Illinois Attorney General Lisa Madigan joined the growing list of officials and agencies investigating consumer complaints about the nutritional supplement company Herbalife Ltd. (HLF:US)
Maura Possley, a spokesman for Madigan, confirmed the probe today, saying customers had questioned whether the Cayman Islands-based business is a pyramid scheme. The consumers’ complaints were filed as early as December, with allegations dating back to 2008.
New York hedge fund manager Bill Ackman has publicly accused Herbalife of misleading distributors, misrepresenting sales and inflating the prices of its products.
The company, which sells products in more than 90 countries through a network of independent distributors, has repeatedly denied Ackman’s allegations. Herbalife has won allies such as billionaire Carl Icahn, who has become its largest shareholder.
Barbara Henderson, a spokeswoman for Herbalife, didn’t immediately reply to a telephone call seeking comment on the Illinois investigation.
Herbalife products are distributed globally by 3.2 million independent contractors who market to family, friends, neighbors and strangers. Distributors can make money by purchasing product at a discount and selling it at markup, or by earning commissions for sales by distributors they recruit.
The Federal Trade Commission last month said it was probing the company, and people familiar with the matter told Bloomberg News last week that the Federal Bureau of Investigation also is investigating its practices.
Shares fell 1.9 percent to $54.24 at 2:08 p.m. in New York after earlier rising as much as 2.7 percent. Herbalife, which is run from Los Angeles, slid 30 percent this year through yesterday, compared with a 0.8 percent gain for the Standard & Poor’s 500 Index.
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