Herbalife Ltd. (HLF): Questionable Distributors To Capitol Hill

Herbalife

Herbalife Ltd. (NYSE:HLF) has lobbied heavily against Bill Ackman and others who claim it is a pyramid scheme—an accusation it has vigorously denied. The nutritional supplements company is now continuing its efforts by bringing 15 of its distributors from six different states to Washington to talk with lawmakers. The company said the goal is to ensure that lawmakers “understand the value Herbalife brings to thousands of its Members and consumers across the country.” However, the distributors the company has chosen to send may be questionable to some.

Herbalife distributors accused of misleading statements

The Federal Trade Commission, the FBI, the DoJ and attorneys general in multiple states have reportedly launched investigations into potentially misleading financial promises allegedly made by Herbalife Ltd. (NYSE:HLF) distributors. As it turns out, some of the very distributors who seem to be making these misleading statements are going to be speaking with lawmakers. In a press release, Herbalife named Brian Holifield as one of the people who is visiting Washington on its behalf.

For example, a YouTube video shows that Herbalife Ltd. (NYSE:HLF) distributor Brian Holifield made statements such as, “I went from broke, not having any money, no gas in the car to $8,000 a month a year and 5 months later.” In the video he also said, “I make over $30,000 a month. … I went from broke with no gas in the car to $30,000 a month.”

Herbalife’s internal figures tell a different tale

The problem with statements made by Holifield in the YouTube video is that they paint a significantly different picture from the one shown in Herbalife Ltd. (NSE:HLF)’s own documents. The multi-level marketing company posted its “Statement of Average Gross Compensation Paid By Herbalife to U.S. Members in 2013” on its website. It’s clear from those numbers that Holifield’s story isn’t typical.

In that document, Herbalife Ltd. (NYSE:HLF) states, “For the 13.6% of Herbalife Members who are Sales Leaders with a downline, the average compensation received from the Company in 2013 was (USD) 5,381.” It also states that that amount is before operational and promotional expenses, which means that the stories of people losing a lot of money by signing up do appear to be true.

The document also states that 93.5% of those who are classified as “sales leaders with a downline” make $10,000 or less a year—a far cry than what Holifield said he makes. Herbalife Ltd. (NYSE:HLF) emphasizes that 73% of distributors sign up to receive discounted prices for products they buy for themselves. The company also said that for 88% of those who sign up, “the economic benefits” were only from the discounted prices the members received on the products they purchased, which did not take the form of a payment.

What will the Herbalife reps say?

So now it’s worth questioning what lawmakers will ask the 15 distributors Herbalife Ltd. (NYSE:HLF) has sent to Washington to speak with them. Will they provide a breakdown of their earnings in commissions and retail sales? Will they list their expenses and say how much of the products they sell to people outside the network? Will they also say how many people are in their downlines and what their net profits are?

All of these questions are important in the consideration of whether Herbalife Ltd. (NYSE:HLF) is a pyramid scheme. Also the fact that Herbalife’s own documents show how little most distributors make is a clear departure from statements some distributors have apparently been making.

See full Herbalife Ltd. (HLF): Questionable Distributors To Capitol Hill in PDF format here.

Herbalife: Questionable Distributors To Capitol Hill

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About the Author

Michelle Jones
Michelle Jones was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Michelle has been with ValueWalk since 2012 and is now our editor-in-chief. Email her at Mjones@valuewalk.com.

14 Comments on "Herbalife Ltd. (HLF): Questionable Distributors To Capitol Hill"

  1. Of course it’s possible, after the regulators disgorge the company, the company officers, and distributors who are net winners, there won’t be anything LEFT. LOL

  2. That’s a nice video if you like distortions and lies.

  3. If you bothered to read my messages, you would know HLF is similar to Amway, the world’s largest MLM scam: http://www.stoptheamwaytoolscam.wordpress.com

    Therefore, I am interested in shutting down the Amway scam, and HLF is a means to that end. LOL

  4. meanwhile back at the ranch THE STOCK IS UP THIS MONTH…..bill stiritz, carl Icahn, George soros and several other billionaires who are long the stock and selling puts have done their own investigation…this group of billionaires have a lot better investigators, lawyers, and analysts than the government could ever hire.. do you think Icahn would have put so many on the hlf board if he had not done a thorough investigation…DUE DILIGENCE..it is what these billionaires do and they do it very well, ackman on the other hand NOT SO MUCH I use j c penny , target. and now hlf as my examples…these billionaires just keep selling puts and the puts just keep expiring worthless.. and once these investigations end and hlf gets a fine and a slap on the wrist the stock goes to 100 bucks a share and all the shorts will be SQUEEEEEZED like volkswagon was..this is going to make a great movie once it is over….one more thing…only 18 percent of hlf sales are in the united states so WHAT IS THE WORST POSSIBLE OUTCOME?? they lose 18 percent of there sales…IT IS NOT POSSIBLE FOR IT TO GO TO ZERO…

  5. tex , you have already proven you do not believe what you are preaching. you have admitted on numerous posts that you do not own any puts and you are not short the stock. our actions speak MUCH LOUDER than our words. if you believed what you say you would be short the stock or own puts. to read your posts you believe they will be shut down and sent to jail..

  6. When HLF is shut down, you’ll realize I would have been worth your time, AND your money. LOL

  7. I’ve decided you are NOT worth my time. Good luck to your arguement

  8. Why are you constantly dodging the illegal pyramid and RICO fraud issues? LOL

  9. An illegal pyramid and RICO fraud doesn’t have to have those aspects. HLF operates very similar to Amway, the world’s largest MLM scam: http://www.stoptheamwaytoolscam.wordpress.com

  10. The shorts don’t think that HLF is a pyramid scheme they “HOPE” that it is.

    Name us a MLM company that was found to be a pyramid scheme by the FTC that had:

    1) No inventory loading*

    2) No recruiting payment

    3) Excellent Return Policy**

    4) Commissions paid related to product sales only

    5) Good customer service. Small # of complaints

    * Members can become supervisors over a 12 month period. Monthly purchases are cumulative until 5k volume is reached.

    ** HLF Gold Standrad (look it up on Google, this doesn’t allow links))
    – Member can return products for a full refund within 1 year of
    purchase, Free shipping both ways. Introduced in 2013 and in current Q1
    2014 HLF had the lowest product return in history 0.2%

  11. To the author Michelle Jones: Please tell why ROYALTIES are better than commissions and salary? All check from HLF over $1,000 are royalties payments!

  12. Michelle Jones can you tell everyone – why ROYALTIES are better than commissions and salary?

    Also, please answer, if you can NOT, then we know you don’t know, ok?

    Name us a MLM company that was found to be a pyramid scheme by the FTC that had:

    1) No inventory loading*

    2) No recruiting payment

    3) Excellent Return Policy**

    4) Commissions paid related to product sales only

    5) Good customer service. Small # of complaints

    * Members can become supervisors over a 12 month period. Monthly purchases are cumulative until 5k volume is reached.

    ** HLF Gold Standrad http://bit.ly/1phPHDh
    – Member can return products for a full refund within 1 year of
    purchase, Free shipping both ways. Introduced in 2012 and in current Q1
    2013 HLF has the lowest product return in history 0.2%

    The shorts don’t think that HLF is a pyramid scheme they are “HOPING” that it is NOT.

  13. Herbalife operates very similar to Amway, the world’s largest MLM scam: http://www.stoptheamwaytoolscam.wordpress.com

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