While reports by The New York Post surfaced Monday that the Federal Trade Commission was investigating Herbalife for alleged pyramid scheme practices, the company refuted the claims calling the information “inaccurate” and demanded a correction.
“Other than the voluntary dialogue with regulators, which we communicated on our January investor day, we are unaware of any other regulatory interest and/or investigation,” Herbalife said in a statement.
An official of the nutritional company told VOXXI that the press release was all the information Herbalife would be releasing at this time and would not comment further or offer any details regarding the allegations.
While some have speculated that the FTC may be investigating Herbalife, an agency spokesperson told VOXXI that the commission could neither confirm nor deny that it was investigating any company, including Herbalife.
Herbalife a pyramid scheme?
The New York Post reported Monday that it filed a Freedom of Information Law request with the FTC on Dec. 26 to see if there were any “substantive complaints six days after hedge-fund activist Bill Ackman went public with a $1 billion short position—calling Herbalife’s multi-level marketing model a pyramid scheme that should be shut down by regulators.”
In response to the information request by The New York Post, the FTC should have said that it withheld some information from documents posted online because it can’t release complaints obtained from foreign sources if they request confidentiality an FTC official confirmed to VOXXI via email.
“The Post reporter read a letter from our FOIA office that made it sound like there’s an investigation,” an FTC official told VOXXI.
While the news sent Herbalife stock in a spiral, the shares rebounded trading at $35.54 at market’s close Monday.
A request was made by The New York Post asking the government for documents that showed 192 complaints against Herbalife in the past seven years.
“Other complaints contained a note referring to a ‘pending law enforcement action.’ The FTC did not say whether the action was civil or criminal,” New York Post reporter Michelle Celarier wrote.
Hedge fund titan Ackman, of Pershing Square Capital, called Herbalife “the best-managed pyramid scheme in the history of the world” because distributors earn tenfold from recruitment as from selling the company’s products.
Herbalife sells nutrition supplements and workout drinks through a network of distributors. Another hedge fund mogul, Greenlight Capital’s Daniel Einhorn, also questioned Herbalife’s business model, Forbes reported.