Quick Hit Anthony Burke Boylan Thursday April 17th, 2014, 9:11pm

Madigan's Office Investigating Herbalife Pyramid Scheme Allegations

Miguel Calderon thought he was part of the American Dream when he heard about Herbalife. You put your money to work to make more money, he believed. He started with an $11,000 investment, using his savings that he earned while working at Abbott Laboratories.

But every time the Waukegan resident asked why all of his efforts for the nutrition and diet company failed to yield any profits, he was told he needed to invest more. By the time he realized there were no profits to be had, he had invested more than $20,000 in what a Latino advocacy group says is a pyramid scheme that preys on immigrants, in particular.

"Herbalife knows Latinos are easily victimized because they face barriers in language, and culture and legal status,’’ said Julie Contreras, president of the League of Latino American United Citizens of Lake County. “We came out and supported Attorney General Lisa Madigan in her election, now we want to see her support our community.’’

The group held a rally at the James R. Thompson Center Thursday before delivering its latest batch of complaints against Herbalife in what has been a long and plaintive cry for an investigation into the company’s practices with Chicago area Latinos.

“I was excited because I was led to believe I’d become wealthy,’’ said Calderon. “It was just impossible to make any money. The business model was not what I had been sold on.’’

Contreras has spoken to 106 Latinos in her area and only two of them report making any money at all from Herbalife. One received a check for a penny, and the other for $5.29, meaning they still had lost significant amounts of money. Overall, the group she represents has lost more than $100,000, she said.

According to Contreras, about 70 percent of Herbalife representatives are Hispanic, and 93 percent of that group make absolutely no money from the company.

A spokeswoman for Lisa Madigan said the Attorney General’s office is investigating Herbalife, though she would not say when the action began. That news came as a surprise to Contreras, who said her group and many others have called for investigations before and were not made aware of any action, including in their last contact with Madigan's office two weeks ago.

Madigan’s rep also said the office has been in contact with Herbalife and is in mediation discussion on previous complaints by LULAC — which was another surprise to Contreras. An Herbalife spokesman confirmed the company is working with the Illinois Attorney General’s office, but declined to answer any other questions and issued a statement.

We are confident in the integrity of our longstanding business and the Company's compliance with applicable laws and regulations. We look forward to working with the Illinois Attorney General’s office to resolve the consumer complaints it has received.

Particularly discouraging, Contreras said of Heralife, is how brazen the company is with Latino representatives because it fears no retribution. She showed a receipt book from one victim who got about 30 people to attend Herbalife orientation seminars at a cost of $25 each. Juana Estala, 52, of Cicero, turned about $750 over to her supervisor and expected all of the people who had paid to get invitations to a training seminar and the related materials necessary to sell Herbalife — but they never came.

In all, Estala and her daughter lost nearly $13,000 in their dealings with Herbalife.

Herbalife is no stranger to legal action, both for the products' ingredients and the manner in which they are sold. The company, which earned $527.5 million on $4.8 billion in sales in 2013, faced its first legal action in 1985, five years after it was founded. It paid $850 million to settle allegations by the California Attorney General’s office that its products did not live up to marketing claims. Since then, the company has paid millions to settle a variety of class action lawsuits.

The Federal Trade Commission announced its own investigation into the company, which operates its multi-level marketing business around the world. Back in February, Chicago advocates and those from across the country met with the FTC to call for an investigation into the company. The Federal Bureau of Investigations and New York State Attorney General Eric Schneiderman have launched their own investigations into the company as well.

Herbalife also has been forced to remove ephedra from its products and has been criticized by researchers in Israel and across Europe for selling products that contain lead and cause hepatitis and other illnesses of the liver.


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