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Hedge Fund Calls Herbalife a Pyramid Scheme.

December 30, 2012

A reader commented about a presentation made by Bill Ackman from Pershing Square Capital Management, on Herbalife. Ackman bluntly declares that Herbalife is a pyramid scheme. Check out his lengthy and detailed PDF presentation here:

http://www.businessweek.com/pdf/who_wants_to_be_a_millionaire.pdf

Because Herbalife is a public company, there are many more details that are available to analysts, journalists, and investigators. I would imagine if private companies like MonaVie, Amway, and LIFE were so forthcoming with their financial records, similar presentations could be created to support claims that these companies are illegal, recruiting-based pyramid schemes where only a small percentage of people (those at the top) make the majority of the money.

Herbalife has taken to attacking Ackman, saying he’s trying to manipulate the markets to his own advantage. Once again, it’s an example of a company that is attacking the messenger, not the message. Forbes magazine has chimed in with their analysis of Avkerman’s claims. Read it for an eye-opener.

Whatever happens with Herbalife with regards to Ackman’s claims, my hope is that more light will be shed on other companies that are engaging in deceptive practices while posing as incredible “business opportunities.”

[Editor’s note: Fixed misspelling on Ackman’s last name]

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36 Comments leave one →
  1. David Miller permalink
    December 30, 2012 9:13 am

    “where only a small percentage of people (those at the top) make the majority of the money.”

    This statement never ceases to amaze me.
    Lets look into this illogical thought, Deans Dairy is the largest dairy in the world with over 100,000 workers. Would you say the majority of the people make the majority of the money or just a few people at the top?? Do you think Deans should brought down by the government because just a few of the people at the top make the most money?

  2. December 30, 2012 10:32 am

    David, TEAM/LIFE makes that point over and over that every business is a pyramid scheme – the CEO or owner makes the most and the entry-level/hourly people make the least. But in a company like Dean’s, even the guys picking up poop on the farm still get paid minimum wage. In a place like TEAM/LIFE, people are payING hundreds or thousands just to be a part of it, and it goes straight into the leaders’ pockets, and they never see a dime. Myself included.

  3. Raquel Peters permalink
    December 30, 2012 11:41 am

    A compant you have a job with doesn’t decieve you. A job tells you what you will be paid up front and you don’t have to give the company your money to work there or be trained. Great points Katie!

  4. Raquel Peters permalink
    December 30, 2012 11:44 am

    The dairy company isn’t promising employees riches to get them to invest in them or work for them. They promise a wage for the hours worked and you make an informed decision based on the truth. They can’t get away with not paying you for the work you do. They have to give you copies of any contracts you sign to take to your attorney.

  5. Raquel Peters permalink
    December 30, 2012 11:46 am

    I am so excited to see if the FTC moves on this……they sure have egg on their face! Kudos to Ackerman!

  6. Melanie Morgan permalink
    December 30, 2012 1:35 pm

    What never ceases to amaze me are those who try to compare MLM to a real job as if there is any comparison …ONLY in the MLM industry does this happen!

    Oh but how I wish the MLM industry were held to the same laws and regulations of the Corporation, since they like bashing and using the “handling objections” propaganda!

    If they were to the SAME laws as Corporations…they would be history!

    They pull this bogus argument ONLY when it suits their agenda, but then what’s new…everything is done to suit their agenda, whether it is BS or not, there is a sucker born everyday.

    So end of story…there is no comparison between a real job and the MLM internal consumption recruiting “trade”, period!

    I hope the FTC see the obligation to “Protect The Consumer”….so they need to act and act on them all.

    There are Billions of dollars being siphoned off the American people though these deceptive and pretend “business opportunities”.

    I believe the time has come for the recruiting and internal consumption MLM’s to meet their fate.

    EVERYONE knows the manipulation that goes on “the trainers” teach you to cover their ass..so the FTC..doesn’t find out the truth…we never had the required costumers and neither did anyone on our team, they taught “just click that customer button” and all is good, don’t even think about it, “just do” or they think calling people they recruited in as “customers” CTA.. cuz they only bought once in a couple months they can call them that…dishonest…and they know they are illegitimate customers.

    They have simply crafted ways to make it appear as they are above board… Integrity..nope there is none. Such a lie and they all know it!

    So it may make a few rich ..very, very few…and far more damaging to humanity, as a whole.

    I pray the time has come… FTC or any other agency cracks down on all of the illegal pyramid scemes! America is being pillaged by the dishonest fraudsters.

  7. No Team For Me permalink
    December 30, 2012 1:45 pm

    David – the 100,000 employees of the hypothetical Dean’s Dairy aren’t spending $500-1,000 a month to work there. Instead they are being paid to work there. BIG difference.

  8. Melanie Morgan permalink
    December 30, 2012 2:09 pm

    Dean’s Dairy isn’t a “Direct Sales” company.

    How long do you think a real “sales company” would stay in business if their “sales force” didn’t have protected territories or didn’t have any customers?

    Or how about if the sales agent= MLMer’ err…independent “sales” contractor but the reality is independent “recruitment” contractors.

    How long would a real “sales person” last in a real “sales” company if they took the liberty of “6 months” before they had figured out how to make a sale?!!! But yet they are made to pay to learn for 6 months in the Team LiEf how to sell or get 1 customers!! Hahahahaha right…deception again..they say they are a MLM and have “customers..

    So before they are required to have 1 sales (according to a comment on here) but are expected to PAY to learn how to “sell” by listening for 6 months!!! of cds, books, seminars, majors, opens, before they could figure out how to make 1 sale?!!!

    What a joke! The mighty will fall.

  9. December 30, 2012 11:49 pm

    MLMs are an advanced fee, pay to play pyramid schemes obfuscated with phoney, often exorbitantly priced wampum that no one would otherwise buy but their adherents out of a fake, artificial need/want (thus, the advance fee, pay to play).

    A job or jaaayyyy ohhhh bheeee is a straight get to the stick, then, get paid – not even a possum in the neighborhood woods has issues understanding that (unless there’s a drink of MLM kool – aide in the woods going on).

    Leave it to an mlm apologist to make a spectacularly befuddled conjecture that ascends to an instant classic of unintentional hilarity. Dan thanks, that did tickle my funny bone today:

  10. Chris permalink
    December 31, 2012 1:57 am

    I’ve been on this site before. I have put team to the side the last 2 months and finally am quitting team. The whole businesses is based on hope…and using that to keep people in the business. As a Christian I believe it is a deceptive way of.keeping people believing they will be successful when the majority is not, plus in team it is also a form of idol worship…ha look what I have…u can have it to…
    so Just thought Id say I’m done..
    I just want the new recruits to know, it’s a very deceptive business excursion and for many a costly one as well.. Few will win, many will lose.
    Sad, but true, its a pyramid scheme, and a form of mind control.
    Sorry to say, but this group isn’t the group they claim to be…They should read.their Bibles more often instead of listening to their egotistical cds, maybe some would break free and wake up from their dependency on team. Any ? S about me and team, feel free to ask..free of team at last!!

  11. Raquel Peters permalink
    December 31, 2012 7:13 am

    Chris- well said! Welcome! Isn’t freedom and truth grand! Hope you stick around. You have a lot of insight you could share on Life and Team. I think a long version of your story would make a great article. How long were you in? What makes you believe Team is a pyramid scheme? Did you know about all the teams being moved around?

  12. December 31, 2012 7:44 am

    Chris – consider filling out the ex-team questions and answers survey. There is a stickies post at the top of this site’s home page.

  13. Chris permalink
    December 31, 2012 10:09 am

    I was in team over a year and a half. I’ve been wavering back and forth if I should quit or not. I started out when monavie was around. I got in team because of the possibilities.I thought down the road could come true, liked the idea of leadership and self improvement and liked the product. So I started to try to recruit people, the fact is I didn’t have any real success in recruiting people. Simply people didn’t have the time or money. Especially with the cost of monavie. I like the juice, but yes I couldn’t agree with them more. So then team merged into life. Life is a new concept for many. I thought it was a bad idea, because its not really a product that’s original. Sell books and cds of information, ok that’s the product. At least monavie was an actual product you couldn’t get anywhere else. The books u can get at a library or on amazon. Somehow even after doubts, I went to seminars and somehow they convinced me to stay in a little longer and you’ll have results. As I tried to recruit again, most the people said they didn’t understand what the product was. I said the product is you, for a better life, they just didn’t get it. Again, no success in getting one in. So I thought I don’t think this is working…but it was hard to quit, because maybe, there was something I was doing that was wrong. As I thought about it more, really the team info is copycated info from others people then shared with others. There is really nothing original in life. They copy it on cds, read books and promote books and leadership ideals to others. I think some of the reasons I didn’t have success is because I was too honest, and maybe I’m not a good salesman. I got in the group because I thought it might be helpful, liked the positive atmosphere and thought maybe I could have a good income. It has helped me in some ways. The fact is I didn’t make any money, am paying in too much, the books and info all sound the same, a long with the seminars. Right now i haven’t listened to their cds for a while, it sounds to me like a broken record. Sick of hearing about Sam Walton!!!So now I decided its just not worth it. I’m paying for a product that is mostly the same, that is overpriced, paying for seminars, majors and not making any money. it just doesn’t add up. Then I’m supposed to honestly share this with others and try to get people in? For me the negatives weigh out the positives. The experience was good for a season, but long term wise I found it not for me. Also my moral battle was telling other people that this info was life changing, as a Christian that was hard to do and promoting Orrin like he was this great guy, and leader. As a Christian I felt I was leaving God out, and as God as my top priority how can I promote the life information as if it’s life changing, if I believe Jesus is life changing. I can’t have both. Due to that I just don’t feel right about the business. Any more ?’s just ask, thanx

  14. Raquel Peters permalink
    December 31, 2012 3:22 pm

    Chris – thanks! I agree if we are honest we cannot promote the business. Great points. Have you read the Life Primer or other articles here? Did you see the Life Policies and procedures?

  15. Raquel Peters permalink
    December 31, 2012 7:24 pm

    Chris I am wondering if you could contact me through fb on how easy or hard it is to build the life business?

  16. Critical thinker permalink
    January 1, 2013 6:39 am

    Chris-
    One thing that hit me hard was at an open after the MFC. A round table member Mark Paul said if you can’t sell yourself this idea then you won’t be able to sell it to anyone. Then I remembered that just last week at the major when the MFC was launched, bill Lewis said from stage that if yoi were serious about building this business, you would have put 8 MFC packs in your trunk today to have ready opon signing them up. He said its more professional than having them wait for theirs in the mail. So there goes my belief when my up line looks at my other upline because he can’t afford over 2 grand to pay for that. It made me realize I was lying to myself by telling myself for those couple of years that I believed in the business when I really didn’t.

  17. Raquel Peters permalink
    January 1, 2013 6:44 am

    Critical Thinker- now I would guess al those MFC mayerials would be obsolete? Junk?

  18. Raquel Peters permalink
    January 1, 2013 6:49 am

    Is the Life business growing that you see? I am being sued by my upline in Monavie, who says his Team business is down. I would guess his Life business is down…so his Team check would be down…..well his Team check would be down anyway since Life is just the Team tools split into Life and Team…it seems Life isnt working? At least from reports we see on this site. What do you see outside of the hoopla?

  19. Raquel Peters permalink
    January 1, 2013 6:51 am

    And of course his Monavie business like everyone’s in Team is WAY down since they started selling everyone on the Life mlm…….. and droves of Team Monavie distributors stopped buying the juice.

  20. Raquel Peters permalink
    January 1, 2013 6:52 am

    It doesn’t seem that people are interested in buying so many cds and books for long term. Just wanted to get your perspective. Also was it easy to get customers for Life?

  21. Critical thinker permalink
    January 1, 2013 8:27 am

    We probably got 2 customers through our up line and down line total. And since life launched about 10 people new in my downline, more than half doing 0 pv. No one I approached wanted anything to do with self help

  22. Melanie Morgan permalink
    January 1, 2013 10:40 am

    Critical thinker~

    Thanks and Keep Sharing!

    Only 2 customers and only 10 new people in over a year?!!

    I am not surprised nothing has changed! Some ‘new’ trendy words and ‘new’ name for the same ole’ business.

    How do they record and what “qualifies” as a “customer?” I have heard they put family and (some who don’t even know they are) or more a fictitious “customers” on system to pretend they have customers.

    I wonder if this is why they came out with the “edge series” for kids, do they count your kids a “customer?”

  23. TruthSeeker permalink
    January 1, 2013 10:56 am

    David seems not to know nor understand the difference between statistics and mathematics. Common fallacy of industry apologists. Sorry David, you are full of hot air, you cannot draw a comparison between your “dairy” and Herbalife, it simply doesn’t relate period.

  24. Critical thinker permalink
    January 1, 2013 11:16 am

    I remember when life launched, we were having a hotel meeting after the major. My unlines were talking about adding there wife’s and kids to meet there customer quota. Someone even joked about signing up their dog. What a good way to scheme the FTC.

  25. Melanie Morgan permalink
    January 1, 2013 11:20 am

    IF they were honest and transparent leeaders as they like others to believe they are, then why Not post on ALL their copy and paste blogs the real number of “customers”…

    HOW many out of (whatever souped up number they say are members vs. customers by defining them);or members actually “qualify” for their “3 for Free?”….

    I would love to interview their so-called “customers” and ask them a few questions. 🙂

    For example, Did you get shown the “business opportunity” and got started as a “member” with the intent to “make money” or did you never see the “business plan” and were approached only to be a “customer?”

    And If you are “called” a customer do you pay to be a customer or does your “sales” person give it to you for free? An educated guess (from experience) I doubt any of them meet the FTC requirements or the “customers” rules!

    Here’s how it worked from my experience, the Team WAS the business, (quixtar shhh…just the supplier) and you never went out to “sell” any products, (that was and is the joke) it was 100% get them started! Recruit, Recruit, Recruit…period! “Build the numbers in the system” and “you will be paid” based on “performance” and how many you bring to the system…passive, residual, on-going, will-able, income for the rest of your life!

    It also makes me wonder and I ask myself: How many real “business owners” they have recruited into Team/LiEf that have coerced with undue influence their own employee’s to be on the system and then count them as “customers?”

    Although I wouldn’t trust whatever they would conjure up, (their word) for their numbers of customers, it would be telling how many they really have…and my guess….no bonafide ones!

  26. Raquel Peters permalink
    January 1, 2013 11:42 am

    Critical Thinker- wow! I have heard they sign up their own kids on the edge series as customers. I wonder if that legally counts to the ftc since mom and dad buy it and they live in the same house? This industry needs to be cleaned up. They can promise whatever, make income claims with no proof and good people loose believing the lies.

  27. Melanie Morgan permalink
    January 1, 2013 11:52 am

    Critical Thinker~

    Thank YOU! Yes that was what I was talking about…NOW…for all them (dis) honest LiEfer’s….Does counting your “wife” as a customer effect your conscience at all?

    What about the” example”of true “leadership”.. remember: “everything rises and FALLS on leadership”…what about “ethics”?..especially when the “wife” is in the “business”!!

    These are the examples they set by telling their downlines to cheat and count your “wife” (business partner) as a customer?!! It is the principle that I am pointing out for all those who think that would be “okay” to do this? Is this a real bonafide customer or is this cheating?

    This is why there is so much contempt.. they claim to be the most honest bunch of “Christian leaders” on the planet, but yet they teach this…they know this is wrong and do it anyway!

    We all know they do “whatever-it-takes” to CTA, it is just too bad they convince themselves and the rest that it is okay for them to cheat…same with the “customer button”.. The same ole’ non (ethics) they have always had. Doesn’t matter, it is “business” and how you get around it to appear legit.

    If the Team/LiEfers business is the “only thing” on the planet worth doing and the “last thing you will have to get good at”, (deceiving?) and if this was going to “change the world” one person @ at time, then this is adds to the problem, it is these subtleties of just ‘cheating’ a little that people overlook and why the need to be deceptive?! Sadly, these ‘little cheats’ slowly deteriorates and desensitizes others. And since this is the “way that business is done” and the “gurus” have “lawyers” and they are “Christians”, then there is no way they would do anything that isn’t on the “up and up.”

    “Leaders” wonder why they aren’t growing!…Thank God, I am free! Here’s a clue…practice what you “preach!”

  28. Critical thinker permalink
    January 1, 2013 4:10 pm

    I bet someone Brought up the edge series casually at a pc meeting and the only reason it went through was because of the fact that they can sign up their kids as customers. I also think they created the edge and the whole trip tracking thing so that your kids will hold you accountable for “doing the action steps for power player”. This way you can never quit the business because you promised your kids a free trip to Disney.

  29. Finally permalink
    January 2, 2013 4:21 am

    Great posts!!! You nailed it Melanie!! The truth is they are not further ahead now than they were in 07 when Orrin Woodward filed a lawsuit against Quixtar…………..going on 6 years with no provable growth. I know they say they are exploding but would that so called explosion stand up to scrutiny from an outside firm doing the numbers??? Buying tools is the way they keep their incomes, they just recycle any team money they might get and put it right back into the pot time after time after time. It would be interesting to see the top 50 leaders income and expense reports………..My guess is half of what they make goes back into the team pot………PYRAMID…….. Oh and when you PC guys read this over your morning coffee prove any of this as wrong……You say Orrin Woodward of Team Life is beyond reproach………..prove it.

    I am spelling his name out purposely because I know the more we do that on here the more hits on his name the more likely people are to find this site……….I think if we did that in all our posts at least somewhere it would push Amthrax to number one when someone searches Orrin Woodward Team Life

  30. January 3, 2013 6:10 am

    “…You say Orrin Woodward of Team Life …”

    True so here we go Orrin Woodward.

  31. January 4, 2013 9:44 am

    @Melanie

    “These are the examples they set by telling their downlines to cheat…”

    “This is why there is so much contempt.. they claim to be the most honest bunch of “Christian leaders” on the planet, but yet they teach this…they know this is wrong and do it anyway!”

    “…it is just too bad they convince themselves and the rest that it is okay for them to cheat…same with the “customer button”

    Dead right Melanie! I recall, ahem! a “leader” did this as usual in my presence but that day those actions hit me faster than Spinks after Mike Tyson was done with him in 91 seconds. It was a good part of my waking up, I’ll never forget.

    MLMs are constituted of some of the most heinous hypocrites. They constantly “…convince themselves and the rest that it is okay for them to cheat…” like you said. And then before a peon knows it they buy right into this baneful culture.

    The common joke (oh and it did happen) in our days was grandma, some aunt or a cousin because hey whatever it took, as we were always impressed upon. Never thought I would ever hear of counting wife as a customer. Kids too?!!! Now that will jar your preserves! Crass & totally classless.

  32. January 4, 2013 10:11 am

    In fact the uplines knew of or would request the downlines’ login info. make an order but have it sent to their own homes (safe to say some of the wampum wound up on eBay/CL). Or they would skip that trouble altogether and create phantom accounts for this purpose. Guess what we were doing and teaching downlines to do on the hush hush? Again whatever it takes, Hooah! Until that one day…

  33. January 11, 2013 7:35 am

    Herbalife Defends Itself Against Pyramid Allegations.
    http://business.time.com/2013/01/11/herbalife-defends-against-pyramid-allegations-does-the-market-believe/

    “In defence against claims that Herbalife has few customers outside its distributor network, Walsh said the company has functioned primarily as a business-to-business seller and had not tracked its retail customer base.”

    “Walsh added that 31 per cent of Herbalife’s orders in the U.S. were directly sent to non-distributor customers in 2012.”

    Safe to conclude the distributors bought 69%, the bulk of it’s sales? Ha!
    Secondly I thought in the previous statement he alleged Herbalife did not track it’s retail customer base? Not a smart liar.

  34. January 11, 2013 9:38 am

    Looks like a white house petition has been started here-> http://wh.gov/PLEk

  35. ageofwisdom51 permalink
    January 14, 2013 4:16 pm

    http://www.moneylife.in/article/how-herbalife-sucks-millions-into-its-pyramid-scheme/30407.html

    the top 1% in Herbalife get 88% of the Rewards……failed distributorships since Herbalife’s inception now totals 3.8 BILLION DOLLARS. Herbalife went into Ireland in 2000. In 2010, not one distributor had made it to Millionaire team status yet–which is their second-top team after President’s team. lots of good stats and drawings on this site.

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