Herbalife may have misled investors, SEC on impact of FTC deal, one short-seller says

August 28, 2016 23:36

BOSTON - After US multi-level marketing company Herbalife settled a probe of its sales practices with the US Federal Trade Commission last month, top executives assured investors that the company would be able to thrive under the new rules.

The consumer protection agency had questioned the company's sales methods.

Billionaire investor William Ackman in 2012 claimed the company was running a pyramid scheme, recruiting members with a promise of payment for enrolling others in distribution, rather than depending on the actual sale of its nutritional supplements and weight management products.

In its July 15 settlement Herbalife agreed to restructure its US business so distributors are rewarded for sales rather than for recruitment of sales agents and it agreed to pay a $200 million fine.

But Herbalife's filings with the US Securities and Exchange Commission painted a much less optimistic picture than its presentation to analysts and investors, according to a private investor who flagged the differences to the SEC this month.

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