“We're broke, ill and splitting up”: Herbalife distributors tell their sad stories
Moneylife Digital Team 27 December 2012

In our final piece on Herbalife, we find out how distributors have been let down by the company they gave several years to. Negative testimonials show how lives have been ruined by this multi-level marketing scheme and why regulators need to act soon

Bill Ackman, an activist and hedge fund manager, has gathered several negative testimonials from former sales people and distributors of Herbalife. The picture is not at all encouraging. While the 1% is consistently enjoying the riches of the 99%, most distributors have become poorer. They’ve now learnt their lesson, but perhaps too late.
 

Click here for part I which describes Herbalife’s dubious products.

Click here for part II which describes Herbalife business model.

 

In our previous two pieces on Herbalife, we described the products and the business propositions of Herbalife’s MLM scheme. We also pointed out from Ackman’s presentation that very few people actually make money from the MLM scheme, let alone get to the top of the pyramid. High-ranking distributors, some with no educational background, use dollar testimonials to showcase their rag-to-riches story and lure hapless distributors to the bottom of the pyramid. Herbalife simply exaggerates such stories.

But what is the reality out there? Many are left behind, make losses and have had their lives shattered. MLM expert Robert FitzPatrick, an expert on the subject, has said that it is very difficult to make money on MLMs. According to him, distributors must invest as much as $3,000 to $4,000 in their Herbalife ‘business’ to even achieve “sales leader” status (and be eligible for ‘rewards’). However, he found out that, on average, distributors make only $549 per year! This means that it would take at least five and a half years just to breakeven. Many distributors aspiring to move up the pyramid borrow money to make that $3,000 investment. Aside from this unnecessary debt, they also had mortgage payments, which made it even more difficult for them to manage their finances.
 

Read what the failed distributors who saw their life savings wiped out have to say about Herbalife.
 

Let’s start with someone who wished to remain anonymous. “I was a Herbalife distributor for five years and never made it past the supervisory level. I spent $55K+ trying to get to the Global Expansion Team (GET) level. I finally woke up in August 2004, after spending yet more money (for airfare, hotel and food) to attend a so-called five-day change-your-life meeting at one of the jokers’ homes in Scottsdale, Arizona. His so-called mansion was a modestly priced home with a huge pool and no backyard. I was so turned off and disgusted by the lies and puffery that I made my decision to immediately resign as a distributor. Too bad that it took me five years to learn that this was nothing more than a pyramid scheme.”
 

One testimonial of a husband-wife who joined the MLM is particularly revealing of its tactics: “Herbalife pressures, bullies, promises and pledges to support and help. We were lied to and basically left on our own. Even though we tried as hard as we could, our supervisor decided we were more trouble than we were worth. The only people that make money in this business are those who have an army of distributors under them and an unlimited income to flood the market with advertising and mass mailings of blue books. My husband and I were left thousands of dollars in debt, but much wiser.”
 

One person who is deep in debt and had moral doubts says, “I lost about $20K to them two years ago. I am still paying off the debt. I got out because I could not bring myself to do what they wanted me to do to make sales and recruit people. It just didn't feel right. Too many half-truths and blatant lies.”
 

Here’s another testimonial from a husband-wife distributor team: “My advice to anyone considering Herbalife is—don't fall for the emotional testimonies. And don't allow your money to fly away the way we did. Be smart and research all the facts independently by yourself first.”

 

Another distributor says, “For almost everyone who invests Global Online System (which sells Herbalife) turns out to be a losing financial proposition. I was losing money every single month in the business (from March 2002-March 2003) working 10 hours per day, but I had to lie on the stage that I was making large sums of money.”
 

Here’s another sad story about a couple who was brainwashed into thinking that they were the “best distributors” only to find out that the pressure to recruit and sell was too much to bear. Rob says, “I was conned all the way and now both my wife and I are ill, and splitting up because of the pressure. It's fine until the investment money runs out, then you are left to rot.  We were told in eight months that we were the best distributors ever to enter his organisation. Now we're broke, ill and splitting up. Please look into this organisation and warn people they need $200,000 minimum to make it work.”
 

The number of negative testimonials says a lot about Herbalife, its dubious business model and the way lives are ruined. You can read the rest of the testimonials here.
 

Herbalife is, of course, thriving in India. One of the biggest malaises in our country is regulatory oversight and the lack of laws to clamp down on MLMs. In India, MLMs may fall under Prize Chit and Money Circulation Scheme (Banning) Act, 1978, which is too badly drafted to be effective. According to Mr Fitzpatrick, numerous class action suits have been filed against major MLMs such as Amway, Herbalife, Usana, Pre-Paid Legal, and others—all making the same charges of pyramid fraud, in the United States. Herbalife is involved in as many as 270 lawsuits all over the world, many of which target the heart and practices of Herbalife’s business model: MLM and pyramiding.



One Indian distributor who shelled out money for Herbalife and lost his friends said, way back in 2005, “I think they might be dumping these in India now, since people in their country didn't let them get away with it (emphasis is ours). I realised that the truth about this business is that the money is made not by the distributors but by the company, when they coerce you into buying their starter kits and badges and assorted rubbish. When something stinks so bad you've got to get out and close the door. I'm lucky I did that, before I compromised on my ethical standards and lost all my friends to boot.”
 

This is what happens when an MLM, booted from one country, targets another with spotty regulation. India happens to be one such country.
 

When will Indian regulators take a hard look at MLMs? How many Indians will have their lives ruined before they take notice?
 

Click here to read about Moneylife Foundation seminars on financial literacy and spreading awareness about shady MLMs. It is time to become aware and brush up your financial literacy.
 

Everything you want to know about Herbalife can be found here.

Comments
Rohit
8 years ago
can any body tell is herbal life formula 1 good for your health
Tex
10 years ago
Besides Herbalife, another scam everyone should be aware of is the Amway Tool Scam. Google "Stop The Amway Tool Scam Wordpress" for more information, and forward this to every non-Distributor/IBO you know, so they don't get scammed.
jaideep shirali
10 years ago
Amway and Herbalife seem to be connected, atleast going by the way they operate. MLM schemes are good for the originators, for others, it is like running to stay in the same place. It beats me how so - called intelligent and educated persons from doctors to CAs to IT professionals, besides others, try to hawk the above schemes. I have been approached by all these professionals to get into one of the above schemes. What also amazes me is that how clients are supposed to buy such outrageously priced items, whose claims of value for money are just glib sales talk. Amway for one, seems to be one good way of ruining relationships, because these guys are so aggressive, that one prefers to stay away from them. Ditto for Nutrilite, an Amway company.
jaideep shirali
10 years ago
Amway and Herbalife seem to be connected, atleast going by the way they operate. MLM schemes are good for the originators, for others, it is like running to stay in the same place. It beats me how so - called intelligent and educated persons from doctors to CAs to IT professionals, besides others, try to hawk the above schemes. I have been approached by all these professionals to get into one of the above schemes. What also amazes me is that how clients are supposed to buy such outrageously priced items, whose claims of value for money are just glib sales talk. Amway for one, seems to be one good way of ruining relationships, because these guys are so aggressive, that one prefers to stay away from them. Ditto for Nutrilite, an Amway company.
Janardan Kothari
10 years ago
What do you think about Amway?
MOHAN
Replied to Janardan Kothari comment 10 years ago
Amway? It is the Mother of Money chain business.
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