The battle between Herbalife Ltd. (NYSE:HLF) and activist investor Bill Ackman continues today, with both sides unloading new rounds of ammunition. Ackman has profiled yet another of the company’s distributors on his website HerbalifePyramidScheme.com. This time, that distributor also happens to be a member of Herbalife’s board of directors.
Meanwhile, The New York Times is reporting that Herbalife has planned a presentation for congressional staffers, which is aimed at explaining its business model.
Bill Ackman targets Herbalife distributor John Tartol
Past targets of Ackman’s included distributors Leslie Stanford and Shawn Dahl. This time around, Bill Ackman is targeting John Tartol, who he says has been a distributor of Herbalife Ltd. (NYSE:HLF) products since 1982. He’s a member of the company’s Chairman’s Club. Ackman has focused in on his methods of doing business, which include “training videos, calls and presentations, recruiting scripts and distributor website registrations.” Tartol owns Success Connection, a business which markets business tools and training videos to Herbalife distributors.
Ackman’s site includes numerous links and videos which show how Tartol appears to do business. He reportedly teaches other distributors how to “wring the lead dry,” as he calls it in one training call. His aim is to explain to distributors how they can push others into becoming distributors.
Tartol reportedly promises distributors that they can earn a lot of money and afford a comfortable lifestyle in less time than it took him. However, Ackman’s site notes that only three-hundredths of one percent of U.S. Herbalife Ltd. (NYSE:HLF) distributors earn $250,000 a year and 88% of them don’t earn anything from Herbalife.
He also pushes a concept called “duplication,” which the website asserts is “little more than a euphemism for pyramidal recruiting.” He tells distributors that if they want to be successful in running one of the company’s nutrition clubs, they must invite 25 to 50 people per day. In addition, he said distributors should send between 30 and 60 packages per month to potential recruits. They have to buy those packages from their sponsors.
Herbalife addresses lawmakers
The New York Times reports today that Herbalife Ltd (NYSE:HLF) will hold a briefing for congressional staff members as it appears to try to ramp up its lobbying efforts. It has invited staffers to ask questions and learn about its MLM business model. Senior executives like Chief Financial Officer John DeSimone and VP Ibi Fleming are expected to conduct the briefing.
In a letter sent to Sen. Ed. Markey, the company claimed that it doesn’t target low income populations or minorities. However, that claim seems to contradict some of the things said by management in the past—including Tartol. For example, in one of Tartol’s presentations, according to Ackman’s website, he spoke about a “separate Extravaganza taking place for ‘the Latin community'” and asks distributors how many of them “would like to get a little more Latino business.” He also urges distributors to target the Vietnamese community, particularly in Los Angeles, and offers suggestions on how to do this.
**Correction: Removed final paragraph which previously stated that Sen. Markey sent a second letter to Herbalife. He sent only one letter to the company. His office provided the following statement to ValueWalk after receiving the company’s response:
“I appreciate the promptness of the company’s response to my inquiry. I am currently reviewing it and look forward to receiving replies from the FTC and SEC.”