The Price of Free Speech is $200,000

Free speech is a privilege we enjoy in the United States. But it is anything but free. My personal price for the right to express my opinion about Medifast, Inc. was 5 years of my life and nearly $200,000. (Of course, that doesn’t include the emotional toll that the case took, as Medifast’s malicious pursuit of its meritless case against me was clearly designed to ruin me professionally.)

Case Summary

To summarize Medifast’s bogus case against the defendants:

In May 2009, Barry Minkow and his Fraud Discovery Institute released a report about Medifast Inc. and its multi-level marketing arm called Take Shape For Life (TSFL)
In September 2009, I wrote an article on this blog about Medifast and TSFL, exposing the fraud behind multi-level marketing (MLM)
In February 2010, Medifast sued Barry Minkow, Robert Fitzpatrick, me, and others with claims of defamation, violations of California Corporations Code and Unfair Business Practices.
Approximately two months later, my attorneys filed an anti-SLAPP motion.

Nevada Anti-SLAPP Law Threatened

In 2013, Nevada enacted an anti-SLAPP law… something all states should have, but only 28 do (and those laws vary in quality). SLAPP stands for “strategic lawsuit against public participation.” It’s basically the type of lawsuit that is filed in order to get people to shut up.

I am no stranger to such suits. I was sued in this fashion by Medifast Inc. (aka Take Shape for Life) in 2010, and it took over five years for me to be dismissed, have the dismissal affirmed, and have the court order Medifast to pay my attorneys’ fees. The whole point of the Medifast lawsuit was to make me stop saying unflattering things about the company. And to scare anyone else who might dare to say bad things about the company…. the cost of litigation is tremendous, and companies like Medifast use the threat of litigation to shut up their critics. Continue reading

Medifast is Ordered to Pay Fees…. Five Years After Filing a SLAPP Suit

It’s taken more than five years and hundreds of thousands of dollars to dispose of the frivolous and unethical lawsuit Medifast Inc. (aka Take Shape For Life) and their dishonest attorneys filed against Tracy Coenen and Sequence Inc.

You will recall that I won my anti-SLAPP motion to dismiss, and Medifast appealed, ensuring that the suit would drag on for years. In June 2014, the appeals court affirmed my dismissal and told Medifast to suck it. But of course, Medifast STILL wanted to fight… this time about the attorneys’ fees they were legally obligated to reimburse.

Yesterday the court ordered Medifast to pay nearly $200,000 and never darken my door again:

In accordance with those orders and decisions, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that:

(1) This action is dismissed as to defendants TRACY COENEN and SEQUENCE, INC., and judgment is hereby entered in their favor;
(2) Plaintiffs BRADLEY MACDONALD and MEDIFAST, INC. shall take nothing by way of their First Amended Complaint against defendants TRACY COENEN and SEQUENCE, Inc.; and
(3) Judgment is entered in favor of defendants TRACY COENEN and SEQUENCE, INC., and against plaintiffs BRADLEY MACDONALD and MEDIFAST, INC., jointly and severally, in the amounts of $190,520.50 for attorney’s fees, $7,502.00 for nontaxable costs related to the proceedings in the District Court, and $855.00 for costs in the Ninth Circuit (for a total of $198,877.50).

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that plaintiffs, jointly and severally, shall be obligated to pay defendants TRACY COENEN and SEQUENCE, INC. the aforesaid sums, each with interest accruing at the legal rate from the date of entry of judgment until paid in full.

IT IS SO ORDERED.
DATED: April 20, 2015

Marc G. Nochimson, CPA, Medifast, and Deficient Audits

Alternative Title: Marc Nochimson, CPA makes the case FOR publicly identifying audit partners. (You really need to know if a goof like this was the engagement partner!)

In 2013, Marc G. Nochimson, CPA entered into a settlement agreement with the Securities and Exchange Commission based on his improper professional conduct as the engagement partner for the Medifast Inc. audits from 2006 to 2008. You may recall that in 2010, Medifast sued me (and several others) for negative opinions we expressed about Medifast.

Among the negative opinions: Medifast’s increasing revenue is the result of an endless chain recruiting scheme. Medifast doesn’t disclose certain figures that would allow consumers and investors to fully evaluate the company and its business. Sam Antar criticized Medifast for its revenue accounting. Others criticized the company’s revenue and business model. Indeed, Medifast did overstate it income, resulting in a civil penalty and a cease and desist order from the SEC.

As time goes on, it appears more likely that our criticisms of Medifast were spot on. It also appears that the professionals affiliated with Medifast did not meet professional standards. Continue reading

Medifast Victory For Tracy Coenen

Another victory for Tracy Coenen in the malicious lawsuit filed more than 4 years ago by Medifast (NYSE: MED) related to their Take Shape for Life business unit. In 2011, I was dismissed from the lawsuit following my successful filing and argument of an anti-SLAPP motion. Medifast immediately appealed that decision to the United States Court of Appeals for the Ninth Circuit.

Today, my dismissal from the Medifast lawsuit was affirmed by the Court of Appeals, which said:

5. Finally, we affirm the district court’s order granting of Coenen’s anti-SLAPP motion. Coenen’s statements were either not libelous per se or were republications for which she should be afforded immunity under the CDA.
6. Appellee Coenen shall recover her costs on appeal. All the other parties shall bear their own costs on appeal.

Medifast can suck it.

Medifast Cease and Desist Order and Civil Penalty

On September 18, 2013 a cease and desist order was filed pursuant to the Security and Exchange Commission’s investigation of Medifast Inc. (Medifast’s business includes Take Shape for Life, or TSFL, which is its multi-level marketing division.) Medifast materially overstated income and understated expenses from 2006 through 2009, according to the SEC. This has resulted in the cease and desist order, and has Medifast paying a $200,000 penalty to the government.

You may recall that Medifast sued several people (including me) in 2010 for criticizing their business model and business practices.

One of the issues in the lawsuit was the criticism of Medifast’s auditors, Bagell, Josephs, Levine, and Company.The criticism of the auditors was grounded in a 2008 PCAOB report on an inspection of six of BJL’s audits, which turned up audit deficiencies in three of them. In 2010 Medifast switched auditors. Continue reading

Does Xyngular Work? (Or Isagenix, or Herbalife, or Take Shape For Life, or Visalus, or Any Multi-Level Marketing Company)

Several months ago I wrote an article on the Xyngular weight loss program being pimped by Jennifer McKinney (aka mommy blogger MckMama). The bottom line for me was that these programs do not work because:

They create short-term weight loss through a dizzying cycle of starvation, unhealthy meal replacement shakes, and questionable drug-like “supplements” that are supposed to get you high and suppress your appetite
The representatives make repeated health claims are strictly prohibited by the federal government. The distributors claim that the products cure anything and everything from joint pain, to autism, to diabetes, and more.
Xyngular (and Herbalife, Medifast, Take Shape For Life, Visalus, Isagenix, and the rest of them) have poor long-term results because they are fad diets that rely on starvation and potentially unsafe substances. The vast majority who lose weight with these programs gain it all back. Continue reading

Medifast Take Shape For Life: Endless Chain?

A recent filing in the Medifast appeal (the case in which Medifast sued me and others, and lost miserably) raises some interesting questions about whether Take Shape For Life (TSFL) is an endless chain recruitment scheme. From that filing:

A. Medifast’s Evidence Does Not Prima Facie Show That FitzPatrick’s “Endless Chain” Statement is Provably False

Medifast’s reply again does not demonstrate that FitzPatrick’s endless-chain statement is false. Because Medifast has alleged libel, it must make a prima facie showing that challenged statements are untrue. Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 516 (1991). Courts also evaluate whether an average reader would consider the statement to be fact or protected opinion. Carver v. Bonds, 135 Cal.App.4th 328, 344 (2005). Continue reading

Right to Free Speech Wins Again

Popehat points us to a nice victory by SOCNET in a lawsuit filed by John Giduck, the man who claims he was defamed when a SOCNET user stated that he was fraudulently posing as a Special Forces veteran.

The court granted SOCNET’s motion to dismiss (even with no anti-SLAPP statute in Colorado), saying:

It is this tension that has generated numerous cases addressing the first element of a defamation action, i.e. is the statement defamatory. Not every untrue, uncomplimentary or offensive statement concerning an individual is defamatory. Continue reading

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. Continue reading

Fraud Files Forensic Accounting Blog

Commentary on fraud, scams, scandals, and court cases.

medifast