Ted Cruz’s Father Worked With Supplements Maker Sued by Investors
By MEGAN TWOHEYAPRIL 29, 2016
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Rafael Cruz and his son, Senator Ted Cruz of Texas, at the Family Leadership Summit in Ames, Iowa, in 2013. Credit Daniel Acker for The New York Times
By 1990, the oil-services company Rafael Cruz had founded with his wife had collapsed. Their properties had been foreclosed on; they declared bankruptcy.
“We assumed the downturn was temporary and struggled through the lean times, hoping for a change that never came,” he wrote in a memoir, “A Time for Action,” released in January of this year. “We lost everything, including our home.”
Mr. Cruz’s inspirational tale of fleeing Cuba and making it in America through faith and hard work has stirred crowds across the country as he campaigns on behalf of his son, Senator Ted Cruz of Texas.
But missing from the elder Cruz’s speeches and his otherwise detailed memoir is how he made ends meet after his financial undoing by working with Mannatech, a religiously inspired dietary supplement company whose history of questionable health claims has already popped up in the Republican presidential race.Mr. Cruz became a top salesman for Mannatech, according to interviews and court records. For several years he also was a consultant to Mannatech’s founder, a role that landed him in a federal lawsuit brought by investors over the company’s sales practices. Allegations against Mr. Cruz were ultimately dropped from the suit.According to the lawsuit, Mr. Cruz was the company’s “Mexican director” and was “trying to get individuals in Mexico or who traveled to Mexico to agree to accept large shipments of Mannatech products, which the recipients were then supposed to resell to customers in Mexico.”At the time, Mannatech did not have permission to sell in Mexico.
“This was ‘a way around’ the rules against Mannatech selling directly in Mexico,” the lawsuit said.
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Asked about Rafael Cruz’s work for Mannatech, the Cruz campaign said that he had been a salesman and consultant for the company, but that he had never tried to sell its products in Mexico. It said the allegation in the lawsuit was “not an accurate representation of what happened,” without elaborating. Rafael Cruz did not respond to written questions submitted to the campaign.
Mr. Cruz’s memoir makes only brief reference to what he did after his own business, which analyzed seismic data for oil companies, dried up. “We were in dire need of income, so I began working for a company that required extensive travel,” Mr. Cruz wrote. “Monday through Friday I worked in Mexico, opening an office, and then I flew home for the weekend.”
The Cruz campaign said he had never traveled to Mexico for Mannatech, but it did not say what company he was working for at the time.
Mannatech’s rocky legal history — it was also sued by the Texas attorney general — came up in a Republican debate in October, when Ben Carson, the retired neurosurgeon who was still running at the time, was asked by a moderator about why he had been involved with the company.
The office of Mannatech in Coppell, Tex., earlier this month. Credit Cooper Neill for The New York Times
Mr. Carson, who had made several paid speeches for Mannatech, responded that he had spoken for other companies, too, adding that he personally took Mannatech products and thought they were good.
“I didn’t have an involvement with them,” Mr. Carson said at the debate. “That is total propaganda.”
The depth of Mr. Cruz’s involvement in the company is somewhat unclear. Mannatech said Mr. Cruz served as an independent sales associate from 2003 to 2009, and as a consultant from 2003 to 2006. But Linda Caster, the wife of Mannatech’s founder, Sam Caster, said she recalled Mr. Cruz working with the company as early as its founding in 1993.
Now a global company that reported $180 million in sales last year, Mannatech markets supplements made from naturally extracted sugars through hundreds of thousands of sales associates who earn commissions by recruiting customers and other sales associates.
Like Mr. Cruz, who was ordained a pastor in 2004, the Casters are devoted Christians. The name Mannatech stems from the biblical manna, food provided by God to the Israelites in the desert, and Mrs. Caster wrote a book, “Undeniable Destiny,” in which she described herself, Mr. Caster and the company as instruments of divine will.
Through his wife, Mr. Caster declined to speak about Mr. Cruz. But Mrs. Caster said she recalled Mr. Cruz being a successful sales associate who translated Mannatech literature into Spanish and served as an interpreter during business trips to Mexico. She crossed paths with Mr. Cruz on occasion in the 1990s in the Mannatech office in a Dallas suburb and on two “incentive cruises” where top-selling associates were rewarded.
“He was very friendly, very outgoing, really a nice person, easy to talk to,” Mrs. Caster said. “Being a Christian, there are people who are up there who don’t have integrity, who don’t represent well. I felt he was not like that, that he was a sincere person and engaging.”
Mr. Cruz was never personally sued or charged with violating any laws. The allegations about attempts to sell products in Mexico appeared in a lawsuit filed by shareholders, in which Mannatech was accused of inflating its value through improper sales tactics.
According to the lawsuit, first filed in 2005 in United States District Court in New Mexico, the company had allowed a sales associate to place large orders for Mannatech products and then distribute them to customers in Australia and New Zealand without approval from those countries. That allowed the company “plausible deniability” because it would appear that the associate was acting alone, the lawsuit said.
Mannatech “intended to do the same thing to gain a foothold in Mexico,” according to the lawsuit.
This claim was attributed to an unnamed former project manager who served as a confidential witness in the case and went on to describe an encounter with Mr. Cruz. The project manager had relatives in Mexico and was asked by Mr. Cruz whether those relatives “were interested in taking in Mannatech products and redistributing them to potential customers in Mexico,” according to the lawsuit.
The project manager, who later left the company, “knew this was not legal in Mexico,” and to avoid getting those relatives in trouble, declined the offer.
It was not until 2011 that Mannatech reported making its first legal sale in Mexico, after securing approval from the appropriate government agencies there.
Jose Francisco Peña Quintana, head of food, beverage and other services and analytical control in Mexico City’s Health Ministry, said in an interview that any sales of Mannatech products in Mexico before that government approval would have been illegal. But it does not appear that Mr. Cruz or the company were ever accused of breaking any laws there.
Jack Crowley, who served as president of international operations for Mannatech from 2001 to 2005, said he recalled seeing Mr. Cruz occasionally around the office and remembered him working with Mr. Caster on ways to expand the company into Mexico.
Mr. Crowley said he would never have approved moving Mannatech products into Mexico before the company received approval from that country’s government, but he added that Mr. Caster had a reputation for pushing legal boundaries, such as having priests in foreign countries not yet approved for Mannatech business try to recruit customers and sales associates from their congregations.
“Rafael was purely an extension of the founder’s interest in the viability of going into Mexico,” said Mr. Crowley, who said he left the company for a better job in California.
The company declined to discuss the allegations involving Mr. Cruz, which were dropped from the lawsuit as it became more narrowly focused on charges that Mannatech permitted sales associates to make false health claims, such as promising that its products could treat and cure medical conditions like autism and cancer. The case was settled in 2007 for $11.25 million.
In 2009, Mannatech struck a separate settlement with the Texas attorney general, who had accused the company of illegal marketing schemes that preyed upon the sick and unsuspecting. To resolve that lawsuit, which did not involve or mention Mr. Cruz, Mannatech agreed to pay $6 million, heighten oversight of its sales associates and prohibit conduct that implied its products cured, treated, mitigated or prevented any disease. Mr. Caster agreed to pay $1 million and was barred from working as a Mannatech employee for five years. Neither he nor the company admitted wrongdoing.
When the case was brought, Ted Cruz was working as the Texas solicitor general, in a division of the attorney general’s office that was separate from the one that sued Mannatech.
Since the 2009 settlement, Mannatech said in a statement, it has “become a wholly different company with a new culture and new leadership team that has adopted one of the strictest regulatory compliance programs in the supplements industry.”
As for Rafael Cruz, the company said, “he was a valued adviser, and we appreciated his service.”
Mrs. Caster said she and her husband had not seen Mr. Cruz for years when they attended one of his public appearances for his son at a restaurant in the Dallas area last year.
At the end of the event, Mr. Cruz came up to say hello to the Casters and other old acquaintances from Mannatech who had come by.
“He did come over and talk to a group of us from back in those days,” Mrs. Caster said.