FBI Probes Herbalife Pyramid Scheme Allegations

Hedge fund manager made accusation in 2012
By Matt Cantor,  Newser Staff
Posted Apr 12, 2014 2:09 PM CDT
FBI Probes Herbalife Pyramid Scheme Allegations
In this Friday, Sept. 8, 2006, file photo, a worker cleans the logo on the Herbalife sign as finishing touches are put on the company's building in Torrance, Calif.   (AP Photo/Herbalife, Susan Goldman, File)

In December 2012, a hedge fund manager accused nutrition company Herbalife of being a pyramid scheme; now, the FBI is investigating. The criminal probe comes on top of civil investigations from multiple agencies, including the Federal Trade Commision, the Financial Times reports—though no charges have been filed. Following news of the FBI probe, Herbalife's share price dropped 14%; it's fallen 34.6% this year, Reuters notes.

Bill Ackman, in charge of the hedge fund Pershing Square, took a $1 billion stance against Herbalife in 2012. Pershing Square has released a number of dossiers which say the company, which operates in 80 countries, recruits independent distributors with videos depicting luxury lifestyles. In fact, the dossiers say, company figures show most distributors never earn a cent. The company says it isn't aware of an FBI investigation, but law enforcement insiders tell the Los Angeles Times the probe started "more than several months ago." Several top investors, including Carl Icahn and George Soros, have backed Herbalife despite Ackman's claims. (More FBI stories.)

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