Herbalife International, acknowledging that publicity generated by federal and state investigations has slowed sales of its health and diet products, announced Tuesday that it has laid off 573 employees, or about 32% of its work force.
The layoffs take effect immediately and trim 328 employees from the company's Los Angeles headquarters and 245 from its nine distribution centers across the country. The cuts are in addition to the 220 layoffs that the company announced in April.
Herbalife executives did not return telephone calls Tuesday, but in a prepared statement the company blamed the sales slowdown on "irresponsible allegations" by Senate staffers that five deaths may be linked to consumption of Herbalife products and on "general rumors and media inaccuracies." Senate staffers say they have never made such allegations.
In the statement, Herbalife Founder and President Mark Hughes said: "Media representatives have repeatedly given inaccurate accounts of facts established in the hearings held by the Senate Governmental Affairs permanent investigations subcommittee.
"Statements, implications and innuendo linking Herbalife products to five deaths have been most injurious and grossly inaccurate," Hughes said. "We have complete reports for each reported death. Each report shows clearly and conclusively that there is absolutely no link between Herbalife and any of the deaths."
Hughes also accused "some Senate staffers" of making misleading statements about the company.
A spokesman for the Senate committee, Charlie Osolin, said neither the Senate committee nor the Food and Drug Administration, which also is investigating Herbalife, have ever "alleged a cause and effect" between Herbalife products and the five deaths. But neither have the FDA or Senate ruled out such a link, he said.
FDA Probe Continuing
Osolin said the FDA continues to investigate the cause of five deaths as well as the medical claims of dieters who use Herbalife products and tout the effectiveness of the goods in Herbalife TV and print advertisements.
Osolin and a Herbalife spokesman said the five deaths under question were brought to the FDA's attention by relatives and friends of the deceased who were concerned about a possible link with Herbalife products. The deaths were discussed two weeks ago during five days of Senate hearings on Herbalife and similar companies that sell diet and other health products. Federal officials testified that no link could be drawn between Herbalife's products and the five deaths but that such a connection could not be ruled out.
A Herbalife spokesman said the company had about 2,000 employees last year. That means that layoffs since the beginning of the year bring Herbalife's work force to about 1,200 people. That's in addition to the 750,000 independent distributors who, as of last month's count, were selling the company's products nationwide, the spokesman said.
Herbalife International, which says it is the largest distributor of weight-loss and vitamin and nutritional supplements in the country, has three distribution centers in California and two each in Georgia, Indiana and Texas.
Founded in 1980, the company has said it now has annual sales of $500 million. But with financial success has come a storm of controversy. The FDA has been investigating Herbalife for about three years, and, in the the last few months, the company gained the attention of the Senate committee, which has been investigating a list of weight-loss products.
In March, the California attorney general, the state Department of Health and the district attorney of Santa Cruz County filed a civil lawsuit charging Herbalife with making false medical claims about some of its products and with using an illegal pyramid-type scheme to market them. The company also faces allegations in Canada, where it has been cited for 24 violations of that country's Food and Drug Act.
The company has denied the allegations.