A federal judge has ordered Berkeley Premium Nutraceuticals to forfeit more than $500 million, which the company says could put it out of business.
The Forest Park company faces the steep penalty because its founder, Steve Warshak, and several other executives were convicted earlier this year of defrauding customers and banks.
Warshak also could be forced to forfeit personal property, including homes, cash from bank accounts, a $10,500 spa membership, a Segway Scooter and two grand pianos.
The penalties are part of an order this week by U.S. District Judge S. Arthur Spiegel, who found that fraud and money laundering tainted almost every dollar the company earned during its most profitable years.
Company lawyers dispute that contention and say the forfeiture order includes millions of dollars unrelated to the jury’s guilty verdict.
They say Berkeley does not have enough money to cover the forfeiture and would be forced to close if the order stands. The company has asked Spiegel to delay the forfeiture until it can appeal his order.
If he doesn’t, the lawyers say, Berkeley’s 230 employees will lose their jobs long before the company gets a chance to argue its case to an appeals court.
“We’ve got 230 people who depend on this company for their mortgages and for their rent,” said John Phillips, one of Berkeley’s attorneys. “I think there’s something there worth saving.”
Berkeley, which sells herbal supplements, is best known for the “male enhancement” pill Enzyte and TV ads featuring a grinning character known as Smiling Bob.
A federal jury convicted the company, Warshak and several others of participating in a massive scheme that included fraud, money laundering and bogus claims about the effectiveness of Berkeley’s products.
Warshak, who faces up to 20 years in prison when he is sentenced in August, said any problems the company experienced were the result of its rapid growth, not an effort to defraud customers.
Phillips said the company has revamped its operations and reduced customer complaints in recent years.
“Berkeley has made a real turnaround,” Phillips said. “The question is, is the jury’s verdict going to keep it from operating in the future?”
The forfeiture order is preliminary until it is imposed at Warshak’s sentencing in August, but Phillips said no amount of time will help the company come up with $500 million.
He said that total represents the company’s gross revenue over several years for all of its products – not just Enzyte, which was the focus of the criminal case. He said profits were a small fraction of the $500 million.
Federal prosecutors, who declined comment Wednesday, have said fraud and money laundering were so rampant that almost all of the company’s revenue should be forfeited.
Although it’s unlikely the company and Warshak can come up with $500 million, forfeiture laws allow the government to recover as much as possible by going after whatever assets it can.
The judge listed several of those assets in his order this week. They include the Segway, the pianos and at least 10 bank and investment accounts.
It also includes Warshak’s 5 percent stake in royalties from Fathead Inc., a company that makes large, sports-related wall hangings.
