In mid-March, George Klipfel II, a retired laboratory scientist from California, received an email with an ad urging him to buy an “immunity oil” to prevent him from getting the coronavirus sweeping the U.S. The 67-year-old says he had “no doubt” the claims were bogus and promptly deleted it. A day later, he got another email. Then another. And then one more—all hawking the same product as a way to stop the virus, a claim that’s illegal in the eyes of federal regulators.

“I’m always disappointed when someone tries to take advantage of tragedy to turn a profit,” Klipfel says.

Of course, hucksters have a long history of separating people from their money by playing on their fears. But while snake oil salesmen of the past hawked their wares at circus sideshows or in the back of magazines, now they have the internet, where it’s quick and inexpensive to find millions of potential customers.

An investigation by Consumer Reports shows how easy it is for ads touting dubious cures to reach huge numbers of consumers and how complicated it is for overtaxed regulators to clamp down on the ads.

More on Dietary Supplements

Such ads have “infested” the internet, according to the Better Business Bureau, because a growing number of companies have taken to the web to sell sketchy dietary supplements and other “health aids.” In many cases, these involve duping consumers into signing up for a free trial, only to find that they have been unwittingly enrolled in a costly auto-renewal subscription.

But the damage to consumers is not just about money lost and the frustration of trying to get it back. It’s also about the exposure to potentially unsafe products. Unlike pharmaceuticals, supplements don’t have to be proved to be safe and effective before they’re put up for sale.

For regulators, it can be a struggle to weed out scammers, especially at a time when those agencies have been flooded with complaints. “Every state’s attorney general and the Federal Trade Commission is overwhelmed,” says David Vladeck, a former director of the FTC’s Bureau of Consumer Protection and now a law professor at Georgetown University in Washington, D.C.

CR’s investigation found that the business of moving the merchandise, through robocalls and spam emails and texts, often relies on the help of numerous parties—marketers, payment processors, suppliers, retailers—who allegedly work hand in hand and are structured in ways that insulate them from legal and financial backlash.

The investigation included a review of hundreds of pages of corporate filings, court records, and documents obtained through public records requests, as well as interviews with advocates, lawyers, and consumers.

Justin Brookman, director of privacy and technology policy at CR and a former FTC official, says consumers often assume the online marketplace for supplements is well-regulated. “In reality, consumer protection authorities are woefully understaffed and can pursue only a fraction of the scams,” he says. “And then the regulators have to peel back the layers to find out what’s going on. Meanwhile, people keep getting ripped off.”

A Window Into a Hidden World

Klipfel says the ad he received was similar to ads cited in an April 1 cease-and-desist letter issued by the New York state attorney general to a company called Finest Herbalist. (Click on the link to see the web of connections among the players involved in this article.) The attorney general’s office wrote that it was “extremely concerned” about claims presenting one of the company’s products—a blend of essential oils called Pure Herbal Total Defense Immunity Blend—in emails, texts, and fake news stories as a cure for the coronavirus.

Finest Herbalist didn’t respond to multiple requests for comment, and customer service representatives said they couldn’t answer questions about the cease-and-desist letter. But CR—through an analysis of corporate documents and website code—found that Finest Herbalist is affiliated with a company called Offer Space, one of a network of interconnected firms owned by Unified Funding, based in Wyoming.

Unified’s family of companies often work together to help clients launch an online business selling dietary supplements and other “natural health products” through websites such as Finest Herbalist. Those companies have been accused in lawsuits and Better Business Bureau complaints of sketchy marketing tactics to peddle unproven products and of allegedly roping customers into costly auto-renew subscriptions.

Websites created for clients are given unique brand names, records show, which can complicate figuring out who, exactly, is behind a particular online retail site. Indeed, it isn’t clear whether Finest Herbalist is the name of a company or a brand name ascribed to it by Unified’s family of companies. The only information about Finest Herbalist listed on the letter issued by the New York attorney general’s office—which declined to comment, citing an ongoing investigation—is a P.O. box in Utah.

CR attempted to contact multiple current and former employees and attorneys linked to Unified’s family of companies, who either didn’t respond or declined to comment. An attorney named Damon Wright ultimately did contact CR, and passed along answers from Offer Space to CR’s questions about that company as well as about Unified and its affiliated companies.

Those statements didn’t directly confirm that Finest Herbalist was the company cited in the New York case, saying only that an unnamed client did receive a cease-and-desist letter. Any bogus marketing related to Pure Herbal Total Defense Immunity Blend was the fault of contractors paid to drive traffic to the website where the product was sold, one statement said, and “swift action” was taken to try to have the content removed from the web.

“It’s a shell game . . . an attempt to mask their business identities and protect themselves from liability.”

-Joe P. Leniski Jr., attorney

Finest Herbalist and Unified Funding’s family of companies are hardly unique: Hundreds of businesses probably have similar models. But New York’s legal action, along with lawsuits related to Unified’s affiliated companies, provide a view into the complicated online world where alleged scammers operate.

Unified’s subsidiaries together function as a turnkey business opportunity for would-be supplement entrepreneurs. Marketing for their products in some cases appears to be tailored to the fad or crisis of the moment. For example, while it’s unclear exactly when Pure Herbal Total Defense Immunity Blend was introduced, when the coronavirus outbreak began some of the product’s ads preyed on consumers’ concerns about the virus.

The products are marketed through third-party contractors who use an ever-shifting mix of robocalls, spam, and social media ads that, according to lawsuits, include phony celebrity endorsements and literal fake news.

“While the world is waiting for a vaccine, one mom has found a solution to fight back against the coronavirus outbreak,” said a headline of a fake news article about Pure Herbal Total Defense Immunity Blend made to look like it had run on Fox News. Despite the warning from New York’s top law enforcement official, CR found two similar phony articles online in June.

The ads were not authorized, according to a statement passed along by attorney Wright.

But while companies may blame contractors for bogus ads, the FTC says it has brought legal actions against other companies, alleging that they’re responsible for the actions of third-party marketers who work on their behalf.

A Complicated Web

Last December, Jean Stone of Ontario, Canada, saw a Facebook ad promoting one of those products, an oil sold by a company called First Class Herbalist CBD, and decided to click through. “It sounded like it could help my husband,” she says. And, as long as she covered shipping, it was free. “Of course,” Stone says, “they get you that way.”

What Stone, 62, didn’t realize was that she’d stumbled into the complicated world of Unified Funding.

Unified says it helped process consumer transactions worth $69 million in 2019. The company claims to have amassed a database of information on more than 1 million customers.

Much of the company’s revenue appears to come from Offer Space and two other subsidiaries it acquired last year: Traffic Space and Real Oil. Unified’s co-founder, Ryan Hoggan, and a handful of others have roles across those subsidiaries, all sharing an address in American Fork, Utah.

Those subsidiaries are involved in the part of Unified’s business that helps client companies sell supplements and other “natural” products online.

Offer Space, of which Hoggan is former president, manages clients’ websites and customer service. Once a client’s website is ready, Traffic Space—whose registered corporate agent is Christopher Armstrong, also an executive at Offer Space—handles marketing, mostly by farming it out to third-party agencies. Real Oil—where Hoggan was once president and partner, and Armstrong was a principal—manages a client’s supplies and fulfills customer orders.

The connections get knottier still. Unified also has a majority stake in a company that owns Desert Lake Group, an online retail company that, records show, sold products by contracting as a client of Offer Space, Real Oil, and Traffic Space. Armstrong and Hoggan were former managers of Desert Lake, whose registered agent is Darin Toone—himself once a president of Offer Space and Traffic Space. Records show Desert Lake operated out of the same American Fork address.


Do you have information on dietary supplements that you want to share? Contact reporter Ryan Felton at ryan.felton@consumer.org or submit a news tip.
 

Desert Lake is also affiliated with a man named Jared Forbush. The FTC issued a warning last year to 4Bush Holdings, a different company owned by Forbush, for allegedly making exaggerated product claims, according to government records. Desert Lake paid Forbush a monthly commission for unspecified work, records show, and in early April, 4Bush and Desert Lake merged.

As a client of Unified’s family of businesses, Desert Lake sold products through websites with unique brand names, records suggest. Multiple plaintiffs have alleged that one such site affiliated with Desert Lake was First Class Herbalist CBD—the website from which Stone tried to buy her product.

If the corporate structure sounds complicated, it is—and it may be intentionally so, experts and plaintiffs’ attorneys say.

“It’s a shell game,” says Joe P. Leniski Jr., an attorney representing an Arkansas consumer who claims one of the group’s affiliated companies illegally texted him ads for natural products. “It’s a deliberate attempt to mask their business identities and protect themselves from liability.”

That the companies are separate legal entities can make it hard for consumers seeking refunds. “It creates some degree of plausible deniability,” says CR’s Justin Brookman. “At the very least, these complicated corporate structures can slow regulators, reporters, or consumers just trying to figure out what’s going on.”

When reached by a reporter, Toone said to call back, but later calls from CR went straight to voicemail. When CR reached him from a different phone number, Toone said, “I have no comment on anything,” before hanging up. Hoggan, Armstrong, and Forbush did not respond to requests for comment.

‘Shut Down’ These Companies

Tracing the lineage of the CBD product Stone tried to buy illustrates how complex corporate relationships can result in practices that allegedly harm consumers while also shielding the companies from liability.

Stone says she never received the CBD oil she’d ordered. Instead, her credit card was billed $89.99 for what seems to be an automatic refill plan that she says she was unknowingly enrolled in. She was also assessed multiple bogus charges—ranging from $7 to $10—from vendors she’d never heard of, she says.

Eventually, Stone had to cancel her Visa card to stop the billing. She kept trying to reach a helpful ear at customer service but got nowhere, until in February, when she says she received checks in the mail from another company she’d never heard of, First Class USA. That’s another name for Natural Brands USA, which—no surprise—is a subsidiary of Unified, according to records filed in May with the Canadian Securities Exchange. (The statements passed along by Wright deny that Unified owns First Class USA, contradicting what the documents say.)

The checks were ostensibly meant as a partial refund for the charges. But Stone has no plans to cash them. The memo line for each says, “firstclassherbtincture.com,” a website she says she never went to.

These companies, Stone says, “need to be shut down.”

How to Make a Sale

The type of advertising Stone encountered is known as affiliate marketing, a business model in which a company pays contractors who bring customers to its website. For example, in late June, affiliate marketers were being offered $95 per sale if they delivered a customer for the Pure Herbal Total Defense Immunity Blend essential oil, the product cited by the New York attorney general.

Affiliate marketers typically don’t use traditional ads but instead create content on social media and in emails, texts, and more that link to websites where purchases can be made. The model is legal. But the commission incentive can attract less-than-savory contractors who use unseemly tactics to promote products, says John Levine, president of the Coalition Against Unsolicited Commercial Email, a nonprofit advocacy group.

And coming by a list of consumers to target seems easy. One website CR reviewed offered a database of 180 million email addresses for just under $200. “Too many affiliate marketers do minimal due diligence on who they sign up,” Levine says, and the person sending the content “often only has the most tenuous relationship with the thing he’s promoting.”

Traffic Space, the marketing firm owned by Unified, uses affiliate marketers but also monitors online ads to ensure that they don’t make inappropriate claims, according to a statement passed along by Wright.

But lawsuits filed in California and Utah suggest otherwise. Eleven former clients of Traffic Space, Offer Space, and Real Oil allege that the companies rely on affiliate marketers who use fake celebrity endorsements, fake news, exaggerated results, “and similar deceptive advertising tactics to drive traffic” to their websites, potentially exposing them to regulatory action.

A statement passed along by attorney Wright denied the claims and said the plaintiffs are former “disgruntled” clients who wanted to “avoid paying for services rendered.”

Lawsuits, previous reports, and government records allege that the companies have been linked to bogus advertising that claimed their clients’ products were endorsed by the popular TV shows “Shark Tank” and “The Dr. Oz Show.” “Jamie Richardson from Dallas Texas just netted one of the biggest deals in Shark Tank history,” one ad said.

Mehmet Oz, MD, of “The Dr. Oz Show,” told CR he has tried “for years” to shut down such bogus ads, and he called on companies such as Facebook and Google to “take responsibility for what they display to consumers.” A “Shark Tank” representative didn’t respond to requests for comment.

A statement passed along by Wright says the company “takes diligent measures” to ensure that its clients do not use those sorts of ads.

Spam Galore

While Jean Stone was lured by an ad on social media, other consumers say they were inundated with unsolicited messages with links to products on websites affiliated with Unified through its subsidiaries.

Patricia Wheatley, a 64-year-old Texas resident, received a text from an unknown number in January containing a link to a website to buy CBD gummies, something she says she doesn’t use. Screenshots of the website showed a warning of a “limited supply” due to “high media demand.”

Wheatley, who enrolled in the Do Not Call Registry in 2007, tried running down who was behind the text, but it wasn’t easy. She sent one email to customer service, on March 2, writing, “I’m hoping we can resolve this in a civilized manner ASAP.”

She attached a letter detailing what she saw as violations of the Telephone Consumer Protection Act, which created the Do Not Call Registry, including screenshots of the texts she’d received.

After a month of silence, a second attempt on April 2 generated an automated response that said she’d receive “more information shortly.” “I want your legal counsel to contact me!!!!” she responded.

That message appears to have gotten someone’s attention. In late April, she received an email from an attorney representing Desert Lake Group, the retail company affiliated with Unified. Wheatley, though, has no idea what will happen next. “I can’t stand this company,” Wheatley says.

“It would be galling if a company allegedly profiting from fake COVID-19 cures was propped up by government aid.”

Justin Brookman, CR advocate

Several weeks into reporting this story, a CR reporter ended up on the receiving end of some unexpected texts, as well. "TUMERIC (sic) + PURE CBD OIL, helps reduce pain & inflammation," the text says. The link provided in the text redirected to a website, tamiasherbtincture.com, which resembled previous client pages operated by Offer Space. The contact page included a phone number that's used by another website, Natural Herbal CBD, which shares source code used by other Offer Space-affiliated websites.

CR didn't receive an answer to questions about whether the website is affiliated with an Offer Space client. Less than an hour after sending the request for comment, a CR reporter received a text from a different number, saying: "You have been unsubscribed from our marketing campaigns." 

Unified’s subsidiaries allegedly operate in other ways that harm consumers, too, according to lawsuits. For example, websites created for clients sometimes include incorrect email addresses, one complaint says, so consumers who try to contact customer service have emails bounce back.

Indeed, in interviews with CR and complaints to the Better Business Bureau, numerous consumers describe difficulty reaching customer service for websites associated with Unified’s family of companies.

A statement passed along by attorney Wright says that Desert Lake’s alleged conduct was due to rogue affiliate marketers, not the company itself.

$3 Million Lost?

Consumers aren’t the only ones alleging that they were fleeced by Unified’s subsidiaries. According to lawsuits filed by the 11 former clients, Offer Space, Traffic Space, and Real Oil scammed them out of at least $3 million. They also allege that the companies “misappropriated” consumer data and, in turn, spammed consumers with ads for their own and third-party products.

When the former clients conducted test buys of their own products in March 2019, one of the email accounts they used received at least 230 “emails marketing other related products,” one lawsuit alleges. The clients’ lawsuits allege that charges for products customers purchased on websites handled for them by Offer Space were credited to bank accounts linked to the defendants.

That allegation fits the description of credit card laundering. According to the FTC, merchants engage in laundering to hide their “true identity from consumers, the acquirer, the card networks, and law enforcement.” With limited exceptions, the FTC says, a merchant has to process a transaction through its own merchant account and not that of another merchant.

Last spring CR conducted a test buy of its own, purchasing two bottles of Total Defense Immunity Blend from Nature’s Exclusive CBD, a brand that Unified Funding recently sold. The wrong product was delivered—and trying to track down anyone to complain to was difficult. The charge showed up as having been processed by a company called Dinomys Keto, which lists another company, Red Roxelle LLC, as the point of contact.

That company, it turns out, was incorporated in March by an individual a few doors down from an address previously affiliated with Unified’s co-founder, Ryan Hoggan. No one answered repeated calls to customer service. When CR did reach a phone number connected to Red Roxelle, the person answering said it was a wrong number.

A statement passed along by Wright didn’t explain why the order was processed this way, but said that “the location of Red Roxelle … appears to be coincidence.”

Going Broke?

Despite the many allegations against Unified’s family of companies, corporate records indicate that the company itself is doing just fine.

In January, Unified brokered a deal with Canada-based Mota Ventures to buy one of its brands, Nature’s Exclusive, in a deal valued at $32 million. Soon after, Mota—which didn’t respond to multiple requests for comment—named Hoggan its CEO. In June, Mota said it would acquire all of Unified—including Offer Space, Traffic Space, Real Oil, and the company that owns Desert Lake—for a deal valued at $45 million. (Mota changed its name to Thoughtful Brands Inc. in August.)

Yet in April, Desert Lake Group filed for bankruptcy, citing dozens of consumer claims for violating robocall laws. The potential damages are so high, the company said in a filing, that it needed bankruptcy to pay its bills. Just prior to that filing, records show that Desert Lake’s registered agent, Toone, incorporated DLGH, which is now the sole owner of Desert Lake Group.

Later, in June, Offer Space and Traffic Space told a judge, during a court hearing in an alleged fraud case against them, that they’ll have to close up shop if forced to repay a former client the almost $1 million demanded.

And just months after Finest Herbalist was cited in New York for allegedly marketing a product as a coronavirus cure, Offer Space and Traffic Space say that the pandemic has hurt business. The damage is so bad, in fact, that they say they needed to apply for—and were granted—federal assistance through the federal Payroll Protection Program, which was started to help companies harmed by the coronavirus pandemic.

CR’s Justin Brookman noted the irony: “It would certainly be galling if a company allegedly profiting from fake coronavirus cures was being propped up by government aid meant to offset damage the virus has done to the economy.”

Editor’s Note: This article also appeared in the October 2020 issue of Consumer Reports magazine.

Complex Web of Unified Funding Companies
FINEST
HERBALIST
OFFER
SPACE
UNIFIED
FUNDING
TRAFFIC
SPACE
REAL
OIL
RED
ROXELLE
RYAN
HOGGAN
CHRIS
ARMSTRONG
DARIN
TOONE
FIRST CLASS
HERBALIST
CBD*
NATURE'S
EXCLUSIVE
CBD
FIRST
CLASS USA
MOTA
VENTURES
DESERT
LAKE GROUP
DLGH
Source: CR’s analysis of corporate records, lawsuits, business filings, and other documents indicating or alleging current or past connections between businesses (such as ownership stakes, client relationships, and product sales transactions) and positions or roles within those companies (such as founder, president, and principal). *According to allegations in a lawsuit, First Class Herbalist CBD is a “doing-business-as” name for Desert Lake Group; CR was not able to independently confirm that allegation.