United States v. Warshak

631 F.3d 266 (6th Cir. 2010)

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Nature of the Case

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Facts

D owned and operated a number of small businesses in the Cincinnati area. One of his businesses was TCI Media, Inc. ('TCI'), which sold advertisements in sporting venues. Warshak also owned a handful of companies that offered a modest line of so-called 'nutraceuticals,' or herbal supplements. They were later aggregated to form Berkeley Premium Nutraceuticals, Inc. ('Berkeley'). Berkeley took orders over the phone, but it also made sales through the mail and over the Internet. Representatives would read from sales scripts, which listed the major points to cover during the transaction. D had the final word on the content of the scripts. The scripts would include a description of the desired product, as well as language intended to persuade more pliant customers to make additional purchases. Berkeley launched Enzyte which was purported to increase the size of a man's erection. Demand grew so dramatically that the company went from 12 people employed to 1500 people, and the call center remained open throughout the night, taking orders at breakneck speed. Berkeley's line of supplements also expanded, ballooning from approximately four products to around thirteen. By year's end, Berkeley's annual sales topped out at around $250 million, largely on the strength of Enzyte. Network television was saturated with Enzyte advertisements featuring a character called 'Smilin' Bob,' whose trademark exaggerated smile was presumably the result of Enzyte's efficacy. The 'Smilin' Bob' commercials were rife with innuendo and implied that users of Enzyte would become the envy of the neighborhood. Advertisements also appeared in a number of men's interest magazines. They cited a 2001 independent customer study, which purported to show that, over a three-month period, 100 English-speaking men who took Enzyte experienced a 12 to 31% increase in the size of their penises. The 2001 study was also referenced in radio advertisements and appeared on the company's website, as well as in brochures and sales calls. The survey was a complete fraud. D instructed, Teegarden, to create a spreadsheet and to fill it with fabricated data. Teegarden plucked the numbers out of the air and generated the spreadsheet over a twenty-four-hour period. D also fabricated a 96% customer satisfaction rating. Print and radio advertisements boasted that Enzyte was the brainchild of reputable doctors with impressive educational pedigrees. According to the ads, 'Enzyte was developed by Dr. Fredrick Thomkins, a physician with a biology degree from Stanford and Dr. Michael Moore, a leading urologist from Harvard.' The ads also stated that the doctors had collaborated for thirteen years in developing a supplement designed to 'stretch and elongate.' In reality, the doctors were just as fictitious as 'Smilin' Bob.' Investigators who contacted Stanford and Harvard learned that neither man existed. Customers who ordered products over the phone were not told that they were being enrolled in an auto-ship program. This resulted in a substantial volume of complaints. Ds then engaged in efforts to disclose the program in ways that the customers would not be listening and as a last resort, those who declined were enrolled anyway. P contacted D’s ISP’s and formally requested that copies of all his emails were to be preserved. D had no idea and the copies would not have existed without that request, and the ISP’s would have deleted them. D obtained a subpoena that compelled the providers to turn over the emails (27,000 in all). D did not receive notice until a year later. D moved to exclude thousands of emails that the government obtained from his Internet Service Providers. That motion was denied. D was convicted of the majority of the charges. D received a sentence of 25 years of imprisonment. He was also ordered to pay a fine of $93,000 and a special assessment of $9,300. In addition, he was ordered to surrender $459,540,000 in proceeds-money-judgment forfeiture and $44,876,781.68 in money-laundering-judgment forfeiture. Ds appealed.