Laguna Hills Firm Told to Stop Selling Weight-Loss Patch

A Laguna Hills company has been ordered by courts in California and Texas to stop advertising and selling a skin-patch weight-loss aid called “Le Patch” that has not been approved by the Food and Drug Administration.

In addition, the California attorney general’s office has characterized New Source, the company that sells Le Patch, as a “pyramid scheme,” an illegal program using money from new recruits to pay off old investors.

Le Patch was marketed as an FDA-approved device that would help users lose weight by merely wearing a patch applied to the skin, according to a complaint filed by the attorney general’s office. The patches were treated with a proprietary formula called Cephatrex that supposedly helped suppress the appetite.

But on Nov. 9, San Diego Superior Court Judge Kevin Midlam ordered New Source; its parent company, Omni Source, and a spinoff firm, Genuine Lifestyle Products, to stop selling and promoting the patch as a treatment approved by FDA.

Albert Norman Shelden, a deputy attorney general, filed the complaint against the firms and their operators Oct. 7. According to the complaint, the three companies and their officers “misrepresented that the Le Patch product could be legally sold.”

It cannot, because it does not have FDA approval, Shelden and FDA officials said.

In addition, the complaint alleged that the companies and their officers told patch distributors that they could make large sums of money if they became a part of the marketing.

Shelden said Wednesday that members of the attorney general’s office “have alleged that this is an illegal marketing scheme . . . an endless chain or pyramid scheme,” which is prohibited by state law.

According to Shelden, the companies have agreed to follow the terms of the injunction. Company officials could not be reached for comment Wednesday.

The attorney general’s office started investigating New Source in early summer, after prospective patch distributors began inquiring about the product and its legality. At the same time, the FDA and health departments in California and Texas began investigations.

By late summer, a state court in Texas had approved a preliminary injunction preventing the patches from being sold in that state, said Lenwood Scholtz, assistant director of the Texas Health Department’s division of food and drugs.

“But they shipped patches shortly after that, in violation of the injunction,” Scholtz said. “We are contemplating fines against them, civil penalties that could be quite high. The total could be a couple hundred thousand dollars.”

Disgruntled distributors said this week that they began ordering and paying for Le Patch in early spring, but none were delivered until July. To date, several distributors said they have not received the patches that they paid for. Others complained that they have cases of patches they cannot sell.

They contend that they are victims of New Source and its officers, including David Sterns and Robert Singerman.

“I invested nearly $20,000 in stock,” said one Los Angeles investor, who asked that his name not be used. “At this point, it looks like all that is lost. The stocks are almost valueless. The total value of my investment is almost nothing.”

The attorney general’s office said it does not know how many people may have lost money because of New Source’s operations. Shelden said the investigation is continuing.

He also said the idea of “victims” in a pyramid scheme is a difficult one: “Technically, anyone participating (as a distributor) is as guilty as the person who set it up. But we rarely prosecute any of those people.

“On the other hand, we are more interested in getting people money, restitution, who have a garage full of stuff. It’s a real tricky question.”

In addition to the attorney general’s civil suit, inspectors for the U.S. Postal Service are pursuing a criminal mail fraud investigation against New Source, companies allied with the firm and company officers, said James Vach, a postal inspector.

‘A Lot of Work to Be Done’

“We are investigating the companies, and we’ll see what turns up,” Vach said. “We have a number of months’ work yet. There’s a lot to be done.”

In addition to New Source, government agencies also investigated a San Diego company called Meditrend International early last summer. Meditrend sold a diet patch system called Appetoff but took the product off the market in June after the FDA said the diet patches needed FDA approval.

No diet patch has been approved by the FDA.