Days before the kick off of the annual Herbalife Extravaganza in Chicago, two former independent distributors from the Chicago area filed new complaints with the Illinois Attorney General’s office, claiming the nutritional products company operates a pyramid scheme that exploits Latino immigrants.
“Herbalife is in Chicago this week for a major conference, where they celebrate what they call their success and what we call a detriment to the Latino economy here in Illinois,” said Omar Duque, CEO of the Illinois Hispanic Chamber of Commerce.
Duque joined about half-a-dozen other consumer and civil rights advocates on Tuesday to submit the complaints on behalf of the former independent distributors to Illinois Attorney General Lisa Madigan’s office at the James R. Thompson Center, 100 W. Randolph St. in Chicago.
The total number of Herbalife complaints submitted to the attorney general’s office reached 20 on Tuesday, according to the League of United Latin American Citizens (LULAC), the group spearheading the campaign.
In April, Madigan’s office announced it is investigating Herbalife and in mediation discussions with the company on previous complaints lodged by civil rights groups throughout the state. The New York Attorney General’s office, Federal Bureau of Investigations (FBI), Federal Trade Commission (FTC), Securities and Exchange Commission (SEC) and Department of Justice (DOJ) are also each investigating Herbalife.
The Chicagoland area’s Herbalife Extravaganza, which will be held at Allstate Arena in Rosemont from Friday to Sunday, is organized to allow the company’s independent distributors from across the world to gather and receive training that will “help their business plans come alive,” according to the company’s website.
“[Herbalife] has come into our community like a thief in the night, stealing the hard-earned money off the backs of Latino immigrants and Latino Americans,” said Julie Contreras, president of LULAC of Waukegan.
Contreras personally submitted the complaints, saying the former independent distributors “feared standing here, because at the base there’s a rumor that Herbalife is communicating with Immigrants and Customs Enforcement (ICE).
Waukegan-resident Claudia Zachinana Trujllo, one of the former independent distributors, lost more than $10,000 investing in Herbalife throughout two years, according to LULAC.
Trujllo was unemployed when she first invested in 2008 and by 2009 her home went into foreclosure, Contreras said. The mother of five now works in a factory, and did not make any money from selling Herbalife.
Independent distributors, such as Trujllo, invest in Herbalife International, Inc. inventory based on the company’s promises of making a profit, civil rights groups allege.
Here’s more from Duque and Contreras:
Independent distributors purchase products from the company and can profit from selling them to their own customers at an escalated price. Profits can also be generated through additional commissions based on sales by distributors they’ve recruited to the company.
But many independent distributors are not in a position to recruit a new distributor and are unable to sell the various diet and protein shake powders, vitamins, drinks, snacks and energy supplements the company wants them to sell, LULAC claims. Subsequently they never recover their losses.
According to a 2012 Herbalife earnings statement for U.S. independent distributors, 73 percent buy in to the business only to receive a discounted price on its products. Some 29 percent of sellers have recruited others to become Herbalife distributors, and a whopping 88 percent only earned income from their product sales and did not receive a payment from the company.
Sylvia Arias lost $36,000 between 2000 and 2003 while working for Herbalife, according to LULAC. The Chicago resident, who has three kids, was the second former distributor to file a complaint with the attorney general’s office on Tuesday.
“We’re worried about the business practices of Herbalife,” said Dan Lira, executive director of the South Chicago Chamber of Commerce. “As a chamber we are trying to create a business district with business owners who are invested in the community, who are trying to give back to the community and support our residents. Herbalife does the exact opposite.”
There are two Herbalife storefronts operating in the South Chicago neighborhood on the city’s South Side, he said.
“They’re very deceptive. You’ve got people investing thousands of dollars and they really can’t sell the product. They’re asked to get others to invest too,” Lira said. “That sounds like a pyramid scheme to me.”
In a statement issued to Progress Illinois, Herbalife claims the company complies with all laws and regulations and will cooperate with the attorney general’s office’s investigation.
We have more than 15,000 members and many more thousands of satisfied customers in Illinois. We will continue to provide the outstanding products and services that they have come to expect from Herbalife over the past three decades. We will always support the good work of our members. We are excited about the upcoming Chicago Extravaganza and the support and enthusiasm that it brings as we continue to positively impact the lives and health of millions of consumers.
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.
Contreras said LULAC and a group of former independent distributors plan to protest on Friday at the Herbalife Extravaganza event.
“It’s so important for Lisa Madigan … to protect our residents. As of today, we don’t see them moving,” Contreras said. “We hear that she commenced an investigation, but why aren’t they interviewing our witnesses yet? We feel that justice delayed is justice denied.”
In addition to submitting the new complaints, Contreras also called on the attorney general’s office to speed up the investigation. She said that the FTC has set up dates to conduct witness interviews in the coming months in Lake and Cook Counties.
“I’m trying to educate my community, by providing the hallmarks of a pyramid scheme,” Contreras said, adding that LULAC of Waukegan is hosting Herbalife awareness meetings every two weeks. Duque joined Contreras in the call for Madigan’s office to fast track its investigation.
“We really believe that right now this is in their hands, it’s in the attorney general’s hands, it’s in the FTC’s hands, and we would like for them to move their investigations forward,” he said. “Every day that goes by and every family that is defrauded and every individual that is lured by the false hopes of Herbalife’s practices, is a day that families aren’t earning money, they’re removing money from the Illinois economy, they’re destroying dreams.”