DNA case

An Aspen woman is suing two companies that were the subject of a federal investigation into deceptive claims about the DNA science behind nutritional supplements they were peddling.

 

An Aspen woman is suing two companies that were the subject of a federal investigation into deceptive claims about the DNA science behind nutritional supplements they were peddling.

Patricia Overton’s lawsuit says she invested over $200,000 in ForU Holdings Inc. starting in 2013. Also listed as defendants are ForU International Corp., a subsidiary; Gilbert Peter, a director of ForU, which has since dissolved; Steven Grubner, who was the president; Diego Roca, who served as chief financial officer, secretary and treasurer; Tad Ballantyne, ForU’s chairman; and Andrew Roth and Kevin Sallstrom, both of whom were also directors, according to the lawsuit.

Overton’s attorney, Peter Thomas of Aspen, wrote that his client was introduced to Peter in 2012, when ForU Holdings was doing business as Capsalus. The lawsuit, filed Wednesday in Pitkin County District Court, describes Overton as an unsophisticated non-accredited investor and Capsalus as a firm that was traded on “over-the-counter (OTC) pink sheets. OTC Markets Group, which operates the U.S. electronic trading system for OTC securities, warns that ‘the pink market is for professional and sophisticated investors with a high risk tolerance for trading companies with limited ­information available and limited regulatory oversight.”

Capsalus described itself as a wellness company that specialized in acquiring enterprises that promote “health, wellness and prosperity — be it social, ecological or otherwise — producing progressive, broad-based solutions for better individual, societal and environmental health.” To fund a “tidal wave” of acquisitions of purportedly high-yield investment opportunities, the company reported that “Capsalus director Gil Peter implemented an aggressive fundraising campaign …,” Thomas wrote, citing the firm’s growth strategy.

In promoting Capsalus to Overton, he described its acquisition of ForU International, a marketing company that claimed to be the first network sales firm to “focus on providing individually customized nutritional formulations based on a consumer’s personal DNA assessment.”

In announcing in 2014 that GeneLink — where Peter served as managing director, according to a Securities and Exchange Commission filing — and its former subsidiary, ForU International, would drop misleading disease claims, the Federal Trade Commission said that the companies agreed to settle federal charges. Among the companies’ claims were that their products could treat diabetes, heart disease, arthritis, insomnia and other ailments, the FTC release says.

They marketed nutritional supplements and a skincare product that were purportedly customized to each consumer’s unique genetic profile — one based on an assessment of the DNA obtained from a cheek swab provided by the customer. The firms claimed the supplements and skin repair serum, which each cost more than $100 per month, “could compensate for an individual’s genetic disadvantages,” the government said.

Overton, like tens of thousands of other unwitting customers, was impressed by Peter’s pitch, the lawsuit says. But she told him that she did not have the funds or ability to invest at the level he wanted.

“Nonetheless, Gilbert Peter continued to promote Capsalus as a once-in-a-lifetime investment opportunity for Ms. Overton,” Thomas wrote. “As a ‘favor’ to her, he claimed to have obtained the board’s approval to let her invest a smaller sum of money than what they were requiring from other investors.”

The attorney said the defendants were running an “apparent Ponzi scheme,” with Capsalus auditors writing in a report that “if we are unsuccessful in raising funds, we may have to reduce expenses and/or cease operations altogether.”

In 2013, Overton entered into a convertible promissory note with Capsalus for $55,000, with the understanding that it would mature by the end of that year and she would be repaid that amount plus $5,000 in “costs,” the lawsuit says, adding the company defaulted on the note and failed to pay her the balance or the costs.

The next year, the defendants allegedly convinced her to invest in a second promissory note for which she wired $140,000 to a ForU International account. Also in 2014, the FTC filed a complaint over the firms’ deceptive marketing practices, so the defendants, when they solicited Overton, knew they were being ­investigated, the lawsuit says.

In 2015, she signed a third note for $169,297, though this note intended to only amend or supersede the previous one, Thomas wrote. Her money was not used for legitimate business purposes but was misappropriated to subsidize “unrelated opportunities and fund [Peter’s] lavish personal lifestyle.”

Two phone numbers listed for ForU International were disconnected Thursday, and contact information for the remaining defendants could not be found. The lawsuit says ForU’s website no longer exists and that it has published a multitude of “seemingly fake” addresses for its corporate headquarters in various U.S. states.

The defendants and Overton eventually entered into a written, enforceable settlement agreement that called for them to make monthly payments to her, but they have only made one payment of $25,000. That was apparently wired from an unrelated bank account controlled by Peter, wrote Thomas.

The lawsuit contains claims for breaches of the promissory notes and the settlement agreement, and for violations of the Colorado Securities Act and the federal Securities Exchange Act.

Chad is a Contributing Editor for Aspen Daily News. He can be reached at chad@aspendailynews.com or on Twitter @chad_the_scribe.