Consumer and immigrant rights advocates from across the country traveled to Washington D.C. on Wednesday to call for a federal investigation into Herbalife International, Inc., a multi-level marketing company they claim is running an illegal pyramid scheme.
“This is not the American dream,” said 68 year-old Miguel Calderon, who claims he lost more than $22,000 within 18 months of investing in Herbalife in 2008.
A Waukegan resident originally from El Salvador, Calderon said he initially invested $100 to become an Herbalife independent distributor based on the company’s promises that he would make a profit.
But, although the retired laboratory technician was consistently unable to sell the various diet and protein shake powders, vitamins, drinks, snacks and energy supplements, Calderon claims he was told he could not return the unsold products and was pressured into purchasing more inventory, making it impossible for him to recover his losses.
“I was told I’d be a millionaire by the end of the year, but I was left with nothing” he said.
He was one of four Illinoisans to travel to D.C. on Wednesday, joining nearly 30 activists from across the country, including California, Florida and Massachusetts, to meet with their respective congressional delegates and the Federal Trade Commission (FTC) in a call for a federal investigation into Herbalife’s business practices.
In addition to Edith Ramirez, chairwoman of the FTC, and U.S. Rep. Luis Gutierrez (D-IL, 4), Calderon met with representatives from the offices of U.S. Reps. Jan Schakowsky (D-IL, 9) and Brad Schneider (D, IL-10), and U.S. Sen. Dick Durbin (D-IL).
“We need to make sure this doesn’t happen to more people like me, this is wrong,” Calderon said.
Herbalife’s independent distributors purchase products from the company and can profit from selling them to their own customers at a higher price. Profits can also be generated through additional commissions based on the sales of distributors they recruit to the company.
Julie Contreras, president of the League of United Latin American Citizens of Waukegan, said the controversial company is operating a pyramid scheme, wherein the independent distributors — the people “at the bottom” — struggle to recover their losses after they are pressured into spending money, while they increase profits for people “at the top.”
She also accused the company of targeting and taking advantage of Latino immigrants, who may be vulnerable to the scheme due to a lack of understanding about American rules and regulations.
“They try to target the most vulnerable populations and those with limited education,” Contreras said. “They give these people a false sense of security and a false guarantee.”
But in a statement to Progress Illinois, Herbalife denies all allegations that the company operates a pyramid scheme and claims the consumer advocates are ill-informed:
Herbalife has repeatedly stated that we would welcome the opportunity to educate the group assembled by LULAC, in order to correct the misinformation and misperceptions they may have been given about Herbalife, and to review and understand the details of those who cite a bad experience with Herbalife. It is disappointing that LULAC prefers to continue making ill-informed public declarations that do not reflect a company that offers industry leading consumer protections, such as clear, accurate and timely disclosures to prospective members regarding potential income-generating opportunities; no minimum purchases and low start up cost; fully-refundable 90-day money back guarantee for the start up kit if membership is resigned; and 100% refund guarantee, plus shipping costs, for return of all resaleable product purchased in prior 12 months upon termination of membership.
According to a 2012 Herbalife earnings statement for independent distributors in the U.S., 73 percent of the distributors buy into the business only to receive a discounted price on its products. Some 29 percent of sellers have recruited others to become Herbalife distributors, and 88 percent only earned income from their product sales and did not receive a payment from the company.
“We need the FTC to do a federal investigation into Herbalife’s business practices,” said Contreras. ‘They need to go through this company with a fine-tooth comb. We have bore witness to the garages full of products with paperwork that says the inventory can’t be returned and they can’t get their money back.”
Although she wouldn’t specify exactly what Ramirez, chairwoman of the FTC, said in Wednesday’s meeting, Contreras said she has a “positive feeling” the agency will investigate Herbalife’s business practices.
“My feeling is that there will be an investigation,” Contreras said. “She listened to our concerns.”