These included lying to its banks, concealing profits and misleading customers with false products claims.
The manufacturer of the male enhancement product, Enzyte, which famously featured Smiling Bob as its TV and internet advertorial mascot, said its revenue-stream had been sufficiently damaged by the affair to render a bankruptcy claim its only feasible business option.
If the claim is granted under Chapter 11 of the US Bankruptcy Code – a verdict that is expected this week – Berkeley will continue to trade while it renegotiates terms with its creditors.
Positive step
“This is a positive step,” said Ohio-based Berkeley president, Jason Broome. “This process will allow Berkeley to properly and responsibly address the current financial obstacles that have challenged the company’s business operations.”
In a statement Berkeley said it was in talks with a potential buyer.
Federal prosecutors wanted a receiver to take over the company but were satisfied with the bankruptcy terms, if granted.
“The bankruptcy filing does what we were seeking to do,” said Anne Porter, an assistant US Attorney, in press reports.
Berkeley founder Steve Warshak was in August found guilty of 93 counts of conspiracy, fraud and money laundering, sentenced to 25 years in jail and ordered to pay $93,000 from his personal savings.
His mother and numerous business associates were also sentenced as punishment for participating in a “scheme” that deceived thousands of consumers into buying the company’s male sexual enhancement products under false pretenses.
Historic decision
At the time of the conviction, veteran Colorado-based food-industry lawyer, James R Prochnow, of the firm Greenberg Traurig, called the verdict historic in its severity and said it sent a clear message to the dietary supplements industry that misleading claims could result in harsh penalties.
“This is the most significant decision in the history of the dietary supplements industry,” he told NutraIngredients-USA.com. “It is a substantial departure from previous sentencing and sends a clear message to industry that transgressions of this nature will be harshly dealt with.”
US district judge, S Arthur Spiegel, said Warshak’s actions victimized thousands of customers and led to criminal charges against many of his friends and relatives.
“This case is about greed,” Spiegel said. "His family and the people who work for him are also victims of his greed."
Berkeley’s range consists of about a dozen herbal supplements that claim to boost energy and memory, manage weight and assist sleep.
The male enhancement product, Enzyte, includes the ingredients Korean red ginseng, ginkgo biloba, zinc, and octacosanol.
NutraIngredients has issued a call for comments on the industry ramifications of the Smiling Bob verdict. Please send your comments by Friday September 19 to lorraine.heller‘at’decisionnews.com.