FTC, COMPANIES SETTLE ALLEGED DECEPTIVE CLAIMS OF TREATING DISEASE WITH GENETICALLY MODIFIED NUTRITIONAL SUPPLEMENTS

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Approves Final Consent Orders Settling Charges that Companies Deceptively Claimed Their Genetically Modified Nutritional Supplements Could Treat Diseases

Following a public comment period, the Federal Trade Commission has approved final consent orders settling charges that two marketers of genetically customized nutritional supplements deceptively advertised that their personalized nutritional supplements treat diabetes, heart disease, arthritis, insomnia, and other ailments. The orders also settle charges that the companies’ data security practices were lax. The Commission also approved responses to the two comments received during the public comment period.

First announced in January 2014, this case marks the first law enforcement action taken by the Commission against marketers of purported personalized genomics products. The final settlements prohibit GeneLink, Inc. and its former subsidiary, foruTM International Corp., from claiming that any drug, food, or cosmetic will treat, prevent, mitigate, or reduce the risk of any disease – by modulating the effect of genes, or based on a consumer’s customized genetic assessment – unless the claim is true and supported by at least two adequate and well-controlled studies. Under the orders, claims that a product effectively treats or prevents a disease in persons with a particular genetic variation must be backed up with randomized controlled trials conducted on subjects who have that genetic variation. The orders also prohibit GeneLink and foruTM International from misrepresenting scientific research regarding any drug, food, or cosmetic, or any genetic test or assessment and from providing their affiliates with the means to make the prohibited health claims.      

Under the orders, the companies also are prohibited from misrepresenting their privacy and security practices. They are required to establish and maintain comprehensive data security programs and submit to security audits by independent auditors every other year for 20 years.

The Commission vote to approve the final orders in this case was 3-1-1, with Commissioner Ohlhausen dissenting and Commissioner McSweeny not participating. (FTC File No. 112 3095.)

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

Labor Department News Releases Update

Labor Department News Releases Update

DEPUTY AG COLE'S COMMENTS ON GUILTY PLEA BY CREDIT SUISSE IN OFFSHORE TAX EVASION SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 

Deputy Attorney General James M. Cole Speaks at Press Conference Announcing Guilty Plea in Credit Suisse Offshore Tax Evasion Case

Washington, D.C. ~ Monday, May 19, 2014

After an exhaustive, multi-year investigation into the use of illegal offshore bank accounts at Credit Suisse, today we have announced an historic guilty plea by the bank and the largest monetary penalty of any criminal tax case ever.

Today’s guilty plea is an appropriate resolution, given the duration and breadth of Credit Suisse’s conduct.  Credit Suisse engaged in serious wrongdoing, first, when it aided and abetted U.S. tax evasion, and then when it failed to take immediate steps to remedy this conduct and cooperate in our investigation.  Today Credit Suisse has admitted that conduct and faces significant consequences for it.  Its agreement to pay fines and restitution in excess of 2 and a half billion dollars reflects both the significance of the problem at the bank and the bank’s acceptance of responsibility for it.

Credit Suisse is taking the appropriate steps to put its criminal conduct behind it and move toward a new era of compliance.  Through this guilty plea and Credit Suisse’s civil resolutions with the Securities and Exchange Commission, the Federal Reserve, and the New York Department of Financial Services, Credit Suisse has committed to working with U.S. law enforcement and banking regulators in order to ensure that its wrongdoing remains in the past.  We acknowledge Credit Suisse’s efforts in this regard, and I expect that as the Bank moves forward, it will continue on its new path of compliance with U.S. tax laws.

In coming to today’s resolution, we are mindful that guilty pleas by a bank can have impacts far beyond the parties to the plea.  This plea demonstrates that the Department of Justice and bank regulators are prepared hold banks and their relevant employees accountable while being mindful of the impacts on depositors and the American public.  The coordination required for this result can take considerable time, as in this case, but it is work that we deem important.

In several public statements, I have promised additional public developments with respect to the Department’s investigations into the use of secret offshore bank accounts in Switzerland and elsewhere, and one of those developments has come to pass with today’s plea.  But there have been many other notable actions in the past few months in our ongoing efforts to combat the use of foreign bank accounts to evade U.S. taxes.  Eight individuals affiliated with Credit Suisse have been indicted by the United States Attorney’s office for the Eastern District of Virginia for their role in conspiring to assist U.S. clients in concealing their income and assets from the IRS.  Two of them have pleaded guilty in recent weeks.  In January 2013, Wegelin Bank, another Swiss bank, pled guilty to conspiracy to evade taxes.  We have targeted 13 other Swiss banks for similar conduct.  Just recently, a Swiss asset management firm, Swisspartners Group, entered into a multi-million-dollar settlement with the U.S. Attorney’s Office for the Southern District of New York, and produced account files of its clients.  We have also had over 100 Swiss banks come forward as part of a program we put in place with the support of the Swiss government.  Under this program, these banks, which were not under investigation, will pay penalties for the violations of US law that were committed at their institutions, and provide us with information that will lead to the identification of their US clients who evaded paying their taxes.  We also have had over 43,000 US taxpayers enter into the IRS voluntary disclosure program and pay over $6 billion in back taxes and penalties to the United States Treasury.

The Department is committed to robust enforcement in the offshore area, not just in Switzerland, but wherever in the world it is found.  We have taken public actions in India, Israel, Luxembourg, the Cayman Islands and several other Caribbean countries.  And we are engaged in law enforcement actions around the world that are not yet public.  The Department’s approach to investigating and prosecuting these cases is multi-faceted, and we are committed to using the many law enforcement tools at our disposal – from grand jury subpoenas to John Doe summonses, to whistleblowers and cooperating witnesses – to gather information and evidence to identify wrongdoers and hold them to account.

While today’s action is a significant milestone in our law enforcement efforts, our work in the offshore area is far from done, and we expect additional public actions in this area in the coming months.

Today I commend the efforts of the Tax Division led by Assistant Attorney General Kathryn Keneally, and the U.S. Attorney’s Office for the Eastern District of Virginia, led by U.S. Attorney Dana Boente.  I also applaud the work and support of the Internal Revenue Service, especially intensive investigative efforts of the Criminal Investigation Division, led by Chief Richard Weber.  We also appreciate the efforts of the Swiss government and banking regulators in reaching a just result and bringing the Credit Suisse matter to a close.

FTC, AMERICAN APPAREL SETTLE CHARGE OF FALSELY CLAIMING TO COMPLY WITH SAFE HARBOR PRIVACY FRAMEWORK

FROM:  FEDERAL TRADE COMMISSION

American Apparel Settles FTC Charge It Falsely Claimed to Comply with International Safe Harbor Privacy Framework

Clothing manufacturer American Apparel has agreed to settle Federal Trade Commission charges that it falsely claimed it was abiding by an international privacy framework known as the U.S.-EU Safe Harbor that enables U.S. companies to transfer consumer data from the European Union to the United States in compliance with EU law.

“The FTC is committed to making sure that when companies claim they’re participating in the U.S.-EU Safe Harbor Framework, they’re abiding by the terms of the program,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.

According to a complaint filed by the FTC, the Los Angeles-based company deceptively claimed it held current certifications under the U.S.-EU and U.S.-Swiss Safe Harbor frameworks. The Safe Harbor frameworks are voluntary programs administered by the U.S. Department of Commerce in consultation with the European Commission and Switzerland.

To participate, a company must self-certify annually to the Department of Commerce that it complies with the seven privacy principles required to meet the EU’s adequacy standard: notice, choice, onward transfer, security, data integrity, access, and enforcement.

The FTC complaint charges American Apparel with representing, through statements in its privacy policy that the company held current Safe Harbor certifications, even though it had allowed its certifications to lapse. The Commission alleged that this conduct violated Section 5 of the FTC Act. However, this does not necessarily mean that the company committed any substantive violations of the privacy principles of the Safe Harbor frameworks.

Under the proposed settlement agreement, American Apparel is prohibited from misrepresenting the extent to which it participates in any privacy or data security program sponsored by the government or any other self-regulatory or standard-setting organization.

This case was brought with the valuable assistance of the U.S. Department of Commerce.

The Commission vote to accept the consent order for public comment was 4-0-1, with Commissioner McSweeny not participating. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through June 9, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section. Comments in electronic form should be submitted online.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.