Herbalife caught up in Hong Kong product investment scam
This one’s a bit of an odd story, in that for once Herbalife themselves aren’t directly involved in controversy surrounding the company.
Well, sort of.
Reports out of Hong Kong a few days ago detail two of the company’s affiliates milking Hong Kong residents for $50 million HKD ($6.4 million USD).
How’d they pull that off?
Some 60 people said they had been duped by two women, surnamed Choi and Ng, who claimed to be presidents in the Hong Kong office of multilevel marketing company Herbalife.
Choi and Ng allegedly told the victims they could buy Herbalife products at a cheaper price from them directly on which they could make a resale profit of between 5 per cent and 10 per cent.
The victims said that initially they received the goods and made a profit, so they started to invest more money in the scheme. However, they said the two so-called presidents disappeared at the end of last month and they had been unable to find them.
I’m going to go ahead and suggest these two have long-since run off to mainland China. Good luck tracking them down there.
What irks about this story though is the timeframe in which all this went down.
One of the victims, who gave her surname as Tsang, said she had lost HK$2.6 million in the scheme. She said she had known one of the women for years and that she had approached her around two years ago to invest in the products.
Alright, so we know this all started around two years ago. So the big question then is, how much of the $6.4 million that these women collected was spent on Herbalife products.
The victims said Herbalife had claimed the two women were only ordinary members of the organisation and were not on its staff.
You’ve got two regular affiliates, who are buying products that they dump on unsuspecting members of the public… to the tune of $6.4 million.
Now obviously for the scam to work, nowhere near $6.4 million was spent on Herbalife products. But how much product would the women have had to spent to trigger an internal investigation by Herbalife?
And remember, this crap went on for at least two years!
50%? Surely $3.2 million in product purchases by two Herbalife affiliates would trigger something on the company’s end?
20%? Still $1.28 million in product purchases.
Hell, even if only 1% of the $6.4 million these two scamsters took in was spent on Herbalife products, that’s still $64,000.
Granted again that’s over at least two years, but at what point does Herbalife make enquiries into it’s affiliate’s purchase of products?
Do purchases of tens out thousand of dollars (at a minimum) by Herbalife affiliates raise questions? Or does Herbalife simply turn a blind-eye and quietly bank the profit on the purchases?
Herbalife said it was “shocked” and appalled” to hear about the case. A spokesman said the memberships of the two women had been terminated, though it did not specify when.
My guess would be shortly after the victims contacted authorities about having been scammed, and not a moment earlier. Otherwise they could hardly be “shocked” to hear about the police case… they should have been all over the suspicious activity months ago.
Herbalife takes any case of violation of the company’s rules of conduct by our independent members very seriously. Herbalife has a very strict ethics policy and code of conduct, which all our independent members are contractually bound to comply with,” the spokesman said.
Right. Now tell me, what is the point of having a “strict ethics policy” and “code of conduct” if nobody at Herbalife was able to detect regular affiliates clearly purchasing obscene amounts of product?
Not good enough Herbalife, and just more of the typical PR lip-service I’ve come to expect from the company over the years.
Civic Party legislator Claudia Mo Man-ching, who is assisting the victims, said Herbalife should shoulder some of the liability for the victims’ losses.
“Herbalife as a multinational company should take some responsibility. We are talking about business ethics … You can’t just say some members had inappropriate practices and you have nothing to do with it,” she said.
Damn straight. Refunding those who were actually supplied with Herbalife products by the scamming duo would be a start.
Fair enough Herbalife isn’t responsible for the money the women ran off with, but certainly they are responsible for failing to detect two affiliates purchasing large amounts of product – and failing to ask any questions, despite a proclaimed strict ethics policy and code of conduct.
Whatever Herbalife products were distributed to these victims should be wholly compensated for, obviously minus any profits the victims might have made.
Meanwhile Herbalife claim they had no idea their affiliates were scamming people for millions of dollars. Does anybody really believe they have any idea how much genuine retail activity is taking place within the company?
Despite the glaring problems with its business model (affiliate purchases the company baselessly insists translate into retail sales), Herbalife maintains that it is not a pyramid scheme.