Herbalife Ltd. (NYSE:HLF) is currently under investigation by the Federal Trade Commission after more than a year of public attacks from activist investor Bill Ackman. His firm has been profiling the activities of distributors in an attempt to prove that the nutritional supplements company is a pyramid scheme which takes advantage of low income people. Today Ackman is targeting distributors Michael Burton and Rick and Carla Berg.

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Lead generation rears its ugly head again

Problems with links to lead generation companies have caused Herbalife Ltd. (NYSE:HLF) problems in the past. This time around, Pershing has pointed to several lead generation companies owned by the Herbalife distributors it has highlighted. Each of the three has strong links to lead generation companies. It was lead generation links which resulted in Canadian officials deciding to investigate Herbalife after Ackman’s first distributor spotlight.

Herbalife said to target low income individuals

The profiles of both the Bergs and Burton suggest all of them targeted low income individuals. In fact, Burton reportedly encouraged people to go into debt so they could become supervisors through Herbalife Ltd. (NYSE:HLF) as soon as possible. Burton appears to have taken his own advice regarding going into debt, as Pershing discovered that he and his wife filed for bankruptcy last year.

One of the companies the Bergs were involved in also encouraged people to go into debt. Their training materials suggest that recruits push others into becoming supervisors by putting the entry fee on a credit card or borrowing money from others. Some of the members linked to the couple also reportedly touted the fact that they had convinced a single mother with very little income to sign up, while another was excited that someone had withdrawn money from their 401K to pay to become a distributor.

Problems with misleading statements

Another reason regulators have become interested in Herbalife Ltd. (NYSE:HLF) is because of concerns that the company’s distributors may be making misleading statements about how much money people can earn by selling the product. Videos of Carla Berg and of Burton show some pretty extreme comments about how much money they were able to make. Pershing notes again that the statements they made are nowhere near typical, according Herbalife’s own filings and statements.