Illinois Investigates Herbalife As
Federal, State Probes Grow
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[April 18, 2014]
By Svea Herbst-Bayliss
BOSTON (Reuters) — Illinois Attorney
General Lisa Madigan's office said on Thursday it is investigating Herbalife Ltd, joining other state and federal probes of allegations
that the weight loss and nutrition company is running a pyramid scheme.
Herbalife shares fell 0.3 percent to close at $55.10, reversing
Madigan's office was urged to look into the company months ago by
civil rights groups, which claimed it was a pyramid scheme targeting
minorities. Hedge fund manager William Ackman was the first to call
Herbalife a fraud and placed a $1 billion bet against the company in
The company denies the allegations, and high-profile investors such
as Carl Icahn, George Soros and Daniel Loeb have supported the
company in the past by taking stakes.
Herbalife said it has more than 15,000 members and many more
thousands of "satisfied customers" in Illinois. The company noted
that it is confident in its business and that it complies with
appropriate laws and regulations.
"We look forward to working with the Illinois Attorney General's
office to resolve the consumer complaints it has received," it said
in a statement.
Madigan's office joins the Federal Trade Commission, Federal Bureau
of Investigation and New York State Attorney General Eric
Schneiderman in mounting a probe.
A pyramid scheme typically pays its members more to sign on more
recruits than for selling a product or service to retail customers.
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The FBI has reached out to former Herbalife distributors and is
probing their business documents, according to sources.
Carl Icahn is Herbalife's biggest investor and was recently promised
three more board seats, paving the way for him to eventually control
five seats on the 13-person board.
(Reporting by Svea Herbst-Bayliss; editing by Richard Valdmanis,
Steve Orlofsky and Richard Chang)
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