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Friday, 26 June 2015
Shock ! as World-class 'Herbalife (HLF)' liar, Michael Johnson, is caught telling the truth.
A charismatic CEO crisscrossed a giant stage as he ticked off a litany of criticisms of Herbalife, the diet-shake company whose products are sold through a multilevel marketing network.
Success in Herbalife, he decried, was a “lottery ticket,” with few making it to the top ranks. In fact, he said, distributors had sometimes engaged in “false promises, claims, in hopes for product, for money, for recruiting, for customers, for pyramiding.”
But the man bad-mouthing Herbalife that day in 2005 wasn’t Bill Ackman, who famously lobbed a $1 billion short against the company in 2012 and called it a fraud.
It was none other than Michael Johnson, Herbalife’s CEO, a former Disney executive who had just joined the Los Angeles company and was trying to exhort the troops to clean up their act.
In a video of his speech, a copy of which was obtained by The Post, a tanned and fit Johnson, dressed in a black polo shirt and slacks, gave the impassioned plea for change at the company’s global management retreat in Laguna Beach, Calif.
Johnson’s words during his 71-minute talk — while perhaps just an interesting take on the company at the time — today would likely spark some chatter in light of Ackman’s accusations.
The words could also provide a blueprint for the probe underway by the Federal Trade Commission, the Securities and Exchange Commission and the Department of Justice, legal experts agree.
“It could be a critical document,” said Richard Holwell, a former federal judge now in private practice.
Herbalife, which has denied Ackman’s accusations, has claimed it has taken steps to address some of the issues raised by Johnson.
In the video, an earnest Johnson worked hard to reassure the distributors that the recruiting that had made them multi-millionaires would always be the “most vital part of our bloodstream.”
But, he said, sales tactics that “top dog” Herbalife distributors used had sometimes led people “down a false road” where $4,000 could buy an “instant distributorship.”
“When the credit card bill comes, the spouse says, ‘How are we going to pay this? You didn’t sell this stuff. It’s in the garage. It’s in the pantry. What are we going to do?’ ” Johnson said, noting some of the practices that led to complaints that Herbalife is a pyramid.
Johnson’s speech even contained what several lawyers said was a stunning statement of the new CEO’s fears.
“You guys gotta do things right because Rich [Rich Goudis, then Herbalife’s CFO] and I have one major job .… to stay out of jail,” he said. “We go to the graybar hotel together if you don’t operate with ethics.”
Herbalife did not respond to requests for comment.
Former distributors who have recently filed FTC complaints claim they are still experiencing the same problems Johnson talked about, according to some familiar with the complaints.
For example, Johnson called lead generation the “source of many evils” that put people “in debt up to their ears.” Herbalife banned the sale of leads after Ackman exposed the practice in 2013.
New recruits are still being sold phony sales leads, sources said.