Thursday 1 March 2018

Bill Ackman's 'Herbalife (HLF)' challenge sinks, but will he now have the courage/freedom to challenge 'MLM' racketeering?

(After posting this article, a Blog reader has asked me to add a 'short' explanation of how 'short-selling' works. Unfortunately, there is no brief way to explain the mechanics of short-selling. For the purposes of this article, all that Blog readers need to know is that, in a short-selling share trade, the short-seller makes lots of money if the market-price of the share being short-sold, collapses, but the short-seller can equally lose lots of money if the market price of the share being short-sold, sky-rockets. In many countries, including the UK, short-selling is considered to be open to abuse and is prohibited by law. However, short-selling is not unlawful in the USA where it has also provided a financial incentive for so-called 'activist investors' to expose abuse). 

Bill Ackman gives up Herbalife fight, ending five-year saga
Bill Ackman

After more than 5 years, Bill Ackman of Pershing Square Capital Management has evidently been forced to cut his company's losses and ditch his $1.3 billion short-selling position against 'Herbalife.' It is important to note that so far, Mr. Ackman has not made any public comment on these matters, but apparently he has called Carl Icahn (who still holds 26% of publicly-traded shares in the 'Herbalife' racket) to admit defeat. However, his latest move doesn't in any way indicate that Mr. Ackman feels that he is wrong about his analysis of 'Herbalife' being the ultimately-valueless corporate-front for a vast, and pernicious, pyramid scheme. That said, I wonder if Mr. Ackman is finally going to realise that he, and his legal advisers, set out on the trail of 'Herbalife' like a bunch of over-confident hunters loaded for rabbit when they should have been loaded for bear.

What would be truly ironic is if 'Herbalife' were now to be subjected to a rigorous, well-informed investigation/prosecution revealing its bosses to have been peddling effectively-valueless shares in an organised criminal enterprise. In reality, so long as Carl Icahn's 'MLM' pitchman chum remains in the White House, the chances of any major 'MLM' racket being busted, are zero. Bill Ackman cannot be unaware of this tragicomic situation.

In the past I've made it no secret that, in the week that Bill Ackman announced his big bet against 'Herbalife,' I managed to speak to him by phone for about 45 minutes (I called his office and he returned my call). Mr. Ackman said he had no knowledge of my work, even though (many months before) I'd been in contact with two of his researchers. I might add that neither of these persons were at liberty to tell me who they were working for or exactly why they were researching 'Herbalife/MLM.' 

Everything fell into place when Mr. Ackman's 'Herbalife' short-selling trade was suddenly everywhere in the financial media. Obviously, this is what prompted me to make contact and tell him what I thought of his initial intervention and perhaps discover the extent of his knowledge and resolve. I also wanted to warn Mr. Ackman that the bosses of 'Herbalife' would try to character assassinate him, and/or dig up dirt to try to scare him off, rather than simply present a defence to his accusations.

I have to say that during the course of our conversation, Mr. Ackman was relaxed and charming, but he did not particularly impress me. He was aware that a number of people had been examining the 'MLM' phenomenon for a lot longer than he had. He privately agreed with me that 'Herbalife' is a cult, but he couldn't use the 'C' word publicly. At this point, I did try to explain to Mr. Ackman that, in my experience, when challenging a cult, the first 10 years are always the hardest. Unfortunately, Mr Ackman thought I was joking, even though I told him that I had supplied informed-complaints to UK trade regulators over a period of 14 years, before (in 2007) a UK Trade Minister filed a public-interest bankruptcy petition against 'Amway UK Ltd.' Subsequently, UK government attorneys failed to close this 'MLM' front-company when it co-opted a former Deputy Director of the UK Serious Fraud Office.The (then) CEO of 'Amway UK Ltd.' was allowed to commit perjury when she gave assurances to a UK High Court Judge that the company had no idea that its 'Distributors' had been acting illegally, but all the same, when faced with investigation/prosecution the company had voluntarily reformed its previous business model, expelled all offending 'Distributors' and, consequently, it would no longer be in breach of UK laws which prohibit pyramid schemes. 

At the time I spoke with him, Mr. Ackman's faith in the US regulatory agencies, and system of justice, was every bit as misplaced as my own faith had once been in their UK counterparts. He had convinced himself that, because Herbalife is so obviously a fraud, US officials (under the second Obama administration) would swiftly take action against the company and close it down; but then, Mr. Ackman did have lots of green reasons to believe in this attractive outcome, and preventing him from listening to any ugly suggestion to the contrary. My own reasons for believing that UK officials would close 'Amway' down, had been different, but nonetheless wishful.

Thus, Mr Ackman did not take onboard my urgent concerns that he was making a big mistake by pursuing 'Herbalife,' rather than taking on the wider 'MLM' phenomenon. That said, he invited me to send my analysis to his attorney. Yet, apart from one unconvincing interview (given in 2013) in which Mr. Ackman started to describe 'Herbalife/MLM' as being an example of a 'Big Lie' - a totalitarian propaganda technique employed by the 'Nazi' regime and other dictatorships  - I might as well not have tried to communicate with anyone at Pershing Square Capital Management.

The sad truth is, that despite having the advantages of money, celebrity (and the resulting access to the media and legislators), by foolishly concentrating their fire on the 'Herbalife' racket (to the exclusion of all other 'Amway' copy-cat 'MLM' cultic rackets), Mr. Ackman and his associates have effectively wasted tens of millions of dollars making it appear that 'Herbalife' might be a fraud, but 'Multi-Level Marketing' must itself be a legal form of enterprise.

Hopefully I'm wrong, but I very much doubt that Bill Ackman will now have the courage/freedom publicly to tell the truth and accept that he didn't really understand the nature, and historic significance, of the criminogenic phenomenon he was actually taking on, when (in December 2012) he challenged the bit of it known as, 'Herbalife.'

Interestingly,  Bill Ackman gave an interview in 2016 to 'Fortune' in which he half-jokingly began to admit that his own humourless attempts to expose 'Herbalife/MLM' were nothing like as an effective weapon as satire: 

 “In the future I am going to bet against the stock and then deliver my material to John Oliver ... He’s the greatest man ever.” 

Personally, in the light of his painful experience with 'Herbalife,' I'd love to know Bill Ackman's opinion of the following deconstructed analysis.

More than half a century of quantifiable evidence, proves beyond all reasonable doubt that:

  • the widely-misunderstood phenomenon that has become popularly-known as 'Multi-Level Marketing' (a.k.a. 'Network Marketing') is nothing more than an absurd, non-rational,  cultic, economic pseudo-science maliciously-designed to lure unwary persons into de facto servitude, dissociate them from external reality and not only steal their money, but also deceive them into unconsciously acting the role of bait to lure other unwary persons (particularly their friends and family members) into the same trap. 
  • the impressive-sounding made-up jargon term, 'MLM,' is therefore, the misleading title for an enticing structured-scenario of control which has been developed, and constantly acted out asreality, by the instigators, and associates, of various copy-cat, major and minor, ongoing organised crime groups (hiding behind labyrinths of legally-registered corporate structures) to shut-down the critical, and evaluative, faculties of victims, and of casual observers, in order to perpetrate, and dissimulate, a series of blame-the-victim 'Long Cons*'  - comprising self-perpetuating rigged-market swindles**, a.k.a. pyramid scams (dressed up as 'legitimate direct selling income opportunites') and related advance-fee frauds (dressed up as 'legitimate: training and motivation, self-betterment, programs, recruitment leads, lead generation systems,' etc.).
  • Apart from an insignificant minority of shills (whose leading-role in the 'Long Con' has been to pretend that anyone can achieve financial freedom simply by following their unquestioning example and exactly-duplicating a step-by-step-plan of recruitment and self-consumption)the hidden overall net-loss/churn rate for participation in so-called 'MLM income opportunities,' has always been effectively 100%.

*A 'Long Con' is a form of fraud maliciously designed to exploit victims' existing beliefs and instinctual desires and make them falsely-believe that they are exercising a completely free-choice. 'Long Cons' comprise an enticing structured-scenario of control acted out as reality over an extended period. Like theatrical plays, 'Long Cons' are written, directed and produced. They involve leading players and supporting players as well as props, sets, extras, costumes, script, etc. The hidden objective of 'Long Cons' is to convince unwary persons that fiction is fact and fact is fiction, progressively cutting them off from external reality. In this way, victims begin unconsciously to play along with the controlling-scenario and (in the false-expectation of future reward) large sums of money or valuables can be stolen from them. Classically, the victims of 'Long Cons' can become deluded to such an extent that they will abandon their education, jobs, careers, etc., empty their bank accounts, and/or beg, steal, borrow from friends, family members, etc.


** The enticing structured-scenario of control fundamental to all 'rigged-market swindles' is that people can earn income by first contributing their own money to participate in a profitable commercial opportunity, but which is secretly an economically-unviable fake due to the fact that the (alleged) opportunity has been rigged so that it generates no significant, or sustainable, revenue other than that deriving from its own ill-informed participants. For more than 50 years, 'Multi-Level Marketing' racketeers have been allowed to dissimulate rigged-market swindles by offering endless-chains of victims various banal, but over-priced, products, and/or services, in exchange for unlawful losing-investment payments, on the pretext that 'MLM' products/services can then be regularly re-sold for a profit in significant quantities via expanding networks of distributors. However, since 'MLM' products/services cannot be regularly re-sold to the general public for a profit in significant quantities (based on value and demand), 'MLM' participants have, in fact, been peddled infinite shares of their own finite money (in the false expectation of future reward). 

Thus, in 'MLM' rackets, the innocent looking products/sevices' function has been to hide what is really occurring - i.e The operation of an unlawful, intrinsically fraudulent, rigged-market where effectively no non-salaried (transient) participant can generate an overall net-profit, because, unknown to the non-salaried (transient) participants, the market is in a permanent state of collapse and requires its non-salaried (transient) participants to keep finding further (temporary) de facto slaves to sustain the enticing illusion of stability and viability.

Meanwhile an insignificant (permanent) minority direct the 'Long Con' - raking in vast profits by selling into the rigged-market and by controlling/withholding all key-information concerning the rigged-market's actual catastrophic, ever-shifting results from its never-ending chain of (temporary) de facto slaves.

Although cure-all pills potions and vitamin/dietary supplements, household and beauty, products have been most-prevalent, it is possible to use any product, and/or service, to dissimulate a rigged-market swindle. There are even some 'MLM' rackets that have been hidden behind well-known traditional brands (albeit offered at fixed high prices). Some 'MLM' rackets have included 'cash-back/discount shopping cards, travel products, insurance, energy/communications services' and 'crypto-currencies' in their controlling scenarios.

No matter what bedazzling product/service has been dangled as bait, in 'MLM' rackets, there has been no significant or sustainable source of revenue other than never-ending chains of contractees of the 'MLM' front companies. These front-companies always pretend that their products/services are high quality and reasonably-priced and that for anyone prepared to put in some effort, the products/services can be sold on for a profit via expanding networks of distributors based on value and demand. In reality, the underlying reason why it has mainly only been (transient) 'MLM' contractees who have bought the various products /services (and not the general public) is because they have been tricked into unconsciously playing along with the controlling scenario which constantly says that via regular self-consumption and the recruitment of others to do the same, etc. ad infinitum, anyone can receive a future (unlimited) reward.

I've been examining the 'MLM' phenomenon for around 20 years. During this time, I've yet to find one so-called 'MLM' company that has voluntarily made key-information available to the public concerning the quantifiable results of its so-called 'income opportunity'.

Part of the key-information that all 'MLM' bosses seek to hide concerns the overall number of persons who have signed contracts since the front companies were instigated and the retention rates of these contractees. 

When rigorously investigated, the overall hidden net-loss churn rates for so-called 'MLM income opportunites' has turned out to have been effectively 100%. Thus, anyone claiming (or implying) that it is possible for anyone to make a penny of net-profit, let alone a living, in an 'MLM,' cannot be telling the truth and will not provide quantifiable evidence to back up his/her anecdotal claims.

Although a significant number of 'MLM' front-companies (like 'Vemma', 'Fortune Hi-Tech Marketing', 'Wake Up Now') have been shut-down by commercial regulators, some of the biggest 'MLM' rackets (like 'Amway' ,'Herbalife', Forever Living Products' ) have continued to hide in plain sight whilst secretly churning tens of millions of losing participants over decades.

David Brear (copyright 2018)


  1. Thanks for posting the Icahn interview

    His HLF shares showing a billion dollar profit.

    Icahn still says HLF gives people an "opportunity to work and earn money" and the interviewer didn't challenge this lie.

    1. Anonymous - I've long-since given up expecting financial journalists to ask common-sense questions regarding 'MLM' cultic rackets.

      Everything that Mr. Icahn has ever said about 'Herbalife/MLM' is reality-inverting drivel which ignores the quantifiable evidence and particularly the suffering of 'Herbalife/MLM' victims. But then Mr. Icahn still has more than a billion green reasons to maintain the 'Herbalife:MLM' Long Con's controlling-scenario.

      Icahn is now in his eighties. He claims to understand how 'Herbalife' functions, because he peddled 'Kirby' brushes door-to-door in his youth.

      Interestingly, Icahn is a (once-penniless) billionaire who came from the same neighbourhood as, and went to school with, Bernie Madoff.

      Unlike Madoff, Icahn will probably never be held to account in a courtroom, but his involvement with the 'Herbalife/MLM' Long Con has damaged, and will continue to damage, infinitely more people than Madoff's Long Con.

      Icahn and Madoff started out in life together, it's a damned-shame that they won't finish together in the same jail cell.

    2. No one gives a shit about losers on wall street so long as they are winning!

    3. Anonymous - On the whole I would agree with you. However, although it's true to say that Bill Ackman, and his close associates, challenged the 'Herbalife' racket because they wanted to win money for Pershing's investors, Ackman also displayed empathy for 'Herbalife' victims and he insisted that he genuinely wanted to stop this fraud from harming his fellow citizens.

      Evidently, Carl Icahn doesn't give a shit who gets harmed, so long as he is winning. That said, Mr. Icahn's lack of empathy probably renders him capable of comprehending how cultic rackets function.

      What I am now interested in, is whether Bill Ackman will just vanish from the 'MLM' scene or whether he will join the rest of us in trying to expose the wider criminogenic phenomenon of blame-the-victim 'MLM' cultic rackeering.

      In brief Anonymous, depending on what he does now, we will see if Bill Ackman really does give a shit.

    4. Think you meant to say Ichan’s lack of empathy renders him INcapable of comprehending how cultic rackets function.

    5. Correct Anonymous and thanks for spotting my error. Although I perhaps should really have said: Ichan’s lack of empathy PROBABLY renders him INcapable of comprehending how cultic rackets function.

      In fact, it's not clear how much Icahn actually understands about all this, or wants to understand. Someone as savvy as Icahn must know 'Herbalife' is a front for a 'Long Con,' but he's been acting dumb.

      Also notice how Ackman has said that the company officers of 'Herbalife' are criminals who, like Bernie Madoff, should be jailed, but he's never condemned Icahn publicly.

      It's easy to think that when Ackman stepped in and 'Herbalife' shares initially tumbled, Icahn merely saw his chance. He realised that all he had to do was make a massive public investment in 'Herbalife'- then his reputation would inflate the deflating value of 'Herbalife' before any investigation was completed, allowing him to make a killing.

      However, Icahn hasn't bailed out yet and I'm not sure we'll ever discover what really lurks behind Icahn's continued support for 'Herbalife.'

      This has never been just about 'Herbalife,'because it is not in the interests of the rest of the 'MLM' crime syndicate to allow 'Herbalife' to fall.


    "Federal prosecutors are looking into the role played by Carl C. Icahn, the billionaire investor, in advising the Trump administration on regulatory issues that had the potential to affect the finances of a company he owns."

    1. Thanks Anonymous.

      Of course this NY Times article refers to yet another company Icahn has invested in (the value of which could be dramatically affected by tighter federal regulation). However, unless they are stupid, federal prosecutors cannot be unaware of Icahn's ownership of 26% of 'Herbalife' (a company which would have been rendered worthless had its bosses not cut a dubious deal with federal regulators and which supposedly remains under close federal regulatory scrutiny).

      Icahn could lose billions of dollars if federal laws were rigorously enforced in respect of 'MLM' rackets, but by the time an honest US government faces the ugly reality behind the 'MLM' fairy story, Icahn will probably be long-since dead

      The idea that Icahn had/has any influence over federal regulatory agencies is both absurd and terrifying, but until recently he was Donald Trump's (unoffical) 'regulatory reform adviser.' Icahn and Trump go back many years and it's almost a certainty that he still retains influence over Trump in all sorts of areas (no matter what he or Trump now pretend).

      For a while it was reported that Icahn had been offered a cabinet post in the Trump administration and that (very wisely) he had declined it.

  3. Even Alec Baldwin mentions Amway, but Ackman says zero about all the other fucking MLMs.

    1. Yes, that was a pretty telling moment Anonymous, and sadly Baldwin did not press Ackman or Braun to comment on 'Amway.'

      Hand on heart, I cannot say that I have watched, or read, every interview that Ackman has given concerning 'Herbalife,' but I'm pretty sure that, to date, he has not referred to the wider ongoing 'MLM' phenomenon. That said, he has referred to the few 'MLM' rackets which have been investigated and closed down. These have even been featured on the Pershing Website, but only after they were busted.

      I'm assuming that Ackman's refusal to comment on groups like 'Amway' has been on the instruction of his attorneys.

      In my opinion, Ackman's decision to concentrate on 'Herbalife' to the exclusion of all other ongoing 'MLM' rackets, was a fundamental error.

      Also Anonymous, we should perhaps give Ackman credit for praising John Oliver's satirical exposé of the wider 'MLM' phenomenon.