Herbalife Ltd., the nutrition company that is under investigation by the Federal Trade Commission, has hired a former FTC commissioner to oversee the conduct of its independent sales team.
Pamela Jones Harbour will monitor training and mentoring programs for Herbalife's nearly 4 million distributors and employ "robust and consistent monitoring and enforcement procedures," the company said in a news release.
Investors seemed to like the news, which the Los Angeles company released early Monday. Herbalife shares rose 6%, or $2.69, to $47.30.
The 34-year-old company has been one of the hottest topics — and most volatile stocks — on Wall Street for nearly two years.
In December 2012, hedge fund manager Bill Ackman accused Herbalife of operating a complex pyramid scheme that victimizes a network of predominantly minority distributors who are attracted by promises of wealth, but end up making little or no money selling its products. At the time, he said he had shorted the company's stock by more than $1 billion, a move that would enable him to profit if its stock price fell.
In an interview Monday, Ackman said he remains convinced that Herbalife's business model is illegal. He declined to comment on Harbour's hiring.
"The problem with Herbalife is if it requires its distributors to comply with the law, its sales will collapse," Ackman said. "You cannot sell billions of dollars of overpriced nutrition powder unless you defraud people into believing there's a business opportunity."
Herbalife has repeatedly denied Ackman's allegations, saying many of its distributors join the company to receive discounts on products they personally consume, not as their only source of income.
The FTC announced earlier this year that it had opened an investigation of Herbalife. The hiring of Harbour quickly became a topic of debate on financial websites: Supporters of the company said it's evidence that the FTC is not likely to hammer the company; critics said it was a sign of Herbalife's desperation.
Harbour was nominated by President George W. Bush in 2003 and confirmed by the Senate. She served as an FTC commissioner from 2003 to 2010 and most recently worked as an attorney for a Washington law firm.
As a Herbalife senior vice president in charge of global member compliance and privacy, Harbour said she has personally consumed Herbalife's nutrition products for 10 years and is impressed with the company.
"My understanding of the industry and familiarity with the products have given me great insight into what a beneficial company Herbalife is, and I am delighted to join such a talented team," Harbour said in a statement.
Herbalife's weight-loss shake mix, vitamins and protein bars are not available in retail stores. They can be purchased only from its distributors, who profit from sales they make and from sales made by others they recruit into the business.