A Medical Device Daily

The U.S. Court of Appeals for the Ninth Circuit has upheld a lower court ruling requiring marketers of Seasilver (Carlsbad, California), an alleged phony cure-all, to pay almost $120 million for failing to comply with an earlier order requiring them to pay $3 million in consumer redress.

In 2004, the FDA reported that Seasilver and Americaloe (also Carlsbad), and their principals, signed a consent decree of permanent injunction in which they agreed to stop manufacturing and distributing violative products, including "Seasilver."

The latest decision, issued on April 10, affirmed a U.S. District Court order requiring Jason and Bela Berkes, Seasilver and Americaloe to pay almost $120 million under an agreement with the Federal Trade Commission (FTC).

The March 2004 order barred them from making false or misleading claims and included a $120 million judgment that would be suspended if they paid $3 million within a specified time. The defendants did not meet the required payment terms, and in June 2006 a district court granted the commission's request to enforce the stipulated judgment. The defendants appealed the decision.

According to the FTC, the defendants claimed that the dietary supplement Seasilver was clinically proven to treat or cure 650 diseases, including cancer and AIDS, and cause rapid, substantial, and permanent weight loss without dieting. The agency said that the claims were false and unsubstantiated.

The commission's initial action against the defendants was part of "Operation Cure.All," a comprehensive law enforcement and consumer education campaign to combat health-related fraud on the Internet. Law enforcement actions were coordinated among the FTC, FDA, Health Canada, Canada's Competition Bureau, and state attorneys general against unscrupulous marketers who prey upon seriously ill consumers.

In other legal news: Cyberonics (Houston), a company that develops neuromodulation technology, said it has settled previously pending legal proceedings with note holders regarding an alleged default and acceleration of the company's $125 million of 3% convertible notes due Sept. 27, 2012.

After receiving a notice in 2006 from Wells Fargo (San Francisco), the indenture trustee, purporting to accelerate the notes, the company filed a lawsuit seeking a declaration that it was not in default. In 2007, the federal district court ruled that the company did not breach the indenture, and the trustee appealed the district court's ruling.

With the appeal still pending in the appellate court, the parties have now reached an agreement to settle the proceedings. In exchange for dismissal of Cyberonics' lawsuit and a release from all claims of breach, the company has agreed to repurchase for par value any note tendered to Cyberonics on Dec. 27, 2011, nine months in advance of the maturity of the notes.