http://nypost.com/2015/06/25/video-reveals-herbalife-boss-saw-pyramiding-signs-early-on/
Video reveals Herbalife boss saw ‘pyramiding’ signs early on
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.
New recruits are still being sold phony sales leads, sources said.
Ackman told The Post he had not seen the video.
(Copyright New York Post 2015)
David, this reminds me of the admission made by Rich DeVos some many years ago in this "Directly Speaking" tapes which was an obvious attempt to distance himself from supposedly "rogue" distributors who were making (and continue) to make unbelievable income claims to new recruits. Of course we know that this is the heart and soul of how MLM operates. They vacuum as much cash from the suckers as possible, and later claim that this wasn't the intended result.
ReplyDeleteI also read this story online. Makes me wonder where this video is? Why it hasn't appeared online? Normally, you would think the video itself would accompany an article of this type?
It angers me that the initiators of these schemes always try to claim innocence by pointing the finger at their own supposedly errant children. They remind me of parents who send their children out to steal, and when they are caught, feign ignorance. It reminds me of the Charles Dickens story: Oliver Twist.
Thanks quixtarisacult - I fear Michael Johnson is more of a Artful Dodger than a Fagin.
DeleteThis damning video has been spoken of in past, but no one seems to have seen it except Michelle Celarier.
The quote you were reminded of is:
"We didn't start out with BV on tapes ... We put it in by the way, to be a competing force and to draw your attention to the kind of potential abuse that we thought was there, which we know is there, with a kind of power and pressure I never believed; and I am not going to take all afternoon to read you the horror stories of the people who say, 'I'm connected with such and such a system. I have $8,000 worth of their tapes in my basement. They will not take them back.' and the others who were told to mortgage their houses, cash in their life insurance, told to go to the bank to borrow because this big weekend seminar was so important. Well, that's extracting money."
--Rich Devos, co-founder of Amway, from a "Directly Speaking" tape, 1983