Herbalife shares jump after company hires former FTC commissioner
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 company released early Monday. Herbalife shares gained 6% to close at $47.30 in Monday trading.
Harbour served as an FTC commissioner from 2003 to 2010 before entering private legal practice. She was appointed to the commission by President George W. Bush.
Her hiring comes as the FTC investigates allegations that Herbalife operates an illegal pyramid scheme that rewards distributors more for recruiting than it does for product sales.
Harbour, who will be a senior vice president in charge of global member compliance and privacy, said she has personally consumed Herbalife’s nutrition products for 10 years.
“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.
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 allow him to profit if its stock price fell.
Ackman, who continues to short the company, has predicted that regulators will shut the company down, driving its stock price to zero.
Herbalife denied the allegations, saying many of its distributors join the company to receive discounts on products they intend to personally consume, not as their only source of income. It’s a business model employed for decades by many other multilevel marketing companies, Herbalife said.