Medifast is either a great way to slim down or a big, fat Ponzi scheme, depending on which ex-con you believe.
On one side: An inmate-turned-fraud-investigator you've never heard of, Barry Minkow, who says the Owings Mills weight-loss products firm is scamming customers.
On the other, the inmate-turned-radio-host you do know, Ed Norris, who says the diet's working for him.
So far, Wall Street has sided with Minkow - if only because the street hasn't seen Norris in his skinny jeans. Medifast saw its stock shed value last week like celebrity pitchwoman Genie Francis sheds weight.
(Apparently when you're no longer fighting off Luke Spencer at the General Hospital disco, the pounds can pile up. But thanks to Medifast, Francis is down 43 pounds. And thanks to the purported fraud-buster, company stock is down 36 percent.)
Minkow spent seven years behind bars for stock fraud and conspiracy. He claims to have seen the light and become a fraud investigator. It takes a thief, right? His San Diego-based Fraud Discovery Institute came out with a report last week on Medifast's direct-selling division, Take Shape for Life.
"No other meal replacement company ventures into a customer's personal financial life as an integral part of its diet regimen," the report states. "Its prescription for how to achieve 'healthy finances' is specific. It means signing up as a Take Shape for Life 'coach,' an unpaid, independent distributor, authorized to recruit other coaches in an endless chain pay incentive plan."
In a conference call with investors, Medifast CEO Michael McDevitt defended the business model as legitimate, The Baltimore Sun's Lorraine Mirabella reported. Medifast also suggested that Minkow could be up to more stock-market shenanigans, by selling Medifast shares short just as his report drove down their value.
The for-profit Fraud Discovery Institute's own Web site acknowledges: "Barry Minkow almost always holds a position in securities reported on, or profiled by, FDI websites. Neither FDI nor Mr. Minkow will report when a position is initiated or covered."
So where does all this leave Norris, the former Baltimore police chief who also did time and went on to become a popular radio host?
Un-Supersized!
At least as far as I can tell over the radio. In about five weeks, Norris has lost more than 20 pounds on Medifast, he's told WHFS listeners.
