HerbaLife Fraud Update (Commentary)

HerbaLife Scam

Some things take the mainstream media forever to figure out. And some things take a financial analyst months to properly reveal. That attention has suddenly flitted on AMWAY knock off HerbaLife is just luck of the draw. It is a flaw in our Wild West legal system that Multi-levels such as Herbalife are able to operate, much less get listed on the public trust corporation exchanges. If they allowed in Tupperware and Avon Cosmetics, why pick on silly HerbaLife? It’s really no more dubious than any other firm in the business. 

Since the unwary have no recourse to regulation it has been the sole function of class action suits to trim the profits of bad actors. But no one really cares about distributors duped into buying garages full of products one could obtain for a fraction of the price at Costco. Those people got what they deserved, right? As much as people who pay for a phony cancer cure. Of course phony methods of becoming rich might not merit as much attention, but selling unproven phony anything is wrong on some level.

Sadly our modern world is filled both with phony health products and phony get rich quick schemes. The only unusual thing about HerbaLife is that it manages to be both at the same time. That it achieved the critical mass necessary to be listed on a stock exchange is an indictment of free market capitalism. Frankly the thing should have been stopped in its tracks well before it became listed.

Crime pays. However, I do notice that the Maffia is not traded on the NYSE. That said, I notice casino firms, tobacco companies and gun manufacturers are listed. Why the sudden burst of ethics regarding a firm that does nothing more odious than push fraudulent health products while swindling its own salesmen?

In the current case unwanted light has been shed in HerbaLife’s dark direction by members of the investment tout class—another dubious example of humanity. His basic bitch is that HerbaLife’s constant churn and burn of its distributors must have some upward limit. Actually that’s somewhat eyewash. What’s really happened is that the analyst has discovered that he has a soul. (A hedge fund manager is riding the stock down, for fun and profit and a Holy Woody.) Firms which do bad things to people are bad firms, no matter how profitable they may seem to be-and investors should not enable their expansion. Period. HerbaLife is just a specifically obvious morally rickety example.

How Multi-Level Works:

The pitch is (1) that the American Job is dead and that you will never have any security unless you work for yourself and (2) people like to buy products from their friends as opposed to cold, unloving retail chains. Without belaboring the point, both claims are false. Moreover, it’s a lead-in to the idea that you can make more money by recruiting people to sell the product than you can by actually selling it. In the end, the organization only gives incentives to buy increasing amounts of the product. The majority of actual sales are made to prospective distributors as opposed to the public. It is these distributors, who wind up with garages full of products they have received incentives to buy, that are the net marks of the scam. Pretty much end of story.

Thus abandoned storage lockers everywhere are more likely to be crammed with Amway and HerbaLife and Fuller Brushes and Tupperware than they are to be filled with antique furniture. The scam targets displaced or frustrated workers. The more profitable ones are run by people who have been part of similar scams. It’s also a nice game for ex-cons to get involved in.

All Multi-Level marketing is a scam. Period. There is no legitimate business function that it performs. It doesn’t offset risk. It isn’t a particularly efficient way of delivering goods. We cover it extensively on our website (HIL-GLE.com Ajax Telegraph “$1000.00 Plus Your Dignity”.) Essentially it is set up as a way of circumnavigating laws against Bubble Games. That is the only intention behind the construction.   

The FTC should have clamped down on HerbaLife and its Multi brethren long ago. But it hasn’t—because no one cares about the miserable schmucks firms like it routinely make their livings by ripping off. The only reason that HerbaLife is netting any attention now is because some Stock Analyst is ticked off that he has been assigned them as a subject. In a better world someone at the public trust exchanges should have taken a whiff and said “Hell no. We don’t want this sort of thing polluting the reputation of our exchange.” This would be a change in course. Since the Clinton Administration all one has had to do is fiction up a billion dollars in assets and show you have a revenue stream and you too can have a listing on the NYSE or similar stock pimping forum.  It doesn’t matter if you have a website with no income or a business plan that involves running over nuns to harvest their blood and organs—show us a billion, spiff Golman and  you were in. Perhaps this latest spate of scrutiny is the start of a fine new trend? In the end, the future of capitalism depends on it.

It’s a target rich environment. If the chattering mass media of finance twits want to start with the obvious scams, then may God go with them. And if hedge fund managers want to ride down the other scams now listed as public trust stock issuing companies, God go with them, too. 

Coda:

And the good news is: Multi-Level marketing is ILLEGAL in every developed country in th world, save the United States. So it can be done.