The League of United Latin American Citizens, a civil activist group applauded the action of Democratic Senator Edward Markey of Massachusetts for urging the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC) to conduct an investigation in to the alleged deceitful business practices of Herbalife Ltd (NYSE:HLF).
Last week, Sen. Markey said he heard complaints from people in his state that Herbalife Ltd (NYSE:HLF) is a pyramid scheme. According to him, “There is nothing nutritional about possible pyramid schemes that promise financial benefit but result in economic ruin for vulnerable families. Herbalife Ltd. (NYSE:HLF) may be a purveyor of health and wellness products, but some of its distributors are suffering serious economic ill-health as a result of their involvement in the company.”
The senator sent a letter to the company demanding answers about its business practices. Herbalife Ltd (NYSE:HLF) said it is looking forward to introducing the company to Sen. Markey, and addressing his concerns at his earliest convenience.
Attorneys general start Herbalife probe
The civil rights activist group also applauded the move of the State Attorneys General across the United States for starting an investigation against the multilevel marketing (MLM) company. Herbalife Ltd (NYSE:HLF) sells nutritional and weight loss products through a network of distributors.
Last week, Lulac met with the staff members of California Attorney General Kamala D. Harris regarding its complaint against Herbalife Ltd (NYSE:HLF), and to know whether that MLM company complied with a 1986 court order requiring it to carefully track distributors’ sales and prohibiting it from exaggerating claims on the benefits of its products.
Herbalife’s “outrageous” claims
The civil rights activist group maintains its position that Herbalife Ltd (NYSE:HLF) is a pyramid scheme and it is generating profits by taking advantage of distributors across the country using “fraudulent arrangements.”
In a statement, Brent Wilkes, national director of Lulac said, “Herbalife’s claim that it provides an opportunity for regular people without any background in business to become millionaires with an initial investment of $4,000 is outrageous.”
“I’ve spoken to many victims who confirm that the only way a distributor can succeed with Herbalife is to recruit new distributors and that the most successful distributors are the ones that become “recruiting machines” – this is Herbalife’s actual business model,” added Wilkes.
Lulac noted that a statement from Herbalife Ltd (NYSE:HLF) that 88% of the company’s distributors earned nothing, and only 3.67% earned more than $1,000 in 2012. The activist group emphasized, “The vast majority of income generated by Herbalife is from the products purchased by new distributors.“