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PORTLAND, Ore. – A civil jury unanimously concluded Wednesday afternoon that James Cole, 66, of Hood River, Oregon, operated schemes to defraud his customers in the operation of two separate but related businesses. The first business, Maxam Neutraceutics, manufactures and sells so-called dietary supplements in the form of spray bottles, which were advertised as being effective in treating a variety of incurable medical conditions, including autism, which was Maxam’s primary target market. The second business, TurboSonic USA, sold electronic vibration machines manufactured in Korea and designed to be used for easy exercise. The Maxam products retailed for approximately $125 per bottle, and the TurboSonic machines retailed for between $12,000 and $16,000.
The jury deliberated for approximately four hours following the six-day trial. Evidence at trial revealed that Cole’s scheme in relation to the sale of the Maxam sprays included: falsely representing that the products were created and manufactured by a Harvard chemist, when in fact, they were made by a twice-convicted federal felon and self-taught chemist in the Boston area operating in unknown labs under unknown conditions; failing to disclose that the products contained rare bacteria not listed on the labels and believed by the government’s expert to have been intentionally put into the products by the felon manufacturer; and failing to reveal that Cole had never conducted clinical trials of the products, despite advertising them as “clinically proven” to improve conditions such as autism, Alzheimer’s, Parkinson’s, and multiple sclerosis.
In addition, the customer service representatives Cole hired to respond to customer inquiries – none of whom had any medical training, and all of whom were trained solely by reviewing Maxam’s own marketing literature and speaking to Cole and to the felon chemist – were instructed to provide medical-sounding advice to customers who called the office.
Regarding the TurboSonic machines, the evidence revealed that Cole marketed the machines as FDA-Approved medical devices that were capable of treating over 100 medical conditions if the machine’s dials were turned to particular settings, including cancer and HIV. Much of the company’s marketing efforts were devoted to placing the machines in the offices of chiropractors and physical therapists. Cole’s office manager compiled an alphabetized list of diseases and their corresponding purported treatment settings into a list of “protocols” which Cole’s company distributed with the machines and instructed chiropractors to place on the walls of their offices for patients to use. The machines were then advertised by Cole to have “researched and proven medical benefits” for the treatment of conditions ranging from anemia to vertigo, when in reality, the only research conducted on the machines confirmed that they were meant to be used as exercise machines. In addition, the machines were not FDA-Approved, as the FDA considered the machines to be purely exercise machines and no different from a treadmill, and that the list of treatment protocols were unsupported by any medical research.
The case was filed as a civil asset forfeiture case, and by returning a verdict in favor of the United States, the government is now entitled to keep over $700,000 in assets that were seized from Cole’s home and businesses in April of 2011. The assets included the full balance of three bank accounts held by Cole’s businesses, Cole’s interest in a condominium located in California, and approximately 320 ounces worth of gold found in Cole’s safe. The jury concluded that those assets were traceable to the proceeds of Cole’s frauds. The evidence at trial revealed that Cole’s two businesses grossed almost $21 million between 2005 and mid-2011.
Two additional cases are still pending against Cole. In September of this year, a Portland grand jury indicted him on five counts of subscribing to false tax returns and other tax-related documents. Also in September, the Consumer Protection Branch of the U.S. Department of Justice filed a complaint against Cole, his corporation, and his office manager seeking to permanently shut down the Maxam business for failing to comply with multiple provisions of the Federal Food, Drug, and Cosmetic Act.
This case was investigated by the U.S. Food and Drug Administration Office of Criminal Investigations, and the Internal Revenue Service, Criminal Investigation. Assistant U.S. Attorneys Katie Lorenz and Allan Garten filed the civil action and represented the United States at trial.