According to press reports, the state accused NutraQuest, formerly known as Cytodyne Technologies, of exaggerating the benefits of its Xenadrine RFA-1 and Xenadrine EFX weight loss products in advertising, and detracting from the risks.
The state also alleged that Nutraquest wrote testimonials signed by five doctors, which made it appear that their own research had found Xenadrine RFA-1 to be safe and effective.
Settlements with each of the doctors have already been reached, of between $15,500 and $17,500 each.
Cytodyne Technologies was the manufacturer of Xenadrine RFA-1, the ephedra-based supplement implicated in the 2003 death of Baltimore baseball pitcher Steve Belcher.
The company ceased marketing ephedra-based products in 2003, in advance of the FDA's final ruling outlawing the herbal's use in supplements, saying that they were no longer profitable.
However in October of that year it filed for chapter 11 bankruptcy protection, citing, amongst other reasons, lawsuits filed against it.
Because it is operating under bankruptcy protection NutraQuest will only pay the state $45,000 of its $235,000 share of the settlement. The state becomes the unsecured creditor for the remaining amount.
Founder Robert Chinery and RTC Research and Development, which owns the patent for Xenadrine EFX, will also pay $235,000 each. Cytodyne LLC and Cytodyne I LLC, which bought the rights to promote and distribute the product, will pay their $235,000 share between them.
NutraQuest has said that it agreed to the settlement in order to avoid mounting litigation costs.
New Jersey has imposed certain restrictions on all the companies as to any future advertising claims for products. These include enjoining them from saying that the products alone cause weight loss without diet or exercise; enjoining them from claiming that products cause weight loss through a specific biochemical mechanism without scientific evidence; and requiring people who endorse their products to sign a sworn statement about their use and the results they achieved.