Everything You Need to Know About the GNC Herbal Supplements Lawsuit
GNC is in more hot water this past week after its own shareholders filed a lawsuit against the company, GNC Holdings Inc. (GNC).
The lawsuit is related to General Nutrition Corp (GNC)’s herbal supplements. Specifically, shareholders allege that GNC stood pat while stock prices inflated before prices eventually tumbled after it was revealed the GNC’s herbal supplements did not feature accurate product labels.
GNC Legal Issues
This shareholder lawsuit follows two legal claims that had already been filed against GNC this year, including a cease and desist order in New York and a lawsuit in Oregon.
The New York Cease and Desist Order Against GNC in February 2015
GNC’s New York cease and desist order was filed in February 2015. The attorney general’s office of New York State accused GNC of selling mislabeled products.
After that New York announcement, stock prices for GNC began plummeting. From August 5 to December 27, stock prices fell a further 43%.
Then, things became worse for GNC after the Oregon herbal supplements lawsuit was made public in October. Stock prices fell once more.
The Oregon Lawsuit Against GNC in October 2015
The Oregon lawsuit against GNC was filed by Oregon Attorney General Ellen F. Rosenblum, who claims that GNC used illegal ingredients in its products.
Those illegal ingredients included Picamilon and BMPEA, both of which are illegal in the United States. Oregon reportedly found these ingredients in dietary supplements and nutritional supplements being sold by GNC.
This practice violates Oregon’s Unlawful Trade Practices Act.
In a statement, Rosenblum tore apart GNC, stating:
“It is scary to know that certain products sold by GNC contain an ingredient that is not even labeled–let alone approved in the United States. When Oregonians buy a dietary supplement, they deserve to know that the ingredients in the products are safe and comply with the law. There are 25 GNC stores in Oregon that sold thousands of these products over the span of a couple of years.”
GNC is also accused of selling products that listed botanical acacia rigidula as an ingredient – yet they had been “spiked” with unlabeled BMPEA.
What Are Picamilon and BMPEA?
Accusing a company of adding illegal substances to their supplement is a big accusation. So what exactly are Picamilon and BMPEA?
Picamilon is a synthetic chemical developed in the Soviet Union in the 1960s. The drug is a combination of niacin and GABA. In Russia, Picamilon is sold as a prescription drug. It’s one of the few substances capable of crossing the blood-brain barrier to raise GABA levels in your brain, which then produces an anxiolytic (anti-anxiety) response.
BMPEA, on the other hand, is described as an amphetamine-like substance and works as a powerful stimulant. The full name for the substance is β-methylphenethylamine. In studies, it’s been shown to vastly increase your risk of cardiovascular events because it’s more likely to raise blood pressure than act as a stimulant.
The FDA has recently started cracking down on BMPEA after an otherwise healthy 53-year old Swedish woman suffered a stroke while working out after taking a dietary supplement (Jacked Power) that contained BMPEA. The only change she had made to her routine was beginning to take BMPEA 30 minutes before her workout.
Neither ingredient is approved in the United States.
The Shareholder Lawsuit of December 2015
As a result of New York’s cease and desist order and the Oregon lawsuit, GNC shareholders decided to take action. In December, they launched their own herbal supplement lawsuit against GNC.
The shareholder lawsuit says:
“The declines in the price of GNC common stock after the corrective disclosures came to light was a direct result of the nature and extent of defendants’ fraudulent misrepresentations being revealed to investors and the market,”
Shareholders are understandably upset about the fact that GNC misrepresented its products on product labels. But they also have an additional complaint: there are displeased by the lack of reporting by the company when things began to go south.
GNC reportedly agreed to strengthen its testing protocols after the first cease and desist order came to light, although the company never mentioned any real or potential damages or the potential for negative pressure on stock price that eventually occurred as fallout from the cease and desist order.
That lawsuit specifically targets the time period between November 28, 2011 and October 28, 2015. The lawsuit claims that GNC violated the Exchange Act through deliberately misleading actions.
The legal case for this herbal supplement lawsuit is filed under James Martin et al. v. GNC Holdings Inc. et al, Case number 2:15-cv-01522, in the US District Court for the Western District of Pennsylvania.
Stay tuned to see what happens to GNC and its shareholders as this lawsuit moves forward throughout 2016!