Tuesday, May 11, 2010

The Power To Crush

During the health care debates, there was a whole lot of teeth gnashing and finger pointing about so-called "death panels."

Liberals said it was all nonsense. They said that creation of a few governmental committees would only be used to help make "informed" decisions based on science.

Others, were not so sure.

The power of government, is the power to crush. Much like the expression "the power to tax, is the power to destroy." An individual who gets caught up in the gears of bureaucracy, is not a pretty sight.

Anybody who has been on hold at the DMV knows this.

God forbid you get targeted by a federal behemoth like the Federal Trade Commission. (FTC). Skip Oliva picks up the story from here...

Bill Isely is an 85-year-old retired systems engineer living in North Carolina. Since the 1990s, he's run a small business out of his home selling herbal products and dietary supplements. Everything he sells is perfectly legal; he even registered with the FDA after some post-9/11 rules were enacted (I don't see the relationship between herbs and terrorism, but okay). Isely doesn't do business over the Internet and relies primarily on telephone orders with established customers.

One of Isely's foreign suppliers started using his name and contact information in connection with one of its websites. This was all done without Isely's knowledge or permission. One of the websites got caught up in a Federal Trade Commission investigation. The FTC, you see, pays its investigators to surf the Internet for porn — er, websites that make claims about the medicinal use of herbs and natural supplements. The FTC's position, which has no legal foundation, is that nobody is ever, ever, ever allowed to even discuss the medicinal use of such products (that is, non-FDA-regulated products) unless they present "reliable and competent scientific evidence." Which sounds great until you realize the FTC — a bunch of lawyers with no scientific or medical training — are the sole judges of what constitutes "reliable and competent scientific evidence."

Anyhow, an FTC investigator in Atlanta comes across this website claiming that a type of mushroom juice had been used in a protocol to treat cancer. The website's details were laughably sketchy. But the investigator pounced. He did a WHOIS search on the domain, which revealed Isely's name and that of another man (the actual owner). The investigator only targeted Isely, however. Indeed, even though other individuals and retailers were mentioned on the website, none of them were ever investigated.

Just Isely.

The WHOIS search turned out to be the majority of the FTC "investigation." The only other thing the investigator did was go to the website where he made two purchases of the mushroom juice — which, again, is a legal product in the U.S. — using government-issued credit cards containing fake names. Yes, the FTC actually makes fake purchases on the Internet. Why, you may ask? Because the FTC wanted to prosecute Isely for harming consumers through false advertising — except that no customers had actually complained to the FTC. Hence, the FTC had to manufacture sham transactions to "prove" Isely was engaged in interstate commerce.

Now, the website belonged to the supplier. When the investigator got his receipt and credit card statements, the foreign supplier was clearly identified as the seller. However, as a courtesy to the supplier, Isely fulfilled the orders from his own stock (after all, why send mushroom juice from Brazil when a guy in North Carolina has extra). But Isely never saw a dime from the sale. Didn't matter. Once the investigator saw Isely's address on the package, that was all the "evidence" the FTC needed to sue Isely for disseminating false advertising.

Note the FTC never called Isely to clear this whole thing up. They just sent him a letter, with an enclosed "consent order," demanding he sign it or face prosecution. They wanted him to admit to running a website he had no control over! Isely fought them in court — actually, an FTC-appointed court — and managed to prevail about a year later. The judge said the charges amounted to nothing more then "guilt by association," and that the FTC's own poor investigation prevented discovery of the website's true operator (who to this day has never been investigated, probably because he's not a U.S. citizen).

Unfortunately, Isely's victory cost him about $130,000 in attorney fees, expenses, and lost business. Federal law does allow him to recover some of that, but when he petitioned the FTC judge, he got nothing. Zero. The same judge who cleared him of the charges turned around and said that since the government was nevertheless "substantially justified" in prosecuting him in the first place, he's entitled to no compensation. Huh?

Basically, the judge said the WHOIS search and the "undercover purchases" were enough for a "reasonable person" to believe Isely had disseminated and benefitted from the allegedly false medical claims on the website. Even though the FTC made the purchases, and clearly it didn't think the claims were true. Even though there were other people clearly identified as connected with the website that the FTC never investigated much less prosecuted. Even though all of the actual evidence showed Isely never conducted any substantial business over the Internet.

Isely still has a last-ditch appeal on his attorney fee petition to the FTC commissioners, the same group that authorized this case in the first place. It doesn't look good. And to add insult to injury, the FTC "accidentally" published a confidential document containing all of Isely's personal financial information — SSN, tax returns, bank account statements — on its own website. It was out there for about a week. It's also a violation of federal law, and when I asked the FTC official responsible, he hemmed and hawed and "no commented" me when I asked if he'd broken the law.

Fun times at FTC!

Skip is a legal writer who is also a big sports fan. You can read his blog here.


  1. Don't worry. The government will do a great job running health-care, though.

  2. And why is this being posted on a so-called "SPORTS" site? Czabe, we get it: You despise the government.

  3. @Dave! With this government that has designs to take over every square inch of your life, Czabe also can see the beginnings of just how this will eventually spill over into the sports world. Notice how congress is doing hearings on steroids and other enhancements? Will then the next step be that the U.S. government seize the sports medicine sector?

    @Czabe - I could speculate that the connection of household pharmaceuticals to terrorism is the easily mixed powder and other dangerous chemicals that could be used as WMDs. A baggy of ground up Tylenol can look just like a bag of umm.. something else illegal.