Herbalife Report: “Pyramid Shakedown”

herbalifeThis 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.

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Advocare: What You Should Know

Written by: Advocare Facts

AdvoCare is a multi-level-marketing company (MLM), founded in 1993 by Charles Ragus. Charlie once worked as a regional vice president for Fidelity Union Insurance while being a distributor for Herbalife. In 1989 Charlie co-founded Omnitrition International. Similar to AdvoCare, Omnitrition sold nutritional supplements, vitamins and skin care products. Charlie sold out after only a few years when Omnitrition became embroiled in controversy for being a pyramid scheme. The resulting lawsuit, Webster v. Omnitrition International Inc has become a landmark case in the MLM industry.

AdvoCare claims to provide physical and financial wellness through the sale of sports performance, nutritional, weight control, and skincare products (AdvoCare). Similar to other MLM companies, such as Mary Kay, Vemma, and Herbalife, they recruit distributors to sell their products via word of mouth and face-to-face sales, all the while promoting the idea that wealth and success can be obtained by anyone that adheres to their business model.

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Consumers Looking for a “Good” MLM

psaRobert FitzPatrick of Pyramid Scheme Alert is bombarded every week by consumers who want to ask him, “What about this MLM?”

You see, the marketers of multi-level marketing companies have gotten very savvy. They know that plenty of us have figured out their con game. They now have consumers convinced that theirs is “one of the good ones.” They’ve convinced consumers that they’ve seen the “bad” MLMs, and that theirs is surely one of the “good” MLMs. (Yet they never tell consumers which ones are the “bad” ones, do they? Why is that?)

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