Herbalife in talks with FTC, outcome “uncertain”
Despite a report in The Wall Street Journal claiming ‘government investigations cleared the company of allegations of having a fraudulent business model‘ earlier this month, Herbalife has revealed otherwise in its latest public filing.
As announced by Herbalife, regulatory investigations into the company are still very much open.
Herbalife Ltd is in talks with government regulators regarding a probe of the company’s business practices and said that the outcome of the talks was uncertain, the company said in a filing on Thursday.
Both the FBI and SEC have announced investigations into Herbalife, with the latest referring to a possible but uncertain outcome in the FTC investigaton.
Herbalife indicated in its filing that the FTC probe could be drawing to a close. “The company is currently in discussions with the FTC regarding a potential resolution of these matters,” Herbalife said.
But Herbalife said that it could not say how the talks would end.
“Potential resolution” strongly suggests Herbalife, on some level, have something to answer for.
“The possible range of outcomes include the filing by the FTC of a contested civil complaint, further discussions leading to a settlement which could include a monetary payment and other relief or the closure of these matters without action,” the company said.
“At the present time, the company is unable to estimate a range of potential loss, if any, relating to these matters,” the filing said.
Till the FTC investigation is concluded and the outcome known, I’m trying not to read too much into Herbalife’s statement.
What I will say though is this is the first time the company hasn’t sugar-coated regulatory investigations. Usually we get some crap about how regulatory investigations are welcomed and the outcome will no doubt vilify the company, but here we’re looking at “potential losses”, relief and monetary payment (a fine).
All of those would have to do with Herbalife running a pyramid scheme, and either settling with the FTC and/or having a Vemma-style lawsuit dropped on them.
Back in 2013, the FTC claimed they found Herbalife’s business practices “disturbing“.
I think at this point it’s likely Herbalife have a sense of what they’re going to be done for. It’s the outcome they’re not certain of.
Clearly the company knows more than it provided in its filing, as evidenced by the supplied possible outcomes. The outcomes provided have to be based on violations, that would have been made known to Herbalife (or at the very least hinted at) by the FTC during the talks.
As always, we won’t get any information from the FTC until a conclusion is reached and they’re ready to make a public announcement.
Stay tuned…
the WSJ report was referring to the FBI and the US attorney in manhattans probe into herbalife.
the current filing by herbalife refers to the FTC investigation and the fact that herbalife is now in talks with the FTC to resolve the issues, points to the probes by other agencies having been culminated.
there will be no vemma style lawsuit by the FTC as herbalife is Not a pyramid scheme. there will be a fine for herbalife for not keeping its house clean, and it will be back to business.
Did it?
The article itself was paywalled but the third-party coverage from memory only referenced “regulators”.
Some more from CNBC:
cnbc.com/2016/02/25/herbalife-q4-earnings-results.html
Bloomberg:
bloomberg.com/news/articles/2016-02-25/herbalife-surges-after-saying-it-s-discussing-an-ftc-resolution
an article by ‘natural products insider’ which has followed the herbalife saga quite faithfully, specifically mentioned the FBI and attorney general [manhattan] probes coming to an end, without any reference to the WSJ article.
naturalproductsinsider.com/blogs/insider-law/2016/02/federal-probe-of-herbalife-finds-no-wrongdoing.aspx
several reports based off the paywalled WSJ article like those from seekingalpha and others, also referenced the FBI and attorney general [manhattan] probes ending.
it seems likely that these reports are based off ‘leaked information’ as against ‘official information’, but are likely to be based on fact, as the WSJ or seekingalpha may be ‘biased’ in their coverage, but are generally based on ‘fact’.
just my twopence.
fortune magazine has also reported on the herbalife/FTC ongoing discussion “regarding a potential resolution of these matters”.
fortune.com/2016/02/25/herbalife-ftc-probe/
an article by ‘bored with the noise’ [ theskeptic21 ] points to a minor change in herbalifes SEC filing this year, which supports the WSJ article announcing the end of the DOJ [manhattan] criminal probe into herbalife.
the word ‘recently’ is missing in the para below, but was present in the previous filing by herbalife.
when you remove the word ‘recently’ the above para reads as though the DOJ inquiry is a ‘past’ event.
also, the general sentiment of reportage on this herbalife/FTC ‘negotiation’ is that a settlement is in the works.
theskeptic21.blogspot.in/2016/02/when-words-matter-ftc-sends-proposal-to.html
Has anyone seen this? It’s Tim Sales response to Bill Ackmans move to short the HLP (Herbalife) stock.
youtube.com/watch?v=A-JWTD5yXzY
Maybe Tim Sales has some stock shares in Herbalife!
Herbalife’s Shocking Confession:
seekingalpha.com/article/3950696-herbalifes-shocking-confession
Herbalife adjusts metric for Active New Member growth, actual results much lower; shares down 15% premarket:
seekingalpha.com/news/3159606-herbalife-adjusts-metric-active-new-member-growth-actual-results-much-lower-shares-15-percent
Earnings Call for the Fourth Quarter and Full Year 2015 held on February 25, 2016
biz.yahoo.com/e/160303/hlf8-k.html
Man that’s a lot of percentage errors.
Still, I suppose it’s something they caught it first before a regulator did.
pretty stupid mistake for herbalife to make, especially since it is under public and regulatory scrutiny arc lights.
however the bottom line remains:
but still. herbalife! what ya doing? you just gave free fodder to the ackholes of this world 🙂
They seem to be pretty blase about it, but Herbalife think the FTC is going to fine them $200 million, get an injunction and be done with it.
usatoday.com/story/tech/2016/05/05/herbalife-stock-jumps-possible-ftc-settlement/83986024/