofing deals and maybe 
they focused in the health field, like selling Medigap policies 
that were not worth the paper they were written on, have now 
moved into the areas that this committee is looking at; claims 
that people will naturally been attracted to, because we have 
seen such a health revolution in biology and genetics, that 
people will be drawn to these kinds of programs unless they get 
the facts. That is what is so important about this hearing, is 
your helping to get the facts out. It is putting a hot light on 
some of these new and very significant ways in which older 
people, both in this country and around the world, are getting 
fleeced. I want to make it clear that I think this is just 
about the most important work this committee could be doing, 
and as usual I will look forward to working with you.
    The Chairman. Thank you, Senator Wyden.
    We want to welcome our first two witnesses, Mr. Mike O'Neil 
and Mr. Vernon Glenn, for their testimony. Because of the 
sensitive nature of the testimony and the subject matter that 
we are dealing with today, we are going to be asking all of our 
witnesses to please be sworn in and promise to tell the truth. 
I would just note to all the members that they should be aware 
that under Title 18, Section 1621 of the U.S. Code, that lying 
before Congress is certainly subject to being prosecuted by 
law, and I think that we understand that. So I would ask the 
witnesses to please stand and raise your right hand. Do you 
promise that the testimony you are about to give will be the 
truth, the whole truth, and nothing but the truth, so help you, 
God?
    Mr. O'Neil. I do.
    Mr. Glenn. I do.
    The Chairman. Please be seated, and we will be happy to 
receive the testimony first of Mr. Mike O'Neil.

 STATEMENT OF MIKE O'NEIL, FORMER CHIEF FINANCIAL OFFICER, GB 
                   DATA SYSTEMS, O'NEALS, CA

    Mr. O'Neil. Good morning. I would like to begin by giving 
you some personal background.
    The Chairman. Get that mike, Mr. O'Neil. Get it a little 
bit closer to you, so we can all pick it up.
    Mr. O'Neil. Is that better? OK. Let me begin by giving you 
some personal background so you will have some perspective on 
how it is I happen to be appearing before you today. My 
education and working career has always been the financial 
arena. I spent 20 years in both commercial banking and worked 
for companies, but my primary focus has been on financial 
reporting and analysis. I have lived in California since 1983, 
but consider myself to have New England roots. I am married to 
a doctor, have two children.
    As a rule, my career and life have been based in logic and 
fact. On the surface, this may make me appear to be a poor 
candidate to discuss advertising practices of any company. 
However, in my capacity as the chief financial officer for the 
Glen Braswell Company, I attended and had input in most 
meetings of senior staff; included in these were weekly 
advertising discussions of content, scheduling, production, 
along with senior management meetings to discuss product 
development and company direction.
    A description of the associated companies of Glen Braswell, 
GB Data, et cetera, would list some 13 companies that are 
primarily involved in the sales and distribution of what have 
become known as nutriceuticals. Combined, these companies have 
annual revenues of approximately $200 million. The targeted age 
market for these products is 45-to 60-plus-year-olds. As the 
CFO from August 1998 to January 1999, I was effectively third 
in command at the company, behind the chief operating officer 
and Glen Braswell. With the knowledge gained from that 
position, I have been asked to come before you to discuss the 
focus and intent of the company's advertising practices and why 
they should demand any attention at all from this committee.
    If the name Glen Braswell sounds somewhat familiar to you, 
it should. Mr. Braswell was the subject of a lot of attention 
back in January and February of this past year as a result of a 
last-minute Presidential pardon, which was arranged through the 
former First Lady's brother and which the press referred to as 
a pardon-for-money scandal. At the time, Glen Braswell was 
reported in the press to be, ``a convicted felon who was under 
investigation by the Internal Revenue Service for a massive 
offshore tax evasion scheme.''
    Because of the pardon, he no longer has a felony conviction 
on his record. However, I can tell you that the IRS 
investigation is ongoing. As you might imagine, as the former 
CFO, I am involved in that investigation. As such, I have been 
asked and request from you that we do not place the ongoing 
investigation in harm's way by discussing it in this hearing.
    The Braswell companies operate as direct-mail marketing 
companies; that is, they sell directly to the consumer without 
going through retail outlets. This is accomplished by sending 
marketing information to consumers through the mail. Consumer 
names and addresses are bought and sold by the millions via 
brokers who categorize names according to whatever demographic 
requirements are required. Gero Vita, Life Force, 
Theraceuticals and other Braswell companies rent these lists 
and mail four-to 16-page solicitations to people on the list, 
touting the benefits of nutritional supplements.
    Again, the target market is 40-to 60-year-olds--I'm sorry, 
65-year-olds--who have good credit and have been willing to buy 
through the mail. These practices, in one form or another, are 
virtually identical to all direct mail businesses in the 
industry.
    What makes the Braswell companies unique to a handful of 
marketers is the predatory nature of the advertising message. 
The primary vehicle for the sale of products is a 50-page 
advertisement that has been referred to here and noted as the 
Journal of Longevity, published monthly. The magazine claims to 
be a journal of medical research reviews in the preventive 
medicine fields. The fact is that it is neither a journal, nor 
does it present any reviews of any preventative medicine. Every 
word in the magazine is composed by Braswell staff, and 
furthermore every word is designed to do one thing, sell 
Braswell products.
    The magazine is presented in such a manner so as to suggest 
that it is a legitimate medical journal with articles written 
by various medical professionals. In the articles, they 
described a variety of medical situations that are painful, 
debilitating or life-threatening. These articles run three to 
four pages with medical detail and facts. In these articles, 
they describe various nontraditional herbal supplements that 
can solve these medical situations and restore health to 
whatever you apparently are bothered by. Then, as luck would 
have it, there is an ad in the journal for nutritional 
supplements sold by a seemingly unrelated company that contains 
the ingredients just described in the previous article, and an 
800-number where you can order that product.
    It is a nice, clean process, except that nowhere in the 
journal does it tell anyone that this is an advertisement. 
Further, the articles are not written by medical professionals, 
but rather by Braswell staff. They are reviewed by medical 
professionals, but written in-house. Finally, the ads contain 
outright false statements. The ads and articles routinely toss 
phrases around such as, ``Thousands of doctors have praised,'' 
whatever product, and, ``Millions of men use whatever 
product,'' which is blatantly false. One product claims to 
improve memory, sex drive, and reduces the chance of a heart 
attack by 83 percent.
    The article routinely described medical problems as life-
threatening, potentially deadly, causing severe illness or 
death. They are described to scare or threaten the reader into 
purchasing the antidote, or at least try the product for 
$29.95. The products sold by the Braswell companies are rotated 
through the journals, with new product names and articles 
concocted as necessary; that is, if a product does not do well, 
it is renewed and given life in treating some other malady. New 
products were introduced at marketing meetings, with Mr. 
Braswell retaining the right to override any conclusions from 
any meetings.
    On more than one occasion, products were deemed to be 
ineffective and ads too outspoken or provocative for 
publication in marketing meetings, only to be overwritten by 
Mr. Braswell, many times to the disbelief of the staff 
involved. What makes this inappropriate is the nature of the 
articles and the advertisement. What makes the activity 
inexcusable is it takes advantage of people with legitimate 
medical needs who are susceptible to a message of miracle 
remedies and cures. What needs to be considered here, in my 
opinion, is not what the person who is in pain is thinking when 
they read the ads, because they want to believe--they almost 
need to believe what is in the story.
    But, rather what needs to be considered is what the person 
writing the ad knows to be true, and to the extent that there 
is a difference, there is fraud. I cannot say that all the 
products do not work or the people who take them do not feel 
better. I am not a doctor, I am not a research scientist, and I 
have no basis to have an opinion on that portion of the 
product. What I am saying is that the process that is used to 
recruit customers is flawed, laden with lies and deception, and 
that the product could not possibly deliver what is promised in 
the advertising.
    I am not the first person to come to this conclusion. A 
Washington Post story of the companies quote the editors of 
Consumer Reports as saying in 1988, ``We see a lot of 
misleading marketing, but what spews out of Gero Vita Industry 
rivals the worst.''
    ``Consumer Reports,'' continues the Post, ``characterize 
the company's literature as masquerading as science.'' The 
booklets cite actual studies, but twist the findings to support 
the company's own unsubstantiated claims. In South Carolina, 
three sports figures, Richard Petty, Stan Musial, and Len 
Dawson, filed suit in Federal court against Braswell and Gero 
Vita for misusing their names in advertisements for Prostata, a 
claimed prostate cancer-preventing supplement. The lawsuits, 
filed in 1997 by Mr. Glenn here and Gedmiem Howe III involved a 
series of advertisements that identify the three sports figures 
among a group of men who, ``waited too long and are suffering 
from prostate problems.''
    Finally if you look at the company itself, there is an 
underlying commitment to deception. All the advertisements by 
the company contain a return in Canada, thus suggesting the 
company is either located or headquartered in Canada. I 
recently placed a call to customer service at the company that 
I used to work for and was told that the company chiefs were in 
Canada, but that she was in Maryland.
    Braswell companies have no employees of an executive or any 
other kind in Canada, but have what amounts to a Mailboxes, 
Etc. address in Toronto. The reason is simple: The United 
States Postal Service cannot easily interrupt mail going 
outside the company--outside the country, I am sorry. If you 
look at the Journal of Longevity, the return address is Reno, 
NV. There are no employees in Reno.
    These are two of the list of attempts to confuse both the 
general public and the government agencies. When I was there, 
and I do not believe things have changed, Braswell companies 
had employees in Marina Del Ray, CA, a shipping warehouse in 
Las Vegas, NV. The reasons the companies wish to have the 
appearance of foreign ownership and ghost locations is to 
create a delay for any individual or government agency seeking 
to locate the company. To the best of my knowledge, all of 
these employees are legal if you pay the appropriate taxes and 
file appropriate documentation. However, the elaborate tactical 
maneuvering of the company suggests it is aware of its own 
deception and has taken preventive measures to delay and 
confuse what it must have known would be eventual government 
investigation.
    One of the reasons I was brought to the company was to help 
clean up the company for potential sale. Financial reporting 
and operational procedures were improving, but still 
compartmentalized and fragmented. During my time with the 
company, we had discussions with a number of buyers, and every 
one of them had concerns with Braswell advertising practices. 
While the potential buyers did not like his style, they wanted 
to know the financial effects of reducing the fabrications in 
advertising practices, clearly realizing the two are 
interdependent.
    When I came to work for the company, Mr. Braswell had been 
described to me as an advertising genius who had the ability to 
build a company to $200 million in annual revenues. As I came 
to know the insides of the companies, a different story became 
very clear. He is not an advertising genius. He is simply 
willing to advertisements outside conventional industrial 
boundaries. To me, this is not a genius. It is a liar.
    In my position as a chief financial officer, I was able to 
obtain answers to questions on advertising and work with the 
chief operating officer, Mr. Ted Ponich, to determine the hows 
and whys of the company's operating principles and practices. 
When he was hired in 1996 and I was hired in August 1998, we 
were advertised by senior outside consultants that the company 
wanted to improve its image and to convert from a clandestine 
operation to a traditional company. By November 1998, it was 
clear there was no desire to improve the company, but rather 
the desire to appear to be making changes at the company by 
hiring persons such as Ted and myself and other department 
heads with traditional business backgrounds, while Mr. Braswell 
and senior advisors continued to manipulate the advertising and 
financial performance of the company.
    The goal was to sell the company to an unsuspecting 
investor or competitor. Just after Thanksgiving of that year, 
Mr. Ponich and I met, where he informed me he was convinced Mr. 
Braswell recognized he could not change the company without 
senior staff, and he intended to use this leverage to approach 
him with his concerns as to the direction of the company.
    Things did not go the way Ted had planned. The meeting 
ended with Mr. Braswell telling Mr. Ponich he wanted the 
company to go back to the old way of doing business. Mr. Ponich 
was a man of great integrity, and he told Mr. Braswell either 
the company gets cleaned up or I will personally turn you into 
every government authority I can find. In January 1999, four 
department heads, including Mr. Ponich and I, were terminated 
for the stated reason that the company was going in a different 
direction. True to his word, shortly after we were terminated, 
Mr. Ponich met with myself to discuss going to the appropriate 
governmental agencies.
    While part of me just wanted to get on with my life, two 
things occurred which would not let me. No. 1, I would not let 
my friend take this process on by himself. More importantly and 
fundamentally, people should not be allowed to get away with 
what was going on. We had been insiders. We knew the strategy. 
We knew the practices of the company. We knew its professional 
advisors and could best ensure that the efforts of the various 
agencies were beneficial and productive, and, in fact, 
contacted the IRS, Federal Trade Commission, State Franchise 
Tax Boards, the Post Office, Food and Drug Administration, 
various other government agencies, including the offices of the 
two Senators from California.
    We expected retaliation from Mr. Braswell. We were not 
disappointed. I was sued for a number of issues, as was Mr. 
Ponich. The suit against me was ultimately withdrawn. Ponich's 
suit has been pending the outcome of a continuing IRS 
investigation against the company. However, I am certain that 
it is fraudulent and it will be settled in his favor at the 
appropriate time. The lawsuits were a not-so-thinly veiled 
message of power and money by the Braswell companies against 
those who would dare to help us. Suits were no surprise to us, 
as it was consistent with the Braswell strategy of overwhelming 
any opponent with expensive and extensive litigation brought by 
very reputable law firms.
    Besides the expensive defense, the strategy is to ruin the 
reputation and credibility of individuals and to ensure that it 
is near-impossible for them to be employable in the future. As 
you may imagine, working in the financial field and having been 
sued by your last employer for financial transgressions is not 
helpful to a career. Mr. Ponich was tragically killed in an 
automobile accident last October. I will tell you I gave up his 
cause of trying to expose the Braswell companies, and the 
companies continue to publish the Journal of Longevity, mail 
out weekly advertisements to millions, and continue to thrive.
    However, at the beginning of this year, after the 
Presidential pardon debacle, people began to notice the 
Braswell companies again. I read a number of articles on 
Braswell companies by leading newspapers and periodicals which 
describe Braswell as scam artists, convicted felons, supplement 
fraudster, huckster, swindler, con artist, and as a man 
convicted of mail fraud and perjury. Even with all of this 
notoriety, the company still continued to be allowed to go on. 
The fundamental reason I am here today is to discuss why a 
company headed by a man as described above can remain in 
business and continue to prey on the elderly and infirm.
    We all know there are Federal and State agencies designed 
to protect the public from these activities and there are a 
suitcase-full of laws already in place to make sure that what I 
have just described does not occur. In my opinion, we do not 
need any laws or agencies in addition to what we already have. 
What we do need is to have the laws already in place enforced, 
and the agencies charged with monitoring these types of 
companies do their job.
    The challenge is Mr. Braswell's senior advisers are not 
going to make it easy for anyone or any agency to impact their 
ongoing business. I have had many discussions with Mr. 
Braswell. The thing he fears most of all is going back to jail. 
He has a substantial amount of money and he will use it. The 
first thing he will do is out-lawyer whomever he goes against, 
even if that is the government. His current legal team is a 
Who's Who of the law profession. They have a client list which 
starts at the former President and Vice President and moves to 
major companies and influential people. His financial and 
technical advisers are the best money can buy. They know the 
law and they know what is massage able within the law.
    The second thing you face when dealing with companies such 
as these are both simple and yet difficult to overcome. They 
play fast and very loose with the truth. The company has 
elevated deception to an art form. He already knows the 
advertising and return policies within the company are 
fraudulent. Why should we believe that they are all of a sudden 
honest when it comes to dealing with government investigators 
or, for that matter, anyone who is a perceived threat to the 
ongoing operation? The United States Postal Service, which was 
responsible for shutting down the 1983 Braswell operation by 
stopping its mail, cannot easily interrupt mail destined to 
Canada. So they go get a Canadian address.
    The FDA, after reviewing some of Gero Vita and other 
Braswell products, issued an import alert for product coming 
from Canada. The agency believes it did its job. However, the 
fact is there is product coming from Canada because the company 
is headquartered in Marina Del Rye, CA. The products are 
encapsulated at various labs on the West Coast and product is 
shipped from a company warehouse in Las Vegas. The company 
maintains its primary banking relationships--the Royal Bank of 
Canada. All funds are wired there on a daily basis. While the 
money in Canada is not beyond the reach of U.S. officials, it 
will delay by 2 or 3 days any seizing process and allow the 
company to move funds offshore.
    Over the past 2 years, almost all of the agencies that were 
contacted by us have come back to say that their initial 
investigation revealed the Braswell companies to be foreign-
based, beyond their jurisdiction, even after we advised them of 
who Mr. Ponich and I were and what we knew, the best we would 
receive was a promise from a few agencies to look into the 
matter. For the record, over half-a-dozen calls to each of our 
State's Senators yielded zero response.
    The Braswell strategy has been effective, and to stop the 
predatory nature of the advertising and fraud, in my opinion, 
you have to defeat the strategy. In a nutshell, this strategy 
is simple--first, remain anonymous. No one knows who you are or 
where you are--compartmentalize the company so even employees 
do not know exactly what goes on. Contract out much of the 
company's activities. Stay off government radar screens and 
stay out of the limelight. Mr. Braswell believes that 
government agencies love to go after big fish. A legitimate 
concern of Braswell is that his company was getting too big, 
one of the reasons for sale is that it would begin to attract 
attention.
    The second strategy is to hire the best attorneys and 
accountants that are available, feed them a tale of misery, 
accented with deception. These people know the government, they 
know the people within the government and they know the 
attending weaknesses within any agency. The reputations and 
credentials of the professionals representing Mr. Braswell are 
known and respected by most agencies and various government 
attorneys. This is intimidation, but it works.
    Third, delay the process; provide no information or 
overwhelm an agency with useless information; ask for 
extensions; plead ignorance; mistakes of intent. Most agencies 
are very forgiving. Use the bureaucratic nature of government 
investigating agencies against them; that is, most bureaucrats 
do not want to draw attention to themselves or other agencies 
by investing government resources in a losing effort. These 
people who work for government agencies do not want attention 
any more than Mr. Braswell does, but for different reasons. If 
they know that going against Mr. Braswell will be long, 
expensive and may yield nothing, they are inclined to look for 
a reason to avoid confrontation.
    Last, strategic settlement; if there is a chance that the 
loss is unavoidable, settle the issue, seal the results, 
maintain your anonymity. That is the basis of the company and 
provides the freedom from which they operate. The company, 
policies and procedures that I have just described exist. It is 
real, operates in California, but how do you know that? This 
committee has the opportunity to view what I have just told you 
as either the truth or the ramblings of a disgruntled former 
employee. I would suggest to you that there are consequences to 
either avenue. If you ignore me, you take the chance I was 
telling the truth and that the company preys on the elderly and 
people who are infirm and in need of hope. These people need a 
collective voice, and this committee can be that voice. If you 
take me at my word, you are going to be taking on a man who has 
money, therefore can buy power and influence, both of which are 
the non-negotiable currency of many governmental endeavors. 
Let's not forget, he just received a Presidential pardon.
    Ultimately, if we are successful in changing or eliminating 
Gero Vita, GB Data and the Braswell companies, another will 
step up and fill the void, as long as there are people in pain 
and getting older, when older brings pain and illness, there 
will be people who believe that there is an herb in India or a 
plant in China that holds the secret to pain-free existence 
that our government does not want them to know about it. The 
fact is most Chinese and Indians do not live near as long as 
Americans, but packaged and presented in the proper format, 
there are millions of people, perhaps tens of millions in this 
country, that are willing to ignore this fact and buy into the 
fraud sponsored by companies such as Gero Vita, Theraceutical, 
and other Braswell-type companies and enrich the owners in the 
process.
    The job of this government and this committee, as I see it, 
is to simply make sure there is a level playing field, that 
citizens have all the information they need to make an informed 
decision, and the information is founded in fact. Fraud and 
deceit, wherever it exists, unlevels the playing field and 
clouds the facts.
    Thank you.
    [The prepared statement of Mr. O'Neil follows:]

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    The Chairman. Well, Mr. O'Neil, thank you very, very much 
for a very detailed and very elaborate tale. I think the 
information that you provided in your testimony is extremely 
important to this committee. We thank you for being with us. I 
know it has not been particularly easy for you to do so.
    We will next hear from Mr. Vernon Glenn, who is an attorney 
from Mt. Pleasant, SC. Mr. Glenn, we welcome you to the Aging 
Committee.

STATEMENT OF E. VERNON R. GLENN, ESQ., LAW OFFICES OF E. VERNON 
                   F. GLENN, MT. PLEASANT, SC

    Mr. Glenn. Thank you, Senator Breaux. I appreciate the 
committee's invitation to testify and I hope what I have to say 
is helpful. My biography has already been provided to the 
committee. I am a trial lawyer and I live across the river from 
Charleston, SC. I would be remiss if I did not extend the 
salutations and good greetings from Mrs. Virginia Kyle Hine and 
Mr. Edwin Kyle. Ms. Hine's son, Johnny, is my best friend from 
college, and they sent their best to Senator Breaux.
    I was taught as a child that if it quacks like a duck, 
walks like a duck, waddles like a duck and has white feathers 
like a duck and has got an orange bill like a duck, then in all 
likelihood it is a duck. I am here to tell you now that what 
Mr. O'Neil has told you is not only a story of some significant 
tragedy for our seniors in this country, but it is a duck. This 
fellow, Braswell, whose deposition I took this time last year 
down in Miami, I would submit to this committee is a recidivist 
of the highest and most chronic nature.
    Let us not forget that Mr. Braswell was sent to jail, to 
Federal prison, by Federal Judge Marvin Shoob back in the early 
1980's. Now, why was he sent to prison? Let us review: Mr. 
Braswell was sent to prison for lying about breast-enhancing 
and hair-growth products, and false marketing, and lying before 
a grand jury, and income tax fraud. All of it was related to 
his marketing. I have with me an excerpt from the Atlanta 
Journal Constitution, 1983: ``Glen Braswell, once a reputed 
multimillionaire who lived in an Atlanta mansion and ruled a 
mail-order empire was sentenced to prison Monday in Federal 
court here. 'He can't even pay his phone bill now, they say,' 
said Assistant U.S. Attorney Robert Stubbs, who handled the 
Braswell prosecution. The picture painted in court testimony 
was that Braswell has little left to show for his years of 
business and will be lucky to keep one of the three homes that 
he owned in better days. He received a 3-year sentence for 
filing false tax returns and a perjury conviction, and when he 
is released he has 5 years on probation, and he is also to have 
Federal alcohol and drug rehabilitation while he is in the 
Federal pen in Kentucky.''
    Ladies and gentleman, I am here to tell you the more things 
change, the more they stay the same, and we are now at another 
moment of critical mass. Mr. Braswell is absolutely making 
money hand-over-fist on the backs of aging and scared and 
fearful Americans. There are two ways to stop this, I would 
submit, and I bet somebody else up there has got another idea, 
but my two ways are this: One, we have got to educate our 
seniors, and that seems to be an ongoing process, because hope 
and hopefulness always triumphs education. It just does. We 
want to believe. I am 51 now. I have gotten very creaky, and 
old, and grumpy about it, and I would love it if somebody would 
give me something to make me feel better every morning.
    Having said that, I also am old enough and experienced 
enough and educated enough to understand that there is no magic 
cure in a bottle. I wish that there was, but there is not. So 
the ongoing educational process, a little bit, is not going to 
be that effective. The other part of it is somebody has got to 
start swinging a great big bat at these people. I know about 
Braswell because I represented a bunch of people that ended 
up--and we ended up suing him, and we sued him in a very 
unlikely place. We sued him in Federal court in South Carolina, 
and Mr. Braswell did not want to come down to the low country 
of South Carolina and sit and face a jury of his peers.
    Mr. O'Neil and I were chatting earlier and he told us we 
were just a flea on a dog's back. They paid us some money--we 
are not allowed to disclose how much and it was a goodly sum, 
but I am not going to tell you how much--but it did not mean 
anything to Glen Braswell, and his insurance company paid some 
of it and Mr. Braswell paid some of it. Isn't that about right? 
And Mr. Braswell went on, and that is the reason, when I sent 
my remarks up to this committee, ``Sin in haste and repent at 
leisure.'' That is something my mother always said to me and I 
now say it to my children.
    Mr. Braswell has a great time sinning and it takes him a 
long time to repent, and until you all get your big stick out 
and all these nice law-enforcement agencies sitting back here, 
Mr. Braswell is going to continue to get a free pass. He wants 
to sell these companies, ladies and gentlemen. He has got a 
passport. He is going to leave the building. He is going to 
come in here with a phalanx of lawyers. He is going to leave 
with a phalanx of lawyers, and we will all throw our hands up 
in the air. I submit we can do better than that.
    John Cheever, one of the great American authors, once said 
that, ``America is a Nation haunted by a dream of excellence.'' 
I always loved that. He said that at the Bicentennial. Walter 
Cronkite interviewed him. What he was saying was we are always 
stumbling and staggering and trying to figure out what is the 
right thing to do, and we mess it up all the time and we get it 
wrong a lot, but we keep trying. So our plea to this committee 
is please keep trying, please let's sort of put on our armor 
now. Let's tell the big-dog, white-collar law firms no, no 
more, we are not going to let you stand in the way here. We are 
going to do our job for our senior citizens and for our people 
who are sick and scared. It is the right thing to do.
    Last, I would draw your attention to three quick things, 
and then I will be quiet. My children would look at me when I 
say that and say, ``Daddy is lying again,'' so I want to make 
full disclosure. There is a poster over here that we pulled up 
off the Gero Vita web site, and I would commend this to you. I 
know the Braswell people will love it because it is free 
advertising. You know that old thing, ``I don't care what you 
say about me, as long as you get my name right.'' But it is 
www.gvi.com. You can go there and I mean you can buy it all, 
and I wish you would look at the bottom. This is the Prostata. 
This was the company, the product that GVI sells, that we got 
into these lawsuits with, with Jim Ferree and these other 
sports celebrities. They have a disclaimer on the bottom, and I 
want to read it to you real quickly: ``Gero Vita products are 
dietary supplements--that is it--and as such are not intended 
to treat, cure or prevent any disease. Those seeking treatment 
for specific disease should consult a physician or other 
qualified health care professional prior to take a Gero Vita 
product or any dietary supplement.'' The message is: Buy our 
stuff, but before you put it in your mouth, go on and see your 
doctor.
    Well, your doctor is going to tell you that it is not worth 
a tinker's damn, none of it is. It is junk. It is all junk. I 
consulted with one of the finest gerontologists in the country, 
Dr. Walter Ettinger, then of Wake Forest University Medical 
School. Walter Ettinger knows more about dealing with the aging 
issues with elderly Americans than just about anybody I know. 
Walter Ettinger said this stuff is not medically efficacious.
    My time is up. I have one last comment. In the web site 
they have a special section, and I do not mean for this to be 
salacious. This is sad. Sexual enhancers, they sell--they list 
10 of them, with such fascinating names as Sexativa Plus, 
Teston cream and Intamax. I conclude my formal comments to this 
committee by giving you a brief description of the so-called 
claimed medical efficacy of Teston cream and Intamax, which 
they sell, by the way, in a combo-pack. Teston cream--now, you 
all tell me if the Federal Trade Commission does not believe 
this is false advertising: ``Teston cream is a hormonal 
supplement,'' which, by the way, nobody knows how much hormone 
is in it or if any is in it because it is not vetted by 
anybody. It is only distributed by GB Data Systems through 
their operations in Canada, Reno, and all parts of the globe.
    But what you do with Teston cream--and this is fabulous--
you rub it on your clean, dry abdomen, and then your sex life 
is going to take off. Now, I am going to tell you now if I can 
rub some cream on my clean, dry abdomen--I guess if you had a 
sweaty or dirty abdomen, you are out of business. The other 
part of it is the Intamax. Now, this is even better. Here is 
the double-barrel. If you get both--if you can get both, first, 
I guess, you put the Teston cream on your clean, dry abdomen, 
but then you spray Intamax with its six prosexual nutrients 
into your mouth. I do not know when you do this, because they 
are not telling us, but I am sure that would really kind of 
lighten the mood. ``Can elevate your sexual vigor to new 
heights of passionate lovemaking.''
    Folks, this is garbage. This is junk. These people walking 
in here today, they can dress it up any way they want, but the 
truth of the matter is this is real wrong, and you all--and you 
all have the power to put the brakes on these people. I have 
always felt that during the course of my life, that from time 
to time things achieve a critical mass, things evolve. They 
kind of come to a point where things are going to happen. Well, 
golly, the country is getting older. I am getting older. We are 
all getting older, and these people are out there just preying 
on us. Stop them.
    Thank you.
    [The prepared statement of Mr. Glenn follows:]

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    The Chairman. Mr. Glenn, thank you very much, and Mr. 
O'Neil, thank you very much. A couple of questions, Mr. Glenn 
has just indicated, in his opinion, that the products are 
garbage and junk. But, Mr. O'Neil, can you give us an idea of 
how much the company was making selling the products that Mr. 
Glenn just described as garbage and junk?
    Mr. O'Neil. Sure. The company has a profit--pure profit 
percentage of between 18 and 20 percent. As he so effectively 
described the product, which I would not even try to do again, 
they sell typically for $29.95. Of that $29.95, the majority of 
the expense going into that $29.95 is advertising. The product 
itself is probably bottled and put in a box for $4, $5 dollars. 
So advertising is clearly the No. 1 expense of the company.
    The Chairman. Do you have any idea what the gross revenues 
were?
    Mr. O'Neil. I have no idea what it was for the last couple 
of years, but I know they were on target for $200-plus million.
    The Chairman. I am sorry. How much?
    Mr. O'Neil. They were on target for $200-plus million when 
I left the company.
    The Chairman. $200-plus million? Was that--over what period 
of time?
    Mr. O'Neil. A year.
    The Chairman. A year?
    Mr. O'Neil. Yes.
    Mr. Glenn. Let me put it in further perspective. When Mr. 
Braswell went to prison in 1983, 1984, he was broke. So in 
about 17 years, he has gotten way past back to even. They 
advertised last year, after Mr. O'Neil and Mr. Ponich and the 
others were summarily kicked out the door for trying to tell 
the truth, they advertised in a number of trade journals that 
they wanted a director of marketing for a $250 million-a-year 
gross sales company. We know that in the cases that we were 
involved in, that they mailed out almost 12 million brochures, 
and these are expensive brochures. They used one of the biggest 
and finest printing outfits in the world, Quebecor, Magog out 
of Canada, and they mailed out about 12 million of these 
glossy, slick brochures. They were just four-fold, but they 
made about $7, $8 million in sales off those brochures.
    They track by zipcode a personal note--and I have seen the 
document. Mr. Braswell owns all this stuff lock, stock and 
barrel. If there is any minority ownership, it is very, very 
minority. Just to put it in perspective, this was a man who was 
broke 17, 16 years ago, when he got out of prison. He just 
settled with one of his wives for $42 million, and he is paying 
her. That is a lot of cash.
    The Chairman. Mr. O'Neil, we got one of the copies of the 
Journal of Longevity at my house. How did I get on the mailing 
list?
    Mr. O'Neil. Mailing lists are an industry unto themselves. 
There are brokers out there who, if you buy something, you 
order something, ask for information on something, any time you 
give your name and address out somebody is capturing it. It is 
a very elaborate industry, because obviously you do not want to 
pay for names that are already your customers. But essentially 
somebody in your family made a request, ordered something, got 
a Visa card, got a TRW report. There are 1,000 different ways 
of getting on a list, and these lists are traded, these lists 
are sold. They are rented--essentially, you rent them for four 
cents a name or thereabout.
    The Chairman. Was there a conscious effort to get names of 
people who are seniors?
    Mr. O'Neil. Absolutely. As Mr. Glenn pointed out, you want 
to sell your product to the target market, and the more you can 
refine that, the advertising is very expensive. If you look at 
the quality of the advertising, not what is contained within 
the issue, but just at the quality of the journal itself, the 
reason it looks like, as you referred to, the American Journal 
of Medicine or the New England Journal of Medicine is because 
it is equally well-prepared, probably better prepared, if you 
truly wanted to go into the details of it. It is very well 
done, it looks legitimate, and that is very expensive to do. So 
you do not wish to put that advertising piece, as it truly 
should be referred to, in the hands of a 20-year-old who would 
not know their prostate if they had to.
    The Chairman. Do you have any information or knowledge as 
to how--I was impressed with the pictures of the doctors and 
all their little initials behind their names, M.D.s, Ph.D.s, et 
al., behind each one of their pictures and their names. I am 
just wondering, do you have any idea of how the company got 
doctors to associate with the articles and did, in fact, the 
doctors write the articles, to your information?
    Mr. O'Neil. The articles were written at the Journal of 
Longevity, which are--the offices of the Journal of Longevity, 
the offices of GB Data, the offices of Gero Vita, are all on 
one floor, in one building, literately across from each other. 
So to presume that there is a distance between them would be an 
overexagerration. What happens with the doctors--and as you 
know, I am not a doctor--but there are many doctors that 
believe that this stuff is valuable to you, as some would say 
it is not valuable to you. So they seek out doctors who are 
willing to have their names associated, they write the article, 
they ship it to the doctor for their review.
    The Chairman. Who would write the article?
    Mr. O'Neil. Writers. If you flip to the front of that book, 
you will see a bunch of budget writers. The people will write 
the article, do the research--and they include a bibliography 
in there, and the research is from wherever--and then ship the 
article off to the doctor to be reviewed for--you know, to see 
if they were wiling to come on board with it. There is a list 
of doctors, and from within the company, I can tell you that 
there are certain doctors that you can ship whatever to and 
they will sign off on it, and other doctors are more critical.
    The Chairman. My final question--thank you. Was there any 
discussion at any time as to whether the word ``advertisement'' 
should appear in this journal at any time, and if so, what was 
the conclusion?
    Mr. O'Neil. That would defeat the purpose, simply put. That 
is a short answer to a long question, but that would defeat the 
purpose. The purpose in not to have that considered as an 
advertisement. The purpose in presenting that whole process--if 
you look through that journal, there is virtually no other 
product, other than the Braswell products, advertised in there, 
and yet it presents itself to be a journal, and if you read 
under the title, of medical review. So to call that an 
advertisement is to put a stake in the heart of it.
    The Chairman. Thank you both, gentlemen, very much.
    Senator Wyden
    Senator Wyden. Thank you, Mr. Chairman.
    Mr. O'Neil, a special thanks to you. It takes tremendous 
guts to do what you are doing, and not just walking through 
that door and talking casually. There is real exposure for 
somebody like yourself who does this, and I appreciate it. I 
think you heard me say that what I think really has changed 
over the years, in terms of how you fleece seniors, is that you 
use these new technologies, No. 1, and with modern 
transportation you have got worldwide mobility, and I think 
what you have documented in your testimony, particularly at the 
top of page four, is especially troubling, in terms of the 
relationship between California and Las Vegas and Canada.
    I want to ask you just a couple of questions about that. 
You mentioned that the company's money is sent to Canada so 
that if anybody goes after it, there is a delay so it can be 
transferred again quickly. Do you have a sense of where the 
money ultimately ends up?
    Mr. O'Neil. Yes, I do. I imagine you will probably want me 
to elaborate on that. As one might imagine, this is a $200-plus 
million operation and there are expenses that need to be paid. 
The money is collected either through credit card receipts or 
through the actual through-the-mail receipts, and starts in the 
Royal Bank of Canada. From there, it goes to--or at least it 
formerly went to, when I was there--Bermuda, to accounts 
controlled by Mr. Braswell directly, and then from then on I 
have my suspicions, but I cannot quote exactly where it goes. 
But it does not end up back here, and the purpose behind that 
is very simple. In 1983, it was the United States Post Office 
that shut him down simply by interrupting his stream of cash. 
If you take the mail, you take the receipts. Now, credit cards 
were not as prevalent back then, but you interrupt his mail, 
you interrupt his receipts, you interrupt his cash-flow.
    Senator Wyden. Does the money move through multiple 
jurisdictions overseas, in your opinion?
    Mr. O'Neil. Define multiple jurisdictions.
    Senator Wyden. I am trying to be helpful to you. As I say, 
I think what you are doing is extraordinarily gutsy, and I 
obviously want you to tell me where it is going to end up, but 
I realize this is a very sensitive point. As I say, this is a 
field I have worked in for 20 years now, since I was director 
of the Gray Panthers, and I think there is clearly a new 
approach that allows this money to be moved literately all over 
the globe virtually overnight, and I want, consistent with what 
you feel comfortable saying, for you to tell me a little more 
about that.
    Mr. O'Neil. Sure. The money flows, as you said, quickly. 
The money flows effortlessly, as simply as wire transfers and 
the money is in California this morning, this afternoon it is 
in Canada, and tomorrow morning it is wherever it needs to be. 
As to whether it takes guts to come up here and say something, 
I would just like to say one thing on that, and that is that my 
friend, Ted Ponich, who passed away, made a promise to this man 
of what he was going to do if he did not clean up his act. I am 
just fulfilling a promise. I am not--this is not--trust me, I 
got other places I would rather be.
    Senator Wyden. I got that drift.
    Mr. O'Neil. I am not the best person to do this. He was a 
gregarious person that would be better served here, but he said 
what he was going to do. I agreed with it, so I am here. So 
whatever you want to know, less what is going on with the IRS, 
I am more than willing to tell you.
    Senator Wyden. You also mentioned that you had gone to 
several agencies to ask them to work with you on this. Can you 
tell us a little bit more about how you were treated by those 
agencies?
    Mr. O'Neil. Are you sure you want to know? Yeah, all right. 
Not well--courteously, but not well. There is a sense among the 
agencies of do you really want to take on this man? Do you 
really want to face the lawyers that you are going to be facing 
in a couple of seconds and go head-to-head with them, and 
potentially lose? When you go to the FTC or you go to the FDA, 
there is no Mr. FDA or Mr. FTC. It is not one person. You are 
talking to a person who works for the agency--I am sure very 
well-intentioned--but they work for an agency. They do not 
represent the agency. They do not have ownership in the agency. 
They want to make their job appear as easy as possible.
    Included in that was our two Senators from California, and 
they were very courteous--I mean, their staff. You do not talk 
to them, naturally. But the staffs of every agency we went to 
were very courteous. Some did some investigations and came back 
and said Canadian company. And we flat told them--Mr. Ponich 
was with me at the time, ``Look, you are looking at the chief 
financial officer and the chief operating officer of the 
company. We know they are in Marina Del Ray. We know there are 
no--'' And then they would say, ``Well, let us look into it 
further,'' and it just rolls on down the road.
    So it was a frustrating experience at best, and 
functionally, as I said, I gave it up. It just was not--it was 
not worthy my time to just be told there is nothing here or 
there is nothing worth it, in the agency, to go after him, or 
there is nothing we can latch our hands on to, or there is some 
agency and we are going to subordinate our investigation to the 
IRS and wait till it--and they do not have to be--they can 
mutually exclusive, I guess is what I am saying.
    Senator Wyden. If you could get to me the names of the 
people in some of these agencies that you met with, I would 
very much like to go over that with them, and I share your 
view. I do not think they get up in the morning and say, 
``Look, I want to let some people off the book.'' I think that 
clearly these are issues that take a whole lot of effort and 
whole lot of commitment, and my sense is sometimes that is not 
forthcoming, and I want to follow this up.
    Mr. O'Neil. Senator Wyden, you are right. Essentially, 
there is an investment that they have to make in their own 
credibility, their own time, and agency resources, and I am 
sure they kind of do a return on investment at their own level, 
and say, ``This is what we are going to go up against,'' and 
frankly there are not five people in this room that could tell 
where O'Neals, CA really is. I am one man from O'Neals, CA. Who 
am I going to talk to? Who am I?
    Senator Wyden. That really leads to the last question I 
want to ask for you, Mr. Glenn, because your testimony was very 
good, and I obviously share your concerns. The point about the 
agencies and the investment goes right to the heart of what you 
need to do in this area.
    I am not convinced, for example, you need to bring hundreds 
and hundreds of cases. What you need to do is send a very 
strong message in instances where it is clear that the conduct 
is over the line, because if you send a really strong message, 
that has real deterrence value, and then all of a sudden those 
who prey on seniors are going to have to be a little more 
cautious. That goes to the point that you made with respect to 
swinging the bat and swinging the bat hard, which is again 
something I have been very committed to in my years, working 
with older people.
    What is being missed as of now when people swing the bat? 
Let's say you are at the plate, you hold the election 
certificate, you sit where Chairman Breaux is and a couple of 
other members of U.S. Senate, and so you have got an 
opportunity now to make sure that when the bat is swung, you 
are not just flailing around out there, but you are really 
swinging it so has to have the maximum effect when you really 
need to send a deterrent, which is what I was trying to elicit 
from Mr. O'Neil. So tell us, if you would, how you swing that 
bat.
    Mr. Glenn. I would have a real brief meeting with the 
following people in attendance, and I would ask them for their 
full and total corporation. I would invite the head of the 
Federal Trade Commission, the head of the Food and Drug 
Administration, the United States Postal Inspector, the 
Canadian ambassador, the Ambassador from the Grand Cayman 
Islands, where one of the big offshore holding companies is 
DeLeon Holdings, I believe it is. I am saying it, he ain't. And 
I would also have the U.S. Attorney from California, who is in 
charge of the ongoing, pending criminal tax fraud 
investigation. I would say, ``Gentlemen, ladies, we are going 
to get on the same page, we are going to get on the same page 
now, and in 10 days I want you back in my office telling me 
exactly what we are going to do, and we are going to shut this 
scam artist down and we are going to shut down now,'' And I 
believe that is probably already in the works. This is part of 
my critical mass theory.
    But I think that is the easiest way. You get everybody that 
has an opportunity to take a shot at this guy, legitimately, 
and get them all on the same page at one time, and then run it.
    Senator Wyden. We are going to try to--and under Chairman 
Breaux's leadership--we are going to try to bring that kind of 
meeting about.
    Mr. Glenn. I do not think there is any question there is.
    Senator Wyden. Thank you.
    The Chairman. Thank you, Senator Wyden. We have been joined 
by Senator Lincoln.
    Any questions at this time, Blanche?
    Senator Lincoln. No questions. I may have a few opening 
remarks.
    [The prepared statement of Senator Blanche Lincoln 
follows:]

             Prepared Statement of Senator Blanche Lincoln

    Good Morning Mr. Chairman and thank you for holding this 
timely and important hearing.
    A recent Newsweek article said that, ``....in England, old 
age is imminent, in Canada inevitable and in California 
optional.'' In their day and age in America, are able to 
replace practically anything that we want from hair to hips. So 
it's no wonder that our expectations for health ``fix-er-
uppers'' are high.
    As the Newsweek article that I'm referring to made clear, 
most of us want to live as long as possible, but we also want 
that life to be healthy.
    We are blessed in our society to have access to some of the 
most exhilarating types of activities; and just because we are 
``a certain age'' doesn't mean we want to stop doing those 
things. Americans want to remain as active and involved in 
every aspect of our lives as possible. We don't even want to 
retire until it is absolutely necessary. So, we all run the 
risk of being ``victimized'' when it comes to products that 
help hold at bay those aches and pains and essentially ``slow-
down'' the process of aging.
    Our senior population is growing and Baby Boomers more than 
anyone will be seeking the most effective health sustaining 
products. This problem is of national concern, considering that 
it is estimated that this is a $27 billion dollar a year 
industry and 60 percent of those consumers in this industry are 
senior citizens.
    Given this set of circumstances I believe it is our 
responsibility to be aware of companies that wish to prey upon 
our vulnerabilities. We must arm our caregivers with yet one 
more weapon with which to fight for and protect our seniors 
from these abuses-knowledge.
    I'm glad to be here today and look forward to the 
testimonies of our witnesses.
    Thank you Mr. Chairman.

    The Chairman. OK. Good deal.
    Gentlemen, we thank you very much. You all have been very 
helpful to this committee. Perhaps we may have some future 
discussions with you, and the best of luck to both of you. 
Thank you very much.
    We would like to now welcome up our next panel, the second 
panel, which will consist of Mr. Glen Braswell, who is 
president of Gero Vita International, and Mr. Ron Tepper, who 
is editor of the Journal of Longevity. The gentlemen, I 
understand, will be accompanied by their attorneys, and we 
would be pleased to have them come before the committee. We 
will, of course, ask them to take the same oath testifying to 
their truthfulness as the first panel did, and would ask them 
to please take their positions at the witness table.
    Mr. Braswell and Mr. Tepper, I was saying while you were 
entering the room that we would ask you to please stand and 
swear to the truthfulness of your testimony, as we have had the 
first panel do, and all the other panels, as well. Gentlemen, 
would you please stand and raise your right hand? Do you 
solemnly swear that the testimony you are about to give to the 
Committee on Aging be the truth, the whole truth, and nothing 
but the truth, so help you, God?
    Mr. Tepper. I do.
    Mr. Braswell. I do.

STATEMENT OF GLEN BRASWELL, PRESIDENT, GERO VITA INTERNATIONAL, 
   MARINA DEL RAY, CA; AND RON TEPPER, EDITOR, ``JOURNAL OF 
   LONGEVITY,'' HEALTH QUEST PUBLICATIONS, MARINA DEL RAY, CA

    The Chairman. Please be seated. Gentlemen, we are glad that 
you are here. I understand that you do not have any testimony 
to present as a statement to the committee. Is that correct?
    Mr. Tepper. That is correct.
    Mr. Braswell. That is correct.
    The Chairman. Well, then in that case, I think that it 
would be appropriate if we would just, since you do not have a 
printed statement to the committee, just to proceed to asking 
you some questions about the subject matter of the hearing 
today.
    I would like to start by first asking Mr. Braswell if you 
are the sole owner or stockholder for the GB Data Systems and 
their subsidiary companies?
    Mr. Braswell.
    Mr. Braswell. On advice of counsel, I respectfully decline 
to answer the question, based on my rights under the Fifth 
Amendment.
    The Chairman. Mr. Braswell, I know the answer, but if you 
would make sure you have your mike as close to you as you 
possibly can.
    Mr. Tepper, you are identified as the editor of the Journal 
of Longevity. My question is isn't it true that the 
publication, Journal of Longevity, which you have seen 
displayed here, is owned by GB Data and is not, by any 
definition, an independent medical journal? Is that correct or 
not correct?
    Mr. Tepper. On advice of counsel, I respectfully decline to 
answer the question, based on my rights under the Fifth 
Amendment to the U.S. Constitution. On advice of counsel, I 
assert the privilege.
    The Chairman. Mr. Braswell, the address that we have noted 
in the Journal of Longevity to order the products that are 
advertised for distribution and sale is in Canada. Do you have, 
in fact, any employees or offices or facilities or products 
based anywhere in the country of Canada?
    Mr. Braswell. On advice of counsel, I assert the privilege.
    The Chairman. Mr. Tepper, the previous panel of witnesses, 
one of the attorneys, talked in terms of litigation, that he 
has proceeded to represent people who are allegedly endorsing 
products in the Journal of Longevity without their permission. 
The question is has the Journal of Longevity and you as the 
editor ever utilized statements or likenesses of any 
individuals without their permission to do so, that appeared 
subsequently in the journal?
    Mr. Tepper. On advice of counsel, I respectfully decline to 
answer the question, based on my rights under the Fifth 
Amendment to the U.S. Constitution. On advice of counsel, I 
assert the privilege.
    The Chairman. Mr. Tepper and Mr. Braswell, I think there is 
a trend here. Mr. Braswell, I have just got to ask you, do you 
really use any of these products that are advertised in that 
Journal of Longevity yourself?
    Mr. Braswell. On advice of counsel, I assert the privilege.
    The Chairman. Gentlemen, certainly you have the 
constitutional and legal right to do that. The assertion of the 
Fifth Amendment right to not testify is a right that has been 
long-recognized in this country, and we respect that right. It 
is not an indication of guilt or innocence or anything of that 
nature. You have that right and we respect your exercise of 
that right, and obviously to continue a long line of 
questioning with the same answers is not going to get us 
anywhere, nor provide any additional information, and the 
committee really needs to move on to other people who will be 
testifying about this and other matters dealing with the 
marketing of products, particularly to seniors.
    With that, and your assertion of your rights, which again 
you have the right to do, both Mr. Braswell and Mr. Tepper 
would be excused at this time.
    We now, as this panel is departing, have a third panel 
which we will anxiously bring to the forefront. Ladies and 
gentlemen of the third panel, we are pleased that you are here. 
We would like to invite your testimony. I think it is a 
distinguished panel, and we would like to introduce them. The 
first member of our panel is Dr. Janet Heinrich, who is the 
Associate Director of Health, Education and Human services at 
the GAO. Welcome back. Next we have Dr. Joyce Lashof, of the 
University of California at Berkeley, author of the Wellness 
Letter, which we have looked at; Dr. Robert Baratz, pleased to 
have you with us; and also Dr. Timothy Gorski. Dr. Gorski, we 
are delighted to have you, as well. We will begin with Dr. 
Heinrich and with the General Accounting Office.
    Dr. Heinrich. Mr. Chairman and members----
    The Chairman. Pull those mikes real close. Let me ask--
because of everybody's time constraints, we are going to ask 
that you attempt to summarize your statements. Dr. Heinrich, 
you have done this many times before, and all of our witnesses. 
We are going to be fair. We have three Democratic Senators 
here, and I expect others to be in attendance in the near 
future. But I have read everything you have written, and I 
think our colleagues have. I have read it, I have underlined 
it, and I have re-underlined it. So I have already heard it. So 
I would like very much for you to attempt, to the extent that 
you can, summarize it for the record. It will appear in its 
entirety in the official public record, and I want to get to 
the questions and hopefully the dialog that would be most 
helpful.
    Dr. Heinrich.

    STATEMENT  OF JANET  HEINRICH , D.Ph., R.N.,  ASSOCIATE 
   DIRECTOR, HEALTH, EDUCATION, AND HUMAN SERVICES DIVISION, 
           GENERAL ACCOUNTING OFFICE, WASHINGTON, DC

    Dr. Heinrich. Mr. Chairman and members of the committee, we 
are pleased to be here today as the committee considers risks 
associated with anti-aging and alternative medicine products 
marketed to senior citizens. These products are popular among 
consumers, with as many as 40 percent of senior citizens 
reporting some use. As you have stated, they include dietary 
supplements, such as ginkgo biloba, used to improve memory, and 
ginseng, used to relieve stress. Some products are promoted 
with anti-aging and cure-all claims for which there is little 
scientific evidence of either safety or effectiveness.
    Because of your concerns about these anti-aging product 
claims, you asked us to do a report on some of the potential 
harms that are physical and economic, and to examine Federal 
and State oversight.
    The Chairman. Do you know when we asked for that request, 
because I was trying to figure out when we asked for it? Do you 
have that in your file?
    Dr. Heinrich. Oh, yes, we do.
    The Chairman. When would that be?
    Dr. Heinrich. It was probably July--March, March.
    The Chairman. March?
    Dr. Heinrich. Yes.
    The Chairman. Thank you. Please continue.
    Dr. Heinrich. Although documented adverse effects for most 
products are generally mild, potential harmful complications 
from supplements can occur due to several factors. Research 
shows that some supplements can have serious health 
consequences for seniors, such as respiratory failure, kidney 
damage. FDA has issued warnings that the herbal product, 
comfrey, for example, used for colds and coughs, represent a 
serious safety risk to consumers from liver toxicity. I was 
able to purchase some comfrey this weekend that had a warning 
that said should not be taken internally because there may be 
some harmful alkaloids if taken over a long period of time.
    Individuals with certain underlying medical conditions 
should avoid some dietary supplements. For example, ginseng is 
not recommended for persons with hypoglycemia, and kava kava, 
thought to promote relaxation, may worsen symptoms from 
Parkinson's disease. A variety of frequently used dietary 
supplements can have dangerous interactions with prescription 
and over-the-counter drugs. Several supplements, such as, 
again, ginseng and ginkgo biloba, alter bleeding times and 
should not be used with blood-thinning products like warfarin 
or coumadin, and should not be used prior to surgery.
    Other risks are associated with poor manufacturing 
practices. Supplements have been found that were contaminated 
by pesticides and heavy metals, some of which can be toxic. 
Finally, dietary supplements may contain more active 
ingredients than indicated on the product label. In a study of 
DHEA, a dietary supplement that may increase hormone levels, 
one product was shown to have as much as 150 percent of what 
was indicated on the label, while other samples had none.
    We do not have exact figures, but millions of dollars may 
be spent on unproven products. For example, rife machines, 
which emit electrical frequencies that manufacturers claim 
kills viruses and parasites can cost up to $5,000. FTC 
estimated that for 20 companies the subject of law-enforcement 
activities, the average economic harm to consumers was about 
$1.8 million per company. The potential for harm to seniors is 
a concern of public health and law-enforcement officials, and 
Federal and State agencies have some activities underway.
    FDA has taken enforcement actions against firms selling 
anti-aging products alleged to be dangerous or illegally 
marketed. It has taken actions to remove from the market 
products that the agency found were actually unproven new drugs 
or medical devices, and it has taken some actions against firms 
that promoted their dietary supplements for the cure or 
treatment of disease. FDA has not prohibited the marketing of 
any specific substances using its administrative authority 
under the Dietary Supplement Health and Education Act.
    The agency has issued warnings for ingredients it deems to 
be unsafe and unlawful. However, many products remain on the 
market despite the agency's warnings. An example of this is the 
case of colloidal silver products. Some manufactures have 
claimed efficacy in treating HIV and other diseases with these 
products. Even though FDA banned colloidal silver products as 
an over-the-counter drug in 1999, these products may still be 
marketed as dietary supplements, as long as they are not 
promoted with specific disease claims.
    Despite FDA oversight activities, colloidal silver products 
claiming natural antibiotic properties to address numerous 
health conditions remain available. FDA can also monitor 
dietary supplements by conducting inspections of manufacturing 
facilities. However, the agency inspects less than 5 percent of 
facilities annually. Publication of good manufacturing practice 
regulations would improve FDA's enforcement capabilities, and a 
proposal rule is awaiting approval. In conclusion, the risk of 
harm to seniors from anti-aging and alternative health products 
has not been identified as a top public health priority or 
leading enforcement target. However, evidence demonstrates that 
many senior citizens use anti-aging products, and that 
consumers who suffer chronic conditions may be at risk of 
physical and economic harm from some of these products.
    Mr. Chairman, that concludes my remarks. I will be happy to 
answer questions.
    [The prepared statement of Ms. Heinrich follows:]

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    The Chairman. Thank you. We will have questions. That is 
some good information.
    Dr. Lashof, thank you for being with us from California. We 
really appreciate it.

STATEMENT OF JOYCE C. LASHOF, M.D., ASSOCIATE CHAIR, EDITORIAL 
BOARD, ``WELLNESS LETTER,'' UNIVERSITY OF CALIFORNIA SCHOOL OF 
                  PUBLIC HEALTH, BERKELEY, CA

    Dr. Lashof. Thank you very much, Senator. I appreciate this 
committee holding this hearing and looking into the marketing 
of nutritional supplements to the elderly. We at the University 
of California-Berkeley Wellness Letter seek to provide the 
public with an independent, reliable summary of available 
scientific information regarding all aspects of health 
promotion and disease prevention. Our criteria for evaluating 
such information include clinical trials with adequate numbers, 
double-blind controls, and good statistical techniques for 
analyzing the data, followed by publication in an independent, 
peer-reviewed scientific journal.
    Following the passage of DSHEA, there was a burgeoning of 
products purporting to prolong life, improve the immune system, 
improve memory and relieve innumerable symptoms. Thus, over the 
past years, a significant portion of our efforts and print 
space has been devoted to carefully examining the claims, 
debunking the ones that could not be substantiated, and helping 
our readers navigate through the slick and mostly misleading 
advertising for dietary supplements.
    One of the very first that we tackled in 1992 was Gero 
Vita. At that time, they were only marketing GH3 as an anti-
aging formula, and we were extremely forceful in recommending 
that our readers disregard all claims for this product. Later, 
we went on to warn our readers not to believe any of the claims 
made in Gero Vita's Journal of Longevity. Today, Gero Vita's 
web site features no less than 12 products which claim to have 
anti-aging products. Those are displayed there. They include a 
number--and I will not go through them, for the sake of 
brevity.
    I should point out that although the ingredients in dietary 
supplements are required to be listed on the label, the amounts 
of individual ingredients in so-called, ``proprietary blends,'' 
is not required. The lack of a system of good manufacturing 
practices and more-stringent ingredient labeling regulations 
make it impossible to know how much, if any, of the purported 
active ingredient is actually in the products, and perhaps more 
importantly, whether it is uncontaminated. The Wellness Letter 
has now reviewed more than 70 dietary supplements, including 
conventional vitamins and minerals. Our complete supplement 
review is available on our web site, www.wellnessletter.com, 
and a print of this material has been made available to the 
committee, and I have our book with descriptions of 70 products 
here.
    While we have acknowledged that some of these supplements 
appear to be useful in certain situations, such as St. John's 
Wort and glucosamine, the only supplements we currently 
recommend to our readers are Vitamin C, if dietary sources are 
insufficient, Vitamin E, folic acid, and a multivitamin for 
older adults whose diet may not be adequate. Our reasoning for 
this is that whereas vitamin preparations are standardized and 
regulated, other dietary supplements reside in a murky 
netherworld, somewhere between drugs and food, exempt from all 
but the most minor of labeling regulations, yet again thanks to 
DSHEA, which we consider unfortunate legislation.
    The manufacturers of these products have nonetheless been 
allowed to make claims in their advertisements that are almost 
completely unsupportable by scientific review. They are not 
required to prove efficacy or safety before they bring them to 
market. DSHEA has put the burden of proof on the FDA to show 
that something is not safe, and the FDA must rely on the 
reporting of adverse events, which in this case turns out to be 
a voluntary, inefficient and unwieldy system, and one that GAO 
has reported on.
    The end result is a juggernaut industry that now 
approaches--I think your figure was $26 billion, gone up quite 
a bit from my figure of $17 billion. While dietary supplements 
are legally precluded from making health claims on their 
label--they cannot say they cure cancer, heart disease or even 
acne--they are nonetheless being marketed as medical miracles. 
But, in fact, these products have drug-like properties. They 
are a drug and they should be regulated and controlled like 
drugs. The common perception that so-called natural products 
used in dietary supplements are always safe is completely 
unfounded and dangerously misguided.
    The rigorous scientific research that needs to be done in 
this area is certainly doable, but it is expensive. The 
manufacturers have very little incentive to carry it out. The 
industry has grown exponentially without this kind of testing 
and without standardization of ingredients, so it continues to 
rely on practically nothing but anecdotal information to 
support its claims. By and large, most young, healthy people 
who take dietary supplements do so without adverse 
consequences, except on their pocketbook. But the ill and the 
elderly are a different issue.
    Perhaps the most insidious aspect of marketing dietary 
supplements to the elderly under the terms of DSHEA is that 
companies like Gero Vita can knowingly exploit the hopes and 
fears of a population for whom safety is extremely complicated 
and which, by and large, has more reasons to be concerned about 
the economic impact of useless substances.
    One of the likely outcomes of aging is the slowing down of 
the renal and hepatic systems, which means that drugs of any 
kind, whether prescription or botanical, are not cleared as 
quickly through the kidneys and not metabolized as efficiently 
by the liver. This makes the elderly more susceptible to the 
effects and side-effects of any drug. Because older people 
typically take many forms of medication for chronic conditions, 
the likelihood of adverse interaction is greatly heightened, 
and I have listed on the next table some examples, and Dr. 
Heinrich has given other examples, and I will not go through 
them for the sake of the fact that the yellow light is on.
    Let me put up another poster on DHEA--again, Dr. Heinrich 
mentioned. DHEA is a hormone manufactured in the human adrenal 
gland. This substance is being marketed as an anti-aging 
formula that enhances mood, energy, memory, boosts sex drive, 
reduces osteoporosis, improves fat loss, increases muscle mass 
and improves the immune system, et cetera. It is not a natural 
medicine and most certainly not a dietary supplements, and 
should never have been classified as such. We do not understand 
how FDA did that.
    You can go on and talk about the expense to the pocketbook 
of the elderly, whose income is limited, to see them spend 
money on these kinds of dietary supplements when they do not 
have enough money to spend for their prescription drugs, and we 
know that is a real concern of yours. It is really disturbing. 
Let me get specifically then to our recommendations. On the 
last poster, I have listed them. We believe that DSHEA should 
be repealed or at least amended to give FDA the power to 
regulate nutritional supplements as they now do over-the-
counter drugs, and thus require scientific proof of efficacy 
and safety. We recognize that that is not going to happen soon. 
The forces against it are great. But until then, first we need 
to make adequate resources available to FDA and the FTC to 
enforce existing rules covering the claims made on labels and 
claims made in other advertising. FTC requirements for what can 
be used as an advertising claim, what it should be based on, 
are really quite good. But they do not have the resources to 
begin to enforce it, considering the size of the industry.
    Finally, we believe that FDA should be required to finalize 
the current good manufacturing practices rule, which I gather 
has been put forward and is bottled up somewhere in the 
bureaucracy, and finally require that the labels of dietary 
supplements instruct consumers to report adverse events 
directly to the FDA, provide toll-free numbers for them and web 
site by which they can do that.
    Thank you very much.
    [The prepared statement of Dr. Lashof follows:]

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    The Chairman. Dr. Lashof, thank you for your testimony and 
thank you for the good work that you do out at the university. 
It is very informative and very helpful.
    Next, we will hear from Dr. Robert Baratz. Dr. Baratz, glad 
to have you before the committee.

   STATEMENT  OF  ROBERT  S.  BARATZ,  M.D.,  Ph.D.,  DDS,  
                           NEWTON, MA

    Dr. Baratz. Thank you, Senator Breaux. Health care is one 
of the most important aspects of anyone's life. While we may 
disagree on where and how to spend our resources, there has 
been little disagreement on what standards we should have. The 
rise of modern medicine over witchcraft, shamanism, vitalism, 
folk tales, anecdotes, wishful thinking and snake oil has not 
been by accident. While there is still a place for the art of 
practice, a bedside manner and practical skills, the foundation 
of the house is and should continue to be scientifically 
gathered evidence.
    In recent years there has been a movement to undo this 
standard, advanced by those who wish to profit from being freed 
from the requirements of evidence, and promoted by others who 
claim that anything should be allowed, whether it has a 
rational basis or not. So-called health freedom is claimed as 
some kind of right under which charlatans, quacks, and 
unscientific and unqualified practitioners can operate. Its 
advocates want a system where anything goes, without any 
standards for either safety or effectiveness, let alone the 
truth.
    Neo-snake-oil salespeople, pseudoscientific zealots and 
profiteers have blurred the lines between science and nonsense, 
and have begun to undermine the foundation of our excellent 
system of care. They substitute pseudo science for science, 
anecdote for evidence, and nonsense for substance. Quality, 
scientifically based health care is currently at risk. I come 
here today to speak with you about this problem. In the popular 
media we are barraged by stories about secret herbal folk 
remedies and tiny electrical devices which can cure all 
diseases, and I brought one with me. If anyone needs to be 
cured, I can do it. [Laughter.]
    Accompanied by testimonials of how wearing refrigerator-
strength magnets will improve strength and endurance, we are 
asked to believe that vast bodies of knowledge have somehow 
been suppressed for years, allegedly to keep profits high in 
the medical establishment. We even are being asked to accept as 
legitimate primary care health practitioners, individuals who 
have unsupported theories of disease based on life forces being 
misaligned, imaginary parasites inhabiting our bodies, 
derangements of our spines which cannot be demonstrated, and 
unnamed toxins in our environment. We are being asked to 
discard science for conjecture and fanciful notions.
    Those who are most likely to be targeted and duped by these 
purveying predators are the elderly. Given the limited amount 
of time we have to speak together here, I urge you to read my 
written remarks, which carry much more detail than I can 
present here now.
    The world of science is not a closed club. One must merely 
put forward evidence of a claim and have it judged on the open 
market of ideas. The process is simple, open and available. 
Instead, we are seeing an increasing array of initiatives to 
legitimize otherwise illegitimate practices. Lawmakers are 
being asked to license practices that lack a scientific basis. 
Agencies are being told they cannot regulate drug substances, 
such as we have heard about today, if they are called something 
else.
    So-called supplements are being marketed and used as if 
they were drugs, free of regulation. Words such as 
complementary and alternative medicine have been reinterpreted 
to cover any nonscientific idea and practice. The public is 
separated from protection only by clever language, something 
Congress never intended in DSHEA. We have seen numerous reports 
of death and severe disability due to so-called supplements, 
including Ephedra, Aristolochia, just to name two, and there 
are many more. I noted, as the prior speakers were speaking, 
dead people cannot report adverse events.
    Let us not mince words. These substances are being promoted 
as drugs in the common, everyday usage of that term, clever 
language, creative terminology and nosological acrobatics not 
withstanding.
    To get to the National Institutes of Health from DuPont 
Circle, I can take a cab or the metro. These are true 
alternative methods of travel. No matter what I believe, I 
cannot ride a magic carpet or self-levitate and fly to 
Bethesda. The alternative to scientific, evidence-based medical 
practices is non-evidence-based, non-scientific nonsense. It is 
wrong and frankly ridiculous to place this collection of 
anecdotes, pseudoscience and conjecture, called alternative 
medicine, on the same stage as the real thing, but this is 
precisely what is being done.
    A woman named Hulda Clark, who wrote this book, ``The Cure 
for All Diseases,'' and who promotes these zappers, says that 
she has found that all diseases have simple explanations. Clark 
has a mail-order naturopathic degree and claims that a rare 
Asian liver fluke, triggered by toxins in the environment and 
harboring mutant bacteria, cause all of our illnesses: 
diabetes, Parkinson's, multiple sclerosis, and even AIDS. 
Inherited genetic disorders such as muscular dystrophy, she 
says, can be disinherited. She can cure you with a simple 
electronic device such as this one, built with some parts from 
an electronic store and some supplements, including the 
dangerous substance, wormwood.
    Outlets, including ones that just happen to be run by her 
son and her brother, hawk her dangerous items and sell her 
illegal devices. They are easy to find and readily available. I 
ask you, why? Let me relate the story of a young woman who 
followed the teachings of this Hulda Clark. This was written by 
her friend, Pia Johansson: ``Hanna was diagnosed with severe 
breast cancer. She got a full mastectomy and was treated with 
chemo and radiation. An alternative practitioner who promotes 
Hulda Clark's protocols, prescribed cleanses and zapping. The 
practitioner told her that her pets carried parasites and were 
the cause of her cancer. She placed all the animals with 
others, except two dogs, which were also treated with the 
zapper. Her pets were with her her whole life and they were her 
heart.''
    ``She has a limited circle of friends, but she couldn't 
visit them, nor ask them to visit her, because she was afraid 
of being reinfected, which is what she was told. She paid him 
more than $800 for these capsules, tinctures, and zappers, and 
followed the protocol to the letter. She had a recurrence of 
the cancer, now spread to her lungs and liver, and the 
practitioner once again claimed he could cure her. He was her 
only hope. Consuming those herbs and capsules--some are known 
poisons--they made her vomit and spoiled her appetite. She was 
taken to the hospital. I visited her and watched her zapping 
both her and her dog as she wasted away, barely able to swallow 
the Clark capsules. She died Monday night, January 15 of this 
year.''
    Do you honestly believe that this is harmless? Can you 
properly call this health freedom? I call it healthy tyranny. 
These supplements are being used as drugs. There are other 
scans where other unapproved electrodiagnostical devices are 
commonly used for diagnosis and treatment. In so-called 
chelation therapy, illegitimate practitioners prey on the 
elderly, claiming they can treat atherosclerosis. Millions of 
dollars are collected for this bogus procedure. You can find 
the ads in virtually every South Florida newspaper. Advertising 
targets elderly individuals, suggesting this therapy is an 
alternative to bypass and can prevent arteriosclerosis.
    The elderly and others are also regularly victimized in 
schemes for cancer cures, alleged heavy metal poisoning, heart 
disease, and neurodegenerative disorders. Colorado dentist Hal 
Huggins emptied the bank accounts of an elderly Kansas farm 
couple, convincing them that he could treat the wife's breast 
cancer and her husband's ALS. The husband nearly died during 
treatment when he aspirated unnecessary pills, which were 
allegedly to detoxify him from his dental fillings. The wife 
wasted away after all her teeth were removed inappropriately. 
Therapy which could have cured her was postponed. These are 
examples of the dental amalgam scam. Stopping these thieves of 
the professions is a task of licensing boards at the State 
level. However, these crimes cannot typically transcend the 
mandates of the boards--they typically do transcend the 
mandates of the boards, excuse me. These crimes cross State 
borders, use telephones, modems, the Internet and the mails 
involving money laundering and hiding assets in offshore 
accounts. After enriching themselves on the public, misbehaving 
practitioners often have huge war chests, dwarfing the meager 
budgets of State prosecutors, where a licensing board often 
cannot recover the cost of prosecution, find the offender, or 
mandate restitution.
    The Chairman. Dr. Baratz, excuse me. We are going to have 
to ask you to try and summarize.
    Dr. Baratz. OK. I am just closer to the end, Senator. Thank 
you.
    We need model legislation to tighten the laws against 
predatory practitioners. The smaller States need help in being 
able to afford to enforce the rules. We also need to put teeth 
into the punishment for offenses. Too often the guilty get a 
slap on the wrist, write off the cost of their defense as a 
cost of doing business, and go right back to bilking the 
public.
    Let me come to the summary--toward the end, please. The 
problems I report transcend the mandates of any one entity. We 
need Federal and State task forces to deal with these problems. 
Millions, if not billions, of dollars are scammed each year. 
Health fraud also causes considerably disability and death. 
These are crimes against all of us, since society at-large is 
typically the resource that has to repair the damage that these 
criminals do. They truly steal from us all.
    Let me quickly name some areas where Congress can act at 
little cost with high impact: First, to assist the Mexican 
government in closing illegitimate cross-border clinics. Recent 
raids in Baja, CA, closed several illegal clinics, including 
one by Hulda Clark. We need improved collaboration with the 
Canadian authorities to help put an end to Toronto mail drops, 
which we heard about earlier; 800 telephone numbers, referral 
services and other cross-border scams which allow fraudsters to 
elude regulators.
    Multilevel marketing schemes are common vehicles for 
promoting supplements and other dubious products. Full 
disclosure of product efficacy and meager chances of financial 
reward to any prospect, before they sign up, should be required 
for any company that engages in multi-level marketing. These 
simple steps may help dispatch the multi-level menace that we 
have now in the health arena. Enabling legislation should be 
enacted to deputize State attorneys general to get nationwide 
injunctions against sale and distribution of illegitimately and 
falsely advertised products. This would extend the reach of 
Federal agencies markedly at very little cost.
    The abuses I outlined above have gone on for simply too 
long. This very Senate committee in 1983 said that quackery and 
medically related fraud are No. 1 of the top-10-most-harmful 
frauds directed against the elderly. After almost 20 years, is 
it not time to act more decisively? We must level the playing 
field so perpetrators lack any advantage over the regulators. 
We must provide resources for quick and effective action, make 
sure reparations are made, and make the penalties severe enough 
so these crimes will not pay. We must keep science and evidence 
as the framework of our medical system. We need a plan, a 
timetable, and a designated leadership to make this happen. The 
cost of not acting is too great.
    The National Council Against Health Fraud, of which I am 
the executive director, stands ready to work with all 
interested parties to address the problems I have outlined. 
Thank you very much, Senator.
    [The prepared statement of Dr. Baratz follows:]

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    The Chairman. Thank you, Dr. Baratz.
    Dr. Gorski, your testimony, please.

        STATEMENT OF TIMOTHY GORSKI, M.D., ARLINGTON, TX

    Dr. Gorski. Thanks very much, Senator. There was a time 
when all of medicine was unproven and irrational, and it was 
only our ability to understand and have the tools to collect, 
analyze and properly interpret evidence that has made the 
difference. So there was not any quackery, really, until we 
were able to do that. This committee's counterpart in the 
House, the Subcommittee on Health and Long-Term Care, Claude 
Pepper's subcommittee, in 1984 issued a report. It was 
entitled, ``Quackery: A $10 billion scandal,'' and it referred 
very candidly to a vast array of pills, potions and devices 
with the terms, ``worthless,'' ``no scientific evidence,'' ``no 
physiological or pharmacologic basis,'' ``no rational 
ability,'' and so on, and noted that many of these schemes and 
scams were being perpetrated on America's elderly.
    Now, in the 1980's, this was a cottage industry on the 
fringe, and, of course, we have heard about how Mr. Braswell 
spent some time behind bars for being engaged in these kind of 
activities during those years. The advocates called it 
``alternative medicine'' because they knew and they still know 
that their claims are inconsistent with objective facts and 
scientific principles. The Pepper report called it quackery and 
defined it as promotion--that is a key word--promotion of 
medical schemes or remedies known to be false or which are 
unproven for a profit, and we have heard about profit today.
    So how did this $10 billion scandal turn into a huge and 
growing industry that is at once a media darling, a feeder at 
the public trough and a threat to the public health? Well, in 
1993 a report appeared in the New England Journal of Medicine, 
the real New England Journal of Medicine, that claimed to 
consider unconventional medicine. This was a survey that lumped 
together every conceivable form of health-related behavior, 
which it said was ``Not taught widely at U.S. medical schools 
or generally available at U.S. hospitals.'' In fact, Senator, 
this is the first survey where we get this information that 
supposedly the use of alternative medicine has been exploding.
    Consider what they counted amongst unconventional, later 
called alternative, medicine: vitamin use of any kind--in fact, 
at that time Niacin was being used to treat high cholesterol; 
Physical therapy, as long as it was performed by a 
chiropractor; imagery, that could be counting sheep for 
insomnia; commercial weight loss products such as Jenny Craig 
and Slim Fast; self-help groups; lifestyle diets, which could 
be anything from keeping kosher to avoiding certain foods for 
personal reasons; and even massage and relaxation. You get a 
bonk on the head--I just used alternative medicine there. But 
these same authors are the same ones that have gone around and 
claimed that their studies show that a huge proportion of 
Americans regularly use and demand unproven, disproven and 
irrational forms of medical care. And this belief is what was 
used to impose on the National Institutes of Health the Office 
of Alternative Medicine, which subsequently became the National 
Center for Complementary and Alternative Medicine, which from 
the beginning has been staffed and controlled by ideological 
advocates who are not seriously interested in protecting the 
public.
    Meanwhile, the DSHEA, as we heard, passed in 1994. And that 
opened the floodgates for the promotion of a new class of drugs 
outside of the FDA's regulatory jurisdiction and including all 
those things mentioned in the Pepper report. They could contain 
parts of animals, plants, minerals, even heavy metals such as 
silver, chromium, lead, either intentionally or 
unintentionally. As long as the substances are found somewhere 
in the universe naturally, they are considered foods. I could 
take my grass clippings, pack them into capsules, and sell them 
virtually on any claims that I wished, with little expectation 
that anything would be done about it.
    We heard a little bit about the huge number of promotional 
gimmicks that are common, television and radio ads, the fake 
newspapers and journals, the things promoting growth hormone 
releasers, DHEA and so forth. You have a card there, I think, 
which gives an example. Mr. Braswell's operation is not the 
only one that arrives in the mailbox, making extraordinary 
claims. How about this? ``Is your doctor curing you or killing 
you?''
    These kinds of promotions make all kinds of idiotic 
statements, claiming that you can self-diagnose, for example, 
ulcers and heart disease by your forehead wrinkles and earlobe 
creases, or that eating a balanced diet, the kind of thing 
recommended by the USDA, ``contains poisons that are killing 
you;'' that dairy products cause arthritis and osteoporosis--I 
think the committee has two members from the State of 
Wisconsin, the Dairy State--and that hormone replacement 
therapy radically increases the risk of cancer.
    Some of these ads are crafted to look like newspaper 
articles that have been clipped, with a little sticky put on 
it, saying, ``Hey,'' whatever the person's name is that they 
are sending it to, ``try this,'' with some initials and, of 
course, no return address. Friends, co-workers, neighbors and 
family members can be involved in multi-level marketing 
schemes. These are the kinds of things that are not going to 
get reported. The Internet and e-mail makes fraud particularly 
easy, cheap, and affords many protections for promoters of 
these fraudulent products. One representative web site says, 
``Before you try dangerous prescription drugs or risky, painful 
surgery, discover my safer, more effective, all-natural, 
miracle-healing program.'' Also, another page on that web site 
says, ``Here is how to cure people with heart disease without 
dangerous drugs or surgery,'' and so forth. And, of course, 
right at the bottom of that long page is this disclaimer, 
``This publication is not intended to provide medical advice, 
and nothing in it should be construed as a therapeutic 
recommendation or prescription for any disease or symptom.'' 
That is meaningless.
    But these promotions exert a very strong psychological 
appeal, especially to people who are sick, people who are 
desperate. These promotions assert falsely that the claims are 
based on solid science and they encourage people to think for 
themselves and consider the evidence. We all would like to be 
independent-minded that way. So they appeal to our normal, 
human weaknesses, as it were. To deflect any doubts, it is 
often said that these devices or products are little-known or 
secret. To hear them tell it, these promoters are all modern-
day Galileo's, courageously battling an evil conspiracy of the 
conventional medical doctors, the AMA, the pharmaceutical 
industry, and the Food and Drug Administration, all supposedly 
arrayed against the public for the sake of profit. Often, they 
will cite the National Center for Complementary and Alternative 
Medicine or the White House Commission on Complementary and 
Alternative Medicine as some kind of proof that their claims 
are legitimate.
    There are five ways that the public is harmed by these kind 
of things: direct harm from adverse effects; indirect harm from 
the omission or delay of appropriate treatment; economic harm 
when people are spending their money on worthless products; 
psychological harm when people realize that they have been 
duped or harmed; and also social harm, because Americans' 
understanding of the facts and principles of health and disease 
are corrupted, which impairs their ability to make wise choices 
and also to help their country determine the direction of 
policy in health-related issues.
    There are some significant public health hazards that I 
want to mention. I am going to skip over Ephedra. That is 
mentioned in my written comments and it was brought up by Dr. 
Lashof. There are different concerns raised about dietary 
supplements promoted for anxiety, depression and relaxation. 
Kava has been mentioned, and let me point out that just because 
a culture somewhere has used an herb such as kava for a long 
time ``safely,'' does not mean that it is safe. These kinds of 
settings are not comparable to that of modern America, where 
people are drinking alcoholic beverages, driving and flying 
aircraft loaded with hundreds of passengers, perhaps. One might 
as well say that drinking contaminated water is safe because 
people once did it all the time, or that lead is safe because 
the Romans piped their water through it, or that tobacco is 
safe because Native Americans smoked it.
    St. John's Wort, was already mentioned. I want to mention 
something on glucosamine, which has been mentioned here. Widely 
promoted for the treatment of arthritis, this medication 
interferes with the action of insulin. So it tends to cause 
diabetes. I hope that you, Senator Breaux, do not have any 
family tendency to diabetes, but there are Americans, many 
Americans, who do-or that are at risk because they are obese. 
Glucosamine bears a striking chemical resemblance to a drug 
called streptozotocin, which is used to make rats diabetic in 
the lab. So it is all well and good to have this limited 
scientific evidence over a few weeks or months, but what is 
going to be the effect of passing this through the livers and 
gastrointestinal tracts of Americans for years?
    May we have the second card? Perhaps the most serious 
public health threat in the making is the growing number of 
dietary supplements being marketed as natural treatments for 
menopause, generally soy, black cohosh, red clover and other 
things. The promoters of these products imply or assert that 
prescription hormone replacement therapy is suspect, dangerous 
or causes cancer and other diseases. This is the most 
outrageous example of that that I have come across, a mailing 
from Medical Recall Notice from Health Notification Service of 
Henderson, NV. The official-looking contents purport to be a 
recall of all prescription estrogen and progestin products 
because of severe and prolonged life-threatening side effects. 
How many of our wives, mothers, sisters or grandmothers 
received this mailing and threw their prescription medication 
in the trash? According to this mailing, the indicated 
treatment to be substituted is a natural progestin cream with 
no harmful side-effects, with the order form conveniently 
enclosed.
    The promoters of dietary supplement products intended to 
treat menopause often claim that HRT, the hormone replacements, 
cause women to die from breast cancer, and we know that this is 
not true. Menopausal women who could otherwise benefit from HRT 
are participating in a vast, uncontrolled and unmonitored 
experiment on the basis of false assertions. Many are them are 
not going to know that they have been duped for 10, 20 years, 
when they fall and they break their hip. There are over a 
million fractures due to osteoporosis in this country every 
year, a good number of which are hip fractures; 20 percent of 
the people with those fractures are going to be dead within a 
year.
    Finally, it should not be forgotten that many Americans and 
others living in this country whose primary language is not 
English live in somewhat insulated communities. It is a big 
problem in those communities, the kind of advertising that is 
directed at them, and this is completely under the radar screen 
of law-enforcement authorities for the most part. Let me just 
summarize here that these dietary supplements are now really a 
serious problem and it is time to review the insights of the 
1984 Pepper report, taking note of the fact that promises to 
the contrary, none of the forms of quackery mentioned in that 
report, not one that were identified have been proven effective 
or safe, despite hundreds of millions of dollars having been 
given to advocates of these methods for, ``research.''
    With regard to alternative medicine, about which there is 
no agreement as to what it actually is besides an advertising 
slogan, let me simply endorse what the editors of the country's 
two foremost medical journals, the real journals, have to say. 
The editors of the New England Journal said that there cannot 
be two kinds of medicine, conventional and alternative, only 
medicine that has been adequately tested and that which has 
not. The editors of the Journal of the American Medical 
Association said, also, there is no alternative medicine, only 
scientifically proven, evidence-based medicine supported by 
solid data or unproven medicine.
    These principles should be applied uniformly and 
consistently. There cannot be two kinds of drugs, those with a 
known composition, potency, effects, hazards, interactions, 
shelf life, and so on, and those about which all these things 
are little more than a guess. There cannot be two standards in 
promotional advertising, one that requires a competent, 
scientific basis before it is disseminated, and one in which 
for all practical purposes anything goes. To have it otherwise 
ultimately is to have two kinds of law, one ruled by facts and 
reason and the other that is not subject to such orthodox, 
traditional and conventional considerations.
    It is not going to be easy to start picking up these pieces 
and setting things right, but further delay is not going to 
make it any easier. The National Council Against Health Fraud 
and other groups and individuals whose concerns are truly for 
consumers, for science, for compassion, and for true freedom of 
choice in the marketplace can be relied on to assist in this 
task.
    Thank you very much for your time and consideration.
    [The prepared statement of Dr. Gorski.]

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    The Chairman. Thank you, Dr. Gorski and all the members of 
the panel.
    Dr. Baratz, halfway through your testimony I realized, my 
God, I take all this stuff. I have taken DHEA. I have taken 
glucosamine and chondrotin. I just had some in my pocket that I 
was taking this morning, and I have got a back brace with 
magnets in it. Here I am, Chairman of the Aging Committee and 
having this hearing, and I have just found out or started 
realizing that I, I guess, along with other millions of 
Americans who are approaching senior status or are, in fact, in 
that status, take this stuff--and the magnets do not help?
    Dr. Lashof. No. No. No. No.
    Dr. Baratz. No, rhymes with Breaux. [Laughter.]
    I think the web site where you bought that was 
www.xxx.con--C-O-N--not .com.
    The Chairman. I have two of them. I have two back braces 
with magnets in it, and it is supposed to help your back.
    Dr. Lashof, the last publication here, which is the one, 
the healing breakthrough of the century, when it listed 
everything that can work for people with everything and that 
you can live 26 percent longer, they have got some stuff in 
here that, really, I need to ask you about, I guess. One of the 
things is this ACF223. They say that this particular doctor did 
the research by going to a former atomic testing site in the 
Nevada desert, and examined plants that had survived a nuclear 
blast and radiation, and they found a seed from one of these 
native desert plants was found to have survived and actually 
grown, and therefore the active ingredient in this simple plant 
was this substance--and it is a very long name. The 
abbreviations are NDGA. They say that clinical studies show 
that this NDGA extends the life spans of animals and works 
against premature skin wrinkling, and the same may be true for 
humans.
    They go on to say that this doctor put together this 
formula, ACF223, and in rigidly controlled laboratory tests, it 
was shown to increase life span by 19 to 26 percent. Another 
thing they quoted here, and I ask you to comment on this, is 
they quote another doctor, whose name I will not mention, who 
they say was Director of the National Institutes of Aging, and 
that is part of NIH, the National Institute of Health, and they 
quote this person, being the Director of the National Institute 
of Aging--has conducted countless experiments in clinical 
trials with ACF 223 nutrients and concludes. ``Our life span is 
directly proportional to the amount of ACF 223 nutrients that 
we have in our bodies.''
    That is a pretty strong statement. Do you have any 
information that anything like this has ever been done at NIH 
or the National Institutes of Health, or what are your comments 
about the material I just read?
    Dr. Lashof. I do not believe it, that is my first comment. 
It is not a particular product that we have looked at. That had 
not come to our attention, so I have not specifically examined 
it. But every time we see that kind of statement, we try to 
request the scientific data, and we never get it. One thing 
they do, and I do not know whether that is what they have done 
there, and you obviously have to talk to the director of the 
National Institute of Aging, is that he may have done a study 
of some nutrient which they now claim is in here, and they will 
quote that out of context. We find that often, that they will 
look at some scientific article that tells you something about 
what a hormone does or what the function of growth hormone is 
in the body, and then extrapolate from that and claim that 
their product will now do all these things, and they take 
scientific stuff out of context.
    But we try always, when we get any product that comes to 
our attention--and basically we are looking for those that are 
most widely advertised and that are being used a great deal, 
and then we start looking at all the literature. We ask the 
company to supply us with data, and we do not get it.
    The Chairman. You and Dr. Heinrich maybe can get in on 
this--Dr. Heinrich talked about the Dietary Supplement Health 
and Education Act that Congress passed, and we made a decision 
at that time that we were not going to subject these supplement 
products to the same rigorous enforcement that we do for other 
prescription drugs, over-the-counter generic drugs, that have 
to be approved by the Food and Drug Administration. This is a 
new category. It is supposed to be like food products, and 
therefore they do not have the same rigorous investigation 
before they are sold to the public.
    It seems to me, in my opinion, there is a difference 
between products that are being targeted to people as a food 
supplement that may make you lose weight or may make you get 
rid of your wrinkles, for instance, as opposed to a supplement 
that actually is supposed to prevent cholesterol problems or 
diabetes or Alzheimer's, or actually cure aging or potentially 
cure cancer. It seems to me that when these food-supplemental 
products are put in various combinations, that that is a 
difference from just trying to say that you are curing 
wrinkles, that you are actually talking about curing diseases. 
Do you think there would be a way for Congress to address that 
particular issue, that would be helpful, Dr. Lashof?
    Dr. Lashof. I think it is very difficult. You see, they 
have tried to make the distinction between a cure and this 
disclaimer, which is always in such tiny print that no consumer 
can ever read it. They say that is really there as a test for 
whether you should go to see your optometrist, but trying to 
separate those two is very difficult, and so they have used the 
term ``function,'' structure and function. You can make a 
structure and function claim, and that was their effort, to try 
to do that. Well, under structure and function, they just say 
about everything. If it improves your body's ability to do 
this, that becomes a function, and yet that is what a drug is 
doing.
    The Chairman. Mr. Braswell did not testify, obviously, this 
morning--I cannot say what he might have said. But let's assume 
for a moment that someone who makes these products comes before 
the committee and says, ``Look, I did not say it cured 
anything. I said it might, it could, it possibly might help, 
this could help you,'' and all of these clarifying phrases that 
keep them within the boundaries of not being sued. What is the 
problem with that? If I came here and said, ``Look, I did not 
say it was going to cure anything. I just said it might; it 
might be helpful; it could be helpful; you ought to take it; 
try it; besides, we give you your money back if it does not 
work,'' what is wrong with that position with respect to this 
particular problem we are looking at?
    Anybody, Dr. Gorski, Dr. Baratz?
    Dr. Gorski. I was going to jump in and say the Federal 
Trade Commission has standards that they can apply in these 
kinds of situations, because the standard is what would a 
reasonable consumer think. When you put something up saying you 
are going to support the cardiovascular system, people with 
atherosclerosis can avoid bypass, et cetera, maybe you have not 
said you can cure atherosclerosis, but the average, reasonable 
man-in-the-street consumer is going to assume that.
    The Chairman. I take it it is particularly a problem, 
obviously, when it appears in a journal that closely resembles 
a, ``legitimate medical journal,'' with doctor, pictures and 
everything else.
    Dr. Gorski. Sure. That is right, and they are inviting the 
public--which, of course, we would all like to think that we 
have some control and have some power over our lives to make 
our own decisions, the self-validating kind of decision.
    The Chairman. Dr. Heinrich, in a GAO investigation of this 
issue--and I will get to Senator Wyden after this question, did 
I hear correctly that you said that FDA has never taken a 
product off the sales list, as a result of these type of 
investigations of supplements?
    Dr. Heinrich. You are correct. What I said, and we made 
sure that we checked with FDA, of course, to reaffirm the 
accuracy of this, but under DSHEA, they have not taken 
administrative action to remove a particular substance. As I 
said, they have taken actions, and in our report to you we do 
list some of the FDA actions that have been taken to remove 
products that have claimed treatment for a particular disease. 
But, no, they have issued warning letters against substances 
that they think are harmful, but they have not--they have 
relied on----
    The Chairman. But you have in your testimony a quote, ``The 
FDA has not initiated any administrative rulemaking activities 
to remove from the market certain substances that its 
analysis--its analysis--suggests post health risk, but has 
sought voluntary restrictions and attempted to warn 
consumers.'' Do they have the authority to take these products 
off the market?
    Dr. Heinrich. FDA has the authority to claim that a product 
is harmful. Then they have to take it to court for court 
action. But, from FDA's perspective, the burden of proof then 
of harm is on FDA and their legal counsel, as opposed to what 
we have with drugs, where it is the responsibility of the 
manufacturer to ensure that there is safety and efficacy.
    The Chairman. One of the things--again, this is the concern 
I think we have--you have also in your statement, the GAO, 
``Although DSHEA allows FDA to remove from the market dietary 
supplements that the agency can prove are dangerous, the agency 
has not prohibited the marketing of any specific substances 
using its administrative rulemaking authority.'' Dr. Heinrich. 
That is correct.
    The Chairman. Senator Wyden.
    Senator Wyden. Thank you. Thank you, Mr. Chairman. It has 
been an excellent panel.
    Dr. Heinrich, one of the constants to me in the health-care 
fraud area, and it has changed and we have talked about it, is 
it seems that somehow the bad guys, after they perpetrate these 
reprehensible, heinous offenses against seniors, somehow 
invariably manage to get back in business and go out and 
continue to prey on seniors. What we have seen this morning 
raises again a question in my mind about how the government 
deals with it.
    Mr. Braswell apparently has been found to violate a number 
of civil and criminal laws in the past, with respect to his 
activities with seniors. He came here this morning and took the 
Fifth Amendment with respect to a variety of issues we wanted 
to explore, and again this is a product that is being marketed 
to the public. I would like to get your sense of whether you 
think that this is a problem of recidivism, that people who 
prey on seniors--that there is a pattern that after they do it, 
that somehow they can leap to another State, they can get 
offshore, they can go to the Cayman Islands, as we had a 
witness say this morning was taking place, set up shop and go 
back to exploiting seniors. Do you think this is a serious 
problem?
    Dr. Heinrich. Oh, I think it is a serious problem. Part of 
the issue, though, is it is hard to understand the magnitude of 
it. But they probably do not have to go as far as offshore. 
Certainly when we examined the work of the FTC and the FDA, we 
were impressed by the work that they were doing jointly, 
monitoring what was advertised on the Internet, and although 
they do have a joint effort there to really find companies that 
are making false claims, even after FTC has issued a warning 
letter to them that they may be breaking the law, we found that 
a very small percentage of companies actually took any action, 
and over 60 percent of companies so notified took no action 
whatsoever.
    Dr. Lashof. If I can barge into that----
    Senator Wyden. Oh, yes, please. Absolutely.
    Dr. Lashof. In California, some of the local district 
attorneys have been taking action against various companies 
based on their laws, and they changed the name of the formula. 
They will take action against one, argue about the 
advertisement, and a few months later they are advertising 
under a different name the same stuff that they were just 
charged with. So it is not one company. It is much more 
pervasive.
    Senator Wyden. Dr. Heinrich, being a pretty devout reader 
of your health materials, I have never seen an analysis you 
have done with respect to this recidivism issue and those who 
are taking advantage of seniors. Have you ever done something 
that has taken six or seven, say, of these major health frauds 
perpetrated against seniors and actually tracked what happens 
to the offenders, and after they are found to have violated one 
set of laws, what happens when they, perhaps as your colleague, 
Dr. Lashof, just mentioned, go and set up somewhere else in a 
different name? Have you ever done that?
    Dr. Heinrich. I do not think so, not to my knowledge.
    Senator Wyden. Do you think that would be productive if our 
committee were to ask you to do that, because I will tell you--
and, again, this is a product of something I have seen. When I 
was director of the Gray Panthers and I had a full head of hair 
and rugged good looks, a number of years ago, you would see the 
person who ripped seniors off selling shingles door-to-door 
come back in a slightly different kind of area with a slightly 
different name. My sense is that it is going on now with some 
of the biggest health frauds that are perpetrated against 
seniors, involving millions and millions of dollars. I do not 
think you all have ever looked at this question of whether 
there are a handful of recidivists who constantly keep coming 
back at this and figuring out how to milk this cash cow and 
exploit the elderly. Do you think it would be productive for 
you look at that?
    Dr. Heinrich. It certainly would be very, very interesting 
to see what those cycles look like, of some of the groups that, 
in fact, seem to reinvent themselves. We found examples of 
that.
    Senator Wyden. I am going to consult with the chairman and 
the ranking minority member, because I would like you to do 
that. I would like you to take six or seven of the major health 
frauds perpetrated against seniors and I would like us to kind 
of walk it through, say for 4 or 5 years afterwards, to see 
what happens to those people, because my guess is just as sure 
as the night follows the day, these people are coming back with 
different names, different front organizations, going offshore, 
as Dr. Lashof stated, slightly revising the product.
    If we, for example, as we look at this next round of frauds 
with the new technologies and look to the biology and genetics, 
get to the point where we can isolate a handful of people, a 
relative handful, that is in everybody's interest, because we 
have already made it clear there are many lawful people in the 
business. So I am going to talk with the chairman and the 
ranking minority member about it, but I would like you to that. 
We, having worked with you many times over the years, are 
confident you would deal with it in a professional way.
    Dr. Lashof, one question for you--and superb testimony, and 
I have known of the good work that you all do at Berkeley, as 
well. I went to the web site of several of the health sites 
recently, and if you are a general person doing a search on a 
particular health issue, you just get flooded now with 
essentially the advertised material, and the advertised 
material, almost invariably, look like authoritative articles 
and it is pretty hard to distinguish. Are there areas that the 
Congress should be looking at to try to do a better job of 
separating out these articles where authoritative, constructive 
information is imparted to people from areas that really are 
just hype?
    As you know, this is hard to do, because there are First 
Amendment questions, free speech questions. But I can tell you, 
having done some searches recently, it is pretty clear we are 
getting flooded with advertisements that do not look much like 
advertisements, and I wonder, at the public health school, 
whether you all have looked at this and have some ideas on it.
    Dr. Lashof. Well, I am afraid that it is a problem for FTC, 
really, and the amount of resources they would need to police 
all of the web sites--I would hate to try to make a guess. You 
can ask them. We have tried very carefully, in the Wellness 
Letter, to recommend the government sites as the sites people 
should go to. The FDA has an excellent site. The FTC itself has 
very good standards that you can read about on their site, and 
then CDC and all of the government agencies at NIH. So we urge 
our readers to consult those sites and, just as a rule, to 
generally recognize that if is something sounds better than it 
could be, it probably isn't true, and just to avoid those kinds 
of sites.
    Senator Wyden. My time is up. I would hope that we could 
figure out more creative ways to deal with this, and I know you 
are interested in that, than just sending people to government 
sites, because, as you know, one of the reasons these 
alternative products have been attractive to so many is people 
are skeptical about the government's  role in  this area. If  
we could  do nothing  else, for example, other than to 
encourage people to look and see whether some of these articles 
have some peer review, have some people who are authoritative 
sticking up for them, those kinds of ideas are might prove 
valuable. But we will be following up with you.
    Gentlemen, I am only skipping you in the interest of time, 
but I know of your organizations and the good work that you do.
    Dr. Baratz. Senator, could we just add two sites that 
people might want to look at that may help them in that jungle 
out there? One is a site called www.quackwatch.com, which is an 
appraisal of dubious claims, so that if someone has some 
questions about something, they can go there for sort of an 
objective appraisal of whether those claims hold up; and the 
other is the National Council Against Health Fraud site, would 
be ncahf.org, ncahf.org.
    I would recommend to Senator Breaux that instead of wasting 
his money on those magnets, he donate the money to us, because 
we could use that money to get better consumer information out 
there on these topics. [Laughter.]
    Those magnets do not even penetrate your skin. They are a 
complete waste of money.
    The Chairman. I will tell you I could not get on an 
airplane with them the other day. They make me stop and 
undress.
    Senator Wyden. I am going to get my friend, the chairman, a 
brand-new Gray Panther card so that he can be working on those 
things with us.
    The Chairman. Thank you, Senator Wyden, very much.
    I want to thank this panel. You have come from long 
distances and I appreciate very much your help and look forward 
to working with you. Keep up the good work.
    We are delighted to excuse this panel now and delighted to 
welcome up our last panel today. We are fortunate to have the 
Attorney General for the State of Maryland as our lead-off 
witness on this panel, Mr. Joseph Curran; Mr. John Taylor, who 
is Director of the Office of Enforcement of the Food and Drug 
Administration; Mr. Howard Beales, who is Director of the 
Bureau of Consumer Protection of the Federal Trade Commission; 
and from the Federal Bureau of Investigation, Mr. Dennis 
Lormel, Chief of the Financial Crimes Section of the Criminal 
Investigative Division of the FBI.
    Gentlemen, we thank you very much. We appreciate your being 
with us.
    Mr. Attorney General, we are delighted you were here for 
the whole morning hearing and we appreciate your patience. We 
know your schedule is very busy and we look forward to your 
testimony.

  STATEMENT OF HON. JOSEPH CURRAN, ATTORNEY GENERAL, STATE OF 
                    MARYLAND, BALTIMORE, MD

    Mr. Curran. Well, thank you, Senator. Actually, I am 
delighted that I had a chance to be here on time and to hear 
the entire scope of the testimony. It was extremely impressive, 
as I am sure that you have been impressed, as I have been. I 
would invite the attention of the committee to some of the 
testimony of the publisher of the Wellness document in 
California. It makes a lot of sense to take a long, hard look 
at the results of the 1994 act to determine ought there to be, 
should there be, can there be some amendments to deal with what 
we have heard about. In the alternative, beefing up FTC and FDA 
certainly would make sense, as helping our own Consumer 
Protection Division.
    I am just going to take a few moments to tell you about one 
of our experiences that will show you the depths of these types 
of cases, and I might add, as the Maryland Attorney General, I 
am able to enjoin a person who is doing business in Maryland. I 
can stop him in Maryland. I can stop him from shipping out of 
Maryland. But if he is in Louisiana and shipping into Maryland, 
I cannot do that. So there are some limitations on those of us 
who are attorney generals, and I am not sure--well, there is 
nothing I can do about it, but I will tell you this. We do work 
with other attorney generals when we learn of something, say in 
another State.
    In our own particular case, in which we cracked down on 
people who were operating in Baltimore a company called Tee Up, 
we later found out, after we stopped them, that they did, in 
fact, move offshore to the Bahamas, and they also moved to 
Pennsylvania. Happily, we were able to contact the health 
authorities in the Bahamas and advise them of this particular 
charlatan, and they stopped him there, and we also alerted the 
attorney general, my friend Mike Fisher, in Pennsylvania and we 
were able to stop them there. So that just gives you the scope 
of what any individual attorney general can do.
    What all consumers want, those of us who have reached my 
age or even those who are much younger, want to make sure that 
when we go to the supermarket or the health store, that when we 
buy this particular vitamin, it is safe and it is effective and 
the ingredients are there. We have heard about some of the 
charts that talk about enhancing sexual functions or removing 
wrinkles, and/or maybe helping with some pain, and that may 
well be. Well, if that happens, and it is a phony thing, then 
all you have done is lost some time and money. But in our case 
involving two people in Baltimore, this involved a cure for 
cancer, a cure for AIDS, 100-percent effective in breast cancer 
cure, 100-percent effective as a colon-or lung-cancer cure.
    I speak to you as a person who was told by a doctor some 10 
years ago, ``We have bad news for you, you have cancer.'' So I 
know what it means when they tell you that. I am happy to say, 
because of medical treatment, I am 10 years operative and I am 
OK. But when you first hear that, you are really concerned, 
``Well, what am I going to do?'' So what I was concerned about 
with these particular people who were selling this--it is an 
aloe vera, the aloe vera plant. They crush it up and grind it 
up in some way that it becomes liquid and they put it in a 
pill, and then they take something cause cesium chloride and 
grind it up in some way, and that is also a pill, and these two 
particular pills will enhance your T-cell quality, they will 
attack the cancer, and within weeks or months it will be gone.
    Well, if you have been told you have cancer, you are 
frightened, and unlike maybe some of these other drugs that get 
rid of wrinkles, these are very expensive, about $600 a month 
you have to take these two particular products that will get 
rid of your lung cancer or colon cancer, or cure AIDS or take 
care of the other conditions that you have. So you are talking 
about a lot of money. To give you some idea, Senators, in our 
investigation--I might add, I will compliment the FDA. They 
alerted us in late 1997--they alerted our Physicians Quality 
Assurance Board that they believed the publication indicated 
one of our persons who held themselves out to be a doctor was, 
in fact, practicing medicine improperly.
    So we got the case from FDA, we got into it. We were in 
court in early 1998, and now they have been shut down, although 
the case is still on appeal. We found out that during an 18-
month period when they were operating they contacted about 
3,700 persons across the Nation, just to give you some idea of 
how many persons were suckered into this, and they spent about 
$2.3 million. So it is big business, and I might add that did 
not cover the money that was paid for intravenous injections.
    There is some good news out of this, because the first 
person said, ``Well, let's pick up the bad''--well, the doctor 
who was administering against FDA regulations in Virginia 
currently resides in the penitentiary in Virginia. So, that is 
good news. He was prosecuted by the Federal attorneys in 
Virginia. The good news is that our case in Maryland, our 
Consumer Protection Division, we were able to stop them. We 
have got a judgment of $3.7 million against them, trying to get 
back the money they have gleaned from a lot of folks, and we 
are also trying to recover a penalty. So we are doing that from 
a standpoint of civil authorities.
    The other good news is that the fellow who holds himself 
out as a doctor will be tried in the Federal District Court in 
Baltimore in November. He escaped before on an 11-1 hung jury, 
but he is being tried again. So I thought I would tell you that 
the Federal Government, the FDA and the attorney generals are 
working together. But the point I am making is that there are 
not only these supplements that take away wrinkles, you are 
talking about a cure for cancer, and when you permit these 
folks to--and these are across the Nation, not just in 
Baltimore--when you permit them to make these advertisements to 
people who have cancer or a family member--if you are a family 
member and your loved one has been told they have cancer, you 
are going to spend money--$20,000 of injections of this aloe 
vera substance into your body, that is what they were costing.
    So the staggering sums of money that a person who has a 
life-threatening disease is going to pay--and so I would invite 
you clearly to see to if that if there needs to be more pre-
marketing since 1994, more pre-marketing overview of these 
kinds of advertisements, that may well be the way to go. 
Happily, in this case, FDA found it early, got it to us; we 
acted properly; the Virginia Federal authorities acting 
properly; the Maryland, Baltimore Federal attorney is 
prosecuting the guy. So we are putting them in jail. That is 
fine, but I will tell you this. My experience, Senator Wyden, 
in telemarketing and other fraud, these guys, they seem to have 
learned how to do con work good. Telemarketing, you stop them 
here, they pop up there. Travel clubs, we put them out of 
business in Baltimore, they go to Topeka or somewhere.
    So I do not know about the health guys, whether they are 
the same ones, but my experience as attorney general for a 
number of years now in Maryland is that these bad guys seem to 
have learned how to make money and they continue to do it. So 
if you are able to get from your survey what these fellows are 
doing, that would be good information. The good news is that we 
have swung the big bat and they are in jail and they had been 
stopped, but they ought not to have been started. They preyed 
on cancer victims and that is just outrageous, and I am glad 
they are in jail and hope that the guy in November will go to 
jail, too, and stay there for a good, long time.
    [The prepared statement of Mr. Curran follows:]

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    The Chairman. Mr. Attorney General, thank you. Let me just 
ask you a quick question before we get to the others. Not only 
did you, I guess, show the product, aloe vera injections, did 
not cure cancer, it also produced some adverse side effects; 
didn't it?
    Mr. Curran. We had testimony from our medical people that 
the product itself caused heart arrhythmia in animals. Now, 
they might say, ``Well, we didn't have it on humans,'' but we 
know that the testing that was done on animals demonstrated it 
was an adverse effect, and the cardiologist, I believe, in 
California also testified for us that his patients, having 
taken this cesium, likewise had a problem.
    I might add, in one of the publications they said--and this 
is very tricky--they said, ``Well, our product has been studied 
by the FDA.'' The truth of the matter is--that is true. The FDA 
did, in fact, authorize a Canadian clinic to study this aloe 
impact on 12 AIDS patients, and they found out it did not work. 
But they were able to say we have had a clinical study 
permitted by FDA. It did not say, ``Comma, and it didn't 
work.'' They just said, ``Period.'' So that is how they can 
play with these ideas that FDA authorized a study. Sometimes 
they do, but when they found out that it does not work, they do 
not say that.
    The Chairman. Thank you very much, Mr. Attorney General, 
for being with us and being so patient. We appreciate your 
testimony and the effort that you have made in this area. It 
has been outstanding.
    Next, we will hear from the FDA and Mr. John Taylor.
    Mr. Taylor.

STATEMENT  OF JOHN  TAYLOR,  DIRECTOR,  OFFICE  OF ENFORCEMENT, 
 FOOD AND  DRUG  ADMINISTRATION, DEPARTMENT OF HEALTH AND HUMAN 
                    SERVICES, WASHINGTON, DC

    Mr. Taylor. Good morning, Mr. Chairman, members of the 
committee. I am pleased to be here this morning to participate 
in this discussion of health fraud, specifically as it relates 
to dietary supplements. You do not have to look far to find a 
health product that is potentially fraudulent or a consumer who 
is totally unsuspecting. Promotions for fraudulent products 
appear daily in newspapers and magazine ads and television 
infomercials. They accompany products sold in stores and 
through mail-order catalogs. They are also passed along by 
word-of-mouth.
    The Internet is another method by which fraudulent products 
can be promoted. As beneficial as this technology can be, it 
also creates a new marketplace for activity that is already 
illegal, such as the sale of unapproved new drugs, prescription 
drugs dispensed without a prescription, and products that are 
marketed with fraudulent claims about these health products' 
benefit. As you have pointed out, consumers respond to these 
promotions hoping to find a cure for their illness, to improve 
their well-being, or even their appearance.
    In general, these promotions are not specifically targeted 
to one population, such as senior citizens, as the goal is to 
quickly establish a broad consumer base and maximize sales 
before being found out. Given the types of claims that these 
products make, one could certainly extrapolate, however, that 
some of these products are intended primarily for senior 
citizens.
    FDA is first and foremost a science-based public health 
agency. However, we are also a law enforcement agency. It is in 
both of these capacities that we strive to meet our mission of 
protecting consumers against health fraud. Strong law 
enforcement tools, coupled with a strong base of medical and 
scientific expertise to evaluate marketed health products are 
vital to the agency's ability to meet its mission in protecting 
the public health.
    When Congress passed the Dietary Supplement Health and 
Education Act, it created a unique regulatory framework for 
dietary supplements. Its purpose was to strike the right 
balance between providing consumer access to and truthful 
information about dietary supplements, while preserving 
regulatory authority for FDA to take action against supplements 
that present safety problems or that are labeled or promoted in 
a false or misleading fashion.
    As you know, the regulation of dietary supplements is, for 
the most part, a post-marketing program, and they are regulated 
by FDA's Center for Food Safety and Applied Nutrition, also 
known as CFSAN. In dietary supplement enforcement cases, the 
burden of proof is on FDA to show that a product or ingredient 
presents a risk after they are on the market. CFSAN, however, 
is not the only FDA center that plays a significant role in 
combating health fraud relating to dietary supplements, as many 
of the products the agency has successfully taken off the 
market were products marketed as dietary supplements that 
turned out to be drugs.
    FDA's Center for Drug Evaluation and Research, or CDER, is 
responsible for ensuring that safe and effective drugs are 
available to the American public. They work to accomplish this 
mission through a commitment that lasts for the lifetime of the 
product, from the early stages of drug review and approval to 
monitoring the products once they reach the marketplace. FDA 
shares Federal oversight of dietary supplements with the 
Federal Trade Commission. FDA regulates safety, product 
monitoring and product labeling.
    FTC has primary responsibility for regulating the 
advertising of these products. When a problem arises with a 
product regulated by FDA, the agency can take a number of 
actions to protect the public health. For dietary supplements, 
as with other products, initially the agency works with 
marketer of the products to correct the problem voluntarily. If 
that fails, we can ask the marketer to recall a product 
voluntarily, seek through the courts seizure of the product 
and/or injunctions against firms or individuals who market the 
products.
    We can also detain or refuse entry of products presented 
for import at U.S. ports, and when warranted, criminal 
penalties, including prison sentences, are also sought through 
the courts. Health fraud can be brought to the agency's 
attention in a variety of ways. For example, FDA's 
investigators often identify violations while conducting 
inspections. FDA may also identify a violation or suspected 
fraudulent product through routine marketplace surveys, 
searches, consumer complaints, informants or through referrals 
from the FTC and other Federal, State or local government 
authorities.
    Despite the complexities involved in building and bringing 
an enforcement action, the agency has been successful in 
bringing cases against fraudulent products in all categories of 
FDA-regulated products. There are several examples in my 
written statement of successful cases that the agency has 
brought in conjunction with the Department of Justice and, in 
some cases, the FTC. I would be happy to discuss any of these 
cases with the committee during questioning.
    The agency has a number of other ongoing activities 
directed at combating health fraud. Many of these activities 
are the result of a strategy plan begun by FDA in 1992 to 
improve its processes for targeting and coordinating regulatory 
activities among its various components and Federal, State, 
local regulatory and law enforcement agencies. This strategy 
also focused on improving the agency's efforts to educate the 
public about the importance of making wise choices concerning 
their health care. The full range of activities is described in 
my written statement, but let me give an example. In 1992, FDA 
began sponsoring a national health fraud working group. The 
working group is currently comprised of representatives from 
the Association of Food and Drug Officials, the National 
Association of State Attorney Generals, FTC, Health Canada and 
FDA representatives from its various components.
    This group meets on a regular basis to facilitate the 
coordination of regulatory activities, information exchange and 
leveraging of each member agency. In addition, the agency is 
engaged in several consumer education efforts with the FTC, 
including a facts-for-consumer brochure entitled, ``Miracle 
Health Claims: Add a Dose of Skepticism,'' that is focused on 
fraudulent claims and spotting quackery and health fraud.
    FDA has also made Internet surveillance an enforcement 
priority. The agency's partnership with the FTC and others in 
Operation Cure-All further demonstrates FDA's commitment to 
monitoring violative conduct on the Internet. Over the past 2 
years, FDA has sharpened its focus on the issue of Internet 
promotion and the sale of drugs as online activities have 
expanded. While FDA tries to be vigilant against health fraud, 
many fraudulent products escape regulatory scrutiny, 
maintaining their hold on the marketplace for some time to lure 
increasing numbers into their web of deceit. For every such 
marketer that we put out of business, another or more appear. 
As long as there are vulnerable populations to prey upon, there 
will continue to be those unsavory and unscrupulous characters 
who do so.
    Mr. Chairman, combating health fraud is a challenge, 
especially in light of the advent of the Internet, and one to 
which the agency is committed to addressing. Our partnership 
with our law enforcement, public health, State and local, and 
international colleagues expands FDA's reach and impact. Good 
enforcement strategies and enforcement actions, vigilant 
oversight of the marketplace, and sufficient legal authority to 
remove these products from the market is not enough. 
Successfully combating health fraud must include educating our 
citizens to recognize fraud when they see it and warning them 
of the potential dangers that some of these products pose. Only 
through these steps can we help the public make fully informed 
decisions about their health care purchases, and thereby reduce 
the number of people who may fall prey to these fraudulent 
products.
    Thank you for the opportunity to participate in this 
hearing. We look forward to working with you as we grapple with 
health fraud as a Nation. I would be happy to answer any 
questions you might have.
    [The prepared statement of Mr. Taylor follows:]

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    The Chairman. Thank you, Mr. Taylor. Right on time.
    Mr. Beales, welcome.

   STATEMENT OF HOWARD BEALES, DIRECTOR, BUREAU OF CONSUMER 
      PROTECTION, FEDERAL TRADE COMMISSION, WASHINGTON, DC

    Mr. Beales. Thank you Mr. Chairman, members of the 
committee. I am Howard Beales, Director of the Bureau of 
Consumer Protection at the Federal Trade Commission. I am 
pleased to have the opportunity to testify at this important 
hearing. The Commission's full statement, which we have 
submitted for the record, are the views of the Commission, but 
my oral statement and my responses to questions are my own and 
may not reflect the views of the Commission or any individual 
commissioner.
    The FTC is the nation's primary general jurisdiction 
consumer protection agency. Protecting consumers from false, 
deceptive or unsubstantiated health claims has long been an 
essential part of our mission. We believe these efforts are 
important, because health fraud often targets a very vulnerable 
segment of our population, those suffering from serious or 
incurable health conditions and diseases. In such 
circumstances, even outrageous claims that ordinary consumers 
would dismiss as fraudulent can be, and are, effective.
    These false, misleading and unsubstantiated health claims 
can injure consumers in a number of ways. First, they cause 
economic injury, taking consumers' money in return for 
ineffective products. Even more importantly, they may threaten 
consumers' health if victims are deterred from seeking 
effective treatment. Moreover, in some cases, the products 
themselves are dangerous. To control these types of claims, the 
Commission has filed numerous law-enforcement actions 
challenging false or deceptive therapeutic claims for products 
claiming to cure a broad range of chronic diseases, including 
cancer, arthritis and heart disease.
    Despite these efforts, deceptive health claims persist. 
Over the past 5 years, the Internet has become the medium of 
choice for many companies marketing unproven health products. 
In response, the Commission  initiated  Operation  Cure.All,  a 
comprehensive effort targeting health fraud on the Internet. 
Operation Cure.All utilizes law enforcement, consumer education 
and business education. In addition to the FTC, participants 
include the FDA, several State attorneys general and Health 
Canada. On June 14 of this year, the Commission announced the 
most recent group of Operation Cure.All cases. Among the claims 
the Commission challenged were claims for colloidal silver, 
like this product here, which is basically distilled water 
containing 3 to 20 parts-per-million of silver ions. These 
products cost $15 to $25 a bottle.
    Internet advertising for these products claimed they were 
an effective treatment for 650 different diseases or ailments, 
including cancer, arthritis and diabetes. Another product 
involved in our recent Cure.All sweep was the so-called Black 
Box, which you see in the poster over here. This was a device 
that purportedly delivers an electric current to the body. 
Promotional materials for the product claimed that it 
neutralizes viruses and kills bacteria in the bloodstream and 
organs. Together with something called the ``Magnetic Pulser,'' 
the Black Box was supposedly effective in treating cancer and 
rheumatoid arthritis. The black box sold for $170; adding the 
magnetic pulser pushed the cost to $355.
    Still another product is this anti-aging product, called 
Longevity Signal Formula, marketed to prevent or reverse aging, 
significantly increase life expectancy, significantly reduce 
the risk of atherosclerosis and cure arthritis. This product 
cost $79 for a 30-day supply. Our law enforcement efforts play 
an important role in our health fraud program, but law 
enforcement is a means to an end. The primary goal of consumer 
protection is to prevent consumer injury in the first place. 
Consumer education is another critical tool in that effort.
    Today, we are releasing a publication produced jointly with 
FDA, called ``Miracle Health Claims: Add a Does of 
Skepticism.'' This is an example of the brochure. It provides 
specific information about the efficacy and safety of popular 
products, as well as information similar to the Commission's 
Tip-offs for Rip-offs, which you see on the poster over here, 
that is advice to consumers about how to spot and avoid health 
fraud.
    The brochure, as well as our other educational materials, 
provide consumers with both a toll-free number, 1-877-FTC-HELP, 
and a web address, www.FTC.gov, to file consumer complaints. To 
fight fire with fire, we have used the Internet to obtain broad 
distribution of our consumer education messages. Our web-based, 
health-related consumer education materials have been accessed 
over 80,000 times since October 1 of last year.
    In addition to law enforcement and consumer education, the 
third prong of our efforts to combat health fraud has been an 
extensive industry education campaign. We have published a 
guide for small businesses on how to avoid making false or 
substantiated health claims. We have sent e-mail advisories to 
more than 1,000 web sites making questionable therapeutic 
claims. Law enforcement, however, remains critical. Additional 
non-public investigations are under way.
    The Commission, in coordination with our law enforcement 
partners, will continue its aggressive enforcement program to 
combat health fraud. In addition, we will continue to expand 
our consumer and industry education efforts, and to continue 
our search for new ways to address problems in this important 
area.
    Thank you very much, and I look forward to your questions.
    [The prepared statement of Mr. Beales follows:]

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    The Chairman. Thank you, Mr. Beales.
    With the Federal Bureau of Investigation, Mr. Lormel?

   STATEMENT OF DENNIS M. LORMEL, SECTION CHIEF OF FINANCIAL 
  CRIMES, CRIMINAL INVESTIGATIVE DIVISION, FEDERAL BUREAU OF 
                         INVESTIGATION

    Mr. Lormel. Thank you sir. We would like to thank the 
committee for the opportunity to participate today, also to 
commend the committee for the initiative to raise awareness as 
to the vulnerability of the elderly and seriously ill to 
falling prey to unscrupulous con artists and fraudsters 
concerning dietary and nutritional supplements, as well as 
other fraud schemes. The FBI views promoting awareness to the 
vulnerability of the elderly and seriously ill to health care 
and other fraud schemes as an important preventative component 
in dealing with the crime problem.
    True deterrence is a combination of proactive, preventive 
measures and enforcement actions. I have submitted to you our 
written statement, which also includes four anecdotal case 
summaries, which unfortunately mirror some of the schemes you 
have heard about. I would like to focus my comments this 
morning to the response in your invitation as to what the 
bureau is specifically doing. First off, health care fraud is 
recognized within our white-collar crime program as the No. 1 
investigative priority. Unfortunately, we deal pretty much in 
insurance-related health care frauds. So the schemes you have 
pretty well outlined here this morning we do not consider or 
work as health care specific.
    One of the things that I would ask the committee to 
consider is expanding health care legislation to allow us more 
jurisdiction in terms of other related health care criminal 
conduct such, as what you have heard here this morning, because 
many of the schemes, as I say, are outside the scope of 
Medicaid or private insurance that we traditionally 
investigate. With that, though, we do have a presence in this 
area. We investigate these cases pretty much as fraud by wire 
or mail fraud matters, and with specific reference, Senator, to 
the invitation letter, you inquired as to the FBI's efforts in 
the area of health care fraud, focusing on dietary and 
nutritional supplements.
    In that regard, we work closely with our companion 
agencies, and as I said, we work the cases mostly as wire fraud 
and mail fraud cases, and outside the scope of traditional 
health care. We participate with other agencies--was one of 
your inquiries--how do we participate. We have limited 
investigative resources in this area, so the partnership with 
other law enforcement agencies, particularly FDA, as it relates 
to the dietary supplements and nutritional supplements, is 
important. We partner with the Postal Inspection Service, with 
the IRS, with State attorneys general and Medicaid officers in 
pursuing these criminal investigations.
    In a broader context, in the traditional health care arena, 
we work with HHS and we work with DCIS and the above agencies 
that I mentioned before. Also, we deal in partnering with 
outside agencies such as AARP. As I mentioned earlier, 
promoting awareness is very important to us. We have an 
aggressive campaign where we use retired individuals to help us 
promote awareness and to act in concert with us in an 
undercover capacity in a lot of the investigations we conduct.
    We have an initiative, in the traditional sense of 
telemarketing fraud, which we call Canadian Eagle, in which we 
deal extensively with Canadian officials and cross-border crime 
schemes and issues. One example of the cooperation, I think, 
between the bureau and FDA, in particular, is the ongoing case 
in Kansas City involving the pharmacist who has now provided 
short dosages of particularly cancer drugs, and obviously the 
elderly is a component of the people there. The FBI and FDA are 
working very closely in that case, in that regard.
    You asked about programs in place to protect the general 
population and, in particular, the elderly. We have joint 
outreach and educational programs, as I mentioned, with AARP 
and through vehicles such as our Internet Fraud Complaint 
Center. As the FTC has Consumer Sentinel, we have the Internet 
Fraud Complaint Center, and we are able to assess and analyze 
Internet Fraud type of complaints, and we are hopefully--in 
that process, we aggregate the complaints and we are able to 
refer out cases, not only to the FBI, but to State and local 
law enforcement entities throughout the country and, in fact, 
around the world.
    Types of proactive investigative techniques that we 
undertake to ferret out these products and frauds include 
short-term undercover operations targeting the fraudsters. We 
use retired individuals, retired FBI agents, and we do so in 
concert with AARP as we can identify cases. We conduct 
assessments and analysis, as I mentioned, through the Internet 
Fraud Complaint Center, and refer cases back out. We certainly 
pursue traditional investigative techniques as appropriate, and 
we look to initiate regional and national investigative 
initiatives where we can really promote the high level of 
visibility, and certainly in terms of the visibility, better 
make people aware of the crime problems.
    Senator Wyden, in your comments, I think you were right on 
the mark in terms of tasking GAO. I would encourage you, sir, 
if you would, to expand that beyond just the health care arena, 
because these fraudsters are across the board in all areas. I 
have been very general in terms of my comments, sir, and if you 
have got some specific questions, I would be very happy to 
pursue them and to follow up with any other additional 
information you would like from us.
    [The prepared statement of Mr. Lormel follows:]

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    The Chairman. Thank you very much, Mr. Lormel. Thank the 
panel members, all of you, for this. I know we have got a 
problem out there. We have got literally thousands of these 
manufacturers out there that are manufacturing this, and it 
seems to me that we are not doing, as a government, nearly 
enough to eliminate the snake-oil salesmen, as I have termed 
them, who operate in the 21st century, not on the street 
corner, but by very sophisticated targeting of seniors through 
mass-marketing efforts, and generate hundreds of millions of 
dollars that we saw one company making annually. It is a $27 
billion industry annually, all of it certainly is not 
fraudulent. In fact, the vast majority of it, I think, is very 
positive and very good.
    But this is something that I think really deserves more 
attention than we seem to be giving it as the government. I am 
concerned that, in 1994, when we passed as Congress the Dietary 
Supplement Health and Education Act, referred to as DSHEA, that 
we did not help you folks in the enforcement area get to the 
problem actors in this supplement business. Am I correct in 
that observation? What, in general, is your opinion from an 
enforcement standard that you are involved in, of the effect of 
the Dietary Supplement Health and Education Act that Congress 
passed? Did it help you get rid of the bad actors? Did it not 
have any effect at all? Did it make it more difficult?
    Mr. Curran. I can  say anecdotally,  in the case  of Tee 
Up,  Senator, the rip-off was out there before we learned of 
it. In other words, there was not any pre-market review. 
Thirty-seven hundred persons spent a lot of money already. You 
did not have a witness who was supposed to be here, Mrs. Crabb. 
The other thing that we were concerned about is that, in our 
case, folks who could have been helped in a legitimate area 
chose to go to this snake oil person. Mrs. Crabb's husband had 
esophagus cancer and was thought to be living another 18 months 
or 2 years, took this snake oil stuff and died within 2 weeks. 
That is the fellow over in Virginia who is in prison right now, 
happily, that doctor.
    So my concern as an AG is that--we catch them after they do 
their deed. I wish that there was some way to make them be 
prescreened or premarketed, and then if it is good stuff, like 
I daresay there may well be, then fine.
    The Chairman. There has been an explosion of these 
supplement sales, a 380-percent increase between 1990 and 1997. 
I am just wondering whether the actions by Congress contributed 
to the explosion of the growth in this area.
    Mr. Taylor, I want some comments from FDA on this.
    Mr. Taylor. Well, I am not sure if the legislation 
contributed to the growth of the industry, but I can tell you 
that, from an enforcement or law enforcement standpoint, the 
very fact that in dietary supplement enforcement cases, that 
the burden is on the agency to prove that the product poses a 
risk is a significant change and a significant difference from 
how we handle other cases.
    The Chairman. Let's just talk about this. That is 
significant. We essentially changed the burden of proof on who 
has to approve whether this stuff is good or bad. Is that 
right?
    Mr. Taylor. Well, there is no pre-approval, so it is just 
sort of a post-market model. As a result, once the product is 
on the market, if FDA has decided that they wish to remove a 
product from the market because it poses a significant and 
unreasonable risk to the consumer, the burden is on FDA to 
establish scientifically that indeed the product does pose a 
risk.
    The Chairman. Obviously, just for the information of the 
committee, what is the difference with regard to 
pharmaceuticals, over-the-counter generics?
    Mr. Taylor. Sure. In the context of drugs, the burden is on 
the company to show that the product is safe and effective. So 
if we were going to bring an enforcement action against a 
pharmaceutical product, we could bring the enforcement action 
and the burden is not on us to show that it is harmful. It is 
on the manufacturer to show that indeed the product is safe and 
effective.
    The Chairman. So the question to FDA is how much has the 
passage of the Dietary Supplemental Health and Education Act of 
1984--how much of an effect has it had on the enforcement 
ability of FDA?
    Mr. Taylor. It makes it much more challenging to bring 
enforcement actions.
    The Chairman. I note that from GAO's testimony, that they 
say that the act allows FDA to remove from the market dietary 
supplements that the agency can prove are dangerous, but the 
agency has not prohibited the marketing of any specific 
substances using its administrative rulemaking authority. In 
fact, they say that FDA has not initiated any administrative 
rulemaking activities to remove from the market certain 
substances that its analysis suggest pose health risks, but has 
sought voluntary restrictions and attempted to warn consumers.
    We had the first panel here talk about $200 million in 
annual sales by a company that publishes the Journal of 
Longevity, and we had other people come in and say that it does 
not work, that it could potentially be harmful, and it targets 
and preys on seniors. Has the FDA done anything in regard to 
that particular activity by that particular enterprise?
    Mr. Taylor. FDA is currently looking into that, those 
activities and that enterprise, and I do not want to say 
anything that would negatively impact on that inquiry. However, 
I would like to address the GAO's statements. The GAO is 
correct. There are two mechanisms that FDA could use to 
administratively remove a dietary supplement product. One 
avenue is a determination by the Secretary, and only the 
Secretary, that the product poses an imminent harm. The other 
mechanism is to use rulemaking to establish that a product 
maybe should be removed from the market.
    That is in the administrative context, and no, we have not 
taken any products off the market through administrative 
channels. However, we have used enforcement actions to remove 
products marketed as dietary supplements that we felt actually 
were drugs masquerading under that protection and we have used 
injunctions in several instances to remove products that were 
marketed as dietary supplements off the market, and as part of 
the relief that we achieved in these injunctions, is language 
that would allow us to bring contempt actions if we found later 
on that these defendants were continuing to manufacture 
unapproved drugs under the guise of dietary supplements.
    The Chairman. That is going after them under the old drug 
regulations and not under DSHEA?
    Mr. Taylor. Yes. What happens is that--and you will note in 
my written testimony that we have several cases where companies 
have marketed products, claiming that these products are 
dietary supplements even though the products make mitigation, 
cure, and treatment claims. If you make mitigation and cure or 
treatment claims, then under the act the product is a drug, 
even if you market that product as a dietary supplement. That 
is the theory and the argument that we have used in several of 
the enforcement actions that are noted in the written 
testimony.
    The Chairman. It seems to me that the Dietary Supplement 
Health and Education Act has greatly hamstrung and hand-tied 
your ability to assure the American people that these 
supplements that are increasing by huge amounts are, in fact, 
safe. The GAO went on to say that FDA's adverse effect 
reporting system for dietary supplements receives reports of 
only a small portion of all adverse events, and the reports 
that you receive are often incomplete, because no one has to 
report. These are voluntary. People are embarrassed. I am not 
going to report to the Federal Government that I was so stupid 
I bought something that did not work. I did not want to tell 
you about my magnets in my back, but I guess I did. [Laughter.]
    So they do not want to report this stuff. In fact, for 
something more serious than magnets in my back and my back 
brace, GAO says that they found documents disclosed in a recent 
court case showed that a manufacturer of a product containing 
Ephedra had received more than 1,200 complaints of adverse 
events related to the product but FDA told us that they were 
aware of few, if any, of these reports before this lawsuit was 
filed. Does that not indicate a real breakdown between the 
amount of adverse reactions that are out there and the 
information that you are getting? If not, why not?
    Mr. Taylor. Well, certainly you are correct. The very fact 
that it is a passive, voluntary system suggests that under-
reporting does occur. However, there have been some instances 
where the adverse event reporting system has acted as a 
sentinel or signal of a growing problem. One example is a drug 
called gamma butyrolactone, which is a GHB precursor, and in 
the winter or the fall of 1998 and the winter and spring of 
1999, we noticed an unusual level of adverse events that led us 
to bring actions against many of the manufacturers of these 
products, and these products were marketed for a myriad of 
claims, mostly energy enhancing, muscle enhancing, but they 
were also marketed for the purpose of addressing wrinkling and 
some other aging conditions.
    So you are right that our adverse event reporting system, 
because it is passive, because it is voluntary, does have some 
weaknesses. But there have been instances where it has indeed 
provided us a signal that a problem is on the horizon or is 
already before us.
    The Chairman. What about inspection of the manufacturing 
facilities? You have the authority to do that, but the 
information I have is that they are about--your own information 
tells me that there are about 1,500 facilities that manufacture 
this stuff, and that last year you all inspected 53.
    Mr. Taylor. That is correct. The number of inspections in 
the dietary supplement program are far fewer than in our other 
programs.
    The Chairman. Is that because of a congressional act of 
Congress or because you do not have the resources to do it? Are 
we telling you not to do it?
    Mr. Taylor. Well, no. I think that the final promulgation 
of the good manufacturing practice regulations will, first of 
all, do two things. One, it will help us locate some of these 
facilities, but more importantly it will set a standard that 
will help ensure that the dietary supplements are safe and 
properly labeled.
    The Chairman. Right now you do not even know where they 
are?
    Mr. Taylor. We know where some are, but because there is no 
registration requirement, it obviously is difficult to identify 
some of the sources of these products. But if you look at all 
of our other programs, the pharmaceutical program, the medical 
device program, a vast majority of our inspections are geared 
toward ensuring that companies are manufacturing their products 
in conformance with the good manufacturing practice 
regulations, because it is those regulations that set the 
standards for quality assurance and quality control in an 
industry.
    The Chairman. I will tell you, if you are only doing 53 out 
of 1,500, that is just barely touching the tip of this problem.
    Mr. Taylor. You are correct.
    The Chairman. I have gone too long.
    Senator Wyden.
    Senator Wyden. Thank you. Thank you, Mr. Chairman.
    Gentlemen, thank you. Thank you very much for excellent, 
excellent testimony, and I hope you walk away knowing that you 
have seen Chairman Breaux, who has got a lot of responsibility, 
be with you for 3 hours, because we are committed to turning 
this situation around, and I just have a few questions I want 
to ask of you before we wrap up.
    The first is we had sworn testimony this morning that Mr. 
Braswell's money finds its way to the Cayman Islands, is what 
we were told this morning. If that is the case, how does the 
government deal with that, and do you need additional tools to 
deal with it? I have said repeatedly that one of the areas that 
I think has changed most with respect to health care fraud is 
how much of this moves quickly around the world. But, since we 
had testimony with respect to the Cayman Islands this morning, 
I would be interested in having your assessment about how you 
would deal with that, if that, in fact, is what happened. May 
we start with you, Mr. Lormel?
    Mr. Lormel. Yes, certainly. I think without making specific 
reference to that case, because it is an ongoing investigation 
the IRS has, we conduct numerous investigations with a money 
laundering nexus, and venues like the Caymans are very 
attractive to somebody who is looking to park considerable 
amounts of money. We certainly can use assistance with the 
governments at play. We have worked very closely, I know from 
the Department of Justice standpoint, through MLATs, mutual 
legal assistance treaties, with the different municipalities to 
try to get access and cooperation from the banking authorities 
in those venues. But certainly, as long as the fraudsters know 
that there is a safe haven for money, that money is going to 
move in that direction.
    Senator Wyden. So if that is where the money were to end 
up, and I was trying to characterize it as you did. It has been 
an assertion, but that was an assertion under oath that the 
money found its way there. In this particular case, where we 
are talking about a potential recidivist, as of now there is 
nothing the government can do about it?
    Mr. Lormel. Yes, sir. That is correct. What we would have 
to do is come into a situation where we had an indictment or 
some type of legal action, so that we could freeze monies and 
hopefully, through the Federal court system, we would forfeit 
the money back to the government.
    Senator Wyden. Does it require a change in Federal law to 
bring about those forfeitures?
    Mr. Lormel. I don't know that it requires a change in 
Federal law, as much as obtaining the cooperation of the 
foreign governments involved. I think, in that regard, we are 
making inroads, particularly in a place like the Caymans. That 
individual is going to be surprised to find out that there are 
cooperative initiatives underway in the law enforcement realm.
    Senator Wyden. For you other three, before I move onto 
other topics, in the international area, are there additional 
steps that you would favor the Congress pursuing?
    Mr. Curran. The one example that we had in Maryland--I 
called to the authorities in the Bahamas, who were very 
receptive, so, one-to-one, they understood the problem, knew it 
was a fraud, and they stopped it. So that is a good news story 
and did not need anything other than a phone call, actually. 
That worked out well.
    Mr. Taylor. I think my answer would be similar to the FBI 
and the State of Maryland. We have contacts in other countries 
overseas, and without commenting on the set of facts that are 
before us, we certainly have had other instances where money 
has moved offshore and we have been able to address a situation 
after indictments or some other judicial steps have been taken. 
So I think we do have the tools. We just have to look at the 
facts and formulate a strategy.
    Mr. Beales. At the FTC, we have been involved in trying to 
work out judgment recognition agreements in various 
international fora, in order to be able to collect on our 
judgments. We have also, in some cases, been successful in 
obtaining an order requiring someone to bring money back into 
the United States that was then available to satisfy a 
judgment.
    Senator Wyden. Mr. O'Neil did not think the system worked 
for him. Mr. O'Neil, at considerable exposure to himself, went 
to government agencies, went to, apparently, some of the people 
who work for all of you, and did not feel that people made the 
kind of effort that was necessary to deal with it. It is not a 
particularly encouraging account. In your view, how should the 
system have worked? Again, let's divorce it from this case, 
because this is a case under investigation. These are charges. 
They were made under oath, so they are particularly 
significant. But how should the system have worked for Mr. 
O'Neil, again, because he is bringing to the attention of the 
government an instance that was already one that should have 
set off some red light, given the previous history?
    Mr. Lormel.
    Mr. Lormel. Yes, if I may. We are dealing with Mr. O'Neil's 
perception and sensitivity there. The IRS does have an 
investigation and it is ongoing, but by the nature of these 
cases, they are so complex and they do not come to some type of 
closure or action in a relatively short frame. The frustration 
in going to numerous agencies, as apparently he did--and, sir, 
I would be very interested, as an aside, to find out if they 
came to the bureau and sit with you, and we could weigh what 
exactly happened or should have happened. I think perhaps, from 
the enforcement standpoint, there needs to be better 
sensitivity in dealing with the Mr. O'Neils who bring these 
complaints in, because certainly you are dealing with a case 
here that is outside the norm, and as he indicated, which is 
somewhat intimidating to him individually.
    I hope that--and I know from the bureau's perspective, and 
I would have to think my colleagues' likewise--would not have 
been intimidated to take a case like that on, although that is 
the perception that is given because of, perhaps, the lack of 
communication back or dialog that he was looking for. 
Particularly, when you look again at a complaint of that 
magnitude, he sees it, he lives it firsthand, certainly when 
they bring us those facts, there are so many variables that go 
into whether or not we have jurisdiction, so there are 
jurisdictional concerns.
    I think you guys have pointed to the fact that a case like 
this, there is so much wiggle room in terms of does the bureau 
have jurisdiction or does one of the other agencies have 
jurisdiction? So there are so many considerations at play, I 
would like to know what all the dynamics were in the dealings 
that Mr. O'Neil had, because I think that we could allay some 
of his concerns when you go point-by-point. However, there is a 
perception. It is a significant problem. We need to address it.
    Mr. Taylor. Senator Wyden, since FDA was one of the 
agencies that was specifically cited, I find it unfortunate 
that his experience with FDA was not to his liking. I think it, 
quite frankly, is our responsibility to listen to his 
complaints. We have set up a web site that specifically deals 
with complaints about violative sites and violative conduct, 
and there is a connection on our Internet site. That does not 
always mean that we will be able to build a case. Obviously, 
there are complexities involved in building a case, but I think 
it certainly is our duty to listen to what he has to say, and 
if the information is useful, weigh that against a decision 
whether not to take some type of regulatory action.
    Senator Wyden. Let me ask it this way. When I asked Mr. 
Glen essentially about that, Mr. Glen said that the people who 
were contacted should have immediately brought together a sort 
of interagency kind of effort. He said we should have had the 
various consumer protection agencies, the various law 
enforcement agencies, invited several of the international 
bodies--I think you mentioned Canadian authorities and others--
and we should have moved quickly in a concerted kind of way. My 
sense is that, for instances, again, where we are talking about 
potential recidivists, people who have already been found to 
have violated laws that prevent preying on the elderly, that 
that would be a practical way to do it in the future. Is that 
what happens now? Is there an interagency effort where FBI, 
FTC, the FDA, the relevant State authorities come together and 
say, ``Look, we are all people who care about following up 
here. Let's divide up the task.'' Is that done today?
    Mr. Taylor. Well, I can tell you all the law enforcement 
agencies represented at this table were part of a law 
enforcement symposium that was held in San Antonio in July, and 
we discussed many of these issues. I think one of the things 
that the advent of the Internet did was, I think, highlight for 
all of us our limitations, and I think has reawakened the need 
to make sure that if it is something that jurisdictionally we 
cannot handle, that there is a mechanism for sharing that 
information with another agency, whether it be on a State or 
Federal level, that can work the matter.
    That is why many of the working groups that I talked about 
earlier comprise members from all of these groups. There really 
is a need to ensure that enforcement is more seamless, so that 
we do not see some of the gaps that we have seen in the past.
    Senator Wyden. Well, I am going to explore this with you 
some more, because that seems to me what should have been done 
here, is when Mr. O'Neil came to your various agencies, there 
should have been some way to bring all of you who work in this 
area together, divide up the task, see who would have 
information, and clearly that was not done. It is always easy 
to Monday morning quarterback, but I think that needs to be 
done in the future.
    Mr. Lormel. Senator, if I may, just to follow on to that, 
that certainly would be the optimum situation. We deal more on 
a case-by-case dynamic, and it makes it somewhat difficult in 
terms of resources to be able to ideally deal with that. But 
you are right, we need to take a look. There are a number of 
working groups at the national and regional levels that do meet 
and deal with those cases. Again, I think we need to look at 
the specific dynamics at play here and then weigh it against 
the national picture.
    Senator Wyden. Well, that really leads me to my last point, 
Mr. Lormel, for you, and you are absolutely right. This is a 
case-by-case situation, and that is why I asked earlier about 
people who are repeat offenders, and I appreciate the kind 
words you had to say. What I would like to do in this area is I 
think there needs to be a way to set off some red lights, a 
kind of warning signal through the Federal Government when you 
are talking about people with a track record of exploiting 
older people. We do this in other law enforcement areas.
    One of the things I am proudest of is I worked with all of 
you and Arlen Specter on the armed career criminal law, where 
we say when you are talking about repeaters, we are, in effect, 
going to have some warning lights that go off so we really 
target them and, of course, there are enhanced penalties. Tell 
us a little bit more then, since you were kind enough to say 
you liked it when I suggested it earlier, how you think it 
would be useful to target the recidivists and these repeat 
offenders? Clearly, case-by-case discretion has to be a part of 
it. But if you were going about trying to laser in on people 
with a track record of preying on older people, how would you 
do it?
    Mr. Lormel. Starting from within, just internally, from the 
bureau's perspective, before taking it to the other agencies, 
because clearly we need to have a joint operational initiative, 
and I would clearly call it that. We would have some type of 
operational initiative, and we would set up the parameters, 
basically, of the fraudsters we are looking at. We are looking 
at repeat offenders. You are talking significant dollar 
amounts, so you are talking cases that have a history.
    So the first step is going to be to study our indices and 
do an analysis, and target proactively those offenders that are 
out there, bring in the other jurisdictional agencies with an 
interest. Again, as I would in a response to a crisis situation 
with an operational plan, put together an operational strategy 
and then proceed, and call it a national initiative. Perhaps 
this is an area that warrants such.
    Senator Wyden. I have imposed on the chairman's time. This 
has been an excellent, excellent panel. You all are on the 
front lines, and it is our job to get you the tools to do your 
work. So we will be working closely with you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Wyden, and thank you for 
your attendance throughout the hearing today. We really 
appreciate it and look forward to working with you, as well. I 
have one question and some closing comments.
    Mr. Beales, I asked Mr. Taylor the question about whether, 
in his opinion--and I will ask you the same--of the Dietary 
Supplement Health and Education Act that was passed in 1994. 
Has it made your job as an FTC employee easier or more 
difficult in trying to find fraudulent bad actors in the area 
of dietary supplements?
    Mr. Beales. I think from the FTC's perspective it has not 
made any difference at all. The basic standard that claims have 
to be substantiated is the law enforcement standard that we 
would apply to any other product and that we have applied in 
other areas with a great deal of success.
    The Chairman. So you are looking at advertising claims. You 
were doing that before this. You will do the same after?
    Mr. Beales. That is right. It really is not different. If I 
could just add one comment about recidivism, at the FTC we have 
a project called Project Scofflaw that actively looks for 
potential recidivists in violation of our past orders and then 
looks to see what kinds of steps are appropriate or remedy 
these recurrent violations. Some are referred for criminal 
prosecution. We have been successful in getting criminal 
contempt for violations of our orders, and some we pursue 
ourselves.
    The Chairman. I want to thank this panel. I want to thank 
the previous witnesses, some who came and testified, which was 
a difficult task for them. We appreciate them and their 
traveling long distances to provide the testimony, and for our 
enforcement people for being with us today.
    Mr. Attorney General, thank you for your good work in 
Maryland. I am disturbed by one of the conclusions in the GAO 
study that we asked them to do, which concludes, ``At the risk 
of harm to seniors from anti-aging and alternative health 
products, it has not been specifically identified as a top 
public health priority or a leading enforcement target for 
Federal and State regulators.'' I know there are exceptions.
    I think we have heard one today from the attorney general, 
but when you have an industry that has increased in sales by 
380 percent between 1990 and 1997, that is a $27 billion annual 
industry, marketing products, particularly to seniors--products 
who, in many cases, claim to be cures for everything from 
cancer to high cholesterol, to heart problems, to diabetes, to 
Alzheimer's, that is still basically self-regulated, it seems 
to me that we have a very serious problem that needs to be 
addressed.
    It seems to me that the Dietary Supplement Health and 
Education Act that Congress passed in 1994 has essentially 
changed the burden of proof on products that are being sold 
that guarantee health benefits to our citizens--was a very 
significant act. It seems to me that this is a huge business 
that is growing every day. I will also point out that many of 
the products are good, solid, do a great deal of good for the 
people that take them, but at the same time we have seen today 
that there is a concentrated effort through modern-day, 21st-
century marketing efforts to market these products aggressively 
and specifically to the most vulnerable people among us. Not 
only do they cost a great deal of money that many of the people 
in the category that buy them do not have, they also present 
potential medical problems for the people who take them because 
of their interaction with other drugs, because they sometimes 
take the supplements instead of the prescribed drugs from their 
doctors, and we are seeing some of the results of these 
efforts.
    I would hope that this committee would be able to look at 
making some recommendations in this area. At the very least, I 
think that this committee will continue to be involved in 
changing the attitude that this, in fact, should be a top 
public health priority for this government. We intend to see 
that it is made such. This hearing has been very helpful, and 
this will conclude the hearing.
    [Whereupon, at 1:19 p.m., the committee was adjourned.]

                            A P P E N D I X

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