4 Berkeley executives admit guilt
'Smiling Bob' ads part of larger consumer fraud
BY JAMES MCNAIR | ENQUIRER STAFF WRITER
<!--ARTICLE BODY TEXT-->Four former executives at Berkeley Premium Nutraceuticals have agreed to plead guilty to charges they conspired to defraud thousands of consumers through the sale of more than $100 million worth of sexual aids and other herbal supplements.
The plea deals, filed Wednesday in U.S. District Court in Cincinnati, came 10 months after agents of the FBI, IRS, Food and Drug Administration and Postal Inspection Service raided Berkeley's headquarters in Forest Park and two other offices and seized a truckload of records. The defendants each face up to 20 years in prison when they go before Judge S. Arthur Spiegel for sentencing.
Since its founding by Steve Warshak in 2001, Berkeley generated as much as $250 million a year through the sale of pills that did not require FDA approval.
Although its offerings include remedies for sleeplessness, excessive weight and poor night vision, the company is best known for Enzyte, which promised bigger erections through a grinning TV character known as Smiling Bob.
But in court papers filed Wednesday, the U.S. Attorney's Office in Cincinnati referred to the business as a scheme to entice customers with false medical claims and false money-back guarantees, only to bill their credit cards for products they didn't want after a one-month trial.
A month's supply of Enzyte is about $35, according to the company's Web site.
"The ultimate goal of the conspiracy was to obtain money from consumers by false and fraudulent representations in connection with the sale of (Berkeley) products," the government said in court papers.
The defendants include:
Greg Cossman, 51, of Maineville, president of Berkeley for most of 2002 and an employee until March 2005. In his signed plea agreement, he admitted taking part in the unauthorized billing of consumers' credit cards.
Susan Cossman, 45, a Berkeley division manager, Greg Cossman's wife and Warshak's sister. As head of Berkeley's customer-care unit, she ordered her employees to disregard customers' requests for refunds or credits, "regardless of the merit or nature of the complaint." She also admitted instructing employees to lie to customers by telling them they would receive refunds or credits.
Michael V. Wagner, 29, of West Chester, who worked as controller and in other financial roles at Berkeley. He admitted falsifying merchant bank account applications to facilitate credit card transactions.
James Teegarden Jr., 36, of Florence, Berkeley's vice president of operations. He admitted developing a computer program that led to the reactivation of about 2,000 customer accounts and the billing of their credit cards without their permission. He also admitted to creating a false spreadsheet indicating a 96 percent customer satisfaction rate for one Berkeley product.
Lawyers for the defendants either declined to comment or did not return phone calls Wednesday. Warshak, of Amberley Village, did not return a call to his publicist in Los Angeles.
Although Warshak has not been charged with any crimes, a federal judge last year froze $24 million in personal bank accounts on the government's claims that the money was obtained by fraudulent means. Warshak is fighting to free up that money.
Consumers filed thousands of complaints to the Cincinnati Better Business Bureau and the Ohio Attorney General's Office about Berkeley's practice of billing them for a second month's supply of Enzyte, Avlimil - a pill aimed at improving female libidos - and other products before the end of a free 30-day trial.
The Center for Science in the Public Interest, a public advocacy group in Washington, complained to the Federal Trade Commission about Berkeley's TV ad claims, but never received a response.
"It's good that justice will be served and that people who defrauded consumers will pay the penalty," said David Schardt, a senior nutritionist at the center. "But I still see Enzyte commercials advertised on TV."
The defendants are scheduled to enter their guilty pleas before Spiegel on Feb. 16. Their sentences will hinge, in part, on continuing the "substantial assistance" they have provided in the prosecution of other, unnamed suspects.
