GNC shares plunge after report of Fed investigation into supplement industry |
Local Stories

GNC shares plunge after report of Fed investigation into supplement industry

The government announced criminal indictments against two dietary supplement companies and their executives on Tuesday as it intensified a crackdown on the industry amid concerns that potentially dangerous products are being sold to consumers using deceptive marketing.

The case against Dallas-based USPlabs, S.K. Laboratories Inc. and five of their executives was the culmination of a yearlong sweep of the industry that resulted in criminal and civil actions against 117 supplement manufacturers and distributors, the Justice Department said.

USPlabs and S.K. Laboratories, which is based in Anaheim, Calif., manufactured and marketed weight loss supplements, including Jack3d and OxyElite Pro, that were sold nationwide.

Shares of several large supplement companies, including GNC Holdings Inc., were pummelled when news broke that the Justice Department was planning to announce an investigation of the supplement industry. GNC shares fell 25 percent and hit a new 52-week low in early afternoon before recovering to close down $2, or 6 percent, to $29.05.

GNC, the nation’s largest retailer of supplements, wasn’t charged or named in any of the actions announced Tuesday. The company does sell products from the companies that were indicted.

The Pittsburgh-based company said it is cooperating with the government investigation, but did not say if it planned to stop selling USPlabs’ products.

“GNC is committed to maintaining the trust and confidence of our customers, and we have rigorous policies and procedures in place with respect to third party vendors and suppliers to ensure that they meet the highest standards of compliance and accountability,” the company said in a written statement.

USPlabs and S.K. Laboratories were accused by the government of marketing supplements as all natural even though they contained synthetic chemicals that were imported from China. USPlabs lied about the source and nature of the ingredients in its products, the government alleged.

“The USPlabs case and others brought as part of this sweep illustrate alarming practices the department found — practices that must be brought to the public’s attention so consumers know the serious health risks of untested products,” Ben Mizer, principal deputy assistant attorney general and head of the Justice Department’s civil division, said in a written statement.

OxyElite Pro was implicated in an outbreak of liver injuries, the Justice Department said, alleging that the company continued to sell the supplement after promising in October 2013 that it would stop. A search of GNC’s website on Tuesday found eight USPlabs’ products for sale, including the weight-loss supplement Jack3d, but not OxyElite Pro.

GNC has been targeted by attorneys general in two states over allegations that some of its products contain illegal ingredients or were impure.

In March, the company reached a deal with New York Attorney General Eric Schneiderman to test its herbal supplements to confirm their authenticity. The deal was made when Schneiderman’s office sent letters to GNC and other retailers in February, alleging that store brand herbal supplements were not what they said they were.

And last month, GNC was sued by Oregon Attorney General Ellen Rosenblum, who accused the company of selling supplements containing illegal drugs. GNC has said the suit is “without merit” and vowed to defend itself.

Alex Nixon is a Trib Total Media staff writer. Reach him at 412-320-7928 or [email protected].

TribLIVE commenting policy

You are solely responsible for your comments and by using you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.