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September 15, 2014

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Groups urge investigation of Herbalife for promises made to Hispanic distributors

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Tovin Lapan

Sergio Osorio, director of Federation of United Michoacan Clubs of Nevada, addresses the media at a press conference Thursday Nov. 21, 2013 calling for an investigation of Herbalife, a nutrional supplement company that uses independent distributors to sell products and create new networks of distributors. Osorio and other Hispanic leaders have said the company is misleading its distributors about the potential earnings.

A trio of organizations serving the Hispanic community says nutritional supplement company Herbalife is misleading independent distributors, promising profits that are all but unattainable, and they have asked Nevada Attorney General Catherine Cortez Masto to investigate the multinational company.

The Nevada chapter of League of United Latin American Citizens, the Federation of United Michoacan Clubs of Nevada and nonprofit legal organization Hermandad Mexicana staged a news conference today to call publicly for an investigation after sending letters earlier this month to the attorney general.

Herbalife is a California-based corporation operating in 88 different countries that sells nutritional supplements, such as protein shakes and snacks, fitness and energy supplements and other personal-care products. The company uses a multilevel marketing system based on direct selling. Independent distributors sell to other distributors or the products’ end users.

“A lot of the distributors are promised riches … and they don’t come true. They tell them all you have to do is invest X amount of money, but then they get stuck with the product. Maybe they do not know how to sell it, and they don’t teach them how to sell it. They are being scammed, I believe,” said Sergio Osorio, director of the Federation of United Michoacan Clubs of Nevada

According to a 2012 Herbalife earnings statement for U.S. distributors, 73 percent of the company’s independent contractors are only seeking a better price on the products and 29 percent have distributors under them. In 2012, 12 percent of Herbalife distributors received a payment from the company, for example for earnings from downstream distributors purchasing products directly from Herbalife. That does not mean they did not earn money from selling the product themselves.

Spokesmen with the three Nevada organizations said they have heard complaints from members of not receiving promised sales commissions and of being purposely mislead regarding the potential earnings for distributors.

“I’m very concerned that it is the executives that are making the money at Herbalife and not the distributors,” said Priscilla Rocha, executive director of LULAC Nevada, who added she knew people who lost as much as $2,500 investing in Herbalife products.

“Another concern of mine is that they are targeting the Latino community, especially those immigrant Latinos who really need the money,” Rocha said.

The spokesmen said they did not have any proof of illegal activity, and none of the local Herbalife distributors with complaints were willing to speak at today’s news conference. However, the organizations felt compelled to ask for an investigation because they have been hearing the same complaints from multiple people.

The organizations have set up a hotline, 855-501-5437, for anyone to call and leave complaints and statements about Herbalife.

Hispanic civil rights organizations, which say Herbalife’s distributors in the United States are predominantly Hispanic, have asked the California attorney general and the Federal Trade Commission to also look into the company. Rocha said high-unemployment couples with an immigrant population that is not always aware of the law and what resources are available to them make for a vulnerable and easily exploited population.

“There is an abnormally large percentage of Hispanic immigrants that are being recruited by Herbalife to serve as distributors. Oftentimes many of these immigrants hold off on paying for their citizenship to join Herbalife with dreams of making great wealth,” Hermandad Mexicana executive director Luz Mosquera said in a statement. “I’m not saying Herbalife is doing anything wrong. What I’m saying is that I’m concerned enough to ask the Attorney General Masto to find out if they are doing anything wrong.”

Herbalife reported record sales in 2012 of $4.1 billion and net income of $477 million.

Herbalife and the Nevada Attorney General’s Office did not immediately respond to requests for comment.

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