Bill Ackman’s campaign against individual Herbalife Ltd. (NYSE:HLF) distributors continues, this time detailing the career of Founder’s Circle Member and former member of the Herbalife board of directors (2002 – 2005) Leslie Stanford. Ackman has been pursuing a high profile short on Herbalife Ltd. (NYSE:HLF) for the better part of a year.
Marketing materials show big emphasis on recruitment, not sales
Two things that become clear from reading the exposes are that senior distributors all know and support each other to some degree and there is an enormous emphasis placed on bringing other people into the hierarchy (what Herbalife calls your downline). Unlike the previous profile on Shawn Dahl, there aren’t any convictions to show proof of wrongdoing, but the report shows that Stanford owns numerous companies and websites that encourage the use of lead generation (the practice that got Dahl in trouble), and which seem to make misleading testimonials to get people interested in the business.
In fact, Dahl was in her downline, and when he was forced out last year she told the distributors who had worked under him, “I’m really sad for what brought us to this call, it’s difficult to see Shawn go and we wish him well, but at the same time I’m really happy and excited at the thought of getting to know some of you better and to work with you.” Not the reaction you would expect from someone who disapproved of Dahl’s business practices. The profile also does a thorough job of linking Stanford to senior Herbalife Ltd. (NYSE:HLF) distributor John Tartol, who will also be the subject of one of Ackman’s profiles in the near future.
Stanford says multiple times that she made $2,000 in her first two weeks at Herbalife Ltd. (NYSE:HLF), $35,000 in her first year, and $400,000 in her second year. The profile doesn’t disprove these claims, but even if they are true they could be construed as deceptive since those results are far from typical.
Ackman doesn’t need a legal win for the profiles to be effective
Even if there isn’t enough evidence in the profile to support a case against Stanford (a legal question this article won’t try to answer), Ackman’s research was at least partially responsible for getting Dahl pushed out of the company last year, and he is hoping that the more he is able to discredit senior distributors the more pressure there will be on regulators to take action.