* Contempt finding ruled proper
* Court "troubled" by fine, TV ban
* Case sent back to district court for new remedy
NEW YORK, Aug 27 (Reuters) - A federal appeals court has thrown out a $37.6 million fine and three-year infomercial ban against Kevin Trudeau, who has long battled regulators over his marketing of "cures" for obesity, disease and financial woe.
Thursday's ruling by the Seventh Circuit Court of Appeals in Chicago sends back to a lower court a case accusing the TV pitchman of misleading marketing that violated his 2004 settlement with the Federal Trade Commission.
Writing for a three-judge panel, Judge John Tinder said a lower court judge properly held Trudeau in contempt for having "outright lied" about the content of a book, "The Weight Loss Cure 'They' Don't Want You to Know About."
Yet the judge was "troubled" by the punishment because it was unclear how the fine was determined, and because the infomercial ban did not consider the possibility that Trudeau could mend his ways.
This despite the FTC's branding Trudeau, in the words of Judge Tinder, as "a 21st century snake oil salesman" and "nothing more than a huckster who preys on unwilling consumers." Trudeau has pitched cures for such things as hair loss, memory loss, excessive debt, cancer and AIDS.
The appeals court ordered the district court judge to craft a new remedy, including a criminal sanction if it so chose.
FTC spokesman Peter Kaplan had no immediate comment. A lawyer for Trudeau did not immediately return a call seeking comment.
In 2004, Trudeau entered a consent order with the FTC that required him to pay $2 million and banned him from advertising products in infomercials.
An exception, however, let him advertise books that did not refer to other products he was marketing, provided he did not "misrepresent the content" of the books.
The FTC said Trudeau violated that order by marketing a weight loss program he said was "easy," "simple" and able to be completed at home.
In fact, the FTC said dieters would be limited to 500 calories a day, needed prescription hormone injections, and faced dozens of diet and lifestyle restrictions such as avoiding sugars, starches, inorganic foods, and exposure to air conditioning and fluorescent lights.
In a 55-page opinion, Tinder wrote that Trudeau was properly held in civil contempt, having repeatedly distorted the content of the program in multiple infomercials.
He wrote though that it was unclear how the court arrived at the fine, including whether it was based on "consumer losses or ill-gotten gains," and said the court should have directed the funds to be used to reimburse book purchasers.
Tinder also said the three-year ban gives Trudeau no chance to clean up his practices, likening it to "a prison term" more appropriate to a finding of criminal contempt.
"Trudeau could take all the steps in the world to convince the FTC and the district court that he will be truthful in his next infomercial, but even if he offers to read his book word-for-word and say nothing else, he cannot free himself of the court's sanction," the judge wrote.
The case is Federal Trade Commission v. Trudeau, U.S. Seventh Circuit Court of Appeals (Chicago), No. 08-4249. (Reporting by Jonathan Stempel, editing by Matthew Lewis)
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