Herbalife Ltd. (NYSE:HLF) confirmed that it received the letter from Democratic Senator Edward Markey of Massachusetts who raised questions regarding the business practices of the multilevel marketing company (MLF) that sells nutritional and weight loss products.
In a e-mailed statement to the Wall Street Journal, Barb Henderson, senior vice president of corporate communications of Herbalife Ltd. (NYSE:HLF) said, “We received the letter from Senator Markey this morning and look forward to an opportunity to introduce the company to him and address his concerns at his earliest convenience.”
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Pyramid scheme allegations
In his letter to Michael Johnson, CEO of Herbalife Ltd. (NYSE:HLF), Sen. Markey requested information regarding the company and his domestic subsidiary. He also emphasized that there have been suggestions that Herbalife is not organized as a multilevel marketing company, but a pyramid scheme based on its operations.
According to Sen. Markey, there have been reports in Massachusetts suggesting that Herbalife Ltd. (NYSE:HLF) is a pyramid scheme. He mentioned several reports from entities such as one family in Norton, MA who reported that they lost $130,000 including their 401(K) from investing in the company, causing them significant stress.
The senator emphasized that such allegations have been repeated by other groups such as the Hispanic Federation led by Jose Calderon who expressed concern whether Herbalife distributors are making money selling products or recruiting others to sell products.
Sen. Markey pointed out that he “take no position in the merits of the allegations” against Herbalife Ltd. (NYSE:HLF), but he requested the company answer questions about its business practices and its impact to his constituents in Massachusetts.
Senator calls for inquiry
Sen. Markey also sent letters to the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC) urging the agencies to investigate the business practices of Herbalife Ltd. (NYSE:HLF).
In a statement to The Hill, Sen. Markey said, “There is nothing nutritional about possible pyramid schemes that promise financial benefit but result in economic ruin for vulnerable families. Herbalife 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.”