Legal issues
Metabolife was investigated by the Internal Revenue Service and the Department of Justice for income tax evasion; ultimately, the company pleaded guilty to filing fraudulent tax returns and was sentenced to pay a criminal fine of $600,000.[15] Metabolife owner William Bradley also pleaded guilty to evading millions of dollars in taxes and was sentenced to 6 months in federal prison and 2 years of probation.[15][16]
According to federal prosecutors in the case against Metabolife and its executives, the company's certified public accountant, Michael Compton, knew about and helped conceal Metabolife's illegal activities. Compton had admitted falsifying tax returns for company executives and was complicit in the company's failure to account for $93.7 million in income on its income tax returns from 1996 through 1999.[17][18][19][20] Compton had assisted the company in setting up secret offshore bank accounts and trusts in the Cayman Islands and was aware that Bradley, Ellis, and Blevins each had over $1 million in unreported cash concealed in safes within their homes.[19] In July 2002, criminal investigators of the Internal Revenue Service raided Compton's office, seizing documents and computer data,[19] and in November 2003, 10 days after a warrant against Metabolife and its principals was unsealed in U.S. District Court, Compton died from a self-inflicted gunshot wound to the head.[19]
Some of the politicians associated with Metabolife also encountered legal difficulties; Texas state legislators Jeff Wentworth and Rick Green were accused of illegal lobbying on behalf of the company.[3]
Following the FDA's ban of ephedra, Michael Ellis was indicted on eight counts of making false statements to the FDA in an effort to obstruct regulation of ephedra.[21][22] Ellis ultimately pled guilty to a single count of lying to the FDA about the adverse effects of Metabolife 356. He was sentenced to 6 months in federal prison and a $20,000 fine.[23]
In response to falling sales, and facing more than $1 billion in personal injury legal claims related to Metabolife 356,[24] Metabolife filed for Chapter 11 bankruptcy in 2005.[25] The company's furnishings and property, including a large collection of artwork, were liquidated in late 2006 to compensate creditors and settle outstanding personal-injury claims.[26]
Metabolife's non-ephedra assets were acquired by Ideasphere Inc., a New York-based dietary-supplement manufacturer, for $12 million in 2007.[23] In 2008, Michael Ellis authored a memoir entitled The Metabolife Story: The Rape of Cinderella, with a testimonial by the former FBI special agent who arrested Ellis in 1989 for producing and distributing methamphetamine.
