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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

FEDERAL TRADE COMMISSION,

Plaintiff,

v.

KEVIN TRUDEAU,

Defendant.

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No. 03 C 3904

Chicago, Illinois

May 29, 2008

10:15 a.m.

TRANSCRIPT OF PROCEEDINGS

BEFORE THE HONORABLE ROBERT W. GETTLEMAN

APPEARANCES:

For the Plaintiff: FEDERAL TRADE COMMISSION

501 New Jersey Avenue, NW

Suite 2215

Washington, DC 20001

BY: MS. LAUREEN KAPIN

MS. SANDHYA PRABHU

For the Defendant Trudeau: JENNER & BLOCK, LLC

One IBM Plaza

Chicago, Illinois 60611

BY: MR. DAVID J. BRADFORD

MR. DANIEL J. HURTADO

Valarie M. Ramsey, CSR, RMR

P.O. Box 16

Hazel Crest, Illinois 60429

(708) 860-8482
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THE CLERK: 03 C 3904, Federal Trade Commission

versus Kevin Trudeau.

MR. BRADFORD: Good morning, Your Honor. David

Bradford and Dan Hurtado for Mr. Trudeau.

MS. KAPIN: Good morning, Your Honor. Laureen Kapin

and Sandhya Prabhu for the Federal Trade Commission.

THE COURT: Okay. We're here today to talk about

where we're going tomorrow, I guess, so I've read the briefs

that you have filed in this case. I have a couple of

questions before we go further.

A lot of these briefs were filed under -- at least

partly under seal. I'm not sure why, to be honest with you.

We're not talking about Social Security numbers or consumer

information or anything like that. We're talking about the

numbers that affect the public, the alleged public harm done

here, and I don't think they should be redacted at all, and I

think if Mr. Trudeau is going to plead poverty he has a right

to do that, but it's going to be in open court. And I know

what our friends on the Seventh Circuit will say about this,

and I'm a little concerned.

I didn't see anything in here that was so sensitive

that it needed to be redacted or filed under seal.

MS. KAPIN: Just to respond briefly from the FTC's

perspective, Your Honor, we would be in agreement except as to

personally identifiable information as to consumers such as
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their address or phone number, which is in some of the

consumer --

THE COURT: In the exhibits.

MS. KAPIN: It might be in some of the exhibits.

THE COURT: It's not in the briefs for sure.

MS. KAPIN: Right, no, it is not in the briefs.

Other than that, under the protective order, once

defendants or third parties designate something as protected,

under the protective order we're obligated to file it under

seal.

THE COURT: I'm not criticizing anybody. I'm just

raising this because, you know, courts and parties have been

criticized by the court of appeals, and, frankly, I'm totally

on board with this, that doing things under seal causes more

problems unless there's a really legitimate reason for it.

MS. KAPIN: Our preference would be to be able to

file published versions of these briefs in mostly their

entirety.

THE COURT: I think the briefs could be unsealed

right now and just leave the exhibits the way they are at the

moment and we'll deal with that because there are some --

you're right, there are some personal names and this stuff of

consumers, and we may be talking about this, but I'll tell you

to the extent we talk about particular consumer complaints and

that sort of thing, it's going to be in open court. Now,
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we're not going to identify perhaps personal information about

those people other than their names, but --

MS. KAPIN: Right, it's the information plus the name

which would be a concern. Their names is -- would not be

personally identifiable information that we think should be

under seal.

THE COURT: Why don't we do this. I'll just in the

minute order today we're going to unseal the briefs, and we'll

go through the docket and do that by number, and just leave

the exhibits the way they are for now.

MS. KAPIN: The only thing I would raise is that when

we were communicating with ITB, which is one of the entities

who has provided some of this information, they indicated to

us that they viewed this information as -- that they wanted

this information being kept under seal and I just --

THE COURT: It's not going to be. Even if they were

here to ask for it, I wouldn't do it.

MS. KAPIN: I'm just letting you know, Your Honor. I

don't agree with it but --

THE COURT: The number of people who bought the

books, the gross number, the gross revenue from those books,

the alleged profit made by various people, that's all grist

for the mill, unfortunately for somebody's interest, but I

don't even know if it's unfortunate. I mean, it's there.

We're going to have to talk about it at a hearing, and it
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looks like we're going to need a hearing.

All right. We'll just put the unseal.

MR. BRADFORD: We agree with all you've said, Your

Honor.

THE COURT: Thank you.

Okay. Now, there's a motion to extend the time for

taking the depositions, which is fine with me. And you want

to make that to June 20th. That's fine.

And then it seems to me that we could debate whether

we need a hearing here or not, but I think that because of the

seriousness of this matter, I think Mr. Trudeau should get his

day in court and be able to explain himself, and whether his

experts are -- you said there might be a Daubert motion or

something like that. I think we could fold that into some

sort of pre-hearing --

MS. KAPIN: Oral argument.

THE COURT: -- proceeding. Well, I mean, I'm going

to hear from them anyway. It's a bench matter, so I'm going

to hear from them. Whether I -- even if I were to agree that

their testimony wasn't -- or didn't meet the Daubert standards

or 702, I would still hear it. I could make that

determination in the context of making any decision in this

case.

You know, there are some things that you argue about

here, and, of course, as always, the briefs are good and
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interesting to read. Just taking one example, just as an

example, there's a big disagreement about whether the retail

book sales are attributable to the infomercial or not.

Mr. Bradford and company here say, well, there's no evidence

that they are, and as I think I mused in open court, which is

always dangerous, I think it is something that we have to deal

with here. Just having been exposed to bookstores, the books

there on the shelf, I mean, a lot of people may never have

heard of it on TV and picked it up and read it, and they had

every reason to -- they had every opportunity to see what was

in it at least at the bookstore if they hadn't seen the

infomercial, and then that person -- you know, that purchase

would have -- wouldn't be influenced by the infomercial at

all.

On the other hand, as FTC points out, in that big

gold seal, as seen on TV, kind of attracts the people who've

seen it on TV. And we see that type of advertising all the

time, and I have no doubt that some portion of those people

who bought it retail probably had been influenced by the

infomercial. Whether there's any way to make a reasonable

inference as to what that percentage is, is an open question

that might be the type of thing that, you know, some sort of

consumer product expert could enlighten the court about, at

least to, you know, on either side to tell me whether or not

there is a way to, based on traditional or historical surveys
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of this type of product or some other way, to make a reasoned

inference. Or perhaps there's no way to make a reasoned

inference. I don't know. It seems to me that that's

something that might be helpful to the court, to any trier of

fact.

That is not a major part of this, but it is still --

it's real money in my book.

I have given some thought, though, and I think you've

given me everything I could possibly need on the issue of

whether disgorgement versus consumer redress is the

appropriate measure. And I'm leaning towards consumer redress

because I think that regardless of the arguments so ably put

by the defendant here, if you -- we're dealing with contempt.

We're not dealing with an original remedy. And when you're

dealing with contempt, I think the latitude is a lot greater,

and it's remedial, and it's not totally equivalent to

traditional remedies that we might be dealing with in a

one-on-one case involving equitable or legal relief. And if

somebody violates an order, whether they get a nickel from it,

if it hurt somebody, a proper remedy would be to make that

right. That's what I think the contempt power incorporates,

and it seems to me the FTC has the longer end of the stick on

that one.

You know, 800 and some odd thousand books were sold

here. There's a lot of money there. There were certain
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things that -- I'm just -- I'm giving you some thoughts. You

know how I do things with you folks. And if we're going to

have a hearing, I'd like these addressed because they're

important to me. And as I'm telling you what's on my mind,

you can tell me what's on your mind.

To actually make people whole -- I mean there may be

people who bought this book who are absolutely perfectly happy

with it who actually injected themselves with this stuff, as

you say in your brief, which I find rather remarkable, but I

don't buy books like this. Fortunately, I don't need to diet,

but maybe some people do and go to these lengths and consider

this to be easy. I don't know.

But one remedy you haven't talked about is some way

to inform the people who bought the books about my order, it's

not going to be very flattering to Mr. Trudeau, and to give

them an opportunity to return the books or seek full

compensation, including -- I think the FTC has a very good

point about the shipping charges here. When you're paying 15

dollars for a book and the shipping charges -- I just mailed a

book. I think it was about six bucks to mail a book

somewhere. And this is a pretty big book too.

MS. KAPIN: It's a hardcover book.

THE COURT: Yeah. The book I mailed was not as big

as this one, I don't think. So, you know, to spend five or

six or seven dollars mailing back a 15-dollar book is not
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exactly remedial in my view. But maybe one way rather than

just, you know, slapping some sort of order on Mr. Trudeau and

having that money go nowhere or to the treasury would be to

give people an opportunity -- there would be expense,

obviously, in doing that. It's just an idea I'm throwing out

because we're settling another huge nationwide class action as

we speak in which we are going to give consumers an

opportunity to seek individual relief.

MS. KAPIN: Just as a brief response to that, Your

Honor.

THE COURT: That was an FTC case too, actually.

MS. KAPIN: Yes, the FTC does have some experience in

administering redress programs. They are expensive for the

first point. And for the second point, sometimes it's

difficult to reach all consumers. And even when consumers are

reached, they don't necessarily go through the steps to

actually get their money back. Historically the response

rates are low. I mean, even when -- even when checks are

mailed to consumers lots of times they don't even cash the

checks.

THE COURT: Because they throw it away with all the

other junk mail they get.

MS. KAPIN: I'm just pointing out that if your intent

is to hope that you get the greatest number of consumers

getting money in their pockets, it's not necessarily going to
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do that.

THE COURT: I understand. It's just something I

wanted to raise with you because, several factors. One is

these are motivated consumers who bought this book. And this

wasn't all that long ago. This wasn't like a blast fax. We

have a case like that too where, you know, how do you find

somebody in a blast fax who, you know, got some sort of junk

fax, tossed it away, forgot about it? You know, this is a

book somebody took the time and trouble to make a phone call

or go on an Internet site or do something about, so they

probably still have it sitting on a shelf somewhere. Maybe,

maybe not. I don't know. I'm just exploring something that

would be more of a direct benefit to the people who actually

want their money back, because I'm really buying your point

about, sure, you get a low return rate because they have to

pay the shipping and handling of sending a hardback book,

which you can't even get into a manila envelope. You probably

need to put it in a box.

MS. KAPIN: Yeah, it has to be in a box.

THE COURT: Unless you had the box. Or wrap it up or

something. I don't know.

MS. KAPIN: It comes in a box.

THE COURT: It comes in a box, but by the time you

read it the box is probably in the garbage.

What else do I want to share with you and then we're
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going to set this for a hearing. I think that may be all I

want to share with you at this point.

The motion to modify the order I think certainly goes

hand in hand with this other thing, and we'll deal with that

in due course because anything that I hear in connection with

the contempt is going to affect that as well. So I think

that's probably all I want to say about that.

How many witnesses do you think -- you mentioned

about four or five witnesses that you had in mind,

Mr. Bradford.

MR. BRADFORD: Yes, Your Honor. We expect to call

Mr. Trudeau; the two experts, one from the Bureau of

Enforcement, former assistant director of the Bureau of

Enforcement from the FTC; the CEO of the book sellers

association relevant to the issue that Your Honor raised; and

then likely Mr. Trudeau's accountant, CPA, to address his

financial circumstances. So that would be four.

THE COURT: And then, you know, I know the FTC's

position is, well, we don't really need to present anything;

but if they present that, what will you anticipate?

MS. KAPIN: Well, I did have one question for Your

Honor, and then I'll answer your question, if I may.

The FTC's position is that the presumption of

consumer -- that the case law supports a presumption of

consumer harm when the infomercials were widespread, and in
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that regard we don't intend to present evidence by way of

consumers for the reasons that we set forth in our brief. On

the other hand, if a live consumer witness is something you

would be interested in, I would like to know that because I

can accommodate it. But our position is we don't think that

that's required under the case law.

THE COURT: I'm not going to make that decision for

you.

MS. KAPIN: It was more input.

THE COURT: I would not prohibit you from putting

that evidence on. I think your basic premise is correct, it's

correct enough to allow the defendant to go first because I

think there is a presumption here. I've already made

findings. I know there's a --

MS. KAPIN: Right.

THE COURT: There was a motion to reconsider that.

MS. KAPIN: Well, that's the thing. You've already

made findings that thousands have been harmed, and we have

evidence that there were more than 800,000 books sold, so that

is the way we see it.

THE COURT: Right, but there is a motion to

reconsider that finding.

MS. KAPIN: Right.

THE COURT: So that's not a final order.

MS. KAPIN: I understand.
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THE COURT: But I think that is the way the case

stands right now, and so I think looking at it as a burden

shifting or however you wanted to, we could let Mr. Bradford

put on his evidence. I suppose we could do this in -- you

know, we don't have to do it all at one time, but I would like

to bring this to a conclusion. It's been a long time.

Is the book still being sold?

MR. BRADFORD: The book is being sold, but the

infomercial ceased as soon as Your Honor's order --

THE COURT: Right, I know that.

MR. BRADFORD: -- was entered.

MS. KAPIN: There is still an infomercial that

relates to the book. It doesn't make the claims that we

challenge, but there is still a Natural Cures infomercial that

also promotes the Weight Loss Cures book.

THE COURT: All right. So this is going to take at

least a day or more.

MS. KAPIN: Probably two. We hope to get it done in

a day, day and a half. Setting aside two days would be a

conservative estimate.

MR. BRADFORD: We agree with that. I know Your Honor

wants to get it done all at once, and the FTC doesn't want to

go and come back, so I would hope we could do it in a day, but

it might make sense to try to schedule two days in a row, if

we could, if your schedule permits it.
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THE COURT: I can schedule this for July 23 and 24.

I do have a 10:00 sentencing on the 24th, which shouldn't take

more than about 20 minutes. Is that --

MS. KAPIN: I have some long bought tickets for that

evening.

THE COURT: Which evening?

MS. KAPIN: The 24th. The 23rd is fine.

THE COURT: We have theater tickets actually, but

it's here in Chicago.

MS. KAPIN: Mine, unfortunately, are in Washington,

D.C. If we ended that afternoon, I think that would still be

fine.

THE COURT: Are you sure?

MS. KAPIN: Although if there were any other dates

that we have available to explore.

THE COURT: Well, didn't you tell me that you were

going to be gone the first part of August?

MS. KAPIN: I am. Are there any other dates before

the 24th that are available by any chance?

THE COURT: No. The 30th and the 31st. 29th or

30th. I have a family problem myself right now that I'm not

scheduling things on Mondays and Fridays, but -- so I'm trying

to do things between Tuesdays and Thursdays, so the 29th,

30th, 31st.

MS. KAPIN: I thought those weren't good for you.
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Is that July or --

THE COURT: July.

MR. HURTADO: That's fine for us.

MR. BRADFORD: I think those work fine.

MS. KAPIN: I think actually that that didn't work

for one of our witnesses, and that's probably why. I think we

should just keep it to the 23rd and 24th, and perhaps that

will motivate --

THE COURT: We could start -- if you wanted to, we

could start on the 22nd in the afternoon for a couple of --

MS. KAPIN: That would be great.

THE COURT: -- for a couple of hours.

MS. KAPIN: That would be terrific, Your Honor.

THE COURT: And adjourn around four.

MR. BRADFORD: I think that makes a great deal of

sense. And we can get any evidentiary issues resolved at that

time as well.

THE COURT: And then I'll set aside the whole day on

the 23rd beginning at ten to 3:30, 4 or something like that,

and maybe we can get it all done then.

MS. KAPIN: Um-hum.

THE COURT: And if we can't, we'll figure out

something else.

Now, do you think we need to do -- any exhibits I

would like marked, exchanged, indexed and put in a book for
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me, that I don't already have.

MR. BRADFORD: I think there will be a few, and we

will do that, Your Honor.

THE COURT: And a witness list for both sides to the

extent possible. And your deps will be done by then, so we

should be ready to go.

MR. HURTADO: Is there a date upon which you wanted

the exhibits and the witness list?

THE COURT: No. Just a couple of days -- the week

before that anytime.

MR. BRADFORD: All right.

MS. KAPIN: Just revisiting our motions in limine, do

I understand --

THE COURT: If you want to make a record --

MS. KAPIN: Right.

THE COURT: -- on filing a motion to exclude expert

testimony, you can go ahead and do that, but I'm telling you

right now I'll hear them out.

MS. KAPIN: Right, okay, I just wanted to make sure.

THE COURT: And that way your position on it will be

clear, because I'm not totally clear about the basis of the

objection. So that's fine.

MS. KAPIN: Okay.

THE COURT: And you can respond or not. It doesn't

really matter to me because I'm going to hear them out, and
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you'll have a chance to argue that post-hearing anyway.

MR. BRADFORD: Certainly, certainly.

THE COURT: Because we'll probably have some sort of

post-hearing, an abbreviated post-hearing. I mean, I've got a

lot of material here, an abbreviated post-hearing schedule.

MS. KAPIN: All in 15 pages, Your Honor.

THE COURT: You did. You did have 15 pages, but you

filed multiple copies of it.

All right.

MR. BRADFORD: Your Honor, on that note, the status

report indicated that we might be seeking leave to file a

surreply, and we're not going to burden you with that.

THE COURT: Don't do that. Don't do that. That's

unnecessary because we have other work to do. You'll all have

a chance to weigh in one last time, I can assure you.

MS. KAPIN: So you anticipate, then, after the trial

at some point we will have a further discussion before the

court?

THE COURT: I suspect, given the history of this

case, that you'll have a chance and I'll have a chance and

we'll probably have some sort of argument either -- maybe even

that third day, you know, that Thursday morning or something.

Maybe that would be a good time to sort of sum up and see if

we even need any additional briefing.

MR. BRADFORD: Right.
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THE COURT: We may not.

All right. See you then.

MR. BRADFORD: Thank you so much, Your Honor.

MS. KAPIN: Thank you, Your Honor.

THE CLERK: 2:00 on the 22nd.

THE COURT: Yeah, we'll start at 1:30 on the 22nd.

MR. BRADFORD: Very good. Thank you, Your Honor.

* * * * * * *

C E R T I F I C A T E

I hereby certify that the foregoing is a true and

correct transcript of the above-entitled matter.

/s/ Valarie M Ramsey 06/25/2008

Court Reporter Date