- By Danny Robbins The Atlanta Journal-Constitution
After more than two months in federal prison for failing to comply with a court-ordered product recall, Norcross dietary supplement CEO Jared Wheat has gained his freedom.
U.S. District Judge Charles A. Pannell Jr. ordered Wheat’s release from the federal facility in Lovejoy Monday, the same day the Federal Trade Commission reported that the supplement maker’s firm, Hi-Tech Pharmaceuticals, had finally recalled four products that falsely advertised their weight-loss potential. The order called for company vice president Stephen Smith to be released as well.
“The court ordered Jared Wheat to be jailed to force him to do what a court order alone did not — recall products that contained false claims,” James Kohm, director of the FTC’s enforcement division, said Friday in a statement to the Atlanta Journal-Constitution. “The court’s action was effective, and all those products are no longer on store shelves. The FTC is now satisfied that this goal has been achieved.”
Pannell ruled Sept. 2 that Wheat and Smith required “coercive incarceration” for failing to carry out the recall. He had ordered the recall in May when he found the company in contempt of a 2008 ruling enjoining it from making false claims.
The contempt ruling stemmed from a civil suit filed by the FTC a decade ago in an effort to reign in numerous deceptive practices by Wheat and Hi-Tech, which operates out of a Norcross office park. The ruling also requires the company to pay a $40 million judgment, an obligation that remains outstanding.
“It feels good to be back with my wife and family and to put this chapter of my life and Hi-Tech’s life behind us,” Wheat said Friday. “We’ll see what happens going forward.”
Pannell ordered Wheat and Smith incarcerated until they could meet four conditions. Those conditions included showing that all four products — Fastin, Lipodrene, Benzedrine and Stimerex-ES — could no longer be purchased from retail stores and distributing a “proper” recall notice.
According to court records, Wheat and Smith sought to show Pannell that they had met the judge’s conditions in mid-October, but the FTC disagreed. That prompted Hi-Tech to initiate another round of recalls at the end of the month.
In a report filed with the court Monday, the FTC said the latest effort brought Hi-Tech into compliance, although the agency still believes the company dragged its feet.
“We note that the record demonstrates that contempt defendants would have persisted in violating the May 14, 2014 recall order indefinitely if not for the coercive sanctions,” the FTC wrote. “In fact, the ongoing contempt resulted more in the `sell off’ of a large volume of violative product … than a recall.
“Worse,” the FTC added, “contempt defendants continued producing and distributing violative products after the recall order.”
At an August hearing, Wheat invoked his Fifth Amendment right against self-incrimination when called as a witness by the FTC. Leach told Pannell that the executive would not answer questions under oath because he was being investigated by federal criminal authorities for a series of matters, including contempt.
Shortly after his appearance on the stand, the 42-year-old Wheat collapsed in a restroom and was removed from the downtown federal courthouse by paramedics.
On the day he was incarcerated, Wheat filed a motion asking the Bureau of Prisons to provide him with medication to control panic attacks.
Wheat said Friday he received that medication and was “very thankful” Pannell granted the motion allowing it.
Wheat previously spent two years in federal prison after pleading guilty in 2008 to conspiracy to commit mail fraud and wire fraud and selling unapproved drugs. The pleas resulted from a prosecution in which authorities said Wheat and others sold knock-off prescription drugs from Canada that in fact were manufactured in Belize under unsanitary conditions.