Why Did Kamala Harris let Herbalife off the hook?
As the former attorney general of California, Harris declined to probe the nutritional supplement company.
WASHINGTON, D.C. — At a rally in late January in her native Oakland, Calif., U.S. Sen. Kamala Harris announced her intention to seek the presidential nomination by casting herself as a tireless advocate of men and women who lack power and wealth. The former attorney general of California — who since 2017 has been the state’s junior senator — described her first appearance in the courtroom, as a young San Francisco district attorney. “I knew I wanted to protect people,” Harris told the crowd of 20,000. “And I knew that the people in our society who are most often targeted by predators are also most often the voiceless and vulnerable.”
But as the attorney general of the nation’s largest state — and therefore one of the most powerful law enforcement officials in the nation — Harris declined to investigate Herbalife, the nutritional supplement company that has been accused of fraudulent marketing practices. Documents exclusively obtained by Yahoo News show that in 2015, prosecutors in the San Diego office of the California attorney general sent Harris a lengthy memorandum that argued for an investigation into Herbalife and requested resources in order to undertake such an investigation. Similar investigations into Herbalife were already taking place elsewhere.
About three weeks after the San Diego letter was sent, Harris received the first of three donations to her campaign for the U.S. Senate from Heather Podesta, the powerful Washington lobbyist whose ex-husband Tony’s firm, then called the Podesta Group, had worked for Herbalife since 2013. Heather Podesta’s own lobbying firm, Heather Podesta and Partners, would soon be hired by Herbalife, too.
Harris did not pursue an investigation, even as the Federal Trade Commission proceeded with an investigation of its own, which had been opened the previous March and which suggested that sufficient grounds for such scrutiny did exist. In fact, the San Diego letter had meticulously laid out those grounds, pointing out that Herbalife presented itself to the public as a lawful enterprise, but that it could nevertheless be “engaged in less obvious conduct” that potentially harmed both Herbalife distributors and Herbalife customers. Allegations of such conduct, by 2015, had become commonplace in media reports.
Harris never gave a reason for declining to investigate Herbalife, but the decision stand in contrast to her oft-expressed promise to fight for ordinary Americans for whom the 21st century economy seems to hold little promise. Those are the very same Americans, critics say, that Herbalife recruited — and exploited.
“It’s disgusting,” says Julie Contreras, a Chicago-based activist whose “Afuera con Herbalife” campaign sharply criticized the company for preying on Latino communities. Contreras says that her Spanish-language nickname for Harris is “Que Mala,” a play on “Kamala” that translates to “how bad.”
“Kamala Harris did a huge injustice” in declining to investigate the Los Angeles based company, says Contreras, who has publicly supported Beto O’Rourke’s campaign.
Harris’s presidential campaign said that it was not accurate to see in her treatment of Herbalife a hesitation about aggressively pursuing corporations. Harris “has a long record of going after bad corporate actors engaging in fraudulent behavior and delivering results for people who have been taken advantage of,” said campaign spokesman Ian Sams.
He noted that as California’s attorney general, Harris “got $20 billion for California homeowners after taking on mortgage fraud by the big banks, secured a billion dollar judgment against for-profit Corinthian Colleges for scamming students, and put Ponzi and pyramid schemers in prison.”
Founded in 1980, Herbalife calls itself a “global nutrition company whose purpose is to make the world healthier and happier.” It is a multi-level marketing operation — MLM, for short — meaning that instead of selling its weight-loss shakes and pills through proprietary outlets, it relies on distributors who make a commission when they sell the products, which they can do out of their own homes, or through “nutrition clubs” that cannot feature Herbalife branding, even though they sell Herbalife products. Such clubs have recently proliferated in Latino communities across the United States, where Herbalife’s hold is strongest.
Critics believe that MLMs, including Herbalife, are pyramid schemes because their profits stem from recruitment of new salespeople, rather than sales to end customers (the pyramid is the shape of such a company’s growing distributor base). Other than Herbalife, the most well-known American corporation to stand accused of running a pyramid scheme is Amway, the home products company founded 60 years ago in Michigan. In 1979, Amway won a crucial case in which the FTC called it a pyramid scheme, but the allegations persisted, both against Amway and other MLMs. In 2010, Amway paid out $56 million in the settlement of a class action suit that revived the pyramid scheme charges. Yet the company survived. (The current federal education secretary, Betsy DeVos, is married to the heir of the Amway fortune.)
Herbalife attracted scrutiny almost from the start. In 1986, the state of California imposed a consent decree on Herbalife that said the company could not make “false or misleading representations” about how much money distributors could expect to make. The company also had to stop making allegedly false or exaggerated claims about its products.
But that did little to stop the company’s growth, and it continued to rapidly expand both in the United States and around the world. In 2003, Herbalife hired Disney executive Michael O. Johnson, who brought management sophistication to its operations. A tanned triathlete, he seemed a living embodiment of the company’s promises. (The company’s founder, Mark Hughes, had died of a drug overdose three years before.) The company went public the following year; a 2005 annual report declared its market capitalization to be $359.8 million.
But despite Johnson’s efforts to add corporate sheen, critics maintained that Herbalife’s profits came not from sales of its weight loss products, but in the aggressive recruitment of new members, each of whom was expected to buy large amounts of inventory from the company. The new recruits quickly realized, according to Herbalife’s detractors, that the inventory of pills and powders itself was largely worthless and that the only way to make money was to attract new recruits.
Herbalife has long denied such accusations, portraying itself as a company that provides access to wealth to people who, for one reason or another, are unable to find success in traditional employment. The company declined to speak on the record for this story.
Harris was first asked publicly to look into Herbalife’s alleged wrongdoing in 2013, when the company held its Extravaganza Latina in Los Angeles. Protesters picketed the event, urging Harris to investigate Herbalife. “We are asking Attorney General Harris to help us protect vulnerable, low income Latinos and other minorities from these schemes that have cost people their life savings,” one of the protest’s organizers said.
At the time, Herbalife was fending off another existential challenge, from Manhattan hedge fund Pershing Square Capital Management, whose founder, Bill Ackman, had become convinced that though the company was worth $8.1 billion at the time, that valuation was predicated on illusion. He declared war on Herbalife with the public presentation of a 334-page PowerPoint dossier, the 64th page of which contained his central argument: “Herbalife is a Pyramid Scheme.”
Ackman eventually came to take an astonishingly bold $1 billion short position on Herbalife, meaning that he borrowed stock in the company with the expectation that the price of the stock would fall dramatically. If that happened, Ackman’s short would provide him with a massive windfall, not to mention a validation of his beliefs about the company. Ackman and Pershing Square declined to comment for this article.
Ackman’s public quest to take down Herbalife — he was explicit about that goal — brought newfound scrutiny to the company, pressuring regulators to act. The FTC opened an investigation into Herbalife in March 2014, with Lisa Madigan, attorney general of Illinois, and Eric Schneiderman, attorney general of New York, doing the same the following month. That meant that what were at the time the country’s fourth and fifth most populous states had now joined the fight. The FBI started an investigation in April 2014, as well.
Harris remained silent. That January, activists met with members of her office. “The concerns were clearly articulated to her staff,” says Brent Wilkes, who at the time was executive director of the League of United Latin American Citizens, one of the groups asking Harris to investigate Herbalife. “They heard us, asked interesting questions,” Wilkes recalls. Wilkes said that he was “hopeful” that Harris “would come around,” but the activism failed to make a sufficient impact on Harris.
Wilkes did not know that at the time, Herbalife was represented by Venable, which also employed Harris’s husband, Douglas Emhoff. Emhoff does not appear to have been involved in Herbalife’s affairs, but his work at the firm came to the attention of Christopher Irons, a financial journalist who first reported on the Emhoff-Herbalife connection. “Surely this would seem like some sort of enormous conflict of interest, no?” he wrote in 2015.
The activists asking Harris to investigate Herbalife did not seem to know that she had a personal connection to the the law firm representing the corporation. “That’s news to me,” Wilkes said when told by Yahoo News about Emhoff’s law firm.
The letter to Harris from Judith Fiorentini, the supervising deputy attorney general in the San Diego office, was sent on March 3, 2015. It was signed by two other deputy attorneys general, Sanna Singer and Jinsook Ohta, who like Fiorentini were in the consumer law department of the attorney general’s office. Their memo asked for a “ delegation of investigative authority,” which was to include “the authority to issue and enforce investigative subpoenas.”
Fiorentini wrote that “while Herbalife has outwardly complied with the 1986 injunction ... we believe that it may be directing or enabling the acts of its distributors in ways that violate” that order “and/or consumer laws in general.” She explained that there was reason to believe that Herbalife was empowering its distributors to make false claims about the benefits of becoming a Herbalife distributor. “Herbalife can be liable for consumer violations by its distributors to the extent Herbalife enabled the distributors’ actions,” Fiorentini wrote.
The letter went on to cite precedent for conducting such a probe, and noted that a preliminary investigation had already taken place. That investigation “revealed that Herbalife, at least in publicly available documents, has carefully drawn its corporate policies and conducted itself in a manner that is outwardly consistent with the 1986 Injunction.” Fiorentini thought it was nevertheless necessary to “delve behind what is publicly available to determine if Herbalife is directing or enabling its distributors” to act illegally.
Fiorentini requested two full-time attorneys, three or four legal assistants and, potentially, officers to conduct undercover operations. The letter ended with the pros and cons of such an investigation. Fiorentini was frank about the energy and resources required while also anticipating a “rigorous legal defense” from the company. At the same time, she said that an investigation would “send the message that this office takes continued monitoring and enforcement of its existing judgments very seriously. In addition, it will ensure that Herbalife is held accountable for the acts of its distributors.”
The contents of the memorandum, or its existence, have not been published before. But it suggests that Harris was made directly aware of the dangers Herbalife may have posed to the people of California. No investigation was opened into Herbalife in response to the memorandum from Fiorentini, who did not respond to repeated requests for comment from Yahoo News. Nor has Harris publicly said why she chose not to investigate Herbalife, a step that would necessarily lead to prosecution.
A person familiar with deliberations at the attorney general’s office at the time disputes suggestions of inaction by Harris. The person — who requested anonymity in order to speak frankly — said that the California attorney general’s office did help the FTC with its investigation, namely through its corporate fraud division. And the person said that Harris was hesitant to join a fight between billionaires: In response to Ackman’s $1 billion Herbalife short, investor Carl Icahn bet heavily on the company, and the two men began to attack each other sharply on television.
Podesta, the Washington lobbyist whose ex-husband represented Herbalife, donated $1,000 to Harris’s campaign for the U.S. Senate on March 31, 2015, at the end of the same month that had seen the arrival of the letter from the San Diego office, asking for an Herbalife investigation. She donated $4,400 to Harris’s senate campaign the following year. (Podesta had made smaller donations, of $100 and $500, to Harris in 2010 and 2014, respectively. She did not respond to requests for comment.)
That July, Herbalife hired a top Podesta deputy, Eric Rosen, to serve as its top government relations official. The following year, Herbalife paid Heather Podesta $250,000 for her lobbying work.
Harris moved on from her duties as a prosecutor in 2016 when, on the same day that Trump became president, she was elected to serve as California’s junior U.S. senator. She was sworn in the following January and exactly two years later, announced that she was running to oust Trump from the Oval Office.
The FTC won a $200 million settlement from Herbalife in July 2016. Related to that settlement was one with Madigan, the Illinois attorney general, for $3 million. California, which often leads the nation in consumer and environmental regulations, remained on the sidelines.
“I wouldn’t limit my disappointment to her,” says Wilkes, the former chief executive of the League of United Latin American Citizens, of Harris. “At least Kamala listened.” Still, he wonders why Madigan could wrest a settlement from Herbalife but Harris could not. “Kamala,” he says with audible disappointment, “should have had that too.”
Since then, however, she has faced questions about whether her progressivism is genuine or only a matter of political expediency. She has yet to explain why she declined to pursue a corporation accused of exploiting her Latino constituents.
Harris was replaced as California’s attorney general by Xavier Becerra, who had formerly represented Los Angeles in the U.S. House of Representatives. Becerra has formerly received significant political donations from Herbalife’s political action group. His office would not say how, if at all, this complicated considerations about opening an investigation into Herbalife.
The attorney general’s press office declined to comment in response to repeated calls and emails from Yahoo News.
Contreras, the Chicago activist, has watched the Harris presidential campaign with skepticism. For her, the decision to go easy on Herbalife is indicative of where Harris’s sympathies lie, and it is not with the downtrodden. Contreras has a simple message for the presidential candidate: “Kamala Harris, shame on you.”
Huffington Post (Copyright 2020)
________________________________________________________________
'Multi-Level Marketing' Warning.
The following deconstructed analysis has been formulated to sharpen the critical and evaluative faculties of all unwary persons approaching so-called 'Multi-Level Marketing' from the dangerous (subjective) point of view that it must be a business/industry, rather than from the safe (purely-objective) point of view that they don't really know what it is.
_________________________________________________________________________
The following deconstructed analysis has been formulated to sharpen the critical and evaluative faculties of all unwary persons approaching so-called 'Multi-Level Marketing' from the dangerous (subjective) point of view that it must be a business/industry, rather than from the safe (purely-objective) point of view that they don't really know what it is.
_________________________________________________________________________
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 as reality, 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.
** 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.
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'.
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.
The quantifiable results of the self-perpetuating global 'Long Con' known as 'Multi Level Marketing,' have been fiendishly hidden by convincing victims that they are 'Independent Business Owners' and that any losses they incurred, must have been entirely their own fault for not working hard enough.
Blog readers should observe how (in the above linked-videos) chronic victims of 'MLM' cults are incapable of describing what they were subjected to in accurate terms. Even though they are no longer physically playing along with the 'Long Con's' controlling-scenario, they unconsciously continue to think, and speak, using the jargon-laced 'MLM' script - illogically describing themselves as 'Distributors.'
Chronic victims of blame-the-victim cultic rackets who have managed to escape and confront the ego-destroying reality that they’ve been systematically deceived and exploited, are invariably destitute and dissociated from all their previous social contacts. For years afterwards, recovering cult victims can suffer from psychological problems (which are also generally indicative of the victims of abuse):
depression; overwhelming feelings (guilt, grief, shame, fear, anger, embarrassment, etc.); dependency/ inability to make decisions; retarded psychological/ intellectual development; suicidal thoughts; panic/ anxiety attacks; extreme identity confusion; Post-Traumatic Stress Disorder; insomnia/ nightmares; eating disorders; psychosomatic illness, fear of forming intimate relationships; inability to trust; etc
David Brear (copyright 2020)
Blog readers should note that abusive comments, and/or comments which contain elements of the 'MLM' fairy story, and/or links to Sites containing elements of the 'MLM' fairy story, will not be posted.
ReplyDelete