Herbalife Ltd. (HLF): Still Work To Do In Monitoring Distributors

Herbalife Ltd. (HLF): Still Work To Do In Monitoring Distributors

At least one Herbalife distributor may not have gotten the memo from upper management regarding making misleading statements and other changes to the company’s business model. Herk (a.k.a. Herculano) Garcia posted an op-ed piece to The Hill earlier this week. He said the company changed his life forever and bashed activist investor Bill Ackman and his long-standing PR campaign against Herbalife.

But those weren’t the issues with his post. As it turns out, Garcia may have changed one detail about his life which led him to become a full-time distributor of the multi-level marketing company’s products. He boasted that he was able to quit his job as a police officer to support himself and his family as an Herbalife distributor. Court documents suggest a different story, however, and something he said in his post could be considered by some to be misleading.

Not all Herbalife distributors are bad

Now to be clear, not all Herbalife distributors make statements that could be considered misleading. In fact, this is probably an issue that every multi-level marketing company faces.

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Of course it’s no secret that many Herbalife distributors lose money, although the reason they lose money is up for debate, depending on which side you’re on. It’s only those who make questionable comments or those who claim to have lost a lot of money who get the press attention. A couple of years ago, Herbalife did try to bring forward some who claimed to have had success as distributors, although there were some questions about the backgrounds of some of them at the time.

Documents suggest Garcia was actually fired


So here’s an excerpt from Garcia’s post on The Hill: “What started as a side gig to supplement my income soon became something I was able to do to support my family. I quit my job as a police officer and began focusing full-time on selling the nutrition products.”

The problem with these statements is that court documents reviewed by ValueWalk suggest that Garcia didn’t quit. They indicate that he was actually fired from his job as an Elk Grove police officer. The documents list the following as reasons for his termination, which the court up held as just cause for his firing: “insubordination; giving false or misleading statements; failure to report to duty as required and failure to notify his employer whether he was continuing to work in outside employment while on medical leave and light duty.”

Garcia denied disability

The document also indicates that Garcia filed for disability due to an injury he said he received on the job while apprehending a suspect. CALpers denied his disability claim, and that decision was upheld on appeal. Among other things, the court ruled: “The evidence is persuasive that Mr. Garcia was terminated for cause, and not as the ultimate result of a disabling condition or as a pretext or a ‘preemptive strike’ to prevent him from filing a claim for disability retirement.”

So the question here, as it relates to his position as an Herbalife distributor, is whether Garcia could have made other comments in his post that could be construed by some as being misleading if more information was known. Unfortunately for Herbalife, its distributors in general have gotten a bad rap for allegedly making misleading comments, so it doesn’t look good that yet another one appears to be continuing to make statements that raise questions. We asked Herbalife management what they’re doing to monitor and potentially weed out distributors who may not be following their policies or might be saying things that could potentially mislead others. They said they had no comment.

It should be noted that we are certainly in no way accusing Garcia or anyone else of making misleading statements of any kind but rather just raising a question based on the evidence we uncovered. Readers can draw their own conclusions about whether his statement about quitting his job rather than being fired is misleading.

(Note: While Garcia is now going by the name of Herk, apparently, his page on Herbalife’s website gives his full name as Herculano Garcia.

Garcia did not respond to a request for comment.


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