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Tag: Bill Ackman

  • EDITORIAL: Herbalife And Polarization In The Latino Community

    A purported nutrition club site visited by Bill Ackman's team. Source: Pershing Square Capital Management LP report on Herbalife. (Red block by PP Blog.)
    A purported “nutrition club” site visited by Bill Ackman’s team. Source: Pershing Square Capital Management LP report on Herbalife. (Red block by PP Blog.)

    The PP Blog’s take on Bill Ackman’s take on Herbalife is that the Los Angeles-based MLM firm dupes prospects into believing they’re boarding the bus to Disneyland, but it’s really the bus to Jurassic Park. Latinos, African Americans and other vulnerable populations pile on bus after bus and become financial protein for the pyramid scheme of a voracious Tyrannosaurus rex.

    Our take on Herbalife’s take on Ackman, meanwhile, is that if anybody’s a T.rex with a ferocious financial jaw, it’s Ackman. Herbalife, in business since 1980, is no pyramid scheme, it says.

    Nearly a year has passed since Ackman showed the world photos of several purported Herbalife “nutrition clubs,” including one in which at least four trash cans and a discarded mattress were lined up outside a less-than-welcoming entrance. Through these clubs, Ackman suggests, Herbalife reps operate unlicensed restaurants by calling them places at which “social gatherings” occur, skirt local sanitation requirements and lure neighbors into becoming reps for the supplement manufacturer by offering “complimentary beverages” served in unbranded, disposable cups.

    The clubs, Ackman suggests, symbolize the surreal point at which the Disneyland dream ends and the Jurassic Park nightmare with elements of black comedy begins. No legitimate business would describe these food-serving clubs with drawn blinds, seating and blenders as nonrestaurants. And a legitimate business certainly wouldn’t provide rules for their continued operation.

    But that’s exactly what Herbalife did — and it did it while claiming it was an MLM company that not only wanted to tackle MLM competitors such as Nature’s Sunshine and traditional-retail competitors such as Jenny Craig, but also wanted to “go after” restaurants such as McDonald’s and KFC, Ackman contends.

    If a nutrition club was located in a residential neighborhood, it was not permitted to “use exterior signage of any kind” under the Herbalife rules, Ackman says, quoting from the rules. Nonresidential sites could have a sign, but the sign must “ensure” that the “location is not perceived as a store, restaurant, franchise or similar operation.”

    Say what?

    Did Herbalife really signal to distributors that restaurants fit nicely within its business model as long as they weren’t called restaurants — and, in any event, to make sure they were well-hidden from the food-service police?

    Ackman broadly asks his audience to ponder what would happen if McDonald’s pretended not to be in the restaurant business and published Herbalife-like talking points that operators actually were charging a “daily, weekly or monthly membership fee” to recover costs, not a fee that represented “the price or cost of products.” He specifically asks what would happen if McDonald’s instructed franchisees to go light on the signage and to pull down the blinds to fend off claims that a restaurant was operating in the shadows.

    The nutrition clubs, among other Herbalife-related matters, caught the attention of the League of United Latin American Citizens (LULAC), which was none too pleased. LULAC says Herbalife needs to get a handle on its “bizarre” rules as they pertain to nutrition clubs and require them “to come into compliance with the law.”

    From an Oct. 18 letter to Herbalife distributors from LULAC (italics added):

    Herbalife’s nutrition clubs are required to follow a bizarre set of rules that prohibit club owners from displaying the Herbalife logo on the outside of the store, posting prices for their products, having an open/closed sign and advertising. Clubs are required to cover their windows, sell only Herbalife products, destroy used containers, and keep products hidden until they are sold. These bizarre rules appear to be designed to bolster Herbalife’s contention that nutrition clubs are not retail stores, restaurants or food establishments when in fact that is exactly what they are because they are selling food at fixed retail locations. Herbalife distributors should demand that the company ensure its nutrition clubs are in compliance with local, state & federal health and business codes that apply to retail food outlets. Better yet the company should franchise the nutrition clubs as most other national brands have done when selling food at fixed retail locations. The “future of the company” shouldn’t depend on hiding from the law.

    LULAC National Executive Director Brent A. Wilkes followed up with a Nov. 11 editorial in the Huffington Post in which he contends Herbalife engages in “predatory business practices” and “targets the Latino community in a methodical and calculated manner.”

    “Somewhere between 60 to 83 percent of them are Latino,” Wilkes’ Nov. 11 editorial contends. “300,000 to 400,000 Latino distributors will quit this year alone only to be replaced by another 300,000 to 400,000 new Latino distributors. If left unchecked, Herbalife could recruit, defraud and dispose of as many as 4 million Latino distributors over the next 10 years.”

    It seems that Herbalife is Jurassic Park to Wilkes, too.

    The Nov. 11 editorial followed a Nov. 4 column on Fox News Latino by Rafael A. Fantauzzi, who spoke out in favor of Herbalife. Fantauzzi, according to his bio line in the piece, is president & CEO of the National Puerto Rican Coalition (NPRC) and a board member of the Hispanic Association on Corporate Responsibility (HACR).

    This is among Fantauzzi’s contentions (italics added):

    Herbalife has succeeded at something that quite a few companies, and the Federal government for that manner, have failed, and that is to achieve real Hispanic inclusion. Hispanics make up at least 60 percent of Herbalife’s direct selling workforce – better known as distributors.

    Fantauzzi goes on to contend that “critics of Herbalife and multi-level marketing companies are confusing business ventures with a welfare program.”

    Say what?

    Fantauzzi explains on Fox News Latino:

    Critics “assume that everyone must have equal outcomes, not just equal opportunity,” he writes. “If individuals want to become distributors/salesmen for these companies, their compensation and reward is based on the results of their effort. A worker that dedicated time and sweat and achieved high sales and promotions should be rewarded. His/her compensation should not be equal to that of an individual who did not put much effort or thought into this venture. Plain and simple, this is a business, not a charity.”

    Earlier, on Oct. 29, NPRC congratulated Herbalife for appointing former U.S. Surgeon General Richard Carmona to its board. Carmona’s appointment occurred on the heels of Herbalife’s Sept. 5 announcement that it had hired former Los Angeles Mayor Antonio Villaraigosa as a senior adviser to chairman and CEO Michael O. Johnson.

    In its news release introducing Carmona, Herbalife apparently felt the need to describe him in part as “[b]orn to a poor Hispanic family in New York City.” Villaraigosa, in an Herbalife-released statement about his appointment, noted that the firm has a “strong presence within the Latino community.”

    It’s no secret why Herbalife is recruiting such prominent and influential Latinos for its team: The firm is under attack from Latino groups or politicians representing them, including LULAC and MANA, a national Latina organization. On Sept. 5, Tito Jackson, a Boston city councillor who said last year that children who speak Spanish as their first language or are of Latino/Hispanic descent make up 43 percent of the student body of the Boston Public School District, asked FTC Chairwoman Edith Ramirez to open an investigation into Herbalife’s business practices.

    Among Jackson’s fears, according to his letter to Ramirez, is that Herbalife is a pyramid scheme that “pr[e]ys on disadvantaged populations.”

    Ackman is a Harvard-educated billionaire who runs a hedge fund and is famous for upsetting Wall Street suits. He’s also an Herbalife short-seller who’d benefit if the stock price craters. Herbalife naturally detests him.

    But if Bill Ackman is right — if Herbalife is Jurassic Park — it will be the greatest call since Harry Markopolos called Bernard Madoff a Ponzi schemer and federal prosecutors later called him an affinity fraudster with enough hubris to chomp down on human souls for decades.

    If Ackman is wrong — if Herbalife is Disneyland or the government comes to believe it would create too much market uproar by even bringing a case or could lose any case it did bring  — Herbalife might emerge as a category creator: an MLM company deemed too bizarre to fail.

     

  • EDITORIAL: Death Of An MLM Salesman — Brought To You Via Empower Network’s ‘Badass’ Button

    This "Badass Content" on Empower Network was about the tragic death of a key Herbalife salesman.
    This “Badass Content” on Empower Network was about the tragic death of a key Herbalife salesman.

    If you’re an MLM company facing a PR problem or a crisis involving the firm and its distributors, don’t expect fellow MLM firm Empower Network to solve it for you. In fact, it’s probably prudent to expect that Empower Network will only magnify your bad press or virally blab the things you’re trying to keep in-house.

    To the uber-bizarre Empower Network, the sudden death of a top Herbalife distributor is “badass content” that plays well alongside other Empower Network “badass content” such as a story posted by “Team America” and titled, “Ingredients for Success: An Interview with Nu Skin President and CEO Truman Hunt.”

    Background

    Herbalife, according to BehindMLM.com,  notified distributors last week about the death of John Peterson, saying in an email that Peterson had died as a result of “a tragic accident at his home in Steamboat Springs, Colorado.”

    “Tragic” was an apt descriptor, to be sure, especially since the New York Post reported that authorities were looking at the death as a suicide carried out with a gun while the MLM trade tries to come to grips with assertions by Bill Ackman that Herbalife is a pyramid scheme. Peterson was 58, married and the father of three children. He reportedly had earned millions of dollars through Herbalife, in part by driving business to the firm through a purported “leads” program.

    Herbalife denies it is a pyramid scheme and has sought to distance itself from such “leads” programs.

    But returning to the subject of all this purported “Badass Content”: The “Team America” post about Nu Skin on Empower Network appears to have been lifted in its entirety from the trade publication Direct Selling News by an Empower Network affiliate interested in getting more sign-ups for Empower Network by using DSN’s Nu Skin story as a lure.

    Meanwhile, Herbalife’s in-house announcement about the death of Peterson appears also to have been cherry-picked by Empower Network affiliates, reposted on Empower Network’s Blogging platform, repurposed as “Badass Content” and used to lure sign-ups for Empower Network.

    When one clicks the incongruous “Badass” button above the Empower Network postings about Peterson’s death, one is taken to a page that in part reads, “Share this Badass Content Now! Click the social network buttons above so all your friends can see this badass content.”

    Yes, really. The death of an Herbalife pitchman in the prime of his life while his family grieves qualifies as “Badass Content” on Empower Network.

    Another part of the message points visitors to a domain styled “BadassContent.com,” which is registered in the name of David Sharpe of Empower Network LLC. Sharpe is one of EmpowerNetwork’s purported founders, and the LLC is listed as a Florida company with Sharpe as one of its two managers. When the PP Blog tried to visit the “badass” URL about Peterson’s death, the McAfee SiteAdvisor security software used by the Blog issued a “Suspicious Site” warning and a message that in part read, “When we visited this site, we found it exhibited one or more risky behaviors.”

    McAfee SiteAdvisor warning about "badass" domain. Red highlights by PP Blog.
    McAfee SiteAdvisor warning about “badasscontent” domain. Red highlights by PP Blog.

    Empower Network also appears to control a domain styled BadassButton.com.

    On Aug. 12, the PP Blog reported that a video playing on YouTube sought to drive traffic to Empower Network by depicting U.S. Vice President Joe Biden as a recent enrollee in the bizarrely named CashCropCycler HYIP “program” who confesses to President Obama that he’s “[j]ust out bumbling around and sticking my foot in my mouth.”

    But if you complain to YouTube about Empower Network, according to David Wood, another of the purported founders, there may be hell to pay, so you should “Back the fuck down.”

    “Be warned: BIG, SCARY WARNING,” Wood wrote. “I’m in the process of having lawyers research into whether or not we can sue the shit out of you.”

    Yes, really. Welcome to the MLM La-La Land of Empower Network. It’s like the La-La Lands of Zeek Rewards and AdSurfDaily and MPB Today needed a replacement and that some of MLM’s purported greatest thinkers have decided that what the MLM world really needs is even more madness.

    Read the Salty Droid swearing back at the purported Empower Network “badasses.” (Salty can curse with the best of them, even when they’re planting the seed he should be executed with a shotgun.)

    Can there be any doubt that MLM is just asking for it?

    One self-described Christian pastor and Empower Network promoter on YouTube tells his audience that there’s money to be made in Empower Network, despite all the swearing. Just tune it out and recognize that swearing is a personal choice and hardly is limited to the MLM sphere, he instructs.

    “This is just an open environment where we accept everybody of all types of beliefs, whether you’re a Christian or an Atheist or a Jew or a Muslim — or, you know, you . . . believe in Scientology and all that good stuff,” the pastor explains.

    He added that he looked at network marketing in general as an “opportunity to be able to advance the kingdom of God” and at Empower Network in specific as a “vehicle to help you to get the money that God wants you to have so that you can advance the kingdom of God.”

    Had the pitch for Empower Network appeared on Empower Network instead of YouTube, the pastor could have given his God talk its very own “Badass” button (with a representation of a human skull included) to drive traffic.

    The only remaining mysteries, we suppose, is whether God, being God, would have cared enough to solve the little problem McAfee has with the “badass” domain  — and whether He’d be offended that His name, once again, was being used to promote an MLM “program.”

    Did we tell you that the PP Blog received information today that strongly suggested that some “sovereign citizens” were pitching a scheme by which winners in the Zeek Rewards MLM scheme, which the SEC has described a year ago as a $600 million fraud, could short-circuit “clawback” litigation from the court-appointed receiver?

    We’ll keep you up to date as that MLM La-La Land story develops.

     

     

     

  • Series Of News Releases From Purported MLM Trainer Plants Seed That Federal Trade Commission Has Given Green Light To Several Opportunities, Including Herbalife

    EDITOR’S NOTE: The PP Blog called the Federal Trade Commission to get its take on these news releases, which use the agency’s name and imply that the FTC  recently has given several MLM “opportunities” a clean bill of health. The agency did not immediately respond.

    What would you think if you read a headline on Google News yesterday such as this: “Herbalife Pyramid Scheme Rumors Untrue: FTC Speaks out on Pyramid Definition.”

    Would you think, perhaps, that the FTC recently had conducted an investigation into Herbalife’s business practices and “spoke out” yesterday in defense of the firm after determining that it had been subjected unfairly to “rumors” that it was orchestrating a pyramid scheme — and that any questions about the the legality of Herbalife had been laid to rest by the government?

    And what would you think if you read headlines such as these:

    “Adzzoo Pyramid Scheme Accusations False – FTC Explains Pyramid Scheme Definition”
    “Javita Pyramid Scheme Accusations – FTC Settles Pyramid Definition”
    “ARIIX Pyramid Scheme Evidence – FTC Settles Pyramid Scam Definition”
    “Agel Pyramid Scheme Accusations False – FTC Explains Pyramid Scheme Definition”
    “Ignite Electric Pyramid Scheme Rumors Not True – FTC Speaks on Pyramid Definition”
    “Creative Memories Pyramid Scheme Accusations Untrue – FTC Settles Pyramid Scam Definition”
    “Photo: ACN Pyramid Scheme Accusations Incorrect – FTC Clarifies”
    “Photo: Celebrating Home pyramid scheme true or false? FTC Clarifies”

    Each of the headlines listed above has appeared online in recent days — some of them carried by Google News, which published the feeds of SBWire, a news-release service. The release that uses both the FTC’s name and Herbalife, for example, carries an Aug. 5 dateline from Altamonte Springs, FL. The release that references the FTC and Javita carries an Aug. 2 dateline from Orlando, FL.

    The release on Javita uses this deck: “Javita Pyramid Scheme question answered. FTC decides on Pyramid meaning.” Meanwhile, the release on Herbalife carries this deck: “Herbalife Pyramid Scheme Accusations Are Without Merit. Consumers Can Now Intelligently Determine Themselves Herbalife Pyramid Allegations Are Not True Based On FTC Pyramid Definition.”

    The release that references Herbalife goes on to assert that Herbalife is “not a pyramid scheme at all by the FTC’s definition.”

    Herbalife’s MLM program has been in the news for months. Billionaire Bill Ackman claims it is a pyramid scheme; Herbalife denies the assertion.

    Each of the news releases referenced above appears to be a bid to sell an MLM “leads” program by planting the seed that the FTC recently has given the green light to each of the companies. The basis of the claims curiously appears to be a 15-year-old speech (May 13, 1998) an FTC official gave on the subject of pyramid schemes that in part defined pyramid schemes as schemes that “promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public.”

    That the speech was given in 1998 and may have less relevance 15 years later was not made clear in any of the news releases. Beyond that, the thinking of agencies such as the FTC and SEC may evolve as the schemes themselves evolve.

    In the 1998 speech, the FTC official went to to say (italics added):

    “Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure. There are two tell-tale signs that a product is simply being used to disguise a pyramid scheme: inventory loading and a lack of retail sales. Inventory loading occurs when a company’s incentive program forces recruits to buy more products than they could ever sell, often at inflated prices. If this occurs throughout the company’s distribution system, the people at the top of the pyramid reap substantial profits, even though little or no product moves to market. The people at the bottom make excessive payments for inventory that simply accumulates in their basements. A lack of retail sales is also a red flag that a pyramid exists. Many pyramid schemes will claim that their product is selling like hot cakes. However, on closer examination, the sales occur only between people inside the pyramid structure or to new recruits joining the structure, not to consumers out in the general public.”

    We’ll leave it to you to decide if it is wise for MLmers to try to shoehorn a 15-year-old speech into news releases in 2013 that imply the FTC recently has scrubbed each of the “opportunities” referenced above and made a legal conclusion that no pyramid schemes exist.

     

  • BULLETIN: KPMG Discloses Chicanery In Its ‘Los Angeles Business Unit’; Shares Of Herbalife Temporarily Halted; MLM Firm Says KPMG Told It That KPMG-Employed Auditor Was Engaging In ‘Insider Trading’ Of Herbalife Stock

    Shares of MLM company  Herbalife were halted this morning after its auditor — KPMG — issued a statement yesterday that it was informed “late last week” that “the partner in charge of KPMG’s audit practice in our Los Angeles business unit was involved in providing non-public client information to a third party, who then used that information in stock trades involving several West Coast companies.”

    KPMG did not specifically mention Herbalife in its statement. Nor did the auditing firm say who informed it that its “partner in charge” was involved in chicanery. KPMG did, however, say that it had fired the partner and was “resigning” two clients.

    The Wall Street Journal is reporting that Herbalife shares were “halted minutes after the opening bell due to news pending.”

    Separately, the New York Times is reporting that Herbalife “is poised to disclose on Tuesday that KPMG will have to resign as the company’s auditor.”

    That disclosure now has occurred — and trading in Herbalife shares has resumed.

    Herbalife said this morning in a statement that KPMG wallked away from the company after stating “it had concluded it was not independent because of alleged insider trading in Herbalife’s securities by one of KPMG’s former partners.”

    That former partner was the KPMG engagement partner on Herbalife’s audit until April 5, Herbalife said.

    “KPMG advised the Company it resigned as Herbalife’s independent accountant solely due to the impairment of KPMG’s independence resulting from its now former partner’s alleged unlawful activities and not for any reason related to Herbalife’s financial statements, its accounting practices, the integrity of Herbalife’s management or for any other reason,” Herbalife said.

    Herbalife has been the subject of a battle between titans Carl Icahn, who is bullish on the company, and Bill Ackman, who claims Herbalife is a pyramid scheme. On its website, Herbalife denies it is either a pyramid scheme or a Ponzi scheme.