For years, Utah Senators have been known for their attempts to cover for natural health supplement companies. It’s a big money maker for Utah, and in some cases, it has come down to the point where I at least questioned their motives, and even the Senators’ criminal involvement. This year, Massachusetts Senator Edward Markey is wondering about Herbalife. He’s probing into the company, calling for an investigation into claims that Herbalife has opened up a pyramid scheme (more politically called MLM’s/multi level marketing).
Since Markey came out with this call for investigation, Herbalife’s shares have dropped more than 12%. Markey claimed to have written into the US Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), and Herbalife itself
Markey stated something we have all been thinking for years,
There is nothing nutritional about possible pyramid schemes that promise financial benefit but result in economic ruin for vulnerable families. He has reported
serious complaints of improper pressure and financial hardship from those types of families.
Herbalife representative Barbara Henderson has stated that the company
looks foward to sharing their side and providing more information. Of course, they aren’t doing this in an early press conference, but rather suggest that they are waiting until a time that is convenient for Senator Markey.
This is not a new battle by any means. The battle over the future of Herbalife has been going on for years. It started when prominent activist investor William Ackman accused the company of running a pyramid scheme (an unsustainable business model focused on recruiting salespeople rather than on selling or making effective products to sell). Herbalife has obviously fought back, denying these types of accusations.
Major investors such as Carl Icahn (yes, the Carl Icahn who is trying to split up eBay and Paypal) have lined up, and Herbalife is accordingly being closely watched on Wall Street. Icahn may honestly be wise to pull out now. The stock prices went up 139% in 2013, but they have already fallen 16.6% this year.
Markey has repeatedly cited Massachusetts constituents, who he says have reported multiple scams, financial hardships, and other issues, being preyed upon by Herbalife. He claims that they lost thousands of dollars in the process, even $130,000 with one family, which included their entire 401k retirement account. Frankly, I really don’t know how you get $130,000 in. That certainly doesn’t sound like a vulnerable family to me, but what do you do. Anyway, another woman claims to have been pressured into recruiting and spending more money in the process to qualify as a
Frankly, I’m not surprised that Herbalife is being pursued right now as a pyramid scheme. At the same point though, I have trouble seeing how people can really keep going to the point of losing that much money. I associate it with a gambling issue. It’s something that doesn’t make logical sense, and I don’t feel as bad for the people doing it, because they have ultimately done it to themselves.
There are accusations that Herbalife is specifically targeting minority communities, which may be legitimate. They promote the idea that you could build your business and obtain the
American dream. In October 2013, Latino civil rights activists also called on the California attorney general to look into the company’s practices . The League of United Latin American Citizens has also gathered to this same end.