Friday, 27 November 2015

Oklahoma Pension Fund's failed 'Herbalife (HLF)' lawsuit - a brief analysis.

Blog readers will draw their own conclusions from the following news from the USA.

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Judge Dale Susan Fischer

Two days ago (for the third time), a US federal judge, Dale Susan Fischer, refused to bite the foul-smelling tip of the 'MLM' bullet, and has now definitively ruled that a civil lawsuit filed against 'Herbalife,' and its senior corporate officers, by a group of former-investors (who lately, freely-accept that they were duped into buying dangerously-volatile shares in a dissimulated pyramid scheme), cannot go ahead.

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When we sift through the largely-irrelevant detail of this series of morally, and intellectually, relativist rulings, we discover that the Judge is not saying that Bill Ackman's unoriginal published analysis of 'Herbalife' (as an effectively-valueless corporate front for a pyramid scheme preying on the vulnerable) is in any way inaccurate, or that certain individuals within the senior ranks of the 'Herbalife' organisation are not guilty of wrongdoing. On the contrary, what she has said is that:

  • Prior to their buying 'Herbalife' shares, the complaining-investors could have formed the same conclusions as Bill Ackman, because the information upon which he formed his own conclusions, was in the public domain. 
  • Bill Ackman's published analysis cannot alone be taken as proof that 'Herbalife' is a fraud.
  • Even though they were given the opportunity to do so, the plaintiffs' attorneys did not strictly follow legal precedent and produce specific examples of misleading statements made by the CEO of 'Herbalife,' Michael Johnson.
  • The plaintiffs failed to show that Michael Johnson personally knew of the wrongdoing inside his company, therefore, they didn't prove the CEO of 'Herbalife' to be a liar.

As ever, the morally, and intellectually, probing question which the plaintiff's attorney's failed to put to Judge Fischer, was:

Given that the empty income-tax record (in more than 100 countries around the world) conclusively proves that the bosses of 'Herbalife' have always been occulting an overall loss/churn rate in their so-called 'MLM Income Oportunity' of effectively 100%, what would be your personal reaction if a close friend, or a member of your own family (particularly a young person), came to you and excitedly announced that he/she was going to sign-up for the so-called 'Herbalife MLM Income Opportunity?'

The plaintiff's attorney's made absolutely no mention of my own published overall analysis of 'Herbalife' as being just one of hundreds of copy-cat counterfeit 'direct selling' companies - the bosses of which have all been hiding key-information, and constantly-broadcasting the same reality-inverting propaganda, to shield a form of ongoing major racketeering activity (as defined by the US federal Racketeer Influenced and Corrupt Organisations Act, 1970). 

David Brear (copyright 2015)


Reuters, Nov 25th 2015: 

A federal judge dismissed a lawsuit accusing Herbalife Ltd (HLF.N) and Chief Executive Officer Michael Johnson of defrauding shareholders by misrepresenting that the weight-loss and nutritional products company's complied with laws designed to prevent pyramid schemes.

U.S. District Judge Dale Fischer in Los Angeles decided on Monday that the Oklahoma Firefighters Pension and Retirement System failed to show that the defendants intended to deceive shareholders and materially misrepresented Herbalife's business.

Fischer, who had thrown out two earlier versions of the lawsuit, dismissed the case with prejudice, meaning it cannot be brought again.

Herbalife shares were up 26 cents at $58.39 in Wednesday morning trading on the New York Stock Exchange.

The lawsuit is separate from the campaign against Herbalife by billionaire activist investor William Ackman of Pershing Square Capital Management LP, who in December 2012 announced a $1 billion bet against the Los Angeles-based company.

Herbalife has long denied that it is a pyramid scheme, which often occurs when participants earn more money by recruiting others to sell products than by selling the products.

The Oklahoma fund's lawsuit accused Herbalife of "grossly" understating the percentage of sales going to retail customers.

It also said Johnson was closely involved in Herbalife's day-to-day affairs, making him familiar with the alleged deceptive activity, and took advantage of a share price he knew was inflated by selling more than $126 million of company stock.

Fischer, however, said that despite new allegations about Johnson's "hands-on" involvement, the lawsuit still failed to sufficiently allege fraud.

"Plaintiff has had multiple opportunities to correct shortcomings," she wrote. "An amendment would be futile."

Maya Saxena, a lawyer for the Oklahoma fund, did not immediately respond to requests for comment on Wednesday. Herbalife, in a statement, said it was "obviously pleased" with Fischer's decision.

The lawsuit sought class-action status on behalf of shareholders from Feb. 23, 2011 to Dec. 19, 2012, when Ackman disclosed his short bet.

In May, another federal judge approved Herbalife's $15 million settlement with distributors who said the company misled them.


  1. This ruling will send out a very confusing signal to Herbalife victims.

    1. Anonymous - Agreed, but if the financial/legal advisors to a major pension fund, couldn't initially recognise the criminal enterprise lurking behind 'Herbalife/MLM,' then what chance have victims?

      That said, I feel that the various attorneys to the plaintiffs in this civil case were trying to jump on a band-wagon. Furthermore, it is not known if the plaintiffs also filed criminal complaints against 'Herbalife' with law enforcement agencies.

      I personally would have advised the plaintiffs to file criminal complaints against 'Herbalife' and to have filed a civil suit seeking damages under RICO.

      That would have sent a clear signal to everyone.

  2. You have got the right question. This judge is frightened to say in public what she would say in private.

    1. Anonymous - 'MLM' cultic labyrinths have been specifically designed to shut down the critical and evaluative facutlies of not just their victims, but also those of all casual observers (including judges).

      The sad truth is that the more highly-educated a casual observer of 'MLM' is, the less likely he/she is to want to admit that they cannot fully-understand what they are really examining.

      Other thought-provoking questions for Judge Fischer would have been:

      Are you aware of the origin of the jargon term 'MLM Income Opportunity?'

      Are you aware of the quantifiable results of the 'MLM' phenomenon, i.e. the overall number of individuals who have signed contracts with so-called 'MLM' companies in which they were arbitrarily defined as 'Distributors' or 'Business Owners', and the percentage of these contractees who have generated an overall net-profit from their so-called MLM business activities?

      Can you briefly explain how so-called 'MLM Income Opportunities' function, but only using accurate fully-deconstructed language?

    2. When you ask anyone in the street or a bar they all know herbalife is a pyramid scam and many say it's a cult. The judge must have known this?

    3. Anonymous - Previously, the judge actually acknowledged essentially what you have written, but in effect ruled that the plaintiffs had, therefore, no excuse for not spotting the pyramid scam themselves.

      Judge Fischer is, therefore, saying '(share) buyer beware!'

      Remember, the Judge refused to allow the lawsuit to continue, not because she thought that 'Herbalife' isn't a fraud, but because she thought that the plaintiffs had failed to show that 'Herbalife' is a fraud or that the corporate officers of 'Herbalife' had specifically misled them into investing in what they (the investors) alleged to be a fraud, but which they hadn't spotted until Ackman pointed it out.

      In reality, the bosses of 'Herbalife' are part of syndicate of cultic racketeers who have misled the entire world for decades. 'Herbalife' is undoubtedly a dissimulated criminal enterprise which should never have been allowed to be capitalised on Wall Street in the first place, but this wider analysis is completely beyond the limited scope of this particular lawsuit.

      What actually annoys me about this ruling is the fact that the judge was not confronted with the hidden quantifiable results of the so-called 'Herbalife MLM Income Opportunity' and then obliged to give her own honest opinion of whether 'Herbalife's' corporate officers have been withholding this key-information from the public, and whether this is, therefore, an entirely-lawful enterprise for any ill-informed member(s) of the public to become involved with.

  3. Speaking as someone who seen many co-workers mad on MLM, I can confirm all they are interested in is recruiting you not selling products for a profit.

    I agree with this blog. MLM is a cult religion. Devotees are creeps hypnotised by their own dreams. They are buying overpriced crap each month and looking for more creeps to buy more overpriced crap.

    1. Anonymous - In essence, you have described how so-called 'MLM' functions, but I wouldn't dismiss 'MLM' adherents as 'creeps.' That said, whilst they remain under the influence of their groups, 'MLM' adherents invariably behave in an extremely creepy way.

      Might I ask what is the occupation which has brought you into contact with 'many co-workers mad on MLM?'

      Are you perhaps a teacher or a police officer?