FBI launch Herbalife criminal investigation
Due to the lack of information that usually surrounds regulatory investigations in the US, this one’s going to be brief.
Last we checked in with Herbalife’s regulatory woes, the company acknowledged that they were under an FTC civil investigation.
Now comes the news that the FBI and Department of Justice are also involved…
Speaking to the Financial Times, “people familiar with the matter” confirmed
The US Department of Justice and the Federal Bureau of Investigation are investigating Herbalife.
When the FT contacted the FBI they “declined to comment”, however CNN managed to get in touch with a “law enforcement official” and confirm that
the U.S. Attorney’s Office in Manhattan and the FBI have been investigating Herbalife for several months.
Curiously, whereas Herbalife themselves revealed the FTC investigation to the public, it appears they had no idea the FBI were also involved:
We have no knowledge of any ongoing investigation by the DoJ or the FBI, and we have not received any formal nor informal request for information from either agency.
We take our public disclosure obligations very seriously. Herbalife does not intend to make any additional comments regarding this matter unless and until there are material developments.
Wouldn’t want to be working at Herbalife’s PR department right about now.
What piques my curiosity is the FTC investigation I get, I myself reviewed Herbalife and concluded there’s some massive recruitment orientated dodginess going on. What the FBI are looking into though… well, let’s just say I’m as clueless as Herbalife on the matter.
A criminal investigation, if anything comes of it, ups the stakes considerably. If I had to guess, I’d say they were perhaps trying to pin something on Herbalife management and/or one or more of their top affiliates.
That of course assumes the FTC investigation has come along considerably. Meanwhile the DoJ’s involvement could signal a joint taskforce probe, which would mean they’re obviously building a case against Herbalife.
What now? Well, as I mentioned at the start of the article unfortunately all we can do is adopt a wait and see approach. Looking at the bigger picture though, I think it’s pretty clear the direction this is heading in.
What that means for the MLM industry at large remains to be seen (bye-bye pretending affiliate’s purchasing products counts as retail!).
New York post have got the story confirmed by 2 unrelated sources.
nypost.com/2014/04/11/us-attorney-fbi-open-criminal-probe-of-herbalife-report/
I have pointed out that area to be the most controversial part of Herbalife’s business practice, but Herbalife cleaned up that area in 2013. It isn’t typical “criminal” either.
Lead sale is controversial because it clearly isn’t about retailable products or services to consumers, it’s about building a downline in a pyramid scheme style of concept. Herbalife could have been found to be the organizer of MULTIPLE pyramid schemes (rather than being one itself).
It was the area where Herbalife IMMEDIATELY started to clean up after December 2012 (after Bill Ackman’s presentation).
* Anthony Powell left Herbalife in January 2013.
* Shawn Dahl left Herbalife in June 2013.
* More than 20 other leaders were “handcuffed” in early 2013.
SECOND MOST VULNERABLE AREA
The mandatory monthly purchase among “sales leaders” (Supervisors and higher positions) is the second most vulnerable area. That part is clearly a “pay for your salary” / “pay for positions and promotions”.
But that part isn’t typical “criminal” either.
Criminal investigation should normally be about something else than those 2 areas, e.g. some type of fraud. VAT and taxes are 2 potential areas.
Herbalife is very similar to Amway, the world’s largest MLM scam. Google “stop the amway tool scam wordpress”
Lately, I’ve started listening to Jim Rohn videos. I didn’t know he had been involved in Herbalife. I wonder what he would think of these investigations, God bless his soul.
Why bless his soul? He was a scam artist.
The Illinois AG has stepped into the foray, launching their own investigation:
http://www.latimes.com/business/money/la-fi-mo-herbalife-gets-more-bad-news-illinois-ag-investigation-20140417,0,6531842.story#axzz2zCQMdtIi
Well this came out of left-field… Herbalife HQ infested with bugs (listening devices)?
Herbalife has found multiple hidden listening devices — bugs — in its Los Angeles headquarters, according to a report on Friday.
My first reaction was with confirmed FBI and FTC investigations, they must really be bringing in the big guns.
But…
And apparently it’s not Bill Ackman either…
So uh… who’s been spying on Herbalife then (or who’s lying)?
http://nypost.com/2014/05/10/bugs-found-in-herbalife-headquarters-report/
Here’s a couple of links to ABC News “Nightline” 6 months undercover investigation into Herbalife (April 23 2014).
Part 1 “American Dream”:
abcnews.go.com/Nightline/video/herbalife-investigation-part-american-dream-sale-23449013
Part 2 “The Whistleblower”:
abcnews.go.com/Nightline/video/herbalife-investigation-part-whistleblower-23449064
Pershing Square (Bill Ackman) has a 13 minute “Herbalife Victims’ Stories” video. It’s “propaganda”, but parts of the stories have indirectly details about WHY people become victims, HOW they’re recruited and similar stuff.
http://www.factsaboutherbalife.com/former-herbalife-distributors-in-their-own-words/
The typical reason for WHY people become vulnerable to income opportunities is “life situations” (all types of situations where people can be looking for a new income source).
* Have been fired or have quit a job
* Have become mother, want to work from home
* Have become older, want to save up money for retirement
* etc.
Another reason is “trust by association”, e.g. the opportunity is advertized by a celebrity (Jeff Beck, Dr. Laura, etc.).
What the recruiters are selling is “The Dream”. The more willing people are to believe in “The Dream” the more money they will lose. “It isn’t about believing in it yourself, it’s about making OTHERS believe in it”.
I can probably dig up some more information about sales tricks, confidence tricks, social influence and other methods used to get people on the hook. If people KNOW about methods like that they will become less vulnerable to them.
Former Herbalife Shawn Dahl’s website incomeathome.com seems to have been abandoned. It only contain ONE general page filled with ads and dead links when I checked it now.
When we (Oz and others) checked different Herbalife complaints in 2013, 2 Sales Leaders topped a short list of detailed pyramid scheme complaints.
* Anthony Powell (left Herbalife in January 2013, left for Vemma)
* Shawn Dahl (left Herbalife in June 2013, Vemma or Nutrie)
Shawn Dahl / Online Business Systems / Income From Home was covered by The Verge in March 2013 (old news). I have used it in several posts to point out the TYPE of business activity that potentially could lead to a shutdown of Herbalife itself.
theverge.com/2013/3/27/4099100/income-at-home-herbalife-scamworld-biz-opp