Excerpted from Whitney Tilson’s email to investors titled “Damning video of Herbalife CEO Michael Johnson; Bombshell investigative report “The American Scheme: Herbalife’s Pyramid ‘Shake’down”; Drug firm CEO Martin Shkreli admits being a ‘jackass'”
1) Two big bombs just dropped on Herbalife. First, Michelle Celarier, a reporter at the NY Post, found and posted on YouTube this incredible damning 1:30 video (https://youtu.be/jIgHiRK_W44) of Herbalife CEO Michael Johnson at Herbalife’s 2005 Global Management Meeting. In it, he admits that “recruiting…is the most vital part of our bloodstream…the company has built its whole reputation, its whole life, on recruiting,” that the company “sometimes led people down a false road,” and that “in our marketplaces where our recruiting…is very heavy…we got issues.”
Here’s my transcript of the entire video:
“It’s the recruiting, meaning bringing new distributors into our company, which is the most vital part of our bloodstream. We bring new distributors in, we grow. It’s that simple. It’s that simple. And the company has built its whole reputation, its whole life, on recruiting.
Our top dogs, Greg calls them The Hunters out there, our Hunters, our top distributors, our Chairman’s Club, our Price Team, they’re professionals at this [pointing to the word “Recruiting” on the slide behind him]. Nobody can do it better. You get next to Alan Lorenz [see: https://www.herbalifepyramidscheme.com/perpetrators/alan-lorenz] and he’ll recruit taxi cab drivers and busboys and waiters and everybody… He doesn’t care who it is and, boom!, he’s got ‘em in this game. Right away, he’s got everybody. How long he’s got ‘em is another question, but he’s got ‘em in this game [again pointing to the word “Recruiting” on the slide behind him]. And that’s what this company built itself on.
The recruiting tactics…very positive for the most part…sometimes led people down a false road. $4,000, jam it into ‘em, buy an instant distributorship, load that product in. See ya! Good luck! Credit card bill comes, spouse says, “Ahem, how are we gonna pay this? You didn’t sell the stuff that’s in the garage, that’s in the pantry, that’s out there. What are we gonna do?” Well, we could return it to the company. And you know it, in our marketplaces where our recruiting heavy…is very heavy [again pointing to the word “Recruiting” on the slide behind him], and we don’t have a balance of business, we got issues.
So what happens today? Today what are we? Today, we’re recruiting. We’re still a recruiting company, and we’ve got to never not be this [again pointing to the word “Recruiting” on the slide behind him]…”
Yes, this was 10 years ago, but if you think Herbalife is different today, please contact me as I have a bridge in Brooklyn for sale…
2) Today, three elected officials in New York and a Brooklyn-based Latino advocacy organization released a bombshell investigative report “The American Scheme: Herbalife’s Pyramid ‘Shake’down”:
The new report found that Herbalife International is running a get rich quick scheme targeted at low-income immigrant families. Prospective distributors are lured into the Herbalife hierarchy with the promise of the American Dream – lavish vacations, extravagant mansions, and cold hard cash – in return for peddling Herbalife products. The reality, however, is much darker – a nightmare in which families report losses averaging $20,000, all while high level Herbalife executives pad their pockets.
Senator Jeff Klein said: “Herbalife’s house of cards is tumbling down. This fraudulent company’s efforts to lure in vulnerable New Yorkers and recent immigrants in pursuit of the American Dream is downright shameful. With false promises of wealth and extravagance, a disproportionate number of Hispanic families are falling prey to these schemes and sacrificing their hard earned dollars. This stops now – my new legislation will significantly boost protections for consumers and distributors, drastically strengthen financial reporting requirements for Herbalife independent members and increase oversight of this deceptive company in New York. I’m proud to partner with Public Advocate Letitia James and Make the Road New York to shine light on this company’s dark and deceitful practices.”
…The Office of Senator Klein examined 56 complaints filed with the Office of the New York State Attorney General and the Federal Trade Commission. Together, these victims reported financial losses totaling $950,000 and ranging from $90 – $100,000. Of the 56 complaints filed, 93 percent indicated Spanish as their primary language. More than 60 percent of new members made initial investments larger than the required $60 to $100.
Herbalife distributors purport prospective sellers can earn as much as $20,000 per month selling Herbalife nutrition products. The reality is, that nearly 90 percent of new distributors will quit within one year. Moreover, of the 56 complaints filed in New York, only eight victims reported receiving a check directly from Herbalife for their royalty claims. The average amount was $100.
Included in their report is another damning video (https://drive.google.com/file/d/0B14BJrEsDhfqYkdtYzYxcERHUmM/view) showing footage from hidden cameras of how Herbalife distributors make outrageous claims about income (one guys tells the room that, after five years, he and his wife now make a minimum of $20,000/month and in 2014 earned $1,138,000) and health effects (another distributors says: “I have a disease where the oxygen is unable to reach my brain. So I’m on medication. This [Herbalife] product has allowed me to stop using the medication…This product completely cleanses your blood and gives oxygen to your brain…”).
3) The latest on the most hated man in America, Martin Shkreli:
He did admit that he and his public relations team handled the controversy “poorly,” and when asked if he would do anything differently, he said he would “explain it more carefully instead of being a flippant jackass.”
He did not say anything to suggest he regretted raising the price of the drug.
Most of his other comments, however, were terse and arguably as flippant as he has been in the past. At times he called himself “very humble,” said the media firestorm was “the best possible way to get girls professionally,” and berated one Reddit user, in all-caps: “SORRY FOR ASSUMING AN INTELLIGENT AUDIENCE.”
Here’s an interesting question for you: who is a bigger horse’s a*s, Shkreli or Donald Trump???
NY Senator Jeff Klein Calls Herbalife “Shameful” and “House of Cards” with Undercover Video
FOR IMMEDIATE RELEASE
Tuesday, October 27, 2015
SENATOR JEFF KLEIN, PUBLIC ADVOCATE LETITIA JAMES & MAKE THE ROAD NEW YORK RELEASE BOMBSHELL INVESTIGATIVE REPORT “THE AMERICAN SCHEME: HERBALIFE’S PYRAMID ‘SHAKE’DOWN”
- New report finds Herbalife International cheating American immigrants out of millions of dollars; Nutrition company running shady pyramid scheme targets low-income Hispanic families in search of the American Dream
- Klein introduces legislation to increase oversight of Herbalife International, require full financial disclosure of independent Herbalife distributors, and strengthen protections for prospective sellers
- Klein, James & Make the Road New York: “It’s time to shed the light on Herbalife’s deceptive business practices and bogus claims connected to nutrition products.”
BRONX, NY – State Senator Jeff Klein (D-Bronx/Westchester), together with Public Advocate Letitia James, Council Member Annabel Palma, and Make the Road New York today released a bombshell investigative report “The American Scheme: Herbalife’s Pyramid ‘Shake’down.”
The new report found that Herbalife International is running a get rich quick scheme targeted at low-income immigrant families. Prospective distributors are lured