Hoax or hit?
Report denounces Herbalife’s “predatory” practices
Story and photos by Mónica Barnkow
Ana Delgado didn’t eat solid foods for a whole month.
Instead, she heeded the advice of a friend, who recommended specific weight loss products, that included powders and elixirs.
“In a month, I consumed about $1,500 worth of powders,” recalled the Colombian immigrant of her first experience with Herbalife International Inc. six years ago. “[I wanted] to lose weight and to improve my complexion.”
The multinational corporation develops, markets, and sells nutritional products it claims spur weight loss and better health outcomes.
There are approximately 3.2 million distributors worldwide. Over half a million alone live in the United States.
As of 2014, the company reported a net worth of $5 billion.
With startup rates ranging from $60 to $100, there is a relatively low investment with which to establish a distribution business. Members are expected to purchase products every month at a discount rate from Herbalife and then sell them at higher retail prices. In addition, they are encouraged to recruit new members and earn recruitment royalties.
Delgado became both a consumer and distributor of various Herbalife products, which claim to be effective at combating a number of conditions, including cancer and diabetes.
But soon, she says, she came to realize the claims did not add up.
Though she had been taking the powders religiously, she did not experience the weight loss that had been promised.
“They don’t work,” she charged.
On October 27th, she joined with Public Advocate Letitia “Tish” James, State Senator Jeff Klein, Councilmember Annabel Palma, and members of the advocacy group Make the Road New York (MRNY), to denounce Herbalife for perpetuating fraud and colluding on a get-rich scheme that targeted vulnerable members of the community such as immigrants and low-income residents.
“With false promises of wealth and extravagance, a disproportionate number of Hispanic families are falling prey to these schemes and sacrificing their hard-earned dollars,” said Klein.
The group presented the results of The American Scheme: Herbalife’s Pyramid Shakedown, an investigative report that analyzed 56 complaints filed with the New York State Attorney General and the Federal Trade Commission. Those complaints represented combined financial losses of $950,000.
Moreover, of the 56 complaints filed, 93 percent indicated Spanish as their primary language, and more than 60 percent of new members made initial investments larger than the required $60 to $100.
The report also engaged individuals who posed as potential salespersons and visited area “nutrition clubs.” They surreptitiously recorded video segments with Herbalife recruiters who boasted of amazing profits, including one distributor claiming to have earned over a million dollars in one year.
“No one is watching how this product is distributed,” said Klein, who is pushing for a bill that would compel full and more stringent financial disclosures of independent Herbalife distributors in order to protect prospective sellers. “Legislation will make sure there is transparency and that someone is watching.”
The report also revealed that only eight of the 56 claimants ever received a check from the company – for an average amount of $100.
“I have yet to see anyone who has been successful selling this product,” said Klein.
Since its founding in 1980, the company has faced multiple lawsuits and allegations that it operates as a pyramid scheme.
Though it has consistently denied such claims, the Federal Trade Commission (FTC) did initiate a probe which remains ongoing.
Legislators on Tuesday agreed that the company’s practices were cause for concern.
“Herbalife is a multi-dollar corporation making their profits on the back of immigrants,” argued James.
The company often promised members “the moon and the stars,” she said. “This is predatory behavior of the worst kind.”
Councilmember Annabel Palma also supported the proposed measure.
“The Herbalife Transparency bill will help protect our families from predatory schemes that many multi-level marketing companies promote,” she said in a statement. “I support this legislation, and will continue to advocate against these unfair business practices that disproportionately target economically distressed communities.”
Florentino Arce was a committed Herbalife member.
Seven years ago, while looking for work, he came across of the company and felt it was a promising opportunity. He regularly brought the company’s products, and sought to bring in new members. He even attended sessions of the company’s “University of Success,” during which first-person testimonials of successful vendors and distributors are shown.
Arce said he did exactly as he was instructed, but there was no return.
Instead, he said he ended up losing $12,000.
He urged others who fear they have been duped to be courageous and step forward.
“Speak,” he said. “Don’t be afraid.”
Francisca Montaña, MRNY Consumer Fraud Prevention Program, also urged anyone, regardless of immigration status, who felt that they had been victimized to speak out.
“My people are being ripped from their dreams,” said Montaña. “Herbalife has to stop abusing our community.”
Arce’s counsel was even more blunt: “Don’t get involved with Herbalife.”
In response, the company said it was reviewing the report, and stated via e-mail, “We look forward to working with anyone who is interested in making the industry stronger.”