Mannatech settles Texas lawsuit

Mannatech (NASDAQ: MTEX), that ever-sleazy multi-level marketing company specializing in the sale of miracle pills, has settled a lawsuit with the Texas Attorney General involving the company's marketing practices.

Mannatech will pay $4 million in restitution to customers and $2 million to the state to cover its investigation expenses. Sam Caster, the company's founder, former chairman, and largest shareholders, will also pay $1 million and be barred from serving as an employee, officer, or director of the company for five years.

In 2007, Texas' attorney general filed a lawsuit accusing the company of exaggerating the benefits of its products, based on marketing materials produced by the company's independent distributors, which claimed that Mannatech vitamins could cure cancer and down syndrome.

Shares of Mannatech still trade on the NASDAQ for around $3 per share. In a press release, the company's CEO said that Mannatech has made significant changes to its operations since the investigation began, including the devotion of more resources to monitoring distributor compliance. But the fact is that Mannatech sells an overpriced product through a multi-level marketing structure that is rife with potential for consumer abuse.