More regulatory woes for Herbalife

Posted 20 April 2020

Global direct sales company Herbalife Nutrition Ltd. has recently extended its decades-long record of being the subject of regulatory actions.

  • Last year, it agreed to pay $20 million to settle Securities and Exchange Commission (SEC) charges that it made false and misleading statements in numerous U.S. regulatory filings about the compensation model for its China-based service providers. SEC alleged that the actual model used is multilevel and based on downline purchases rather than hours worked. While direct selling is permitted in China, multilevel marketing is not. SEC found that Herbalife’s misleading statements deprived investors of the information they needed to fully evaluate the risk of investing in Herbalife stock.
    Reference: Herbalife to pay $20 million for misleading investors. US Securities and Exchange Commission press release. Sept 27, 2019

  • Two former company executives, Yanliang Li and Hongwei Yang, were charged in November on criminal and civil charges of violating the FCPA.
    Reference: Tokar D. Former Herbalife executives charged with conspiracy to bribe Chinese officials. Wall Street Journal. Nov 15, 2019They allegedly (a) bribed Chinese officials to obtain sales permits and to influence government investigations into the company’s compliance with Chinese laws and (b) attempted to hide the bribes by providing false sworn testimony to the SEC and wiping clean computer files.
  • This year Herbalife reportedly set aside $40 million in preparation for resolving U.S. Justice Department and U.S. Securities and Commission investigations focused on the company’s compliance with the Foreign Corrupt Practices Act (FCPA).
    Reference: Tokar D. Herbalife sets aside $40 million for bribery settlement. Wall Street Journal. March 2, 2020

Since there are at least 50 known cases of liver damage or fatal liver failure in users of Herbalife  products while evidence is lacking that they improve health, consumers have good reason to be wary. Reference: Hall H. Herbalife or herbadeath? Science-Based Medicine. Sept 10, 2019

Source: Consumer Health Digest #20-13, April 5, 2020

2 Responses to More regulatory woes for Herbalife

  1. Nico 18 May, 2020 at 11:42 am #

    Hi Dr. Steinman

    Is it legal to call a product “FAT BLOCK” as with USN’s new product?

    https://usn.co.za/shop/products/fat-block-x/

    • Harris 21 May, 2020 at 10:12 am #

      @Nico
      This product is a scam. There is much evidence that Chitosan does not bind sufficient fat to have an effect on weight loss. It is the same nonsense as the old product, Bioslim Fat Attack. IOL

      This product falls under CAM regulations, and should be registered, which it is not. Again, against regulations.

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