Nutri/system Is Target Of Suit Charging Fraud

Posted: December 13, 1986

A Chester County man filed a $17 million suit yesterday against Nutri/ System Inc. and its former president, Harold Katz, charging the Malvern- based weight-loss company with fraud, breach of contract and violations of the Racketeering Influenced and Corrupt Organizations Act.

The suit, filed late yesterday in U.S. District Court in Philadelphia, charges Katz and other defendants with, among other things, devising a scheme to defraud overweight people "by marketing medically unsound and dangerous" diet programs, programs that, the suit says, led to the deaths of two individuals.

"In connection with this scheme, all the defendants participated in a further fraudulent business scheme to market these diet programs to franchisees by means of fraudulent claims of medical and business expertise,"

the suit alleges.

Neither Katz nor current officers of the company could be reached for comment yesterday.

The complaint, which was filed by Alfred G. Gonzalez, a Glenmoore man who purchased the franchise rights to Nutri/System in Washington and Virginia, is the latest of a series of lawsuits and other legal entanglements that have plagued Katz and Nutri/System in recent years.

One of the suits against the company was a class-action complaint filed by 280 dissatisfied owners of Nutri-System franchises. That suit was later settled.

Katz, the multimillionaire owner of the Philadelphia 76ers who founded the weight-loss chain 14 years ago, sold the company earlier this year to senior managers in a deal reportedly worth more than $69 million.

In the suit filed yesterday, Gonzalez, who purchased his franchise rights in 1977 and sold them in 1979, charged that despite oral and written representations from Nutri/System and its representatives, the company did not conduct medical research or testing of any kind for its liquid protein diet, which once formed the basis of Nutri/Systems' weight-loss programs. The company no longer markets liquid protein.

It was not clear from the suit why Gonzalez, who acquired the franchise operation almost a decade ago, is filing suit now. Gonzalez and his attorney, Perry F. Di Cola, could not be reached for comment.

The suit also names as defendants Norman Horvitz, an osteopathic physician who is described in the suit as Nutri/System's former medical director, and S.Laurence Shaiman, an attorney who served as general counsel for the company.

Neither of the men could be reached for comment last night.

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