Diet pill peddler fined $600,000
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A WEIGHT-LOSS venture set up in jail by international fraud Peter Foster has been fined a record $1 million for price-fixing and he has been banned from the weight-loss industry.
Chaste Corporation, which charged sales recruits $40,000 to sell a diet pill called TRIMit, was fined $600,000 for misleading and deceptive conduct and price-fixing.
In a judgment delivered in Brisbane last week, Federal Court judge Bruce Lander found Chaste had breached the Trade Practices Act by prohibiting distributors from reselling the pills at a discount.
The Australian Competition and Consumer Commission pursued Chaste over deceptive dealings since a 2001 complaint sparked an investigation.
Foster was personally fined $150,000 for his involvement in the scheme and banned from participating in any weight-loss, cosmetic or health industry-related business for five years.
Foster has previous convictions for unlawfully promoting diet products and has been jailed in three continents over his involvement in other weight-loss schemes.
Chaste’s sole director, Braddon Webb, and legal adviser Sean Cousin received fines of $150,000 and $100,000 respectively, twice the penalty previously imposed for resale-price-maintenance offences.
The ACCC said it was difficult to link Foster to the case at first because his name was left out of company documents, making it hard to prove his controlling role in the business.
Justice Lander noted Foster’s reputation as the instigator of dubious and failed schemes and said his role in Chaste was deliberately hidden from creditors, misrepresenting the risks involved in joining the scheme.
He said it was clear that Chaste Corporation was set up for the sole purpose of profiting from the sale of distribution rights, money that was immediately split between Foster and Webb for their own use, with no funds reserved to promote the business.
Chaste told potential creditors it had planned a $1.5 million national advertising campaign, when in fact it had neither the means nor the intention to do so.
The court also found that Chaste made false claims about the quality of TRIMit pills and lied about scientific research conducted on the product.
ACCC chairman Graeme Samuel said the heavier than usual penalties would deter price fixing and send a strong message to individuals who violated trade law.
“Mr Foster was in jail in Brisbane when the Chaste business was set up. He was in Fiji and Vanuatu during most of the company’s short history,” Mr Samuel said.
“Even given these circumstances, he was the effective controller of the scheme.”
In reference to barrister Mr Cousins’s role as a company spokesman, Mr Samuel said the judgment warned people in positions of trust in the community to be prudent in giving their professional endorsement to business schemes.
Mr Cousins admitted in court that he knew Chaste’s conduct was illegal.
During the company’s life he represented Chaste to distributors and travelled to Fiji and Vanuatu at Chaste’s expense to receive directions from Mr Foster.
Chaste ceased operations in late 2001 and went into liquidation.
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