Medifast Lawyers Lie to the Court (Again)

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.

In the never-ending saga of Medifast Inc’s $270 million lawsuit against me for defamation related to their Take Shape for Life division (TSFL), the company and its lawyers have repeatedly lied to the court about what I have said, written, and done. Apparently, this is the only way they think they might win their case. Thankfully, the judge saw through their lies and dismissed me from the case under California’s anti-SLAPP legislation.

That hasn’t stopped Medifast from continuing the lies, however. And the company appears to be upset over my writings about the lawsuit. Management and the attorneys have falsely stated that I am writing about this case to get publicity for myself. The truth is that I write about this case to expose the lies and shady litigation procedure employed by the company.

I do not believe a company like Medifast should be allowed to commit these acts in the dark of night. I want to expose management and the attorneys for the liars that they are, so the whole world can see it.

This lawsuit has been ongoing for nearly three years.  Medifast refuses to accept the fact that I did not defame the company, and that the judge wholly agreed. The judge ruled in my favor on the anti-SLAPP motion, saying:

Under California law, recovery for defamation may be had only for false statements of fact. Statements of opinion are not actionable… The critical determination of whether the allegedly  defamatory statement constitutes fact or opinion is a question of law… The key is not parsing whether a published statement is fact or opinion, but ‘whether a reasonable fact finder could conclude the published statement declares or implies a provably false assertion of

Problematically though, Medifast does not plead the exact words constituting the alleged defamation… Rather, as Minkow argues, Medifast paraphrases Defendants’ statements in its pleadings, seemingly for maximum shock value. (Minkow Reply 1.) Of the thirty-seven allegedly false statements identified in Medifast’s opposition—which Medifast calls “the more egregious statements made by each Defendant” (Opp’n 41)—most regard the structure and function of TSFL’s compensation system. (See id. 41–44.) These statements do not charge Medifast with commission of a crime, nor are they otherwise defamatory without the necessity of explanatory matter; accordingly, they cannot support Medifast’s claim for libel per se. Cal. Civ. Code § 45a…

Medifast’s allegations suffer from a fatal flaw: Defendants’ statements cannot reasonably be understood as implying the provably false assertion of fact Medifast claims they imply, namely, that Medifast is running a Ponzi scheme. If Defendants had said, “Medifast, like Bernie Madoff, is running a Ponzi scheme,” one could scarcely dispute that Defendants would be liable for defamation… Similarly if Defendants had said, “Medifast runs its business like Bernie Madoff.” But Defendants’ actual statements were not nearly so explicit. Contrary to Medifast’s apparent contention, Defendants did not accuse Medifast of running a Ponzi scheme by simply using “Medifast” and “Madoff” in the same breath. Rather, the context of Defendants’ statements shows that they used Madoff as a contemporary cautionary tale. (See, e.g., Cohen Decl. ISO Opp’n Ex. 61, at 7 (“Like . . . Madoff’s secret trading system, Medifast dazzles its prospects with the classic and indecipherable MLM pay plan, showing the potential of an income with ‘no cap.’”).) If any statement of fact can be implied from Defendants’ statements, it is this: Things at Medifast are not what they seem. Such a statement is too inexact or subjective to support a libel per se claim; no reasonable person could construe it to be provably false.

Viewing Defendants’ statements in their context, no reasonable factfinder could conclude that Defendants accused Medifast of running a Ponzi scheme. Accordingly, Minkow’s and Coenen’s motions are GRANTED as to these statements.

The judge further ruled:

Medifast also alleges that Defendants accused Medifast of “committing securities fraud, and using their one-office auditing firm to cover up the fraud—their one-office accounting firm that was illegally pumping MED stock to their clients.” …

Similarly, in a post on the Fraud Files blog maintained by the Defendants Coenen and Sequence, Inc., Coenen cited Minkow and FDI’s press release and opined:

[Medifast] is audited by Bagell, Josephs, Levine & Company. The audit partner happens to also be a part of BJL Weath Management, an investment firm with the same address as the audit firm. This becomes interesting when you consider that BJL Wealth Management recommended the purchase of Medifast stock to an operative of FDI. Is this a conflict of interest? It may be. Does the audit partner, in his role at the investment firm, make recommendations regarding Medifast stock? Does he have any financial interest in transactions involving Medifast stock? If the answer to either of these questions is yes, then the audit partner would have compromised his independence…

Medifast makes a prima facie showing that the initial statement—that BJL recommended the purchase of Medifast stock to an FDI operative—is false… That this statement is false, however, is not dispositive; the allegation that Medifast’s outside auditor recommended the purchase of Medifast stock is not defamatory without the necessity of explanatory matter…

As to the remainder of Defendants Minkow and Coenen’s statements, the Court finds that they do not imply that Medifast committed securities fraud by colluding with its accounting firm to “illegally pump[] MED stock.” (Opp’n 37.) In context, Coenen’s statement only expresses her opinion that the audit partner might have a conflict of interest—an opinion that is dependent on the existence of additional facts.

No reasonable factfinder could conclude that Defendants Minkow and Coenen accused Medifast of committing securities fraud through collusion with its accounting firm. Accordingly, Minkow’s and Coenen’s motions are GRANTED as to these statements.

In the slow-moving appeal process, Medifast and its attorneys Lainie Cohen and Robert Giacovas make many false statements about my actions. I am going to go through them point-by-point in order to expose the falsity:

1. Unable to respond to the legal arguments contained in Medifast and MacDonald’s opening brief Minkow, Coenen and FitzPatrick3 all apply the same tactics–attack the credibility of Medifast (and its attorneys) and apply fundamentally-false assertions of the law on defamation to obfuscate their liability for their direct statements of criminal conduct. Once the vitriol is stripped away, there is little left to Defendants’ arguments.

As has been pointed out on this blog several times, the credibility of the company and its attorneys is at issue. The company and its attorneys have repeatedly lied to the court, and they do so again in this filing.

2. Minkow and Coenen, who use similar tactics, repeated the same accusations of criminal conduct made by FitzPatrick, and made other direct statements that libeled Medifast.

I did not accuse Medifast or TSFL of criminal conduct, nor did I make any direct statements that constituted libel. This has been demonstrated repeatedly throughout the litigation.

3.  Minkow made money on the scheme by shorting Medifast stock and paid Fitzpatrick and Coenen well for their “expertise” in bolstering his false attacks.

As was discovered during my deposition, I was paid $1,500 to $2,500 for my work on the Medifast investigation. Despite that information,  Medifast continues to falsely claim that I was paid $14,000 for my work, which they say means I was “paid well.”

4. Coenen is not entitled to CDA immunity because her post, which included FitzPatrick’s January 2010 Update libeling Medifast, went well beyond mere republishing. Coenen’s contributions to and analysis of FitzPatrick’s post make her an “information content provider” and “responsible, in whole or in part, for the creation or development of information provided through the Internet…” 47 U.S.C. § 230(f)(3).

I did not contribute to FitzPatrick’s report. I reviewed the report prior to it being published by Fraud Discovery Institute, and made a few comments about the report. I had no control over how my comments were used or whether they were incorporated into the final report. I did not write any portion of the report, nor did I have any editing capabilities over the report. Indeed, as Medifast is well aware, I was simply a republisher when I posted FitzPatrick’s report on my site.

5. Everything about Coenen’s forensic accounting expert website where her statements accusing Medifast of committing crimes were posted would lead a reasonable reader to believe that Coenen was stating facts–not her opinion.

I never accused Medifast of committing crimes. And being an expert in something doesn’t preclude an individual from forming and expressing an opinion about it. The expertise does not turn the opinion into a fact.

6. These allegations make clear that what Medifast alleged as defamatory was always Defendants’ unequivocal statements asserting that: “TSFL operates as an endless chain or pyramid scheme” and “violates California Penal Code Chapter 9 § 327” ER34lines22-23; “that Medifast is similar to Bernie Madoff’s massive Ponzi scheme”, ER35line12; that “Medifast is a Ponzi scheme and a pyramid scheme and is in violation of the laws of California…” ER36lines23-24; that Coenen continued the attacks with her blog entitled “Medifast and Take Shape For Life: Weight loss pyramid scheme?” and made false statements that “TSFL is a pyramid scheme”, ER38lines18-22.

I never made any of the statements that are listed in quotes by Medifast and its attorneys. What I did say is that the evidence I have seen leads me to this opinion: “Everything points to the real deal being endless chain recruitment into a pyramid scheme.” Whether  a multi-level marketing company is a pyramid scheme is purely a matter of opinion (not fact), and is hotly debated on the internet at large.

7. There is no indication that what Coenen is writing on her blog should not be taken seriously–the average reader would assume they were reading the statements of an expert providing objective facts, not subjective opinion or “observations”. CRB36. Coenen presents herself as someone with authority. Readers will give deference to her claimed expertise, and assume she speaks the truth.

Medifast admitted earlier in this filing that the blog on my website includes the tagline “…daily commentary on frauds, scandals, scams, and court cases.” The word “commentary” clearly indicates to readers that I give my opinion in my writings there. Opinions are not verifiable statements of fact, thus there can be no truth or falsity to them.

8.  However, Coenen’s false statements do not gain First Amendment protection simply by placing them on a blog. Her accusations of criminal activity are provably false assertions of fact. There is nothing “loose, figurative or hyperbolic” about language accusing an individual of committing a crime, and the fact that they appeared on a blog does not “‘negate the impression that the writer was seriously maintaining that [the individual] committed the crime[.]’”

No false statements were made about Medifast. In nearly three years, the company has yet to prove that even ONE statement I made about it was a false statement of fact. The company and its attorneys falsely claim that I made “accusations of criminal activity,” when no such statements were ever made by me. (Medifast continues to repeat this theme, despite its falsity.)

9.  The allegation that TSFL is a pyramid scheme is either true or false–it is an objective, provable fact.

Not true. Whether something is a pyramid scheme is a matter of opinion, and that is clear when one explores the ongoing heated debate over whether multi-level marketing companies are pyramid schemes.

There is no single definition of a pyramid scheme. Hence, people come to different conclusions about whether MLMs are actually pyramid schemes. Some supporters of multi-level marketing companies point to government inaction against these companies as proof that they are not illegal pyramid schemes. Yet the inaction only proves that there is inaction, not that there is no illegal activity being committed. And the debate continues over the nature of MLM.

10.  Unable to refute Bell, Coenen claims that Bell’s declaration only addressed FitzPatrick’s statements and so it cannot establish the falsity of her statements; and it is inadmissible anyway. CRB40. This is just absurd. Coenen called TSFL a pyramid scheme. Bell’s declaration goes into great detail as to how TSFL is not a pyramid scheme.

Medifast takes the opinions of Daniel Bell, an individual closely affiliated with Medifast, and falsely claims they are fact. Bell is of the opinion that Medifast is not a pyramid scheme. This does nothing to prove whether my opinion of the company’s structure is true or false, because opinions cannot be proven true false.

In this regard, my appeal brief stated the following:

Medifast did not present evidence establishing that Coenen’s statements were actually false. A statement is not false for defamation purposes if it is substantially true; it must be provably false… A statement that is too vague or subjective to be proven true or false is also not actionable…  In addition, a statement viewed in its full context must convey a statement of fact, not opinion. What constitutes a statement of fact in one context may be treated as a statement of opinion in another, in light of the nature and content of the communication taken as a whole…

In the opposition to the SLAPP motion, as here, Medifast relies on proprietary data – that health coaches make money through sales, not recruiting – to try to prove that the Appellees’ statements were false…  However, Medifast did not publish such information until it filed the opposition. And, the only so-called evidence Medifast cites in support of the falsity of the allegedly libelous statements is an unsupported and unqualified hearsay declaration of Daniel Bell… The declaration neither establishes that Bell is an expert nor submits any documents to support Bell’s statements and opinions. The declaration also solely disputes FitzPatrick’s reports, not the statements Coenen made…

Regardless, Bell’s declaration does not change the fact that Coenen’s statements are not libel; Coenen’s opinion on TSFL’s structure and business model was based on an analysis of those documents publicly available at the time… To the extent Medifast now contends that it has information that demonstrates the falsity of Coenen’s statements, the majority of the information Medifast (and, specifically, Bell) relies upon – private corporate information – would never have been known and was not made available to Coenen until late December 2010, almost one year after this lawsuit was filed… In fact, even in Medifast’s press releases responding to FDI’s reports, Medifast did not offer any facts to demonstrate that the statements being made were false… It is difficult to comprehend how Coenen could be held liable for not knowing information Medifast was withholding or not disclosing. She could not have relied on or analyzed materials and statements that were not publicly available.

11. Even giving Coenen the benefit of the “totality of circumstances” test, her rhetorical question asking whether TSFL is a pyramid scheme, and then providing her ‘evidence’ as to why the answer can only be “yes,” shows that Coenen clearly implied a provably-false statement of fact.

On the contrary, I provided information in support of my opinion about pyramid schemes. My writings did not state or imply that “the answer can only be “yes”.”

12. Coenen repeatedly claims Medifast “makes a far stretch when it tries to link Coenen’s statements to FitzPatrick’s in order to hold Coenen liable.” CRB31. More specifically, she claims that she “never accused Medifast of violating Penal Code § 327 and has never stated that Medifast operates as a criminal enterprise.” CRB33. Both of these statements are demonstrably-false.

Indeed, it is a far stretch because I never accused Medifast of violating any Penal Code, nor did I even imply that such was the case. I never made any allegations or assumptions about criminal activity, and simply providing FitzPatrick’s report (which does make such an allegation) to readers does not mean that I endorse or agree with the conclusions.

13.  To support her statement that she never accused Medifast of violating § 327, she claims that her post, which contained the statement “everything points to the real deal being endless chain recruitment into a pyramid scheme” ER967-968, could only be interpreted as libel per quod, since, in order to understand this statement as one accusing Medifast of violating § 327, the reader must have read FitzPatrick’s report… Coenen pointed her readers to FitzPatrick’s report so they would understand precisely what criminal conduct she claimed Medifast was carrying on, but now she would like this Court to believe her readers would never have understood her use of the term “endless chain” to refer to any such criminal behavior.

Again, I never stated or implied that Medifast was engaged in criminal behavior, and merely referring to FitzPatrick’s report (which made such a statement) does not make me guilty of making the statements FitzPatrick made. The phrase “endless chain” does not refer to criminal conduct, but is rather a descriptor of the recruiting aspect of mutli-level marketing.

14. Indeed, her assertion that she cannot be held responsible for libeling Medifast because she has fully-disclosed the facts upon which she relied must fail for this reason–Coenen’s source for each of the statements at issue was FitzPatrick, and FitzPatrick’s motion to strike was denied.

I am not responsible for libeling Medifast, and the court ruled that I did not libel Medifast. I made no false statements of fact, only statements of opinion. And in providing links and documents related to Medifast, I was merely setting forth information and other opinions that were related to the controversy. Indeed, my “source” for my statements of opinion was not FitzPatrick. Rather, it was the many years of research and analysis that I have done regarding multi-level marketing.

15. Coenen’s statement that she never accused Medifast of operating as a criminal enterprise is also easily disproven. Coenen wrote Medifast is “an endless chain pyramid scheme.” She entitled her post “Medifast’s Take Shape For Life: weight loss pyramid scheme?” ER967-68. A pyramid scheme is an illegal business structure, Webster, 79 F.3d at 782, ergo, according to Coenen, TSFL operates like a criminal enterprise.

Medifast relies on a tortured explanation of what I said, rather than on the words themselves. Medifast asks the court to believe that only one definition of pyramid scheme exists, and that if you use that definition, I was saying that Medifast is a criminal enterprise. I have never said any such thing.

16. Like FitzPatrick, Coenen was hired by Minkow because of her bias–she believes every multi-level marketing company is a pyramid scheme, and she blogs vehemently on the topic on two separate websites.

I have never said that every multi-level marketing company is a pyramid scheme. Medifast simply made this up. In fact the falsity of this claim was set forth in my deposition:

Q In your opinion, is Herbalife a pyramid scheme?

A I don’t know

17. Any “expert opinion” Coenen gives regarding Medifast is skewed by this bias.

My opinions on multi-level marketing do not amount to bias. I have spent years researching and writing about this business method. Through my research and analysis, I have developed a negative opinion about MLM and the likelihood of participants developing viable businesses. This does not constitute bias, but a well-researched and thought-out opinion based on many facts.

18. Here, although adamant that Medifast is a pyramid scheme, Coenen never reviewed the one document central to such an analysis–the TSFL compensation plan.

The real truth is that I never saw the document Medifast attorneys claimed was the compensation plan presented to me at my deposition. I did review documents that outlined the compensation plan and levels in TSFL. I simply didn’t review the specific document that was put in front of me at the deposition.

19. Coenen made clear, provably false statements of fact about a compensation plan she knew nothing about. She relied solely on FitzPatrick’s analysis, and as shown, FitzPatrick had no understanding of how it worked.

I made no false statements of fact about the compensation plan.

20. Similarly, Coenen re-posted allegations made by Minkow without factchecking. When writing her post on Medifast’s outside auditor and stating definitively that a person who worked at the wealth management division of the auditor recommended Medifast stock to an “FDI operative”, Coenen did not bother to find out either who the operative was, or if the statement was true–she relied solely on Minkow, the “ex-fraudster.”

Minkow stated that the wealth management division of Medifast’s auditor, recommended the purchase of Medifast stock to an FDI operative. I stated the following on my blog: “This becomes interesting when you consider that BJL Wealth Mangement recommended the purchase of Medifast stock to an operative of FDI.”

I was unable to verify this statement by Minkow, and took it at face value. Even if it is untrue, the statement itself does nothing to libel Medifast.  It is not a statement about Medifast’s conduct or anything else.

21. At deposition, Coenen testified she did not care who the operative was… Coenen’s statements were made recklessly and with utter disregard for whether they were true.

This is utterly false. I never said that I did not care who the operative was.  The transcript reads:

Q Is there any reason why you didn’t ask who the source for that statement was?

A Because I didn’t need to know who it was.

Q You just believed that if Barry told you, that it must have been true?

A No. I had been working with Barry at that time for two-and-a-half years, a little more than that, and I had known him to work with private investigators who would go do undercover things or make phone calls or whatever it is he had them do. And so it wasn’t unusual to me when they said, oh, yeah, someone called there and got this stock recommendation. That didn’t raise any red flags because it’s the type of thing that Barry might have hired out for in previous cases.


Q So when you wrote this blog, you had no idea Mr. Lair had a criminal record, correct?

A I had no idea who he was, and I had no idea that he had a criminal record.

Q Okay. Would that have been some — a piece of information that might — you might have wanted to know before you made that statement in your post?

MR. DUVERNAY: Objection, calls for speculation.


Q It wouldn’t have mattered to you?

A If I had known the information prior to the post, it probably would have affected what I wrote, but the information I had in hand at the time I wrote the post did not raise any questions for me or give me cause for concern.

22. Minkow also asked Coenen for her opinion on this same subject, i.e., whether a conflict of interest existed for Medifast’s outside auditing firm if a person connected with the firm had recommended Medifast stock. In response, Coenen was adamant that no such conflict existed, and told Minkow she wanted no part in his post… Nonetheless, two weeks later, Coenen blogged on this very topic, misleading the public into thinking there might be just such a conflict of interest for Medifast’s auditors.

Medifast and its attorneys are lying when they say, “Coenen was adamant that no such conflict existed.” What I actually said is recited in my deposition transcript:

Q This is Exhibit 28. It’s 4190, FDI document, June 2, 2009. Your e-mail to Sam and Barry or to Sam, CC’d to Barry, yourself and Howard Sirota at the bottom. Oh, I’m sorry. Actually, first it starts with Sam Antar wrote, I need Tracy and Howard to review the following. And then your response to Mr. Antar’s post is, What proof is there of a conflict of interest or lack of independence? You can’t say that just because Carl is part of the investment firm there’s automatically a conflict of interest or lack of independence. Is that still your position?

A Yes.

Clearly, I did not say that no conflict of interest existed. I stated that the facts as presented to me did not immediately indicate whether there is was conflict of interest or not.

23. Additionally, Coenen’s posts about Medifast continually included references to what she claimed was key information Medifast didn’t disclose, leading her audience to believe that there was something nefarious or potentially illegal in Medifast’s failure to make such disclosures.

The posts are referring to information that is key for investors or consumers, and things that I want to know as a fraud investigator. But no suggestion or statement was made that Medifast is doing anything illegal or wrong. The statements were simply that the information was not disclosed.

24. She even went so far as to compare Medifast’s failure to disclose to that of, a company under investigation by the California Attorney General at the time.

Yes, a comparison was made for the purpose of showing key pieces of information regarding YourTravelBiz that the California Attorney General deemed important. Might not those same pieces of information also be important regarding Medifast? Yes, and that was the only implication that was made in the comparison.

25. In sum, Coenen’s disdain for the truth comes across loud and clear in her email correspondences with Minkow, in her failure to corroborate a single fact before posting statements she took from others, and her bias against Medifast.

This is patently false. At all times I was interested in the truth and posted only what I knew to be truthful facts, along with statements of opinion. Many facts were indeed corroborated during my analysis of Medifast. And there is no bias. Simply a well-researched and supported opinion of multi-level marketing in general, and Medifast to be specific.

26. Indeed, Coenen appears to take great pleasure in continuing to attack Medifast. And the company is not the only subject of her attacks–nothing is off limits for Coenen if it will bring her publicity.

Pointing out the lies in Medifast’s court filings do not amount to attacks. They amount to setting the record straight and holding Medifast accountable for their lies. My writings about this case are not about publicity for myself, but publicity for Medifast, its bad business model, and its dirty and dishonest litigation tactics.

Here’s the bottom line: People are afforded free speech protection under the United States Constitution. They are permitted to research companies and write about their findings and opinions. The court ruled properly that nothing I said was defamatory to Medifast. The lies Medifast has repeated in its filings in the original case and the appeal do not change the fact that I did not libel or defame the company.