Federal Register / Vol. 62, No. 66 / Monday, April 7, 1997 / Notices 16587

adequate substantiation, that

testimonials from consumers appearing

in the ads reflect the typical or ordinary

experience of people who have used the

product.

The complaint also alleges that

respondent falsely represented that

scientific studies demonstrate that the

Slimming Insoles cause significant

weight loss without changes in diet or

exercise. In addition, the complaint

alleges that respondent falsely

represented that an organization named

Advanced Bio/Natural Research Labs is

a bona fide, independent research

organization that has published a report

containing the results of valid,

independent testing of the Slimming

Insoles.

The proposed consent order contains

provisions designed to remedy the

violations charged and to prevent

respondent from engaging in similar

acts and practices in the future.

Part I of the order requires respondent

to possess competent and reliable

scientific evidence to support any claim

that any product causes weight loss,

with or without changes in diet or

exercise, or provides any weight loss, fat

loss, weight regulation, weight control

or weight maintenance benefit. Part II

prohibits respondent from using the

name ‘‘Slimming Insoles’’ or any other

name in a manner that represents that

any product causes weight loss, unless

respondent possesses competent and

reliable scientific evidence that

substantiates the representation.

Part III prohibits respondent from

claiming that the experience

represented in any user-testimonial or

endorsement of any food, dietary

supplement, drug, device, or weight loss

product or program represents the

typical or ordinary experience of

members of the public who use the

product, unless, at the time, respondent

possesses and relies upon competent

and reliable scientific evidence

substantiating the representation or

respondent discloses, clearly and

prominently, and in close proximity to

the testimonial or endorsement, what

the generally expected results would be

or that consumers should not expect to

experience similar results.

Part IV prohibits respondent from

representing that Advance Bio/Natural

Research Labs is a bona fide,

independent research organization or

that it has published a report containing

the results of valid, independent testing

of any product. Part V prohibits, in

connection with the sale of any food,

dietary supplement, drug, device or

weight loss product or program,

misrepresentations of the existence,

contents, validity, results, conclusions

or interpretations of any test, study or

research or the existence, nature,

purpose or activities of any

organization.

Part VI requires respondent to deposit

$40,000 into an escrow account, which

will be used by the Commission to

provide either direct redress to

purchasers of the Slimming Insoles or

will be paid to the United States

Treasury, if the Commission determines

that direct redress to consumers is

wholly or partially impracticable. The

order suspends the full $40,000 liability,

however, provided that respondent pays

$7,500 to the Commission no later than

the date the order becomes final. The

full $40,000 becomes due, however,

should respondent default in making

the $7,500 payment. In addition, the

Commission’s acceptance of the order is

expressly premised upon financial

statements and related documents

provided by the respondent, and the

Commission reserves the right to reopen the proceeding to determine if the

financial information provided by

respondent contains any material

misrepresentations or omissions. If the

Commission determines that there are

any material misrepresentations or

omissions in the financial information

provided, then the full $40,000 becomes

due and payable.

Parts VII through X relate to

respondent’s obligations to maintain

and make available to the Commission

certain records; to provide copies of the

order to respondent’s personnel; to

notify the Commission of changes in

corporate structure; and to file

compliance reports with the

Commission. Part XI provides that the

order will terminate after twenty years,

under certain circumstances.

The purpose of this analysis is to

facilitate public comment on the

proposed order, and it is not intended

to constitute an official interpretation of

the agreement and proposed order or to

modify in any way their terms.

Donald S. Clark,

Secretary.

[FR Doc. 97–8800 Filed 4–4–97; 8:45 am]

BILLING CODE 6750–01–M

FEDERAL TRADE COMMISSION

[File No. 942–3237]

KCD Holdings, Inc., et al.; Interactive

Medical Technologies, Ltd., et al.;

William Pelzer, Jr.; and William E.

Shell, M.D.; Analysis to Aid Public

Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreements.

SUMMARY: In settlement of alleged

violations of federal law prohibiting

unfair or deceptive acts or practices and

unfair methods of competition, the four

consent agreements, accepted subject to

final Commission approval, would

prohibit, among other things, the

California-based companies, which

market cellulose-bile products, and their

officers from providing means and

instrumentalities or substantial

assistance to any person who they

know, or should know, is making any

false or unsubstantiated benefit,

performance, efficacy or safety claim for

any weight loss, fat or cholesterol

reduction product or program. The

consent agreements would require KCD,

KCD Holdings and Richards to pay

$150,000 in consumer redress, in

thirteen installments over a period of

one year, Interactive Medical and

Effective Health to pay $35,000 in

consumer redress, and Dr. William E.

Shell, a former officer of Interactive

Medical Technologies, Ltd., to pay

$20,000 in consumer redress.

DATES: Comments must be received on

or before June 6, 1997.

ADDRESSES: Comments should be

directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W.,

Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:

Laureen France or Nadine Samter,

Federal Trade Commission, Seattle

Regional Office, 915 Second Ave., Suite

2896, Seattle, WA. 98174. (202) 220–

6350 or 220–4471.

SUPPLEMENTARY INFORMATION: Pursuant

to Section 6(f) of the Federal Trade

Commission Act, 38 Stat. 721, 15 U.S.C.

46 and Section 2.34 of the Commission’s

Rules of Practice (16 CFR 2.34), notice

is hereby given that the above-captioned

consent agreements containing a

consent orders to cease and desist,

having been filed with and accepted,

subject to final approval, by the

Commission, have been placed on the

public record for a period of sixty (60)

days. The following Analysis to Aid

Public Comment describes the terms of

the consent agreements, and the

allegations in the complaints. An

electronic copy of the full text of the

consent agreement package can be

obtained from the FTC Home page (for

March 25, 1997), on the World Wide

Web, at ‘‘http://www.ftc.gov/os/actions/

htm.’’ A paper copy can be obtained

from the FTC Public Reference Room,

Room H–130, Sixth Street and

Pennsylvania Avenue, N.W.,

Washington, D.C. 20580, either in

person or by calling (202) 326–3627.

Public comment is invited. Such

comments or views will be considered
16588 Federal Register / Vol. 62, No. 66 / Monday, April 7, 1997 / Notices

by the Commission and will be available

for inspection and copying at its

principal office in accordance with

Section 4.9(b)(6)(ii) of the Commission’s

Rules of Practice (16 CFR 4.9(b)(6)(ii)).

Analysis of Proposed Consent Orders

The Federal Trade Commission

(‘‘Commission’’) has accepted, subject to

final approval, agreements to proposed

consent orders from KCD, Incorporated

(‘‘KCD’’) and KCD Holdings, Inc. (‘‘KCD

Holdings’’), their former officer, Clark

M. Holcomb (‘‘Holcomb’’), and their

current officer, Bonnie L. Richards

(‘‘Richards’’) (hereinafter ‘‘KCD

respondents’’), their advertising agency

Deerfied Corporation (‘‘Deerfield’’), and

its owner, Gerald E. Hatto (‘‘Hatto’’).

The KCD respondents market and sell

an over-the-counter weight loss product,

known as SeQuester, comprised of fiber

and ox bile. The product advertisements

have represented that the product

reduces the body’s absorption of fat and

sugar from consumed food, thereby

providing weight loss and cholesterol

lowering benefits. Respondents

Deerfield and Hatto assisted in the

creation and dissemination of the

SeQuester advertisements.

The Commission has also accepted,

subject to final approval, agreements to

proposed consent orders from

Interactive Medical Technologies, Ltd.

(‘‘IMT’’), its wholly owned subsidiary,

Effective Health, Inc. (‘‘EHI’’), William

Pelzer, Jr. (‘‘Pelzer’’), a former officer of

IMT and EHI, and William E. Shell,

M.D. (‘‘Shell’’), also a former officer of

IMT (hereinafter ‘‘IMT respondents’’).

These respondents marketed and sold

an over-the-counter weight loss product,

known as Lipitrol, also comprised of

fiber and ox bile. The Lipitrol product

advertisements represented that the

product reduced the body’s absorption

of fat from consumed food, thereby

providing weight loss and cholesterol

lowering benefits. The IMT respondents

also provided means and

instrumentalities or substantial

assistance to the KCD respondents’

marketing and sale of SeQuester.

The proposed consent orders have

been placed on the public record for

sixty (60) days for receipt of comments

by interested persons. Comments

received during this period will become

part of the public record. After sixty (60)

days, the Commission will again review

the agreements and the comments

received and will decide whether it

should withdraw from the agreements

and take other appropriate action or

make final the proposed orders

contained in the agreements.

The Proposed Complaints

The Commission’s complaint against

the KCD respondents, Deerfield and

Hatto, charges these respondents with

making false and unsubstantiated

claims, in advertising and promotional

materials, regarding the efficacy of

SeQuester as a weight loss, fat reduction

and cholesterol reduction product.

Specifically, the complaint alleges that

the KCD respondents falsely

represented, expressly or by

implication, that SeQuester prevents or

significantly reduces the body’s

absorption of fat and sugar from

consumed food. The complaint also

charges that these respondents failed to

possess and rely upon a reasonable basis

for these representations. The

Complaint further alleges that these

respondents made false and deceptive

representations that scientific research

demonstrates that SeQuester prevents or

significantly reduces the body’s

absorption of fat from consumed food

and causes significant weight loss.

In addition, the compliant alleges that

the KCD respondents have represented

that SeQuester causes significant weight

loss; allows consumers to eat high-fat

foods without gaining weight; causes

significantly greater weight loss than

diet and exercise alone; allows

consumers to eat high-fat foods without

increasing their risk of high cholesterol,

clogged arteries, heart disease and other

health problems associated with a highfat diet; reduces the risk of high

cholesterol, clogged arteries, heart

disease and other problems associated

with a high-fat diet; and is beneficial

and safe when used in amounts

sufficient to cause diarrhea. The

Complaint charges that these

respondents did not possess and rely

upon a reasonable basis for these

representations.

The complaint also alleges that

Deerfield and Hatto have represented,

expressly or by implication, that

SeQuester causes significant weight

loss; allows consumers to eat high-fat

foods without gaining weight; allows

consumers to eat high-fat foods without

increasing their risk of high cholesterol,

clogged arteries, heart disease and other

health problems associated with a highfat diet; prevents or significantly

reduces the body’s absorption of fat and

sugar from consumed food; reduces the

risk of high cholesterol, clogged arteries,

heart disease and other problems

associated with a high-fat diet; and

significantly reduces the body’s

absorption of sugar from consumed

food. The compliant charges that

Deerfield and Hatto did not possess and

rely upon a reasonable basis for these

representations. The complaint further

alleges that Deerfield and Hatto falsely

represented that scientific research

demonstrates that SeQuester prevents or

significantly reduces the body’s

absorption of fat from consumed food

and causes significant weight loss. The

compliant also charges that respondents

Deerfield and Hatto knew or should

have known that these representations

were false and misleading.

The Commission’s complaint against

the IMT respondents charges IMT, EHI

and Shell, with making false and

unsubstantiated advertising claims

regarding the efficacy of Lipitrol as a

weight loss, fat reduction and

cholesterol reduction product.

Specifically, the complaint alleges that

IMT, EHI and Shell falsely represented,

either expressly or by implication, that

Lipitrol prevents or significantly

reduces the body’s absorption of fat

from consumed food, and absorbs

approximately 5.9 grams of fat per tablet

from consumed food. The complaint

also charges that respondents IMT, EHI

and Shell failed to possess and rely

upon a reasonable basis for these

representations. The complaint further

alleges that these respondents made

false and deceptive representations that

scientific research demonstrates that

Lipitrol prevents or significantly

reduces the body’s absorption of fat

from consumed food, absorbs

approximately 5.9 grams of fat per tablet

from consumed food, causes significant

weight loss and lowers blood

cholesterol levels.

In addition, the complaint alleges that

respondents IMT, EHI and Shell have

represented that Lipitrol causes

significant weight loss; lowers blood

cholesterol levels; reduces, or reduces

the risks associated with, high

cholesterol, including clogged arteries,

high blood pressure, diabetes, breast

cancer and heart disease; causes

significantly greater weight loss than

diet and exercise alone; and is beneficial

and safe when taken in amounts

sufficient to cause diarrhea. The

complaint charges that these

respondents did not possess and rely

upon a reasonable basis for these

representations.

Respondent William Pelzer, Jr. in not

included in the above-mentioned

allegations because he had no

involvement in the advertising,

marketing or sale of Lipitrol.

In addition, the complaint charges

that the IMT respondents, including

respondent Pelzer, provided means and

instrumentalities and/or substantial

assistance to others who respondents

knew or should have known were

making false and deceptive or
Federal Register / Vol. 62, No. 66 / Monday, April 7, 1997 / Notices 16589

unsubstantiated claims for the product,

sold under the name SeQuester.

Specifically, the complaint alleges that

the respondents licensed to KCD, its

holding company, KCD Holdings, those

companies’ former principal, Holcomb,

and current principal, Richards, the

exclusive rights to market the product.

The complaint alleges that the IMT

respondents knew or should have

known that the KCD respondents made

false and deceptive or unsubstantiated

representations similar to those made

for Lipitrol, in advertisements for

SeQuester. The complaint charges that

despite the fact that respondents knew

or should have known that KCD was

making the false and deceptive, and/or

unsubstantiated representations in the

marketing and sale of SeQuester, the

IMT respondents nevertheless provided

various services and promotional

materials to the KCD respondents in

furtherance of the KCD respondents’

efforts to disseminate these false claims,

including providing the KCD

respondents with studies purporting to

show that SeQuester effectively reduces

the body’s absorption of fat from

consumed food and causes significant

weight loss; the licensing rights to

market and sell the product to

consumers; technical information

regarding the product; and various

promotional materials and information

for marketing the product.

The Proposed Orders

The Commission has accepted four

separate consent orders in this matter.

The proposed orders contain provisions

designed to remedy the alleged

violations. The proposed orders against

respondents KCD Holdings, Inc., KCD,

Incorporated and Bonnie L. Richards;

IMT and EHI; and Shell provide for the

payment of consumer redress in

installments over a period of one year

from the date the proposed orders

become final. In the event that

consumer redress is not feasible, the

proposed orders provide that the funds

will be deposited in the United States

Treasury. In addition, the proposed

order against respondent Shell requires

him to post a performance bond of

either $250,000 or $1,000,000,

depending on the circumstances of his

activities.

Proposed Consent Order with the KCD

Respondents, Deerfield and Hatto

Part I of the proposed consent order

against the KCD respondents, Deerfield

and Hatto bars them from making

representations that SeQueter or any

product or program prevents or reduces

the body’s absorption of fat or sugar

from consumed food unless the

representation is true at the time it is

made and is supported by competent

and reliable scientific evidence.

Part II of the proposed consent order

against the KCD respondents, Deerfield

and Hatto prohibits them from

representing that Sequester or any

product or program provides any weight

loss benefit; causes greater loss of body

fat than diet and exercise alone; allows

consumers to eat high-fat foods without

increasing their risk of high cholesterol,

clogged arteries, heart disease or other

health problems associated with a highfat diet; or reduces, or reduces the risk

of, high cholesterol, clogged arteries,

heart disease and other health problems

associated with a high-fat diet, unless

respondents can substantiate these

representations with competent and

reliable scientific evidence.

Part III of the proposed consent order

against the KCD respondents prevents

them from representing that SeQuester

or any product or program can be used

beneficially and safely, in amounts or

with frequency sufficient to cause

diarrhea, unless, at the time the

representation is made, they possess

and rely upon competent and reliable

scientific evidence that substantiates the

representation, which when

appropriate, must be competent and

reliable scientific evidence.

Part IV of the proposed consent order

against the KCD respondents, Deerfield

and Hatto bars them from

misrepresenting the existence, contents,

validity, results, conclusions or

interpretations of any test, study or

research.

Part V of the proposed consent order

against the KCD respondents, Deerfield

and Hatto prohibits them from making

representations about the benefits,

performance, efficacy or safety of

SeQuester or any product or program

unless competent and reliable evidence

substantiates any such representation.

Part VI of the proposed consent order

against the KCD respondents provides

Deerfield and Hatto with a defense to

Parts I, II and V of the order if they

neither knew nor had reason to know of

an inadequacy of substantiation for any

representation covered by those parts of

the order; and a defense to Part IV of the

order if they neither knew nor had

reason to know that the test, study or

research did not prove, demonstrate or

confirm any representation covered by

that part of the order.

Part VII of the proposed order against

the KCD respondents requires KCD,

KCD Holdings and Richards to pay

$150,000 in consumer redress, in

thirteen installments over a period of

one year. If consumer redress is

impracticable, Part VII provides that

these funds will be paid to the United

States Treasury. Part VII(C) requires

KCD, KCD Holdings and Richards to

provide the Commission with a security

interest in certain property to insure full

payment of the $150,000 of consumer

redress.

Parts VIII and IX of the proposed

order against the KCD respondents,

Deerfield and Hatto contain provisions

permitting certain claims that are

approved for labeling by the FDA, either

under the Nutrition Labeling and

Education Act, a tentative final or final

monograph or under any new drug

application approved by the FDA.

Parts X, XI, XII, XIII and XIV of the

proposed order against the KCD

respondents, Deerfield and Hatto

contain compliance reporting provisions

requiring respondents to: retain records

that bear on their compliance with the

order; distribute copies of the order to

those persons having responsibility with

respect to the subject matter of the

order; notify the Commission of any

changes in the structure of the corporate

respondents that may affect their

compliance obligations under the order,

or any changes in the business

affiliations of the individual

respondents; and report to the

Commission their compliance with the

terms of the order.

Part XV of the proposed order against

the KCD respondents, Deerfield and

Hatto contains a provision automatically

terminating the order twenty (20) years

from the date that it becomes final.

Proposed Consent Order With IMT,

EHI, Shell and Pelzer

Part I of the proposed consent order

against respondents IMT and EHI bars

them from making representations that

LIPITROL or any weight loss, fat

reduction or cholesterol reduction

product or program prevents or reduces

the body’s absorption of fat from

consumed food or absorbs any amount

of fat from consumed food unless the

representation is true and supported by

competent and reliable scientific

evidence. Part I of the proposed order

against respondent Shell contains the

same bar, but covers representations for

Lipitrol or any product or program.

Part II of the proposed order against

respondents IMT and EHI prohibits

them from representing that Lipitrol or

any weight loss, fat reduction or

cholesterol reduction product or

program, or any food, drug or dietary

supplement, provides any weight loss

benefit; lowers blood cholesterol levels;

reduces, or reduces the risks associated

with, high cholesterol, including

clogged arteries, high blood pressure,

diabetes, breast cancer and heart
16590 Federal Register / Vol. 62, No. 66 / Monday, April 7, 1997 / Notices

disease; or can be used, beneficially and

safely, in amounts or with frequency

sufficient to cause diarrhea, unless

respondents can substantiate these

representations with competent and

reliable scientific evidence. Again, the

same prohibition is contained in Part II

of the proposed order against

respondent Shell, but covers

representations for Lipitrol or any

product or program.

Part III of the proposed order against

respondents IMT and EHI prohibits

them from misrepresenting the

existence, contents, validity, results,

conclusions or interpretations of any

test, study or research in connection

with Lipitrol or any weight loss, fat

reduction or cholesterol reduction

product or program, or any food, drug

or dietary supplement. Part IV of the

proposed order prohibits respondents

IMT and EHI from making

representations about the benefits,

performance, efficacy or safety of

Lipitrol or any weight loss, fat reduction

or cholesterol reduction product or

program, or any food, drug or dietary

supplement unless competent and

reliable scientific evidence substantiates

any such representation. Parts III and IV

of the proposed order against

respondent Shell are the same except

that the prohibitions apply to

representations for Lipitrol or any

product or program.

Part V of the proposed orders against

respondents IMT, EHI and Shell, and

Part I of the proposed order against

respondent Pelzer, bars each of these

respondents from providing means and

instrumentalities or substantial

assistance or support to any person or

entity who they know or should know

is making any false or misleading or

unsubstantiated claim for any weight

loss, fat reduction or cholesterol

reduction product or program. The

proposed orders define ‘‘assistance’’ to

include providing: tests, analyses,

studies or research to determine the

benefits, performance, efficacy or safety

of the product or program; licensing or

other contractual rights to market any

such product or program; technical

assistance; or advertising, labeling or

promotional materials for the marketing

and sale of any such product or

program.

Part VI of the proposed orders against

respondents IMT, EHI and Shell, and

Part II of the proposed order against

respondent Pelzer, require these

respondents to monitor business

practices of certain parties to whom

they provide assistance. To the extent

that any such party is engaged in the

marketing and sale of any weight loss,

fat reduction or cholesterol reduction

product or program, these respondents

must make an effort to determine

whether false or misleading or

unsubstantiated claims are being made

with respect to any such product or

program. Specifically, these respondents

must review all advertisements and

promotional materials and all tests,

reports, studies, surveys,

demonstrations or other evidence that

any such person relies upon in making

any claims to consumers. In addition,

these respondents are required to

terminate their business relationship

with any person whom they know or

should know is making any false or

misleading or unsubstantiated claims.

Part VII of the proposed order against

respondents IMT and EHI requires them

to pay $35,000 in consumer redress in

three installments over a period of one

year. If consumer redress is

impracticable, Part VII provides that

these funds will be paid into the United

States Treasury. Part VII(C) requires IMT

and EHI to provide the Commission

with a security interest in certain

property to insure full payment of the

$35,000 of consumer redress.

Part VII(A)(1) and (2) of the proposed

order against respondent Shell requires

him to obtain a performance bond for

$1,000,000 before he markets, sells or

holds any ownership interest or official

position in any business that advertises

or sells Lipitrol or any other weight loss,

fat reduction or cholesterol reduction

product composed of fiber and bile

extract. Part VII(A)(3) and (4) of the

proposed order also requires respondent

Shell to obtain a performance bond of

$250,000 before he markets, sells or

holds an ownership interest or official

position in any business that advertises

or sells any weight loss, fat reduction or

cholesterol reduction product or

program to consumers, other than his

treatment of patients in connection with

his private medical practice. Parts VII(B)

through (F) require respondent Shell to

provide a copy of the bond to the FTC;

prohibit him from disclosing the

existence of the bond to any consumer;

and describe the period during which

the bond must remain effective, the

bond’s coverage, the bond’s potential

beneficiaries and certain other

administrative requirements.

Part VIII of the proposed order against

respondent Shell requires him to pay

consumer redress in the amount $20,000

in four installments over a period of one

year. In the event that consumer redress

is impractical, this Part provides that

these funds will be paid into the United

States Treasury. Part VII(C) requires

Shell to provide the Commission with a

security interest in certain property to

insure full payment of the $20,000 of

consumer redress.

Parts VIII and IX of the proposed

order against respondents IMT and EHI,

Parts IX and X of the proposed order

against respondent Pelzer, contain

provisions permitting certain claims

that are approved for labels by the FDA,

either under the Nutrition Labeling and

Education Act, a tentative final or final

monograph or under a new drug

application approved by the FDA.

Parts X, XI, XII and XIII of the

proposed order against respondents IMT

and EHI, Parts XI, XII, XIII and XIV of

the proposed order against respondent

Shell, and Parts V, VI, VII and VIII of the

proposed order against respondent

Pelzer, contain compliance reporting

provisions requiring these respondents

to: retain all records that would bear on

their compliance with the respective

orders; notify the Commission of any

changes in the structure of the corporate

respondents that may affect their

compliance obligations under the

orders, or any changes in the business

affiliations of the individual

respondents relating to the advertising,

offering for sale, sale or distribution of

any weight loss, fat reduction or

cholesterol reduction product or

program; distribute copies of the orders

to those persons having responsibility

with respect to the subject matter of the

respective orders; and report to the

Commission their compliance with the

terms of the respective orders.

Part XIV of the proposed order against

respondents IMT and EHI, Part XV of

the proposed order against respondent

Shell, and Part IX of the proposed order

against respondent Pelzer contain a

provision automatically terminating the

order twenty (20) years from the date

that they become final.

The purpose of this analysis is to

facilitate public comment on the

proposed orders. It is not intended to

constitute an official interpretation of

the agreements and proposed orders or

to modify their terms in any way.

Donald S. Clark,

Secretary.

[FR Doc. 97–8802 Filed 4–4–97; 8:45 am]

BILLING CODE 6750–01–M

GENERAL ACCOUNTING OFFICE

Federal Accounting Standards

Advisory Board Meeting

AGENCY: General Accounting Office.

ACTION: Notice of meeting.

SUMMARY: Pursuant to section 10(a)(2) of

the Federal Advisory Committee Act

(Pub. L. No. 92–463), as amended,