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.

This week multi-level marketing expert Robert Fitzpatrick released his second report in the last year on Medifast (NYSE: MED) and their Take Shape For Life multi-level marketing division. The report highlights how little money the company’s “health coaches” actually earn from selling the products, and makes it clear that the real money (if there is any) is in recruiting new marks into the scheme.

Following the release of FitzPatrick’s first report last year, Medifast management came out with bizarre statements. The most recent version of their statement was included in a 10-Q filed with the Securities and Exchange Commission on November 9, 2009:

An Independent Committee of the Board of Directors of Medifast was constituted to review the public allegations of a third party “Convicted Felon” on his website.  The Independent Committee of the Board of Directors of Medifast Inc. recommended that the Company make a formal complaint to the Securities and Exchange Commission and the Attorney General of Maryland as it pertains to the convicted felon Minkow and his “for profit” company’s false and misleading claims against Medifast. There are currently no pending matters of a material nature related to any government investigation of the case involving Mr. Minkow, his company, its affiliates or associates. Any actions related to any government investigation pertaining to this complaint have been deemed confidential at this time.

The problem is that the allegations weren’t made by convicted felon Barry Minkow. The allegations were made by multi-level marketing expert Robert Fitzpatrick, who has researched hundreds of MLMs.  Minkow didn’t make any “false and misleading claims.” FitzPatrick made claims based on Medifast’s own published numbers, none of which the company has refuted in any forum.

The madness doesn’t stop there, however. In reaction to FitzPatrick’s most recent report, Medifast issued a press release entitled “Medifast, Inc. Comments on False and Misleading Allegations.” It states in part:

The independent Directors’ Committee, after investigation of facts and information concluded the allegations were false, misleading, and/or without merit. The same is true for the re-issue of the report posted January 8, 2010 – the allegations are false, misleading, and/or without merit.

Yet the company has not seen fit to point out what might be false or misleading about FitzPatrick’s report. They have the data at their fingertips that could supposedly refute any allegations made, yet the company declines to provide any specifics.

Why not? Because FitzPatrick printed the truth based on Medifast’s own numbers. Apparently it isn’t bad enough that the company doesn’t tell the whole story about the business to either stockholders or health coaches. Now they’re maligning an independent expert who merely used the company’s own data to show what an awful “opportunity” TSFL offers health coaches, and how heavily the company relies on the recruiting of coaches to grow revenue.

Barry Minkow has issued an invitation to Medifast executives. He’s inviting them to point out exactly what is false or misleading about FitzPatrick’s report, and to provide the documentation that proves their points.  Certainly if there really are material points that FitzPatrick has made which are false or misleading, the company would like to immediately identify them? And Minkow has even offered to retract his statements about FitzPatrick’s report and apologize to the company in return for them backing up their allegations about the report.