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Executives of multilevel marketing firm charged in China bribery scheme

U.S. District Court in Manhattan
Two China-based executives of a U.S.-based firm were each charged in U.S. District Court in Manhattan with a single count of conspiring to violate the Foreign Corrupt Practices Act.
(Stan Honda / AFP/Getty Images)

Two former executives with a China-based subsidiary of a U.S. multilevel marketing company were charged by American prosecutors in a decade-long bribery scheme.

Yanliang “Jerry” Li, a former managing director, and Hongwei “Mary” Yang, a former head of external affairs, were each charged with a single count of conspiring to violate the Foreign Corrupt Practices Act, which bars payoffs of foreign officeholders to win business and avoid regulation, U.S. officials said Thursday. Li also was charged with perjury and destruction of records.

In court filings, the firm Li and Yang worked for was identified only as “Company-1,” though the description matches that of Los Angeles-based Herbalife Nutrition Ltd., which has previously disclosed in regulatory filings that it’s been under scrutiny over compliance with the anti-bribery law.

Li and Yang, both citizens of China, aren’t in U.S. custody, according to a statement from Manhattan U.S. Atty. Geoffrey Berman. The U.S. Securities and Exchange Commission sued Li on Thursday in Manhattan federal court.

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Herbalife didn’t respond to calls seeking comment. Li and Yang could not be located.

The defendants, both 51 years old, “allegedly approved the extensive and systematic payments of bribes to Chinese government officials over a 10-year period,” Berman said. “In an effort to obstruct the government’s investigation into this widespread corruption scheme, Li lied under oath about the bribe payments when interviewed by the SEC and also destroyed evidence.”

Prosecutors claim that, from 2007 until February 2017, Li, Yang and others participated in a scheme to pay bribes to officials in China’s Ministry of Commerce and its State Administration for Industry and Commerce. They also allegedly made illegal payments to executives of a government-owned media company, court papers show.

Herbalife is a multilevel marketing company that uses an outside network of sales people to sell its weight-loss shakes, dietary supplements and personal care products.

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Chinese law doesn’t permit multilevel marketing, but does allow companies to sell products through independent sales representatives, if they adhere to certain requirements, according to prosecutors. Li and Yang allegedly paid bribes to get licenses to operate as a direct-sales business, to avoid complying with local laws and to suppress negative reports in the press.

Li and Yang are charged with making fraudulent expense claims to be reimbursed for the bribes and to conceal the nature of the payments. Prosecutors claim Li lied about the bribes when questioned by the SEC in 2016. The following year he deleted about 200 files from his company laptop after learning of pending SEC and Department of Justice investigations, they said.

Herbalife spent years fighting off short sellers and endured a probe by the Federal Trade Commission tied to allegations that it is a pyramid scheme. The company resolved the FTC probe in 2016, agreeing to pay $200 million and to reform some of its business practices.


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