Weight Loss Company Embroiled in Controversy - NBC Connecticut

Weight Loss Company Embroiled in Controversy

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    Herbalife says members can make a profit selling its weight loss supplements and drinks, but some community groups say many of the people selling its products are actually losing money. (Published Wednesday, Sept. 10, 2014)

    Herbalife’s Web site promotes a commitment to healthy living and weight loss through its supplements and drinks, and says members can make a profit selling them.

    But some community groups say that, while the company is making millions, many of the people selling its products are actually losing money.

    “They’re attacking the community from many different levels," said Mary Sanders, Executive Director of the Spanish Speaking Center of New Britain.

    Sanders says the company is targeting Hispanics, particularly in low-income neighborhoods. She calls it a pyramid scheme that leaves people out hundreds, sometimes thousands of dollars.

    "It is a pyramid, but it's called a family. So people recruit people to work under them, and they're your children and then the next tier down is you grandchildren," she explained.

    The company calls their sellers “independent members” and says nearly 4,000 of them in Connecticut sell products like shakes, teas and other supplements. Some of those independent members tell us they are encouraged to enlist others to sell under them.

    An Herbalife reseller in New Britain was closed, but Yolanda Aroyo, who lives in the same building, told us Herbalife products gave her relief from digestive problems and helped her lose weight.

    "It did good for me,” said Aroyo. “It helps you out. It does good."

    While Aroyo is a believer, critics call the company nothing more than a pyramid scheme. The most vocal of them is hedge fund manager and billionaire Bill Ackman. He's been on a crusade to draw attention to the company and its tactics.

    But he has a stake in Herbalife's failure – Ackman has bet against Herbalife’s stock in a short position. Simply put, if the stock price plummets, Ackman profits.

    Organizers of the New Britain outreach told the Troubleshooters that Ackman is funding them.

    In a written statement, Herbalife told us "the allegations being made today are misguided and entirely incorrect,” and told us "Herbalife has been the target of a manufactured and misleading campaign by a Wall Street hedge fund manager with the hope of putting the company out of business to enrich himself."

    Attorney General George Jepsen's office has received 26 complaints about Herbalife. A spokesperson says they have followed up on all leads, and Jepsen himself sat down with both Herbalife and Bill Ackman. Based on their findings, we're told there is not an active investigation at this time.

    There are, however, investigations into the company by the Federal Trade Commission, Department of Justice and FBI.

    Those who feel cheated by Herbalife say that, while there is a lot of money at stake, they aren't seeing any of it.

    “The people on the bottom are going to lose while the guy at the top is making $10 million dollars a year," said Sanders.

    Ackman has said publicly that any personal profits he would make from the company’s failure would go to charity. He had not returned a request for comment at the time of publication.