Maintenance Phase - Herbalife

00:00:00.000 wait can i tell you my one piece of like fun and exciting news yeah so you know i moved

00:00:17.000 recently and made a selection of where to live in the like fall slash winter it's now spring 0.79

00:00:23.920 and all of the plants in the yard have started blooming and i'll tell you what's fucking fun

00:00:30.540 michael as it turns out i have two blueberry bushes a cherry tree and an apricot tree 0.90

00:00:38.580 fruit for days no more ultra processed foods only homegrown flaming hot cheetos

00:00:44.140 yeah uh when i was growing up we also had a blueberry bush in the backyard it's like a

00:00:50.440 cherished memory from my childhood like eating these homegrown blueberries and then one day

00:00:54.900 when me and my brother were like i think five and seven or something we beat it with sticks

00:00:59.080 and then it never gave blueberries again i was about to be like oh my god we also had blueberry

00:01:07.180 bushes in the backyard it was also a cherished childhood memory of mine yeah but then you really

00:01:13.160 lost me at beat it with sticks and somehow killed a blueberry bush but you were not a boy a little

00:01:18.160 boy who was like i need to inflict violence on this beautiful thing for no reason i was a little

00:01:23.740 girl who was uh drinking pond water and calling it magic potion this explains so much about us

00:01:33.100 there's kind of no point in saying our names at the beginning of the show anymore so we can just

00:01:37.780 say i'm someone who beat a blueberry bush with sticks i'm someone who drank pond water absolutely

00:01:45.540 Okay, so I have a tagline.

00:01:47.860 Oh, it's not about pond water and blueberry bushes?

00:01:50.280 Well, it's potentially libel-less, depending on what we decide in this episode.

00:01:53.980 Can't wait.

00:01:54.400 Welcome to Maintenance Phase, the podcast that wants you to recruit two of your own podcasters.

00:02:00.200 And then if they recruit two podcasters, and they recruit two podcasters, you see what I'm going with this.

00:02:06.520 If you'd like to support the show, you can do that through Patreon at patreon.com slash maintenance phase.

00:02:12.140 You can also subscribe through Apple Podcasts Premium.

00:02:14.900 it's the same audio content same stuff michael ombre we are talking about a company that makes

00:02:23.560 its own magic potions out of pond water oh herbal life mike do you know anything about

00:02:30.300 herbal life are you familiar the thing is i'm only familiar with this vaguely through i guess

00:02:34.960 it was like financial media there was a whole thing with short selling this stock and the whole

00:02:40.760 debate hinged on like is this a real business or is this an mlm yes that was a big part of it

00:02:48.060 absolutely and i think you're right that the way that the story gets told is like super investor

00:02:53.720 v super investor yes and that's the primary way that the story of herbalife has been told but

00:03:01.400 they are a weight loss and wellness company yeah this is okay this is what i could never actually

00:03:06.640 figure out is what does this company do great which is also one of my like telltale signs of

00:03:12.640 an mlm when you go on their website you're like sorry what are you selling one of the other telltale

00:03:17.060 signs of an mlm is if there's they don't tell you the prices of their products on their website

00:03:22.700 and if there's not like a buy now button there's just like find a local distributor like you know

00:03:30.120 you're done so yeah not something businesses typically do so herbal life sells supplements

00:03:36.220 shake mixes protein bars vitamins energy drinks sort of the whole shebang okay they are as you

00:03:44.160 noted a multi-level marketing company sometimes people describe them as a pyramid scheme in

00:03:50.180 different countries there is a distinction there right between multi-level marketing and a pyramid

00:03:55.780 scheme pyramid schemes are um illegal and multi-level marketing is not wait what's the 0.87

00:04:00.840 fucking difference between mlm is a pyramid scheme i would agree with you colloquially right that i'm 0.89

00:04:06.400 like whatever fucking same difference yeah there are distinctions in the definitions and i think 0.98

00:04:12.160 the tipping point in a number of those is that a pyramid scheme is where you get officially that 0.98

00:04:18.660 like your money is coming from recruiting other people way the fuck more than it's coming from

00:04:24.580 actually selling the product oh it's all bad but fair enough there's a difference okay so

00:04:29.280 their products for folks who are unfamiliar with multi-level marketing their products are sold by

00:04:34.800 independent distributors who also recruit other independent distributors this is like amway this

00:04:41.180 is like plexus this is like optivia if one of the sister wives is selling you a shake on instagram

00:04:50.600 Yeah.

00:04:50.920 Just steer clear, buddy.

00:04:52.600 Go to the store and buy normal products when you need a product. 1.00

00:04:56.060 I should say, they're all ex-sister wives now. 1.00

00:04:59.320 Okay. 1.00

00:04:59.640 There's only one wife left.

00:05:01.600 And now they're all like, I always knew he was a monogamist.

00:05:05.080 And I'm like, this is very funny.

00:05:06.560 Is that show called Sister Wife now?

00:05:10.240 So in multi-level marketing, when you recruit someone else to become a salesperson,

00:05:15.580 they become part of what's considered to be your downline.

00:05:18.440 That's the term that they use. And when you have a downline, you get a commission off of their

00:05:25.060 sales. So the sort of famous thing about multi-level marketing is that there are people

00:05:30.680 who get super rich. It's just like the first 10 people. And almost everybody after that gets a

00:05:38.720 much shorter end of the stick than that. Because you're being promised that you're going to recruit

00:05:43.920 a bunch of people, but these things kind of always top out because there just aren't that many people

00:05:47.580 who want to do this. I don't want to hide the ball. Around 90% of Herbalife distributors make

00:05:53.340 little or no income, which the company itself stipulated in 2013, according to the LA Times,

00:06:00.640 right? So everyone here agrees. The company agrees. Distributors agree. More than 90% of people

00:06:07.820 are making little or no money off of this and are actually in the hole because they had to buy some

00:06:14.240 inventory to get themselves started it's funny how like i thought this was going to be like is

00:06:18.240 this a scam or is this not a scam you're like stipulated it's a scam no no no no we're just

00:06:22.880 starting out with 90 percent of people making no money i do not even want to leave any room

00:06:28.800 for people being like maybe it's okay it's really not okay yeah the other thing to know about herbal

00:06:35.100 life is that they've been around for over 40 years they're about the same age as whole foods

00:06:40.060 i didn't know as a company they're older than me look at her flexing look at her flexing i'm young

00:06:46.380 and spry i'm as old as an mlm herbalife was founded by a guy named mark hughes who was born

00:06:55.820 on january 1st 1956 in la mirada california mark's parents divorced in 1970 when he was about 14

00:07:07.160 and his mom had sole custody after that it is clear that hughes life as a kid was not easy

00:07:16.280 by his own account his mother had what he referred to as quote-unquote emotional problems

00:07:21.240 and the family subsisted on public assistance programs hughes dropped out of high school as a

00:07:28.760 freshman so at around 14 and described himself as quote a little delinquent who got in trouble with

00:07:36.640 the law okay he said that he used drugs uh predominantly amphetamines and barbiturates

00:07:42.780 so by the time he was 16 he was sent to a troubled teens boarding school well another 0.98

00:07:50.580 another episode we gotta do it's a troubled teen incorporated shit so rough leak yeah this one the 0.98

00:07:58.260 one that he was sent to is called cdu cdu oh like the jet skis like the jet skis 0.98

00:08:05.680 cdu is a troubled teens boarding school in california that was run by synanon

00:08:12.640 mike do you know anything about synanon yeah i used to go there in the mall all the time

00:08:17.000 no no you get like one of the you get a prostate you get the center of the role one

00:08:21.300 uh-huh that's the one you asked me the little question because you knew i was going to make

00:08:25.040 that terrible joke oh wait sin is it like alcoholics anonymous but it's synonymous no

00:08:30.320 Synanon was an organization founded in the late 50s. Synanon was really unusual at the time. It

00:08:36.780 focused on drug users helping other drug users move towards sobriety. However, over time and

00:08:44.940 like not very much time, the organization really kind of curdled and is now widely described as a

00:08:52.300 cult oh see do the troubled teens sort of portion of it was famously absolutely no picnic i can't

00:09:01.040 believe being mean to teens is not assisting yeah this is model unsurprisingly there was a lot of

00:09:07.600 abuse that happened at sea do right by sort of all accounts of people who went there this is

00:09:13.380 actually the place that paris hilton went when she talks about like the abuse that happened to her

00:09:17.740 when she was a kid. Holy shit. All that is to say Mark Hughes as a teenager is in a rough place. 0.99

00:09:22.820 So one of the programs at Sea-Doo required him to sell raffle tickets.

00:09:28.980 Okay. Also, everything is so scam adjacent. Everything. And Hughes proudly told the press

00:09:37.060 for pretty much his whole life that he was the school's highest grossing salesman. And I was like,

00:09:42.480 god damn it if you ever catch me telling a reporter about how i was the best at something 0.98

00:09:49.180 in high school like put me out of my misery you know what i mean were you voted anything in high 0.99

00:09:55.060 school nothing not a goddamn thing you didn't get like most like most promising or anything 0.86

00:10:01.440 i was at a real overachiever school oh and i was sort of like middle of the pack amongst 0.95

00:10:08.300 kids giving themselves stress ulcers and that kind of thing i got most dramatic and most romantic 0.52

00:10:13.640 gayest and gayest well yeah i it basically meant that i was covering up my homosexuality with

00:10:19.500 misogyny but doing it badly those two things come together so mark hughes went door-to-door

00:10:27.720 in la for this c-do program selling raffle tickets he claims that he managed to get a 500

00:10:35.440 dollar check from uh someone who was then the former california governor but not yet president

00:10:41.920 ronald reagan oh i mean okay it does tell you about that guy that he's like you'll never believe

00:10:48.140 who i met reagan yeah look how cool i am look how cool i am reagan right although i was once on a 0.80

00:10:55.520 flight with shakira and i do actually think that makes me cooler what the fuck are you kidding me 0.79

00:11:00.040 i was like mega late for a flight and i i don't know how it fucking works but like i think 0.92

00:11:04.500 celebrities they like get everybody boarded and then like whisk a celebrity on to first class 0.83

00:11:08.600 because Shakira can't be sitting there as everybody's filing past right and like getting

00:11:12.500 their luggage in the bins so it's like everybody was boarded and then as they're like sneaking

00:11:17.340 Shakira on I like run up to the gate and I'm behind this like giant starburst of hair in this 0.95

00:11:24.120 like very small human being she's very short and I was like what the fuck and then she sort of 0.94

00:11:28.880 turned around and looked and I was like oh my god you're Shakira but I didn't say anything and then 0.97

00:11:32.680 she got on and I got on my flight but hey look how cool I'm do you say your estimation of me

00:11:36.680 has expanded I would say my estimation of Shakira has expanded that she like flies commercial she

00:11:43.480 understands the stakes of climate change she walks among us so Mark really seems to find

00:11:49.400 meaning and success in this raffle ticket sales business and gets really into it

00:11:54.820 when he is 19 he's still out at seadoo and his mother passed away she died in her apartment

00:12:04.500 and her toxicology report showed that she had darvon or darvacet in her system her doctor

00:12:10.420 acknowledged that she frequently abused prescription drugs and was engaged in some

00:12:15.400 like doctor shopping oh man but also like this is happening in the 70s when there's just like

00:12:20.820 way less literacy on substance use disorders in general right and doctors are like have you tried

00:12:27.240 speed totally you're trying to lose three pounds why don't you try meth so hughes had just completed

00:12:34.140 this troubled teens program after being a pretty heavy drug user himself and then his mom dies of

00:12:42.320 what appears from the autopsy to be an overdose trauma wise especially for a 19 year old this is

00:12:49.780 like an earthquake right yeah his mom passes away when he's 19 the very next year he started selling

00:12:57.060 diet drugs professionally okay so in 1976 he started selling something called slender now

00:13:04.760 for safe worth laboratories and then moved on to selling diet products for a place called golden

00:13:12.920 youth okay both of those were mlms nice both of those went out of business nice and that gave

00:13:20.720 mark an idea what if he started his own cursed weight loss company right this is something me

00:13:27.860 and peter find in these like grifty self-help books all the time and like financial scam books

00:13:32.240 it's like oftentimes the people giving grifty advice are like victims of grifty advice yeah

00:13:37.160 yeah yeah absolutely in 1980 mark is 24 years old and that is when he founds herbal life

00:13:45.800 he talks about starting the company quote unquote out of the trunk of his car and then they pretty

00:13:51.240 quickly get production space set up in an old wig factory in beverly hills and when they said

00:13:57.400 an old wig factory in beverly hills i was like we've been here in this era before early 80s

00:14:04.380 Beverly Hills wig factory. I hope that it is wigs today. The establishment where Richard

00:14:11.400 Simmons made friends with the proprietor of the wig shop. Is that true? Not to my knowledge.

00:14:17.640 Wigs today kept operating, but I like thinking that this place maybe had supplied wigs to wigs

00:14:23.500 today. I don't know. I got really excited about it and then it wasn't anything. Also, what are

00:14:30.560 they selling right now it's pills they are selling at this point their main thing is like essentially

00:14:38.080 just like a powdered shake mix so this is another challenge of herbal life but honestly a lot of mlms

00:14:45.840 is that they're selling like a shake mix and their shake mix is not like proprietary it's not super

00:14:54.780 different than other shake mixes on the market but it'll be like 40 for a canister of shake

00:15:02.400 when you can go to the store and get like a giant canister of slim fast mix right for like 10 bucks

00:15:11.520 or something right like so that's part of the uphill battle here is that they're selling stuff

00:15:16.880 that's like you can also go get a lot of these things at the store so you have to believe that

00:15:22.540 there's like some magic beans in the in the Herbalife stuff or something. Right. Right.

00:15:27.320 His wife at the time, his first wife says that she was a co-founder of the company,

00:15:32.480 but that when they split up, she was sort of scrubbed from any of the company's materials.

00:15:38.680 Okay. Later, when journalists ask Hughes about her role, he says that she was actually just

00:15:46.000 the first employee and acted as quote my first secretary to which I say get fucked asshole 0.99

00:15:53.260 again this is all just five years after leaving Sea-Doo and after his mom's death and by this 0.99

00:16:01.800 point he has started talking about his mom's death a little more publicly and he's using it

00:16:10.100 essentially as an origin story for himself so i am going to send you a clip oh okay

00:16:18.360 now i'm very excited about talking about herbal life because herbal life has been something that

00:16:24.040 not only that i wanted to do for a long time but it's something that's very very important for me

00:16:28.660 just about everybody in my family's had a weight control problem especially my mother as i was

00:16:33.980 growing up she was always trying to you know diet and trying some kind of goofy type of diets and so 0.84

00:16:39.220 and eventually she went to doctors to try to get it cleaned up

00:16:43.460 and they prescribed to her a product called Dexamil

00:16:46.300 and for those of you who are not familiar with Dexamil, it's a speed, it's a narcotic

00:16:50.700 it makes you not be able to eat, it makes you not be able to sleep

00:16:53.840 and from several years of using this particular drug

00:16:56.900 she ended up having to use sleeping pills to be able to go to sleep at night

00:17:00.500 and from several years of doing that

00:17:02.660 she secretly behind doctor's back started getting her prescriptions filled

00:17:06.640 and she started seeing three and four and five doctors to keep her habit up and when i was 18

00:17:11.760 years old she died from an overdose and it seemed to me at that time that there was a lot better

00:17:16.400 things that people could go out and do to themselves and just destroying their lives

00:17:19.780 to try to lose weight and because i've seen literally people do everything to themselves

00:17:25.700 to try to lose a little bit of weight people are even joining mlms to lose weight it's funny i

00:17:32.040 thought he was leading up to like she started on this drug and then she started taking this other

00:17:35.920 drug. And that's what we're selling at Herbalife. She lost 30 pounds. His father later told the LA

00:17:44.400 Times that he was like, I don't know what this guy's talking about. His mom was not fat. She

00:17:49.500 overdosed on painkillers. Like it's pretty straightforwardly, just like a drug dependency

00:17:54.140 story. That's actually really dark. Both versions are extremely dark, right? Either it's my mom

00:18:02.780 overdosed on drugs and i'm gonna figure out how to spin that up to sell weight loss supplements

00:18:08.120 to people right or it's weight loss drugs are responsible for my mom's death so that's the

00:18:15.440 business i'm going into yeah yeah neither one is like great news right as if the solution to his

00:18:22.560 mom's alleged problem is like well there's a better weight loss method absolutely right like

00:18:27.780 that's not the issue here yeah regardless of all of that herbalife very quickly takes off

00:18:34.240 they very quickly build their ranks of distributors and their ranks quickly build their downlines

00:18:40.800 by 1985 ink magazine was reporting that the company's growth from 36 000 in uh sales in 1980

00:18:51.020 to 423 million. Oh, wow. In 1985. Wait, really? That's insane. You have become a billion dollar

00:18:58.860 company by today's dollars, right? Right. By the end of those same five years, Herbalife is

00:19:04.120 reporting that they had more than 700,000 distributors. Wow. Distributors were encouraged

00:19:10.580 to share their own sort of personal stories of using Herbalife. If they don't have a personal

00:19:16.800 story they are instructed to quote unquote get one from a friend which i think is very funny

00:19:21.760 nice i'm crowdsourcing my like memoir and a great job everyone there's a little bit of reporting

00:19:27.720 from the la times in 1985 this is a long time distributor whose last name is delacy and i just

00:19:36.660 sent it to you showing that she has learned her lessons well delacy hiked up her white herbalife

00:19:41.000 sweatshirt to display the scar that runs the length of her chest and abdomen from a 1977 heart

00:19:46.660 bypass surgery i was on eight medications for my heart i take no more drugs now i take herbalife

00:19:52.260 i've never felt happier and healthier in my whole adult life de lacy quickly added herbalife cures

00:19:57.920 nothing wait wait wait de lacy quickly added herbalife cures nothing we can't make medical

00:20:05.020 claims you know that's a funny thing to include it's so funny that she's like doing the thing and

00:20:11.420 then it seems real like it really seems like something popped up in her brain and was like

00:20:16.180 don't forget reporter and she was yeah do you ever find yourself like talking to someone you

00:20:20.800 don't know that well and then you say something and you realize as you're saying it that it's not

00:20:24.660 true she's like oh my god i'm like totally fixed this is great it's not great i'm not allowed to

00:20:29.840 say this okay so we've been talking about this like exponential growth that herbal life has

00:20:37.740 been going through in these first few years of its inception right what we haven't talked about

00:20:44.020 is the other thing that starts growing exponentially in that time,

00:20:48.420 and that is FDA consumer complaints about Herbalife.

00:20:52.740 You worked on that transition for so long.

00:20:55.140 I did not.

00:20:55.760 I'm so proud of you.

00:20:56.420 It's not even written in my notes.

00:20:58.540 If every FDA complaint gets five more FDA complaints.

00:21:03.440 All the FDA complaints in the world.

00:21:06.120 Yes.

00:21:07.000 Within just one year of the company's founding,

00:21:10.800 the FDA starts getting consumer complaints about Herbalife products.

00:21:13.740 perfection customers complained of taking herbalife products and then experiencing nausea

00:21:18.900 diarrhea headaches and constipation distributors were reportedly instructed to tell people that

00:21:25.400 that was all part of getting toxins out of your body oh yeah i mean when you think about it pooping

00:21:31.000 is getting toxins out of your body so like they're not they're not incorrect are just herbalife

00:21:36.920 products there's this thing that your body does where it creates waste then you have to get rid

00:21:40.780 of the waste. So the FDA focused on Herbalife's Slim and Trim Formula 2. Okay. Which Herbalife

00:21:49.400 said could, quote, cleanse the digestive system and curb the appetite. Sure. As it turned out,

00:21:56.480 Slim and Trim Formula 2 contained mandrake and poke root. What the fuck? Mandrake is a 1.00

00:22:02.780 hallucinogen that is famously toxic and can cause asphyxiation. That is an enemy in Dragon Quest.

00:22:08.460 you are incorrect and every part of pokeweed can be toxic but none more than the root and that is 0.61

00:22:15.940 what they use they're just like why would they even do this there's pretty random shit in there

00:22:20.240 right they're sort of doing a thing part of the kind of origin story of the company is that mark 0.54

00:22:26.240 hughes went to this like uh herbalism sort of seminar led by a group of chinese nationals and

00:22:34.520 i'm just like sure man this is such deep early 80s shit where it's like i met a person from 0.93

00:22:41.020 china once and they taught me about herbs and now i'm teaching you about herbs although it 0.94

00:22:45.680 is interesting because it does indicate like some level of good faith that like he probably thought

00:22:50.080 these were healthy and he put them in his product without really looking into it it's not like he's

00:22:54.680 like selling sawdust it's sort of like he doesn't know it's a scam necessarily he thinks that these

00:22:59.480 are actually beneficial. Listeners, mark this moment down where Mike says he doesn't know it's

00:23:04.960 a scam. Foreshadowing as a narrative device. Much of the notice of adverse findings from the FDA

00:23:10.240 focused on what was called Herbalife's career book, which was its product guide for distributors to

00:23:17.300 help them pitch products to customers. The career book said that formula two can also help with

00:23:22.960 quote, venereal disease, arteriosclerosis, tumors, bad breath and bedwetting.

00:23:29.100 I love this is another thing we see all the time where it's like, oh, this like this cures acne

00:23:33.780 and like HIV, even if there's like no biological mechanism by which that would happen.

00:23:38.380 It also claimed that a product called cellulose was a natural cellulite eliminator. And they were

00:23:47.660 like, no, you don't hear that much about cellulite anymore. There were so many products for cellulite

00:23:52.880 back in the day. You know what you hear about now is crepey skin. I am absolutely crepey skin years

00:23:58.480 old. I am a food truck outside of the Louvre. I am all crepe. So the FDA issues its adverse

00:24:06.820 findings, its notice of adverse findings in 1982. By 1984, Canada's Department of Justice

00:24:14.440 filed charges for false medical claims and misleading advertising practices. Nice. The

00:24:20.120 company just pleaded guilty to the canadian charges and paid eight thousand dollars in fines

00:24:24.780 and kept on oh my god you could pay that a day and it wouldn't meaningfully cut into your revenues

00:24:29.840 around this time the company starts facing some questions and criticisms around its claims of

00:24:37.140 expertise so i mentioned earlier mark hughes had an official bio with the company which said that

00:24:43.620 he had learned about herbs at a symposium hosted by a trade delegation from china okay when an la

00:24:51.380 times reporter pressed him on it he admitted that he had never gone nor had he been trained in any

00:24:56.800 kind of herbalism no way what so were you just lying about that it's a symposium it's not a degree

00:25:03.060 yeah it's not even like cool you did this right it's like i spent an afternoon doing a thing is

00:25:09.520 what they're lying about and then as soon as he gets questioned about it he's like whoops never

00:25:13.400 that's like i recently heard of a podcaster who lied about seeing shakira on a plane

00:25:17.220 just to seem cool i know where i heard that did you did you not see shakira no i'm kidding i'm

00:25:23.200 kidding i did actually see shakira i was about to be heartbroken the thing is it was it would be a

00:25:28.400 really funny thing to lie about because it's not impressive it's like yeah okay a person exists

00:25:33.400 so in addition to mark hughes credentials coming under fire so did the credentials of one of his

00:25:40.940 colleagues. Richard Marconi was Hugh's right-hand man at Herbalife and managed manufacturing of

00:25:48.400 Herbalife's products. He also sort of acted as like the science guy to sort of justify the

00:25:55.060 company's products from a scientific perspective and was frequently referred to as Dr. Marconi,

00:26:01.180 right? Yeah, just get, you already know where it's going. Again, context clues. Honestly,

00:26:06.920 even his role as science guy seemed to amount to a lot of hand waving at the time where he'd be like 0.99

00:26:13.220 herbs nutrition science right yeah they're putting poison mushrooms in the fucking smoothies of 0.84

00:26:17.640 course here is a quote from the la times businessman richard marconi manufacturer of 0.97

00:26:25.760 herbalife food supplements and the man hughes turns to for scientific backup has represented

00:26:30.060 himself in nutrition publications since 1983 as a doctor of nutrition but marconi who operates out

00:26:35.880 of two Orange County plants, got a mail order doctorate in 1984 from Dunsbach University School

00:26:42.240 of Nutrition, an unaccredited correspondence course in Huntington Beach. I've been calling

00:26:46.860 him doctor ever since we got started, Hughes said, adding, I got more credibility and so does Dick

00:26:51.700 than anybody else in the weight loss business. That is true, but also bad because of our results.

00:26:57.220 So I don't care about his degree. I don't care about anybody else's degrees. Great sign.

00:27:02.940 I don't know why it makes it worse that the Correspondence School is based in Huntington

00:27:08.140 Beach, but it really does.

00:27:10.240 He has a doctorate from the outdoor gym where buff guys go to do pull-ups.

00:27:14.280 This is so close to the Simpsons, like, Dr. Nick went to Hollywood upstairs medical school joke.

00:27:22.240 The company's regulatory issues and legal issues just keep getting worse from here.

00:27:28.120 In 1985, California's attorney general filed suit against Herbalife saying that they violated laws against essentially pyramid schemes and that they lied about the caffeine content in their products.

00:27:41.620 Oh, that's dangerous.

00:27:42.700 The company once again ultimately settled for $850,000 without admitting any wrongdoing.

00:27:51.600 According to California's AG, that was the largest settlement with a diet or wellness company to date in the state's history.

00:28:00.440 I mean, that's also kind of sad because you should be doing bigger settlements than that.

00:28:03.260 And also they should be admitting wrongdoing.

00:28:04.800 That same year, a U.S. Senate subcommittee called Mark Hughes to testify about Herbalife.

00:28:13.040 And for context, we're going to watch a clip.

00:28:16.400 A panel of medical experts had testified the day before.

00:28:21.400 And then Mark Hughes comes up to testify.

00:28:27.160 During six days of grueling televised hearings in which Herbalife was the main focus,

00:28:31.840 mark's confidence in his products and his dream never wavered and they should have been brought

00:28:38.520 to this hearing instead of the so-called expert weight loss people that were here yesterday i

00:28:43.720 think if they're so expert in weight loss why were they so fat yesterday it seems to me and i'm not

00:28:49.160 trying to make any jokes but i do think that they ought to use our product we're gonna cut it there 0.78

00:28:53.140 he seems nice what a blast i'm doing i run a weight loss company because i hate fat people 1.00

00:28:58.980 you're like a huge piece of shit if you're fat including fat i hate fat people and i hate doctors 1.00

00:29:04.160 and there's no one i hate more than doctors who i perceive as being fat also why the fuck 1.00

00:29:08.980 is this documentary being like he he never stopped chasing his dream or whatever oh honey this is 1.00

00:29:14.620 herbal life shit oh this is like herbal life propaganda yes this is them being like look 0.99

00:29:19.500 how good he did wait they chose this clip to fucking show they're like nailed it mark nailed 1.00

00:29:26.400 to get those fat doctors. My notes just say nightmare blunt rotation. In the hearing, 0.99

00:29:32.880 they also discussed an internal study conducted by Herbalife based on a sample of 428 Herbalife

00:29:40.320 users. That study allegedly found that 40% of users had experienced significant symptoms as

00:29:48.600 a result of using Herbalife products. Nausea, diarrhea, heart palpitations, headaches,

00:29:54.520 all kinds of stuff, right? I will say those side effects didn't surprise experts who were familiar

00:30:00.360 with the products. A number of Herbalife weight loss ingredients were just super strong laxatives

00:30:06.780 and high doses of caffeine. When I think of my weight loss journey, I think of how I want to be

00:30:11.240 jittery and pooping all the time. That's the life that awaits me. Well, Michael,

00:30:17.860 I've got both a product and a business opportunity for you.

00:30:21.740 that's how you recruit people have you thought about being jittery and pooping so even amidst

00:30:27.680 all of these charges and investigations from multiple jurisdictions and multiple nations

00:30:33.560 herbalife just sort of soldiers on for years it certainly takes some hits both in its public

00:30:40.620 perception on some level and in its you know having to pay these fines but its sales remain

00:30:47.780 in the hundreds of millions, right?

00:30:50.300 In that same time,

00:30:51.740 when they're facing all of these charges

00:30:53.320 from all of these different countries,

00:30:54.940 they expand into Japan, Spain, New Zealand,

00:30:59.320 Israel, and Mexico.

00:31:00.720 Amazing. 0.98

00:31:01.260 On top of their existing presences in the UK,

00:31:04.640 the US, Canada, and Australia.

00:31:07.260 By 1996, the company was operating in 32 countries.

00:31:13.460 Why let a little lying get in the way of growth?

00:31:16.820 That's right.

00:31:17.780 Hey gang, Editing Mike here. We recorded this episode in a couple different sessions because

00:31:23.960 we were having some lawnmower issues over at Aubrey's house. And when she came back for the

00:31:29.060 third little session, her mic input got switched from the microphone to the laptop. So that is why

00:31:36.600 she is going to sound a little bit different for the rest of the episode. Just wanted to let you

00:31:41.200 know and thank you for bearing with us so herbalife keeps facing scrutiny and also keeps

00:31:48.720 expanding in a pretty uninterrupted way until the summer of 2000 on may 21st 2000 mark hughes died

00:32:01.780 in his home in malibu he was 44 and was survived by his nine-year-old son which is just a real

00:32:10.780 painful echo of the stuff with him and his mom yeah so initially they say it's natural causes

00:32:16.960 but when the coroner's office released its autopsy results they attributed his death

00:32:21.940 to alcohol doxapin intoxication doxapin was prescribed to hughes as an antidepressant

00:32:30.760 but after his death people in the company start telling a really different story about him and

00:32:38.160 his health okay a few of his colleagues told reporters after his death that they had sort of

00:32:43.920 hatched a plan that never got executed to take mark hughes to a swiss treatment center for

00:32:51.880 alcohol abuse okay also as it turned out he had been arrested twice for drunk driving in the few

00:32:59.420 years before his death oh wow so this was like a known thing about this guy and the company had

00:33:05.760 done a really effective job of sort of keeping the lid on it.

00:33:09.240 Also, it was well known enough within the company that there was like plans and strategies

00:33:12.720 and stuff.

00:33:13.240 So it really, it must have been like quite bad.

00:33:15.520 His colleagues actually like say this to reporters that they're like, we really knew that if

00:33:21.420 news of his drinking got out, that that would be bad news for like all of our jobs and for

00:33:26.680 the company.

00:33:28.020 So they're also invested in a pretty direct self-interest kind of way in keeping it concealed.

00:33:33.960 Right.

00:33:34.040 So you would think that this kind of, you know, event would be a real hit to the company, but the company continues to sort of soldier on even after the loss of its founder.

00:33:47.980 And throughout the 2000s, they just keep getting sued and sanctioned.

00:33:55.520 Interestingly, the lawsuits aren't from customers.

00:33:58.180 They're from former distributors, right?

00:34:00.320 So one class action lawsuit is filed in 2002. Another is filed in West Virginia in 2003. They had a class action settlement in 2004 with 8,700 distributors who accused the company of running a pyramid scheme.

00:34:17.820 again, they settle for $6 million, they admit no wrongdoing, and they move on. This is sort of

00:34:24.820 their whole thing, right? In 2005, there's a California class action lawsuit around Herbalife's

00:34:30.500 marketing practices. They get sued around using auto dialers that violated the Telephone Consumer

00:34:36.620 Protection Act. I mean, it's just like one after the next, right? In 2004, Israel's health minister

00:34:44.000 investigated Herbalife and found that there was a causal relationship between Herbalife's products

00:34:49.360 and liver damage. In 2007, a Swiss study found a link between consuming Herbalife products and

00:34:59.620 contracting hepatitis. Part of the reason I don't have more detail here is that there are a handful

00:35:06.120 of studies on Herbalife products in particular, but there are some real challenges to getting

00:35:12.400 good data on them one is that the company is not disclosing what it considers to be like

00:35:19.380 proprietary blends of whatever so it's not telling people all of what is in their products

00:35:24.340 great sign great sign but also a bunch of people who come in with these like this liver damage

00:35:30.740 with all of this sort of stuff that is allegedly attached to herbalife product when doctors say

00:35:37.140 hey what are you taking they don't actually volunteer the herbalife stuff because they're

00:35:40.960 Like, it's not a prescription medication and it's just good for me.

00:35:43.840 So there's nothing, why would I tell you about that, right?

00:35:46.940 So it's really sort of hard to nail down from a research perspective.

00:35:52.140 To remind everyone, this is the sector that people like RFK Jr. want to have way more power because he's like anti-big pharma.

00:35:59.500 Yeah, nutraceuticals. 0.90

00:36:01.160 Say what you want about big pharma, but at least there's actual regulation of what the fuck they're selling to you and like products have to be tested. 0.99

00:36:06.520 That can also be better, but, like, this sector is just – they can just say anything and sell you fucking anything. 0.92

00:36:12.780 Okay, but counterpoint, what if there was no regulation for anyone?

00:36:16.940 Yeah, what if –

00:36:17.580 Wouldn't that be better?

00:36:19.380 So there's fast fallout from all of this.

00:36:22.720 Spain's health minister issues a public caution against using Herbalife products.

00:36:27.860 But after investigation, they retract that statement for the same sorts of reasons.

00:36:32.380 It's just really hard to prove in a causal way, right?

00:36:35.180 Right.

00:36:35.380 In 2011, courts in Belgium ruled that Herbalife was in violation of the law by operating a pyramid scheme, but Herbalife then appealed that and won.

00:36:47.940 So they're getting regulated, and then it's getting overturned. 0.99

00:36:51.220 We're not a pyramid scheme, you assholes. 0.99

00:36:53.580 We're pyramid scheme adjacent. 1.00

00:36:55.460 We're an MLM.

00:36:56.860 After Mark Hughes' untimely death, Herbalife starts bouncing back with some new marketing

00:37:05.500 tactics. And a number of these will be how many of our listeners will know Herbalife to begin with.

00:37:11.400 One of its more conventional moves in the marketing world was that it goes really big

00:37:16.160 on celebrity endorsements. Is it her? It's Shakira. It's your old pal, Shakira.

00:37:23.480 My close friend, Shakira.

00:37:25.820 They get celebrity endorsements from a number of huge deal soccer players.

00:37:32.200 Cristiano Ronaldo does a bunch of endorsed content for them.

00:37:36.300 At two, Cristiano Ronaldo.

00:37:39.520 Messi does a bunch.

00:37:42.080 And they sponsor the LA Galaxy.

00:37:45.260 so every time david beckham plays at the club level he steps out onto the pitch with herbal

00:37:54.320 life written across his chest nice okay according to the la times that was the result of a 10 year

00:38:01.060 44 million dollar sponsorship i like how we've also named literally the only three soccer players

00:38:07.160 i could name gun to my head yeah that's the only one and he hasn't played soccer in like four

00:38:13.040 decades it's like those three people are the only soccer people i know so michael you're probably

00:38:20.600 thinking we're talking about all these soccer players there's one big name missing we're gonna

00:38:25.400 watch an additional uh celebrity endorsement i thought i could keep this secret from you i can't 0.96

00:38:30.560 so i'm gonna just send you the link now wait what you're fucking kidding me 0.88

00:38:37.900 This person's like barely even a celebrity. 1.00

00:38:40.100 Bullshit. 1.00

00:38:40.680 She's barely a celebrity. 1.00

00:38:41.840 Tell the people who we're talking about.

00:38:43.420 Okay.

00:38:43.660 You just sent me a link called Madeline Albright and Herbalife.

00:38:50.080 In a million years, I never would have guessed this.

00:38:53.260 Former Secretary of State Madeline Albright. 1.00

00:38:57.680 I think that women are a huge undervalued resource in every country. 0.96

00:39:03.100 And I have believed that when women are politically and economically empowered, societies are more stable.

00:39:10.420 And the part that I like about what you do with Herbal Life is women are very good at interpersonal relations.

00:39:17.980 And are really developing a relationship with the person that they're dealing with.

00:39:24.300 And I think that the kind of sales operation that Herbalife has is the one that really

00:39:31.900 allows women to shine in terms of explaining how you're good about family health and nutrition. 0.85

00:39:38.980 That's kind of what women do on a daily basis. 0.99

00:39:41.640 And so I think they are a very natural sales force for you. 1.00

00:39:46.740 Women are really good at being scammed and scamming others. 1.00

00:39:50.180 There you go. 1.00

00:39:50.760 I mean, not that I'm like so fucking disappointed in Madeleine Albright. 0.95

00:39:54.620 I know. 1.00

00:39:55.180 But like to use this sort of women's empowerment language to defend a scammy business that is selling scam products. 1.00

00:40:03.920 It's not like they're selling like bananas or like something useful. 1.00

00:40:07.160 They're selling fucking scam products for weight loss. 0.98

00:40:10.160 According to a new book that was released this year about multi-level marketing called Little Bosses Everywhere, Madeline Albright's firm was reportedly paid $10 million for its work with Herbalife. 1.00

00:40:25.000 Yes, they underpaid for Beckham and they overpaid for Madeline.

00:40:27.780 Their wildest endorser was someone named Louis Ignaro.

00:40:33.040 Ignaro is really worth talking about because he won the Nobel Prize for Medicine in 1998

00:40:42.300 for his work focusing on cardiovascular health, particularly the function of nitric oxide.

00:40:49.880 Ignaro endorsed Herbalife's heart supplement, which sold for $90 a bottle for a month's

00:40:57.220 For a month? $3 a day!

00:41:00.240 They used his signature on the bottle, and the bottle also noted that he was a Nobel laureate.

00:41:06.940 According to SEC filings, Ignaro's company received at least $1 million from Herbalife sales in just over one year.

00:41:17.200 Dude.

00:41:17.920 Some of his work for them appears to have been publishing studies in academic journals.

00:41:25.040 Oh my god!

00:41:26.220 So first he published two mice studies about vitamin C, vitamin E, and arginine, which is an amino acid.

00:41:36.880 Those are all advertised active ingredients in a specific supplement from Herbalife.

00:41:44.400 Dude, what if we enter a world where winners of the Nobel Prize come out to receive it also wearing branded jerseys?

00:41:51.640 They're like, Vodafone!

00:41:53.320 He published those papers without disclosing his existing financial relationship with Herbalife.

00:41:59.740 He was a professor at UCLA at the time.

00:42:03.820 UCLA also issued a press release that didn't acknowledge the relationship.

00:42:08.280 I'm presuming that's because he didn't disclose it to them.

00:42:12.000 The press release from UCLA did include an absolutely incredible quote from Ignaro,

00:42:19.780 who said that the research quote shows that supplements work well even in the absence of

00:42:25.280 exercise what's good for mice is good for humans oh as science tells us om nom nom eat some cheese

00:42:32.880 go live in the walls it's funny that like of these celebrity endorsements like david beckham

00:42:37.520 is kind of like the most honest one you know when david beckham wears a shirt you're not like he

00:42:41.660 takes herbalife you're like no they paid him money but this is like so much more insidious

00:42:45.260 because especially with the researcher it's like when you speak as a nobel prize winner about 0.99

00:42:50.040 cardiovascular health people assume you're speaking from science not from your fucking 0.99

00:42:54.220 wallet i don't know man i heard dale earnhard jr really likes palm olive i mean no one fucking 0.98

00:43:00.440 cares it's so much worse so according to fortune magazine this is around the time in the sort of

00:43:08.760 mid-2000s, when Herbalife first starts taking on what it calls nutrition clubs.

00:43:16.440 That was a concept that first started in Mexico with Mexican distributors of Herbalife.

00:43:22.200 The idea is that an Herbalife distributor rents a storefront. They charge a small admission fee,

00:43:30.740 $5 or $10, which gets you in the door. And once you're in the door, you get some

00:43:38.100 drinks and snacks and Herbalife shakes and Herbalife products, right? The reason that

00:43:44.100 they structure it that way, do you want to say? This is how they used to do raves is because you

00:43:52.560 can't sell alcohol without a license. You sell the map to the rave for like $20. And then when

00:43:58.260 you get there, you get free alcohol. If you're not technically selling it, you're not in violation

00:44:03.500 of the licensing. I'm going to send you another quote from Little Bosses Everywhere. The clubs

00:44:11.000 were not stores, however. Legally, they couldn't be. Operating as retail stores or shake shops would

00:44:16.440 invite a whole host of regulations negating one of the very reasons multi-level marketing exists,

00:44:21.220 to avoid labor laws. So the company developed a slate of counterintuitive rules for distributors

00:44:25.960 operating nutrition clubs in commercial spaces.

00:44:28.960 They were not allowed to post signage anywhere that said Herbalife

00:44:31.720 or call themselves a shake or smoothie shop.

00:44:34.420 They couldn't have an open or closed sign.

00:44:36.740 The only clue a storefront was an Herbalife operation

00:44:39.380 was often its trim or facade painted in lime green,

00:44:43.040 the company's signature color.

00:44:44.560 They weren't even allowed to have windows,

00:44:46.260 or if they did, they had to be covered.

00:44:48.220 Distributors could not post prices or quote-unquote sell their products.

00:44:51.800 They were allowed to sell low-cost daily memberships

00:44:55.240 for which customers got a shake or drink.

00:44:57.200 Dude, if you're selling products in this way,

00:45:00.160 you're like not a real company. 0.98

00:45:01.820 This is so fucking weird. 0.99

00:45:03.220 It's so bad. 0.96

00:45:04.200 If your products work

00:45:05.180 and they're these miracle cures that you say they are, 0.99

00:45:07.640 then just fucking sell them normally. 0.95

00:45:09.840 The fact that you have to like go talk to a person 0.99

00:45:12.900 and go through all this weird fucking rigmarole, 0.95

00:45:15.000 this is how timeshares get you too. 0.99

00:45:17.000 It's like you shouldn't have to sit 1.00

00:45:18.300 through a fucking seminar to buy something. 1.00

00:45:19.940 It's like, just sell me a thing 1.00

00:45:21.280 if it has inherent worth.

00:45:23.060 You should just sell it to me normally.

00:45:24.560 I watched a documentary at one point about someone who had rented a storefront and signed a lease for his Herbal Life Nutrition Club. And he was like, I didn't realize that I was getting in at sort of the end of that trend.

00:45:37.740 yeah so he was like i sort of had two options i could either move into another kind of business

00:45:45.580 that used that same storefront or i could find you know essentially like a rube to sort of pawn

00:45:52.420 it off on and he was like i didn't feel great about that yeah so i just moved on to another

00:45:57.880 business and now he sells vapes okay fair enough at least it's like a real business selling a real

00:46:03.500 product right a real business with a real product where like you do actually have to tell people

00:46:08.440 that there are health risks instead of just health benefits yeah totally so i'm like i honestly see

00:46:13.500 how he got there and it's a weird position to be in where we're like cheering for someone moving

00:46:18.520 into vape sales more vape you did it thank you sir yeah so the nutrition club initiative is

00:46:27.460 especially concentrated in Latino communities in the US, including among immigrants and monolingual

00:46:36.300 Spanish speakers. Yeah, I was going to say this earlier. These things oftentimes prey on kind of

00:46:40.620 existing close networks, like religious networks or like ethnic networks. And that's another like

00:46:46.640 element of the kind of predatory nature of them is that they're like exploding these like personal

00:46:51.320 connections between people. The last of their marketing tactics that we're going to talk

00:46:56.320 about is arguably their most creative. Some of their distributors start buying up TV advertising

00:47:04.700 time and advertising Herbalife as a get-rich-quick scheme. So I'm going to send you a little video

00:47:13.120 clip. Dude, this is going to bum me out so much. One of the talk shows, they was advertising this

00:47:20.140 in home business. It sounded pretty good. Listeners just like you are discovering how to earn

00:47:24.580 quit-your-job-type money right from their kitchen table.

00:47:27.460 The secret? Incomeathome.com.

00:47:29.340 Oh, of course.

00:47:29.740 I thought this would be a good opportunity.

00:47:31.400 It was being endorsed by Sean Hannity.

00:47:33.220 I believe it was Sean Hannity's program.

00:47:35.400 Oh, sweetie.

00:47:35.740 So I thought there was some validity to it.

00:47:38.380 You know, listeners, just like you,

00:47:39.740 discovering how to earn quit-your-job-type of money

00:47:43.300 right from their kitchen table,

00:47:44.440 we've been telling you about Incomeathome.com.

00:47:46.740 When I watched the video,

00:47:47.960 that was the first time I heard Herbalife.

00:47:49.800 This is a great business opportunity.

00:47:51.880 You have the opportunity for financial independence and freedom.

00:47:56.040 You can do it with helping people change their lives,

00:47:58.920 by getting them in a better nutritional mode, by getting them healthier.

00:48:02.400 We're going to stop it there.

00:48:03.940 On a title card that says,

00:48:06.800 in 2011, Johnson was the highest paid chief executive in the U.S.,

00:48:11.160 and that's attributed to Forbes.

00:48:13.240 Think about his downline.

00:48:14.640 His downline is like thousands of people.

00:48:16.160 It's an astonishing downline. 0.98

00:48:17.780 We haven't even covered the sort of the adjacency of right-wing politics to grifts.

00:48:23.120 It's wild. 1.00

00:48:23.860 If you watch like Fox News, they're selling them fucking gold and shit. 1.00

00:48:26.980 So like this is straightforwardly, wildly unethical to just be like, here's a TV ad. 1.00

00:48:33.820 If you do this thing, you will be able to quit your job is one of the claims.

00:48:38.600 Yeah, quit your job money. 1.00

00:48:39.040 Fuck no. 0.99

00:48:39.680 And frankly, at this point in the company's development, it's too far developed for anyone 1.00

00:48:45.600 to make a real payday, right?

00:48:47.500 Again, like you really only get the big paydays in multi-level marketing if you're one of the first in the door. 0.99

00:48:54.380 If they're advertising on TV, you're not one of the first in the fucking door. 0.99

00:48:57.420 Yeah. 0.96

00:48:57.820 So in 2012, Bill Ackman of Pershing Square Capital makes a public presentation that essentially makes the case against Herbalife.

00:49:08.280 He makes a three-hour presentation that consists of over 330 slides, all detailing why Herbalife is a bad investment and why he believes they're in violation of the law. 0.73

00:49:23.880 My understanding is that Bill Ackman is kind of a shithead as a person, but also I love a petty grievance just brought to this level.

00:49:31.980 In addition to this presentation, he does a ton of press around Herbalife. 0.97

00:49:37.040 he goes on cnbc he goes on cnn he goes on c-span he was like i think this company is fake and it's

00:49:43.340 going to like crater into oblivion right that's why i'm trying to short sell it for folks who're

00:49:48.680 unfamiliar essentially in a short sale if uh herbal life stock price dropped akman would have

00:49:56.600 made money buy high sell low right so if this guy who is sort of trying to ring the alarm about

00:50:04.240 herbal life is also going to make millions and millions and millions of dollars if they fail

00:50:10.900 it raises i think reasonable questions about to what degree he's raising the alarm for the

00:50:15.860 good and to what degree he's doing that for some form of like market manipulation or personal

00:50:21.440 profit right in the same way there's like a pump and dump scheme where you promote a stock

00:50:25.380 and raise its price this is like a like a beflacciding and dump scheme where it's like

00:50:31.600 if you crater a stock, you can make money on cratering the stock.

00:50:35.600 Biflacening is just a terrible word.

00:50:37.920 What? It's good. They give awards for podcast hosts. And then did this tank the stock price 1.00

00:50:43.560 or was it relatively consistent during this time?

00:50:45.280 The stock price took a hit, but again, like the company just kept profiting.

00:50:48.900 It's like, this is America. Just because this company is a scam doesn't mean the stock price

00:50:53.700 is going to fall or it's going to go away.

00:50:55.440 And I'm proud to be an American.

00:50:58.020 And the short answer here is that Ackman's attempted short sale doesn't pay off for him,

00:51:04.740 but it does lead to a new wave of scrutiny around the company.

00:51:11.960 Yeah, this is what I heard about.

00:51:13.080 I had never heard of Herbalife before this.

00:51:14.640 I was like, why is everybody talking about this?

00:51:16.100 In 2013, the LA Times writes a piece called Latinos Crucial to Herbalife's Financial Health.

00:51:24.500 Herbalife acknowledged at the time that more than 60% of its product sales went to Latinos in the U.S.

00:51:32.180 That's according to ABC News.

00:51:34.560 In 2014, the New York Times publishes a big piece about the sort of Ackman thing.

00:51:41.640 In 2015, Fortune magazine publishes The Siege of Herbalife is the name of the story.

00:51:47.660 And in 2016, Betting on Zero comes out and premieres at Tribeca.

00:51:54.120 It is a documentary about Herbalife and Bill Ackman's fight to take it down.

00:51:58.840 I love that we've managed to find a weight loss company that's like

00:52:00.780 actually scammier than all the other weight loss companies.

00:52:03.620 In 2014, the FTC launched an investigation into Herbalife.

00:52:10.640 And by 2016, they announced a settlement for $200 million.

00:52:17.100 Okay.

00:52:17.400 But again, Herbalife admits no wrongdoing.

00:52:20.200 Right.

00:52:20.600 And they continue operating?

00:52:21.560 They continue operating, although there are some conditions required by the FTC if they

00:52:28.420 want to continue operating.

00:52:30.720 One is that they have to overhaul Herbalife's compensation system for distributors' sales

00:52:35.980 to make sure that they're rewarding actual external sales rather than just distributors

00:52:42.520 buying inventory, right?

00:52:45.300 The FTC's public statement on this said, quote,

00:52:48.280 to make sure everyone at Herbalife is on board with the new setup,

00:52:51.600 80% of the company's net sales will have to be real sales to real buyers.

00:52:57.500 If that doesn't happen, the rewards that high-level distributors pocket will be cut.

00:53:02.760 It's so funny to be like, by decree of the government of the United States,

00:53:07.160 you have to run a real business. 1.00

00:53:08.780 You have to sell a real fucking thing to real fucking people. 0.99

00:53:12.880 You have to sell a good or service to actual customers. 0.99

00:53:16.840 So that all happened in 2016 and 2017.

00:53:21.540 In 2020, so they're still very much in the thick of that FTC settlement restructuring.

00:53:27.660 They still have their auditor on staff.

00:53:29.980 All of that is happening.

00:53:31.440 Herbalife is hit with another penalty, this time from the DOJ.

00:53:35.660 Oh, my God.

00:53:36.620 Michael, you may be worrying.

00:53:37.900 What does the DOJ have to do with absolutely any of this?

00:53:41.180 Well, here is a little recap from CNBC.

00:53:46.540 I was not wondering that at all.

00:53:50.820 Okay.

00:53:52.740 Authorities said Herbalife schemed from 2007 to 2016 to bribe Chinese officials with cash, entertainment, meals, and travel to obtain direct selling licenses, reduce government security, and suppress negative coverage by state-controlled media.

00:54:07.020 Overseas corruption complaint?

00:54:09.040 Correct.

00:54:09.460 China accounted for 19% of Herbalife's $4.49 billion in net sales in 2016, up from 7% in 2006's regulatory filing show.

00:54:19.260 Herbalife approved extensive and systematic corrupt payments to Chinese officials while falsifying records to make the bribes appear as legitimate business expenses, acting U.S. attorney Audrey Strauss in Manhattan said in a statement.

00:54:32.360 Dude.

00:54:33.080 They were ordered to pay $123 million as a result of this one.

00:54:39.460 But their annual revenue at this point is still in the low billions, right?

00:54:45.020 So it's certainly a big price tag, but it's far from what would be needed to just deal a death

00:54:50.200 blow to the company. They can afford it. They pay it and they keep trucking along, right?

00:54:55.180 Also, if they've gone from 7% of their sales to 19% of their sales in China,

00:55:00.040 that in itself probably swamps numerous times over the size of this settlement.

00:55:04.480 So ultimately their investment paid off.

00:55:05.840 I tend to go pretty hard on regulation of diet and wellness companies as being like a thing that we need to do more of.

00:55:12.280 And I do stand by this.

00:55:13.880 But this is a story where regulation was pretty heavy.

00:55:17.220 Yeah, just failed to achieve anything good.

00:55:19.400 Yeah.

00:55:19.600 Right.

00:55:19.920 Because their revenue is so great.

00:55:22.840 Even when they take these kinds of hits in the public eye, even when they take these kinds of hits in the press or in their stock price, they are still making bank.

00:55:33.200 Yeah.

00:55:33.420 We now live in a world where other multi-level marketing companies have seen what is possible,

00:55:40.100 right?

00:55:40.300 Both from a profit perspective and from a regulation perspective, and has seen that

00:55:45.140 regulation is like not actually necessarily the end of your business, right?

00:55:49.820 They'll still absolutely like make all kinds of noise about how terrible it is to be regulated.

00:55:55.400 But ultimately, this is a real case of like, you know, cockroach survives the apocalypse 0.99

00:56:00.760 kind of shit. 0.99

00:56:01.620 We're now at the culmination of like 40 fucking years of complaints. 1.00

00:56:05.220 And from day one. 0.99

00:56:06.520 Within the first year.

00:56:08.460 Yeah.

00:56:08.840 Before they even made it into the wig factory.

00:56:13.160 They were already getting FTC complaints, right?

00:56:16.440 What we're getting is minuscule fines.

00:56:18.340 And what we need is the government treating this company the way that me and my brother treated a blueberry bush.

00:56:31.620 Thank you.

Maintenance Phase - July 10, 2025

Herbalife

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