Stakes High for Latinos in Battle Over Herbalife

By Gloria Alvarez, EGP Staff Writer

California based nutrition-supplement giant Herbalife has been busily trying to shore up support from prominent Latinos, amid claims by some Latino groups and former Herbalife distributors that the company has preyed upon low-income Latinos to beef up the company’s profits.

The company uses a multi-level marketing approach to sell its products, which also include diet shakes and cosmetics. It has been reported that Herbalife sells 60% of its products to Latinos in the U.S.

Herbalife has been embroiled for more than a year in a campaign by hedge fund manager Bill Ackman to prove the company is a “fraud.” Ackman’s company, Pershing Square invested $1 billion that the company would fail, betting regulators would ultimately determine the company is an illegal pyramid scheme and its stock prices would plummet.

Herbalife has countered with its own campaign to rebut Ackman’s claims, including high profile sponsorship of Latino events, such as the Billboard Latin Music Conference and Awards taking place this week in Miami, as well as recruiting prominent spokespersons like former Los Angeles mayor Antonio Villaraigosa to speak out on the company’s behalf. The company has reportedly also made large contributions to at least three Hispanic organizations that signed on to a letter of support from “The Friends of Herbalife” 10 days after 16 Hispanic groups called on members of congress and regulators to investigate the company’s business practices.

Herbalife supporters claim Ackman is fueling the accusations against the company in his bid to reap substantial profit by bringing the company down.

On Tuesday, LATINO magazine named Herbalife to its 2014 “LATINO 100” list of the companies that “offer the most viable business opportunities for Hispanics in the United States.”

Nevertheless, claims that Herbalife has increased its profits at the expense of Latinos rather than to their benefit persists. Latino critics of the company say the issue is not Ackman’s financial gamble, but the thousands of Latinos who have been misled by Herbalife’s selling tactics.

The League of United Latin American Citizens (LULAC), one of the country’s oldest and most prestigous Latino oganizations, claims Herbalife is specifically targeting its message to Latinos with promises of “striking it rich” by selling Herbalife products, “but rarely delivering.”

LULAC Executive Director Brent Wilkes said Herbalife offered to make a donation to his groups, but he turned it down when he learned that 88% percent of the company’s distributors did not earn any money in 2012, a figure acknowledged by the L.A. based company in media reports.

Fifty-two-year-old Boyle Heights resident Martha H., who asked that we not use her last name because she still sells the product, said she became an Herbalife distributor about four years ago because she needed money to supplement the salary she earns at a small women’s clothing store near downtown Los Angeles.

She said a friend who sells Herbalite products told her “she was making a few extra dollars working part-time, and I should join her.”
“Pretty soon I was really involved, I went to the conventions, they showed us great entertainment and I met a lot of friends,” she said, adding her involvement with the company has been positive and profitable. “Am I getting rich? No. Do I have more money to spend? Yes I do,” she said.

But Martha also said not everyone who sells Herbalife has had her same experience. She said some of the women she’s worked with saw the company as a way to end their financial troubles, and had “big dreams of making it to the top, buying a house or car from what they made,” she said.

“They got in over their head, borrowing money, using up their savings. Some of them even quit their jobs, I just could not understand it,” Martha said.

And that is the problem, according to LULAC and the other groups that claim the company’s “pyramid scheme” rewards people who got in early, but needs to keep bringing in more people to keep the base of the pyramid strong for those at the top. Herbalife engages in “corporate practices that cheated hundreds of thousands, perhaps millions of people, between 60% and 83% (of them) of Latin origin,” Juan José Gutiérrez of L.A. based Vamos Unidos USA told Efe, a Spanish language news service earlier this year. Vamos Unidos advocates for Hispanic civil rights issues and is deeply involed in the immigration reform movement.

The Latino groups have lobbied legislators and regulatory agencies to take a look at the company’s business practices and in March, the Federal Trade Commission (FTC) confirmed it has opened a formal investigation into Herbalife’s business model.

Herbalife has repeatedly denied claims that it “cheats” Latinos, saying LULAC and other Latino groups are “mistaken” and their views are based on “misinformation.” They claim their practices are no different than those used by cosmetic companies Avon and Mary Kay, which also use a multi-level sales approach.

East Los Angeles resident Ana S. Talamantes, 44, told EGP she lost thousands of dollars working as an Herbalife distributor and eventually a supervisor.

She said you hear people’s stories and you get excited and join: “They tell you a lot of stuff and then it turns out to be something different.”

Talamantes says she has no doubt the company was going after Latino distributors, and told EGP she joined the company in 2007 and invested around $25,000, most of it borrowed from family and friends.
“When you first start they give you a lot of support,” she said. “The speakers would tell us to go to the schools, where Latina mothers are to get customers,” explains the mother of two.

She says her supervisor pushed her to open a “club,” to bring people to her house for meetings: something she did over the objections of her husband. “He would tell me I was being brainwashed, it caused a lot of arguments. But I thought, ‘oh he’ll like it when I bring in all the money,’” she added.

But Talamantes says she, and most of the people she knows who sold Herbalife never made any money. She said she was stuck with a lot of product.

Herbalife says it has a process for returning product and that no distributor is ever stuck with product they cannot sell. But according to Talamantes, the company makes it nearly impossible to return items for a refund. She said she tried for months to return the product, “but they would tell me to call back, or to call a different number” and eventually, disgusted with the company, she just threw the product away.

Talamantes told EGP she is glad the company is being investigated. She said she’s wanted to tell her story, to take it to the media for a long time so she could warn people not to get involved.

“It was really sad the way they got the people,” she said. “I would see how they talked people into getting into it, most of them were older and did not really have the money, but they would convince them,” she said.

“We have our dreams, we all want something more for our kids” and they took advantage of that.

Editor’s Note: This story is a longer version of the original articled published in EGP’s 11 newspapers.

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April 24, 2014  Copyright © 2012 Eastern Group Publications, Inc.

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