Advertisement

Legal Battle on Diet Plan Ads Winding Down

San Diego County Business Editor

Officials of Grapefruit 45, the controversial mail-order diet plan, and U.S. Postal Service authorities are expected to file final arguments today in a legal battle that has resulted in the seizure of more than $2 million of Grapefruit 45 orders since February.

An administrative law judge probably will rule in the next few weeks whether national television and newspaper advertisements produced by World Communications Inc., the Carlsbad-based marketer of Grapefruit 45, were false and misleading, as postal authorities contend.

In February, U.S. Postal Service officials began seizing all money and product orders for Grapefruit 45 that were mailed to three World Communications post office boxes in Carlsbad. In March, the seizures were expanded to include post office boxes in Encinitas, the City of Orange, Long Beach and Orange City, Fla.

A weeklong hearing in April before Administrative Law Judge Quentin Grant followed, with both sides expressing confidence that their positions would dominate.

Advertisement

Grant has refused to discuss the case.

Company officials have claimed that authorities have seized orders worth more than $2 million.

Last week, the company launched a new series of advertisements that take a “different creative approach” to the ads that authorities previously found objectionable, according to Jay M. Kholos, WCI’s 44-year-old founder and president.

Postal Officials Concerned

Advertisement

The Postal Service was informed of the new commercials, which Kholos described as “non-controversial.” Grapefruit 45 sale orders from those ads have been sent to a WCI postal box from which mail is not being seized, Kholos said.

Postal authorities remain concerned that the firm is “continuing to make millions of dollars while they’re waiting for the bureaucracy to take action to stop them from doing it,” said Jim Harbin, an attorney for the Postal Service’s inspector’s office.

Government officials previously charged that WCI had violated a 1984 consent agreement prohibiting it from making claims about any orally ingested weight-loss products. In the past, WCI has marketed diet plans known as Energizer and Slim Wrap.

Regardless of the case’s outcome, authorities believe that their dealings with WCI will continue after the Grapefruit 45 issue has been resolved.

Advertisement

“I expect we’ll deal with these people for years,” Harbin said.

In another development, Edward E. Schmidt, a veteran financial industry executive, on Wednesday was named executive vice president and chief operating officer of WCI, where he will run the firm’s daily operations and be in charge of long-term planning.

Schmidt resigned last week as president and chief executive of Capital Bank of Carlsbad, the 6-month-old subsidiary of Coronado-based Crown Bancorp. When he left the bank, Schmidt, who will remain on Capital’s board, said he had received an “excellent offer” from a company outside the banking industry that he refused to identify.


Advertisement