BULLETIN: U.S. Senator Calls For Investigation Of Herbalife; Says Constituent’s Family Lost $130,000, Including ‘Entire 401(K)’ Retirement Account, To MLM Program

Sen. Edward Markey

Sen. Edward Markey

BULLETIN: Sen. Edward J. Markey, D.-Mass., has called for an investigation of Herbalife, an MLM program.

“There is nothing nutritional about possible pyramid schemes that promise financial benefit but result in economic ruin for vulnerable families,” Markey said in a statement. “Herbalife may be a purveyor of health and wellness products, but some of its distributors are suffering serious economic ill-health as a result of their involvement in the company. I have serious questions about the business practices of Herbalife and their impact on my constituents, and I look forward to receiving responses to my inquiries.”

Markey is a member of the Commerce, Science and Transportation Committee.

On Sept. 5, 2013, Tito Jackson, a Boston city councillor, asked FTC Chairwoman Edith Ramirez to open an investigation into Herbalife’s business practices.

In a letter to Ramirez, Jackson said he feared Herbalife is a pyramid scheme that “pr[e]ys on disadvantaged populations.”

Markey has asked both the FTC and the SEC to open Herbalife probes.

From a statement by Markey’s office today (italics added):

One family in Norton, Massachusetts reported that it lost $130,000, including the family’s entire 401(K), investing in Herbalife. Another Massachusetts resident claimed that she was encouraged to recruit new members by approaching her family and also received pressure to spend money to buy more Herbalife products so that she could qualify as a so-called “Supervisor” in the Herbalife system. She also stated that she was encouraged to stay in the program even after she said she wanted out.

Herbalife stock fell about 10.35 percent today, to $65.92, on the news of Markey’s call for probes.

The company denies it is a pyramid scheme.

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4 Responses to “BULLETIN: U.S. Senator Calls For Investigation Of Herbalife; Says Constituent’s Family Lost $130,000, Including ‘Entire 401(K)’ Retirement Account, To MLM Program”

  1. I’m no fan of Herbalife but there may be something other than simple consumer interest at work here. There are some pretty powerful people with more than just a rooting interest in Herbalife’s stock price.

    One stock analyst come right out and asks if Senator Markey is being paid to make this request:

    http://www.zacks.com/commentary/31012/bull-of-the-day-herbalife-hlf

    It doesn’t seem the author of that piece understands how it might be possible to lose money in Herbalife but that isn’t the focus of his argument. Is this a few rich folks using not quite illegal means to manipulate the stock price? I have no clue.

    But honestly, if I were in charge of Herbalife I’d go on record requesting a full investigation of their business practices. Put all the questions to rest once and for all. Assuming I thought they could stand scrutiny.

  2. John Hempton said it best back in January 2013: “They (MLMs) are scumbags then – but they are scumbags working for stock market investors.”

    Translated: as long as the stock prices go up, who cares how many people they screw over.

    Case in point: tobacco companies.

    So the stock analyst is basically blinded by his profession… In his mind, the ONLY reason you’d want to investigate Herbalife, whose stock prices keep rising, is for “nefarious purposes”.

    Rather sad, actually. Really demonstrates his own ignorance.

  3. And now, Canada opens an investigation:

    http://nypost.com/2014/01/28/canadian-regulator-probing-herbalife/

    The article points out that the Canadian Competition Bureau, the agency performing the investigation is like our own FTC but that it can also bring criminal charges.

  4. GlimDropper: And now, Canada opens an investigation:

    http://nypost.com/2014/01/28/canadian-regulator-probing-herbalife/

    The article points out that the Canadian Competition Bureau, the agency performing the investigation is like our own FTC but that it can also bring criminal charges.

    Thanks for this, Glim.

    Patrick