This week New York State Senator Jeff Klein and Public Advocate Letitia James issued a scathing report on multi-level marketing company Herbalife (NYSE: HLF). The report, The Amercian Scheme: Herbalife’s Pyramid ‘Shake’down, is based on complaints filed by 56 Herbalife victims. It definitively calls the company a pyramid scheme and highlights the company’s deceptive practices.
The key findings include:
- Since 2004, only 56 Herbalife victims in New York have been brave enough to file complaints against the company. Most victims are afraid of betraying family, friends, and neighbors.
- The 56 victims that have filed complaints reported nearly $1 million in financial losses ranging from $90 to $100,000. The average amount loss was approximately $20,000.
- Over 60 percent of new members make initial investments larger than the required $60 to $100 for the new member kit. The average initial investment is $1,800, but some are as high as $10,000.
- Herbalife distributors purport that supervisors can make as much as $20,000 in monthly income.
- Of 56 complaints analyzed, only eight victims received a check directly from Herbalife for their royalty claims. The average amount was $100.