News Column

Herbalife Shares Wilt on Senator's Inquiry

January 23, 2014

Associated Press

Herbalife Ltd. shares fell Thursday after U.S. Sen. Edward Markey called for an investigation into the company's business practices.

After hearing complaints of improper pressure and financial hardship, including one of his constituents who lost her entire retirement savings, the Massachusetts Democrat said he wants more information about the nutrition supplement company. He sent letters to the Securities and Exchange Commission, the Federal Trade Commission and the company itself seeking more detail.

"There is nothing nutritional about possible pyramid schemes that promise financial benefit but result in economic ruin for vulnerable families," Markey, a member of the Commerce, Science and Transportation Committee, 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."

Herbalife, which is incorporated in the Cayman Islands and based in Los Angeles, uses a network of distributors to sell its nutritional supplements and weight-loss products globally.

The company said in a statement Thursday that it has received the senator's letter in the morning and looks forward to an opportunity to "introduce the company to him and address his concerns at his earliest convenience."

This is not the first time Herbalife has had questions raised about its business structure.

Hedge fund manager William Ackman accused it in 2012 of operating a pyramid scheme, in which a company makes most of its money by recruiting new salespeople, rather than on the products that they sell. Herbalife has repeatedly denied the claims and rival investor Carl Icahn has disagreed as well, taking his fight against Ackman public and increasing his stake in the company.

Shares of Herbalife fell 12 percent to $64.76 by midmorning, far outpacing a broader market decline. As of Wednesday's close, its shares were up nearly 71 percent for the past 12 months.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Original headline: Herbalife shares fall on senator's inquiry


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Source: Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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