Pershing Square Capital Management, L.P. Releases Report Outlining Herbalife Ltd. (NYSE:HLF)’s Deceptive Practice of Lead Generation and Profile of Another Top Herbalife Distributor Doran Andry Provides Example of Additional Lead Generation Systems
New York, NY – February 5, 2014
Pershing Square Capital Management, L.P. today released two new papers on its websitewww.herbalifepyramidscheme.com – one about the deceptive practice called ‘lead generation’ and the other a profile of top Herbalife Ltd. (NYSE:HLF) distributor Doran Andry (reportedly #1 distributor in recent years), who has victimized thousands of failed recruits. These reports are part of Pershing Square’s ongoing series about the Herbalife pyramid scheme.
Herbalife Ltd. (NYSE:HLF) relies on a wide range of deceptive sales practices, including a system of lead generation, to continually recruit new members into an illusory “business opportunity.”
To spur recruitment to replace the millions of distributors who fail each year, Herbalife fosters and rewards its senior-most distributors, who use deceptive schemes that churn rapidly through large numbers of victims.
Lead generation (‘Lead-gen’), in use since at least 2001, is one of the pernicious practices employed by Herbalife and its top distributors.
Lead-gen systems use radio, print, and Internet ads to lure victims with promises of an unnamed ‘business opportunity’ that assures financial freedom. (Only later does the victim learn that the ‘opportunity’ is Herbalife.) When the victim provides a name and contact information, he or she becomes a ‘lead,’ which is sold for up to $130 each to a distributor already in the system. Once ensnared, the target is encouraged to qualify for supervisor as quickly as possible (which requires a purchase of $3,000-$4,000 of Herbalife products) and to buy ‘leads’ and additional ‘business tools’ for many thousands of dollars.
Most ‘leads’ are worthless, as the perpetrators know. The vast majority of lead-gen recruits drop out rapidly and suffer significant financial and other losses, often in the tens of thousands of dollars. Herbalife Ltd. (NYSE:HLF) and senior distributors have been sued over lead-gen and have settled for millions of dollars, but their practices continue.
From the start, Herbalife Ltd. (NYSE:HLF) has known about, encouraged, rewarded and profited from the lead-gen practices of its Chairman’s Club and Founder’s Circle members (the top 50-60 people in the pyramid). Lead-gen perpetrators are often celebrated and featured at Herbalife events.
Despite recent attempts to distance itself from lead-gen, Herbalife Ltd. (NYSE:HLF) cannot escape liability for the enormous consumer harm caused by lead-gen over more than a decade of its use.
Doran Andry Exemplifies Lead Generation Practices
As an example of a Herbalife top-level distributor using lead-gen, Pershing also released a report on top distributor Doran Andry, a 22-year current Herbalife distributor and member of the Chairman’s Club, who achieved success by running a lead-gen business called Financial Success System (“FSS”). Andry founded FSS when his previous business, Newest Way to Wealth, was sued in 2002, along with Herbalife and Andry himself, for operating a pyramid scheme and for fraud and securities fraud. Herbalife and its co-defendants settled the suit for $6 million. In the wake of the settlement, Andry shifted his business to the new entity FSS and continued to engage in lead-gen and other methods of deceptive recruiting.
FSS recruits huge numbers of new distributors into the Herbalife scheme with promises of easy money and financial freedom. Herbalife has repeatedly awarded Andry discretionary Mark Hughes bonuses in the millions of dollars and has featured Andry as a speaker at events as recently as December 2013.
The lead generation white paper and report on Doran Andry, with extensive links documenting the facts, are available onwww.herbalifepyramidscheme.com
About Pershing Square Capital Management, L.P.
Pershing Square Capital Management, L.P., based in New York City, is a SEC-registered investment advisor to private investment funds. Pershing Square manages funds that are in the business of trading — buying and selling — securities and other financial instruments. Funds managed by Pershing Square have established short and other bearish economic positions against securities of Herbalife Ltd. Pershing Square may change its views about, or its investment positions in, Herbalife at any time, for any reason or no reason. Pershing Square may buy, sell, cover or otherwise change the form or substance of its Herbalife investment.
|Dates of Herbalife Distributorship: 1992 – presentStatus in Herbalife: Chairman’s ClubBusiness Methods: Lead Generation, Nutrition Clubs, Recruiting Scripts, Training Materials|
All statements in this report are made pursuant to Pershing Square’s disclaimer, available at http://factsaboutherbalife.
- · For over twenty years, Doran Andry has been one of Herbalife’s most successful distributors, and Herbalife has celebrated and promoted him as a paragon of success.
- · With full knowledge of Andry’s deceptive conduct, Herbalife promotes Andry as a shining example of success in its publications and at its events, giving Andry a critical aura of respectability that facilitates his recruiting efforts. Herbalife has repeatedly awarded Andry discretionary Mark Hughes bonuses in the millions of dollars, and has featured Andry as a speaker at events as recently as December 2013.
- · Andry has achieved success by running a lead generation business called Financial Success System (“FSS”), which he founded when his previous business, Newest Way to Wealth, was sued in 2002, along with Herbalife and Andry himself, for operating a pyramid scheme and for fraud and securities fraud. Herbalife and its co-defendants settled the suit for $6 million. In the wake of the settlement, Andry transferred the business to the new entity FSS and continued to engage in lead generation and deceptive recruiting.
- · FSS recruits huge numbers of new distributors into the Herbalife scheme with promises of easy money and financial freedom. FSS promotional materials downplay the costs of enrolling and are replete with highly deceptive income testimonials, including from Andry himself. Andry regularly flaunts his wealth in videos and at promotional events, showing images of his $25 million dollar mansion, luxury cars, private jets, exotic vacations and more in order to recruit unwitting consumers to sign up as Herbalife distributors and members of FSS. He tells distributors to “fake it ‘til you make it.”
- · FSS purports to train its members on how to operate Herbalife Nutrition Clubs. FSS tells its members that in order to be successful as Club operators, they must focus on recruiting new operators and “duplicating” their Club. Andry falsely tells FSS members that by following his system, over a period of just ten years, they can earn a net income of over $170 million and claims that people who open Clubs will “generate immediate results.”
- · In its marketing materials, FSS tells distributors to focus their efforts on recruiting new distributors, rather than selling Herbalife Ltd. (NYSE:HLF) products to genuine retail customers outside the distribution network. Andry makes clear that “the end goal is not how many $4.00 [shake] services” you sell, it is “upgrading” customers to distributors to Nutrition Club operators. He says that “Where your money’s made is not serving smoothies, where your money’s made is having hundreds or tens or thousands of distributors around the globe.”