continued The affidavit relates how, in 1998, the IRS Criminal Investigative Division received an anonymous letter indicating that "an accountant by the name of Michael Compton" helped Ellis and Blevins "divert cash from Metabolife." This letter charged that Compton helped the pair stash money in the secrecy-shrouded offshore tax havens of the Cayman Islands, Mauritius, and the Isle of Man. When they raided Blevins's home, federal agents sought offshore banking records from such havens as the British Virgin Islands, Switzerland, Hong Kong, and the Cayman Islands.
There was another ploy, according to the affidavit. Metabolife would send its advertising agency, California Creative, much more money than was owed. Part of that money was then kicked back to Ellis, Bradley, and Blevins, according to several former Metabolife officials. One auditor resigned the account because it could not reconcile the billings and actual advertising costs. This was not small change. "The initial review of these expenses revealed that Metabolife had been billed for tens of millions of dollars in radio time that was not supported by advertising tickets from the relevant media outlets," says the affidavit.
"It is my opinion that Metabolife had entered into an agreement allowing California Creative to overcharge it for advertising expenses," says Martinez in his affidavit. "In exchange, California Creative would kick back a portion of the excess charges to the owners of Metabolife. This would allow the owners of Metabolife to reduce Metabolife's taxes by deducting the inflated advertising expense." If the alleged kickbacks were paid in cash or by some other secretive manner, the Metabolife owners would also avoid personal taxes, says Martinez in the affidavit.
The ad agency could not be reached for comment.
Hardly surprisingly, Metabolife and its owners have been lining the pockets of politicians. In 1997, the Texas health commissioner decided to restrict sales of dietary supplements containing ephedrine. But the industry threw money around, and the commissioner shortly changed course completely. Ellis and two colleagues gave $10,000 to then-governor George W. Bush. Shortly, Blevins popped with another $5000. Later, after Bush found out about the pair's past, he returned the money. After raking in $150,000 from Metabolife, then-governor Gray Davis vetoed a bill that would have mandated warning labels for ephedra. Metabolife was ranked seventh among all pharmaceutical companies for donating more than $600,000 to political campaigns in the year 2000.