An 18-month investigation exposes a pattern of online advertising abuses
DES MOINES – Iowa Attorney General Tom Miller has reached settlements with marketers of deceptive online advertisements and fake news stories featuring Stephen Hawking, Ashton Kutcher, Bill Gates and other celebrities supposedly promoting “smart pills.”
Miller announced Wednesday that the 18-month investigation resulted in six settlements totaling $205,000 and required marketers to reform their practices or avoid Iowa altogether. The actions by the Attorney General’s Consumer Protection Division involved 22 subpoenas as investigators tried to track down marketers, many of whom operated in Russia, Ukraine, Pakistan, Canada and elsewhere.
All of the affected advertisers were online marketers of Intellux, a dietary supplement claimed to enhance mental abilities and reverse the cognitive decline sometimes associated with advanced age or disease. At least 183 Iowans spent $23,200 on Intellux, with some buyers spending as much as $300 for the grossly over-hyped pills.
“Consumer Protection investigators discovered a number of over-the-top online advertisements for Intellux, including some that went so far as to impersonate stories by legitimate news organizations, pose as neutral product reviews, or lie about having the endorsement of luminaries like Stephen Hawking,” Miller said. “It took a lot of digging, but we were able to trace some of the worst practices back to their sources and impose some reforms that should make a difference.”
Miller said it’s important to understand how a system of online advertising called affiliate marketing works to see how each of the individual cases fits into the larger picture.
- Product seller: This is any business that sets up a website to sell its product. To drive online traffic to the site, it can hire an affiliate network.
- Affiliate networks: These businesses provide a platform to coordinate the separate marketing efforts of several “affiliate marketers” to promote a given product. The network maintains a website that offers marketing opportunities to anyone who wants to try their hand at online product promotion, and the network pays commissions to affiliates who get consumers to go to the seller’s website or place an order. A network’s agreement with its affiliates may require them to obey consumer fraud laws, but the network may do little or no monitoring to ensure that happens.
- Affiliate marketers: These may be individuals sitting at computers at home, or businesses harnessing the efforts of a team of employees. Each affiliate signs up with the network to promote a particular product, receives some product information that the network got from the product seller, and earns commissions by finding creative ways to drive online traffic to the official product website to make a purchase. Too often, those creative ways of driving traffic may involve fake news sites, unauthorized use of logos and names, made-up celebrity endorsements, and promotions disguised as independent product reviews.
The Consumer Protection Division’s investigation into the online marketing of Intellux produced judgments or agreements with the following individuals or businesses:
JGG Enterprises, Inc.: This Las Vegas company and its CEO and owner, Joseph Gregory Grelock, sold Intellux directly to consumers through its website, intelluxsupplements.com. Miller alleged the website made numerous deceptive and unsupported claims for the pill’s brain-boosting powers, including the claim that people aged 40 to 65 had “drastic increases” in short and long-term memory. JGG generated more than $23,200 in Iowa sales of Intellux in 2015 and 2016, mostly to older Iowans. As announced last December, JGG and Grelock agreed to the terms of a consent judgment that barred misleading brain-booster claims and other deceptive claims to Iowans, and required a payment of $35,000 to refund Iowans and cover investigative costs.
Convert2Media, LLC: Based in Ocoee, Florida, this affiliate network arranged for commissions to be paid to more than 600 affiliate marketers for promoting Intellux or other products through a variety of online advertising tactics. About half of these affiliates were operating from outside the U.S. Their home countries included Russia, Ukraine, Pakistan, India, China, Singapore and Canada. Miller noted that when a deceptive online ad originates in another country, U.S.-based law enforcers find it much harder to stop it at its source and remedy the harm. According to Miller, by enabling operators around the globe to profit by “creatively” pitching products to Iowans online, an affiliate network like Convert2Media has a legal obligation to monitor the advertising being produced and to cut off support from bad actors. Miller said Convert2Media did little monitoring and failed to act even when it knew that the web addresses created by some of its affiliates contained terms like “Forbes-USA,” “Fox News,” and “Doctor Oz” -- red flags that ads were being disguised as news stories. In addition, Convert2Media’s affiliate marketers made a range of blatantly deceptive claims for Intellux, such as claims that Intellux would produce “extreme IQ effects,” improve memory “by 60%,” help prevent “all strokes” and “premature aging,” and that the U.S. military had tested it in Iraq and became a major purchaser. A consent judgment entered Tuesday by Polk County District Judge Paul D. Scott ordered the company to monitor its affiliate marketers’ advertising practices and drop any that are found to impersonate news sites or mislead consumers in other ways. In addition, while noting that Convert2Media denied wrongdoing, the judgment ordered the company to pay $100,000 to support future enforcement of Iowa’s consumer fraud laws.
Top Source Media, LLC: This Minneapolis company and its owner and CEO, Robert Hurst Anderson, were affiliate marketers in Convert2Media’s network. As such, Top Source promoted Intellux online, along with many other dubious merchandise, such as male enhancement pills, anti-aging remedies and money-making schemes. Top Source ads made unsupported claims that Intellux prevented the negative effects of aging on the brain, was a highly advanced “smart pill” that would speed up learning, and was better than prescription medications for some purposes, like treating Attention Deficit Hyperactivity Disorder (ADHD). On February 26, 2018, Polk County District Court Judge Paul D. Scott entered a consent judgment that ordered Top Source and Anderson to refrain from making any unsupported claims for merchandise, in particular health-related claims for products like Intellux. The consent judgment acknowledged that the defendants denied any law breaking, but ordered them to pay $45,000 to support Iowa’s consumer fraud enforcement efforts.
Mass Marketing, LLC: This Wilmington, Delaware, company and its owner, Jason Shaw, who also goes by the fictitious name “James Smith,” acted both as an affiliate network and as affiliate marketers through Convert2Media. Their network, called NutraCash, enlisted the efforts of affiliates in Pakistan, Ukraine and other countries to market Intellux and other merchandise. One Pakistani marketer operating through Shaw’s operation presented Intellux ads disguised as independent product reviews. These “reviews” concluded that Intellux produced “extreme” IQ effects, was effective in treating “senile dementia,” and was regarded by scientists as “Viagra for the brain.” A consent judgment entered on February 21, 2018, by Polk County District Court Judge Jeanie Vaudt ordered the defendants to monitor the ads of their network’s affiliates to prevent consumer fraud, and also to refrain from any deceptive advertising of their own. Although the judgment recited the fact that the defendants denied any illegal conduct, it also ordered them to pay $25,000 to the state’s consumer fraud enforcement fund.
Garrett M. Blasko and Jesse Reinle: These San Diego residents engaged in affiliate marketing through Convert2Media’s network. They maintained the website mentalwellnessandhealth.com, which pretended to answer the question, “Is This Smart Drug the Most Powerful Brain Enhancer in the World?” The website included a series of outrageous claims, including the claim that Intellux doubles thinking ability, had replaced prescription Adderall as the brain-booster of choice on college campuses, and had been banned by quiz shows for the unfair advantage it gave some contestants. The site even included the personal testimonial of the supposed “editor-in-chief” of a non-existent magazine called HealthyStart Magazine. Both claimed to have been short-term participants in affiliate marketing and agreed through Assurances of Voluntary Compliance to refrain from any online marketing directed at Iowans. A $5,000 payment was suspended as long as they complied with the Iowa ban.
“We traced one of the very worst ads, a bogus endorsement of Intellux falsely attributed to Stephen Hawking, to a Canadian operation that was very hard to reach, given the international boundary,” Miller said. “When a fraudster sitting at a computer in Canada, or Russia or China can use all manner of lies and trickery to cheat consumers, we need to give some attention to the domestic operations, like affiliate networks, that provide the infrastructure that makes it possible.”
Online health marketing general cautions
The familiar adage, “If it sounds too good to be true, it is almost certainly not true,” has special application in the wild-west, no-holds-barred context of online promotions. More specifically:
- Don’t assume that every eye-catching announcement framed as news from a trusted source is necessarily legitimate. The unauthorized use of names, logos and designs to create fake news stories is all too common.
- Consumers should be wary of ads boasting extraordinary health benefits for products. Claims like “scientific breakthrough” and “miracle cure” are almost always more about marketing than responsible treatment.
- Be aware that dietary supplements (like Intellux) can go on the shelves without proof that they are safe or effective, unlike prescription drugs that must be scientifically tested before going public.
- When claims relate to your health, get advice from trusted professionals who know you and are well-situated to evaluate the best treatments for you. They are typically the most reliable source of help in dealing with health challenges.
- There is no substitute for bringing a healthy dose of skepticism to every appeal for your money. For every online promotion touting a legitimately great buy, there are many bent on cheating you through clever ruses and outright lies.
For more information or to file a complaint, contact the Consumer Protection Division through the Attorney General’s website at www.IowaAttorneyGeneral.gov or email directly to firstname.lastname@example.org. Consumers can also call the Consumer Protection Division at 515-281-5926, or outside the Des Moines area, toll free, at 888-777-4590.