By Jonathan Stempel and Terry Baynes
(Reuters) - Infomercial pitchman Kevin Trudeau lost his bid to throw out a $37.6 million fine for violating a 2004 Federal Trade Commission settlement over his advertising and a federal appeals court said the amount might even be too low.
Trudeau argued that U.S. District Judge Robert Gettleman in Chicago wrongly based the fine on consumer losses rather than his unjust gain. He also challenged Gettleman's imposition of a $2 million bond to ensure his compliance with the settlement, saying it violated the First Amendment.
But the 7th U.S. Circuit Court of Appeals in Chicago found that the penalty was fair, saying Trudeau aired infomercials more than 32,000 times, a violation of the FTC settlement.
"The figure is conservative -- it only considers sales from the 800-number, not sales in bookstores carrying his 'As Seen on TV' titles," Judge John Tinder wrote for a three-judge panel.
Trudeau "should not now be surprised that he must pay for the loss he caused. The government is not impotent to protect consumers -- nor is the court powerless to enforce its orders -- by imposing narrowly tailored restrictions on commercial speech."
The 7th Circuit in 2009 had thrown out the same fine, saying Gettleman did not explain his calculations sufficiently. The appeals court at that time also jettisoned a three-year infomercial ban that Gettleman imposed on Trudeau.
"We respectfully disagree with the Court of Appeals' constitutional analysis," said Kimball Anderson, a partner at Winston & Strawn in Chicago who represents Trudeau. He called the decision an "unwarranted government intrusion on the First Amendment right of free speech." No decision has been made on an appeal, he added.
Trudeau has long battled federal regulators over his marketing of "cures" for such conditions as AIDS, hair loss, memory loss, obesity and financial distress.
In May 2010, the 7th Circuit threw out a 30-day prison sentence for criminal contempt after Trudeau urged supporters to flood Gettleman's email box with letters, saying the judge had overstepped his authority.
The case is FTC v. Trudeau, 7th U.S. Circuit Court of Appeals, No. 10-2418.
(Reporting by Jonathan Stempel and Terry Baynes in New York; editing by Andre Grenon)