UPDATE: On February 17, 2010, Medifast Inc. filed suit in US District Court, Southern District of California, alleging defamation, violation of California Corporations Code, and unfair business practices. On March 29, 2011, Judge Janis Sammartino dismissed all of Medifast’s claims against me in her ruling on my anti-SLAPP motion.
The Medifast (NYSE:MED) lawsuit against Barry Minkow, Fraud Discovery Institute, me, Robert FitzPatrick, William Lobdell, and others marches on. Yesterday, the Medifast lawyers filed an amended complaint in the case. The passage of time has not made Medifast or its lawyers more honest, however, as the amended complaint repeats factual inaccuracies (those are called lies in my world) and even expands on them.
Grab a cup of coffee and kick up your feet while you read the amended complaint. The document now alleges a civil conspiracy related to Medifast’s Take Shape for Life (TSFL) division, and repeatedly refers to the defendants as co-conspirators. I can’t speak for the other defendants, but I certainly know that I conspired with no one. I simply performed services for a paying client, and I wrote about Medifast on this blog in a continuing effort to advance the discussion of the pitfalls of multi-level marketing.
Here are some of the more amusing points that Medifast makes in its amended complaint:
- Medifast continuously states that the “conspiracy” was aimed at driving down the price of the company’s stock. I don’t disagree that Medifast’s stock has gone down and has gone up over time. I can’t tell you by how much or even when those changes took place, because I simply don’t care. I’ve never cared what the company’s stock price is, and I’ve never engaged in any actions targeted at affecting the company’s stock.
- The lawyers continue to falsely maintain that publishing the written materials of others (FitzPatrick’s reports, Minkow’s press releases) means that I’ve adopted their statements as my own. That’s simply not the way things work. Indeed, a person can publish the writings of another and not adopt those writings as her or his own.
- The amended complaint states that the defendants have engaged in “defamatory attacks which have continued to grow exponentially over the past year, and still continue relentlessly on a daily basis…” A simple look at my website proves that no discussion of Medifast and TSFL has grown exponentially, and that it has never occurred on a daily basis.
- Medifast claims that “While investigating, Minkow and his co-conspirators then take a short position in the target company’s stock.” The company and it’s lawyers can’t be bothered with silly little things called facts. My response to their lawsuit clearly stated that I’ve never taken a short position in Medifast stock. In fact, I’ve never taken any position in any stock of any company I’ve been retained to investigate.
- The amended complaint alleges that Minkow “gets” me to republish his “false allegations” on my website, and that we (the alleged co-conspirators) “reap huge profits” when the stock price of the target of our investigation falls. Minkow doesn’t “get” me to do anything. He pays me for fraud investigation services, and what I write or don’t write on this site is my choice. And again, there are no huge profits to reap, since I don’t invest in the stock of the targets of our investigations. (But Medifast already knows that, and you do too.)
Then we get to the really good stuff. Can the Medifast lawyers actually read and comprehend? Because they have the uncanny ability to misstate some very clear writings on my site. I wonder if their misstatements are intentionally designed to mislead the court…
- Medifast claims that I stated in an article on my blog that BJL Wealth Management recommending the purchase of Medifast stock to an FDI operative “would certainly be a conflict of interest for Medifast and its auditor, Baggell, Josephs, Levine & Company.” That’s an outright lie. What I really said was “An auditor working in the capacity of an investment advisor does not automatically give rise to independence issues.” I discussed what would and would not constitute a conflict of interest, but I gave no conclusion as it relates to the Medifast situation because I simply did not have enough information to render an informed opinion.
- The lawyers go on to falsely state that on my blog, I stated that TSFL health coaches “are required to put up their own money.” A simple reading of the article they reference shows that no such statement was ever made by me.
- It gets even better as Medifast falsely states that I “…maliciously [lead] readers to believe that Medifast is not complying with some unknown and undisclosed legally mandated reporting requirements, without disclosing to readers that no such reporting requirements actually exist (a fact that should be well within the knowledge of a forensic accountant like Coenen).” Again, this is a flat-out lie by Medifast and its lawyers. The article in question states “We’ll never know for sure, as Medifast doesn’t disclose how much money the coaches are making, how much they spend on expenses of the business, what their attrition rates are, or how many recruits are actively selling or recruiting.” There is no reference to any legal mandates or reporting requirements. The sentence speaks for itself. It states that Medifast doesn’t disclose to the public certain numbers, when in fact, that is the case.
There are many more inaccurate statements of “fact” by Medifast and their lawyers in this amended complaint. I’ll let the court sort all of those out. But if I didn’t know better, I’d suspect that Medifast is continuing on with its factual inaccuracies only to increase the litigation costs for the defendants.
Yesterday, my attorneys filed an andti-SLAPP motion in the case. The bottom line is that Medifast is trying to step on my constitutionally protected right of free speech. They are hoping the cost of a $270 million lawsuit and drawn-out litigation is too high for me and people like me… those who would criticize the questionable multi-level marketing business model of TSFL.
I am a fraud investigator by trade. I write about fraud all the time. I devote significant efforts to the issue of multi-level marketing. My criticism of Medifast and TSFL falls right in line with that. Who is Medifast to say I have no right to criticize their business model?
Providing information to consumers about Medifast is part of what I do professionally. But consumers don’t have to take my word for it. I provide links to plenty of resources regarding MLM, and consumers are free to make their own decisions about the legitimacy of the business model.
Medifast wanted a fight, and now they’ve got one. I won’t be bullied by a corporation that lies to the court about the facts and tries to trample on my constitutionally protected rights. Game on.