• by Wendy Davis  @wendyndavis, February 5, 2008

In the largest penalty to date for a Can-Spam violation, a federal judge has fined an e-mail marketer $2.6 million for making false claims about human growth hormone products and the diet supplement Hoodia.

Federal district court judge David Coar of the Northern District of Illinois ruled that the marketer, Sili Neutraceuticals, violated the federal Can-Spam act by sending e-mails that contained misleading subject lines and didn't offer an opt-out mechanism.

Coar also found that the Las Vegas, Nev. company falsely advertised the products, claiming that Hoodia could cause people to lose as much as 40 pounds a month, and that human growth hormone supplements can reverse aging.

The Sili Neutraceuticals fine will be the biggest the FTC is expected to collect in a Can-Spam case, but the agency exacted a larger settlement on paper in a 2005 deal with Hitech marketing, FTC spokesman Frank Dorman said. Hitech, also charged with touting human growth hormone supplements via e-mail, agreed to a $5.9 million fine, but all but $485,000 was suspended based on Hitech's inability to pay.

The relatively large penalty against Sili Neutraceuticals appears to reflect the FTC's view that the conduct was more serious than simply failing to comply with the technical requirements of the 2003 Can-Spam law, said Tim Tobin, a privacy lawyer with Proskauer Rose, who has represented other companies in Can-Spam cases. "The level of the fine reflects not just the violation of Can-Spam itself, but of the misleading advertising," Tobin said.

The FTC first brought charges against Sili and its principal, Brian McDaid, last August. The complaint said that Sili had been marketing Hoodia and human growth hormone supplements since 2004 via e-mail, which contained links to Web sites that made false claims about the product.