DISTRIBUTION CHANNEL … OR SCAM?
Recent trends in use of herbal and other natural products. After 4 days, she visited our department for follow-up. London was quickly arrested for insider trading: In the second, in November , four victims were interviewed. But they all described being victimized by a lead-generation business.
In March , Herbalife came under investigation by the U. Federal Trade Commission and the state of Illinois. The company also announced that its shareholders had approved a two-for-one stock split. Herbalife's "nutrition" products include weight-loss and protein shakes.
Other products include products for heart health , digestive health , skin care, and the 24 sports line. Some products are vegetarian, kosher , allergen free,  or halal. Herbalife's products are produced at the company's five manufacturing facilities in the U. As of , 58 percent of the company's nutrition products were manufactured at Herbalife owned facilities.
In China, the company's manufacturing sites are located in Suzhou , Nanjing. Herbalife's claims of health benefits from its products have met scrutiny from the medical community, consumers, and government agencies. In May , an organization known as the Fraud Discovery Institute reported that laboratory test results of Herbalife products showed lead levels in excess of limits established by law in California under Proposition Multiple independent labs reported finding lead in Herbalife products.
On May 10, , a civil lawsuit was filed on behalf of a woman who developed lead-related liver complaints that she claimed were a reaction to a combination of Herbalife products. In , Israel's Health Minister began an investigation into Herbalife's products after four persons using Herbalife's products were found to have liver problems.
Herbalife was accused of selling products containing toxic ingredients such as Qua-qua, Kompri, and Kraska. D , to a private U. A study of the cases funded by the Israeli Ministry of Health concluded that a causative relationship  is suggested by the evidence, which included the temporal association between exposure to Herbalife products and the development of liver injury, the negative evaluation of other potential causes of liver injury, the normalization of liver function when Herbalife products were discontinued, and the return of liver injury symptoms in three patients who resumed using Herbalife products after recovery.
Herbalife withdrew one product, which was only marketed in Israel, but not all of the Israeli patients had consumed this specific Herbalife product. The Israeli Ministry of Health advises individuals with compromised liver function to avoid dietary supplements.
Scientific studies in by doctors at the University Hospital of Bern in Switzerland and the Liver Unit of the Hadassah-Hebrew University Medical Center in Israel found an association between consumption of Herbalife products and hepatitis.
Hospitals in Israel, Spain, Switzerland, Iceland, Argentina, and the United States had reported liver damage in a number of patients, some of whom had used Herbalife products. After reviewing cases implicating Herbalife products in Spain, Switzerland, Israel, Finland, France, Italy, Iceland and Portugal, the member scientific panel issued a report concluding: The panel attributed the cases to metabolic changes from overzealous and unsupervised dieting.
A July peer-reviewed study published in the World Journal of Hepatology reexamined known cases of hepatoxicity that had previously been linked to consumption of Herbalife products and concluded that using "the liver specific Council for International Organizations of Medical Sciences scale, causality was probable in 1 case, unlikely and excluded in the other cases.
Thus, causality levels were much lower than hitherto proposed. Herbalife is a multi-level marketing company. As a result of the FTC settlement, the company is required to prove that at least 80 percent of its sales are made to individuals outside of its distributor network. Distributors are responsible for providing receipts for sales and proving they have legitimate customers. In the past, company management considered the number and retention of distributors a key parameter and tracked it closely in financial reports.
By January of each year, sales leaders are required to requalify. In February of each year, individuals who did not satisfy the sales leader qualification requirements during the preceding 12 months are removed from that rank. For the latest month requalification period ending January , approximately In a California class action suit Minton v.
Herbalife International, et al. In a West Virginia class action suit Mey v. More specifically, the plaintiffs' complaint alleges that several of Herbalife International's distributors used pre-recorded telephone messages and autodialers to contact prospective customers in violation of the TCPA's prohibition of such practices. Herbalife management insisted they have meritorious defenses in both cases and that, in the West Virginia case, any such distributor actions also went against Herbalife's own policies.
Management also contends that any adverse legal outcomes Herbalife might suffer would not significantly affect their financial condition, particularly since they have already set aside an amount that they "believe represents the likely outcome of the resolution of these disputes".
As of April , a series of commercials featuring a large red animated fox advertising home-based business opportunities has been running on American television. The advertisements direct viewers to a website that allows them to purchase a "success kit".
The kit also provides no information about how the business opportunity works. These advertisements have been found to be run by independent Herbalife distributors, as a method of recruiting new downline distributors. A settlement resolved a class action suit on behalf of 8, former and current distributors who accused the company and distributors of "essentially running a pyramid scheme. Einhorn said the short had been closed before the end of On December 20, , Bill Ackman of Pershing Square Capital presented a series of arguments outlining why his firm believed that Herbalife operates a "sophisticated pyramid scheme".
Ackman claimed that Herbalife distributors "primarily obtain their monetary benefits from recruitment rather than the sale of goods and services to consumers. Herbalife operates with the highest ethical and quality standards, and our management and our board are constantly reviewing our business practices and products.
The second and perhaps bigger question is: What if Ackman is wrong? While activist investing was already controversial, Ackman has taken it into new terrain. Is it sound public policy to have freelance, for-profit billionaire regulators roaming the landscape, no matter how well-intentioned? Ackman, by contrast, is trying to annihilate a company. Ackman rejects such criticism. We are extremely proud of the work we have done on Herbalife. Photograph by Michael Lewis for Fortune. For that matter, so might novelists, psychologists, and—if only they were still around—ancient Greek tragedians.
At this point one might ask: Trying to protect huddled masses yearning to be free? Or trying to save face? Perhaps the best thumbnail précis of this saga was provided by hedge fund manager John Hempton, who runs Bronte Capital, in what was actually a prognostication.
Someone is going to lose big. And the victor will be so bloodied that the word victory will sound hollow. Johnson is the immovable object. Johnson, who headed Walt Disney Co. In July, Johnson, now 61, completed his third Tour TransAlp, the legendarily grueling, seven-day, mile stage race through the Alps during which cyclists traverse ascents totaling more than 60, feet. That business took off, and he rode it up the ranks until he was heading the international operations of the whole company.
Along comes a guy with half-facts and half-truths and a jaded point of view and starts not just shorting your stock but trying to totally demonize me and demolish the company. Who the hell does he think he is? Six-foot-three, lean, fit, with salt-and-pepper hair, Ackman cuts an intimidating presence.
He spits out words with machine-gun rapidity, and often with flesh-tearing trenchancy. We spoke at his offices on the 42nd floor of a midtown building that offers panoramic views of Central Park. In the corner of the conference room stands a striking memento: It evokes a crucial skill for a hedge fund manager: Yet he is fallible.
His first fund, Gotham Partners, had to be suddenly wound down in late after some illiquid investments left him unable to rebound from a handful of redemptions.
He also lost big on stakes in Borders, J. Risk management is not his strong suit. Ackman is astoundingly competitive. His father wisely let him off the hook the night before, and he scored a And then there was a Hamptons bike ride of , described by William Cohan in Vanity Fair, in which Ackman joined several hedge fund guys and serious cyclists on a mile pleasure ride.
Though out of practice, Ackman rushed out in front at an unsustainable pace, became dehydrated, and had to be helped back, barely able to pedal due to excruciating cramping. The battle has taken a toll. Yet he professes no regrets. But if the commission finds that an MLM is a pyramid scheme—which is considered inherently deceptive—it must shut it down.
The best definition of pyramid scheme emerged from a case in which the FTC shuttered a cosmetics marketer called Koscot Interplanetary. Few MLMs are so foolish as to do that. Instead, they typically pay a distributor—as Herbalife does—based on the products he orders, and on the products ordered by his first three levels of recruits, i. Further complicating the analysis is another striking feature of virtually all MLMs, including Herbalife. Whereas conventional businesses pay salespeople based on their sales, MLMs pay them based on their purchases and those of their downlines.
The year-old Johnson, training near his home in Malibu, recently completed his third Tour TransAlp, a mile, seven-day race across the Alps. While judges and economists have proposed other definitions, most boil down to this: With a pyramid scheme, the product is little more than a fig leaf camouflaging what is, at its core, an elaborate chain letter.
When the FTC ruled that Amway was legitimate in , all other MLMs took steps to make themselves look like Amway—at least on paper—and an industry exploded. In recent years, however, with consumer advocates protesting that the industry is rife with pyramid schemes, several market leaders have sought to disassociate themselves from the pack. Tupperware quit the Direct Sellers Association in , and Avon dropped out in Both declined to be interviewed for this article. But Johnson has made key changes to Herbalife during his 12 years there.
The question is whether the great white whale Ackman is so doggedly pursuing still exists. In the beginning Hughes, a ninth-grade dropout, sold weight-loss products from the trunk of his car, according to company lore.
His main product was Formula 1, which then came in one flavor: That year the company became the subject of a CNN series that highlighted dubious medical claims distributors were making about Herbalife products. The California attorney general sued the company, and a Senate subcommittee held a hearing.
His scrappy performance energized his loyal distributors. Hughes wrote for Herbalife a comically complex, page compensation plan. Such impenetrability is typical of MLM remuneration schemes.
Critics say these are intended to perplex the recruit, leaving him no choice but to trust what the recruiter tells him. Defenders of the Herbalife plan say its complexity arises from efforts to reward diligence, punish laziness, and ensure fairness. The plan created nine main levels of distributor. Ackman will later reject this notion, insisting that these distributors are pursuing the business but failing.
At level seven they begin accruing additional bonuses. Only a tiny percentage of distributors reach this level, though precisely how tiny is a matter of dispute. In in the U. Top-tier distributors are also eligible for the subjective and lucrative Mark Hughes bonus.
It has always been hard to make money as an Herbalife distributor. That number excludes income distributors may make from retailing, but also fails to take into account any business expenses they may incur. Ackman will later argue that a system so slanted toward rewarding the highest tiers—attainable only through recruiting—must be a pyramid scheme. In May , Mark Hughes, 44, was found dead in his bedroom. In two private equity firms—W.
They went looking for a turnaround team to spruce it up and take it public again. A headhunter approached Michael Johnson, then in his 17th year at Disney. But the private equity guys promised him he would be in control, stressed that it was about nutrition, and offered him a slice of the company. In April , Johnson made the move. Johnson tried to quickly launch a new product without consulting the distributors. And they deeply mistrusted him.
What does he know? A lot of them felt that when the company went public I would exit. The company could annul their distributorship, but that meant forfeiting a business the distributor had built over years.
If expelled, the distributor might take his whole downline—sometimes thousands of people—to another MLM. Top Herbalife distributors ran several dozen such side businesses at the time.
They worked like this. They, in turn, would contact the prospective recruits and send them a video that showed testimonials of top distributors describing astounding wealth they had purportedly amassed in very little time and with no discernible skills. Herbalife shut down Newest Way to Wealth in , before CEO Johnson was hired, and reached a tentative settlement of the suit a few months after he got there. That fall, he considered quitting.
He went to see his mentor, Jerry Perenchio, who was then chairman of Univision. Perenchio asked him a series of rhetorical questions, Johnson recalls: During the past several years, many physicians have begun selling health-related multilevel products to patients in their offices.
Doctors are typically recruited with promises that the extra income will replace income lost to managed care During the past 20 years, more than 25 health-related MLM companies have faced regulatory actions for false advertising, operating a pyramid scheme, or both.
Although such actions usually improve future behavior, they rarely provide adequate redress for victims. Moreover, the number of MLM frauds known to Federal Trade Commission vastly exceeds its capacity to prosecute them on a case-by-case basis. The growing reports of life-threatening health risks among users of these products remind us to not to be taken in by claims of magical benefits of any dietary intervention.
Beyond preventing deficiencies — which is easily achieved by virtually everyone simply when enjoying all sorts of foods — no food or supplement is supernatural. When we hear claims that optimal or personalized nutrition is science-based and can improve our heart, digestive or immune health; help us age healthfully, improve our memory or eyesight, or remove wrinkles; increase our energy and fitness; or manage weight, control our appetite or boost metabolism Three new studies, however, have documented liver toxicity among healthy people using natural herbal supplements — more than 20 cases were just among Herbalife customers in two small countries.
The identification of earlier cases in which the culprit agent could not be established raised the hypothesis of a possible contamination of some specific batches of Herbalife products. We searched the Spanish Pharmacovigilance Centres' database of adverse reactions for reports of liver injury associated with the use of Herbalife products from , when the first case was submitted, through September Two patients experienced a positive rechallenge.
One patient developed cirrhosis, whereas all the others recovered. Causality assessment by the Karch and Lasagna modified algorithm showed a category of definite in 1 case, probable in 14, and possible in 5.
Analysis of the different Herbalife products that each patient had taken did not enable us to identify any commonly known hepatotoxic ingredient. Our results support the relationship between the consumption of Herbalife products and hepatotoxicity, underscore the concern regarding the liver-related safety of this dietary supplement, and emphasize the need to establish further regulatory measures.
Two years ago liver doctors sounded the alarm about cases of liver damage in users of Herbalife products. They were unable to say which component in Herbalife products was causing the liver damage, but researchers at the University of Bern made an attempt to do so in an article published this year in the Journal of Hepatology. They found the bacteria Bacillus subtilis in Herbalife products. In the article the doctors discuss two cases of people who became ill after using Herbalife products: The man's urine had turned dark brown, he had hepatitis and had been feeling unwell for a couple of weeks.
According to the analyses, the man had a liver complaint. When the doctors took him off the shake his blood values recovered, but they deteriorated again later. The doctors gave the man corticosteroids and ursodeoxycholic acid , after which he recovered completely. The woman sold Herbalife supplements. She had stomach pain and hepatitis and the doctors found signs of liver damage in her blood.
They got the woman to stop taking the supplements and the graph below shows how the liver values in her blood improved. The researchers examined samples from the livers of the man and the woman and found signs of damage in both. The doctors turned the supplements that the men and women had used inside out, but found no contaminants: But when they examined the Herbalife products for micro-organisms, they did come across something.
The meal substitutes the man and woman had been using contained the bacteria. As far as we know, B. It would seem pretty unlikely then that B. Bodybuilder drugs his liver to oblivion — twice. A medical case study that will give you goose bumps, this report from doctors at the US Massachusetts General Hospital. The article tells the story of a year-old competitive bodybuilder and part-time policeman who turned up at the Emergency Department. For a start, the concentration of the enzyme ALT is units per litre: The bodybuilder says he injects nandrolone and takes androstenedione.
The scan the doctors make of his liver shows a real mess, shown in Picture A below. The light patches are swellings, the biggest of which measures 10 x 10 cm. The doctors operate and discover that the liver is in an even worse state than they had feared. The organ contains swellings that are filled with blood. The doctors also found a swelling with a diameter of 23 cm.
The doctors decide to amputate part of the liver. After the operation the bodybuilder recovers and is allowed home. When the doctors make another scan three months later they see that the swellings in the remaining part of the liver have shrunk by 40 percent, Picture B above.
After three years the bodybuilder returns to the doctors. Six weeks previously he had treated himself to injections of a nandrolone derivative. When the doctors make another scan — the picture above on the right — they see that his liver is in a bad way again.
The swellings have started to grow again, and the liver has a protuberance that has started to bleed. The doctors discuss briefly whether they should give the guy a new liver, but reject the idea.
It would be a waste: Alcoholics are not given a new liver either. So they just stop the bleeding and send the bodybuilder home again. Thinking about it, we find it difficult to believe that the bodybuilder was only using deca and androstenedione. True, a number of cases have been published of bodybuilders who, as the result of a mild course of deca, developed a blood clot the size of a brick in their stomach, or became psychotic after one single deca injection.
Moreover, neither androstenedione nor nandrolone is harmful to the liver. Laboratory research on liver cells has shown this. And, by the time the doctors were seeing their patient, George Bush had already outlawed androstenedione. Although androstenedione is still on the market, bodybuilders hardly ever use it. In countries like the US there are much more effective legal anabolic steroids available.
But among these, there are a number of substances that are notoriously bad for the liver. The most dangerous is Superdrol, an anabolic that was developed at the end of the fifties by Syntex. Doctors have recorded damaged livers and destroyed kidneys in users of Superdrol more than once. This is what makes us suspect that the bodybuilder in this case study used stronger stuff than androstenedione and deca.
Bodybuilders are often not entirely honest about what they have been using when they visit a doctor about medical problems. Even when being honest could have saved their life.
Bodybuilder gets jaundice from creatine and protein supplements. A healthy man of 27, a fanatical bodybuilder, developed liver damage and jaundice after using sports supplements containing creatine and whey protein.
The man in the case study had no pain and did not feel unwell, but because he showed signs of jaundice he went to hospital. There the doctors discovered that his blood contained high levels of bilirubin, a substance that should have been removed by the liver.
The first substance can be an indication of liver malfunction. The second is a waste product of creatine. In people with jaundice, the skin and whites of the eyes turn yellow [see pic below], but this is not necessarily cause for alarm.
Bilirubin is not a dangerous substance, and may even be an endogenous antioxidant. But jaundice is a sign that something is wrong with the liver, and it therefore needs to be taken seriously.
The ducts that should have been doing so were blocked. The scientific term for this is cholestasis. The bodybuilder had been taking creatine for nine months and whey protein for one month. The doctors thought that this might be responsible for his condition.
When the man stopped taking the supplements, his liver returned to normal and the jaundice disappeared. If doctors come across healthy athletes with an abnormal liver, the researchers write, then they should ask whether the athletes are using potentially 'dangerous' supplements like whey protein and creatine.
We agree with the opinion of a blogger — who by the way also works at Gaspari Nutrition — at bodybuilding. But these reports are probably the result of silent use of forbidden substances — and in high quantities. For example, there was the bodybuilder who said he had developed gyno from using Tribulus terrestris supplements. A preparation made by Natterman, which supposedly protects the liver and which chemical athletes are using more and more often: Greek researchers refer to it in their study as compound N.
The researchers, at Thessaly University, set up an experiment to determine whether compound N really works. After a bit of surfing we worked out that Compound N is Essentiale forte. A packet contains a couple of dozen capsules, each of which contains mg of polyene phosphatidylcholine. This is choline-phosphoric acid with two unsaturated fatty acids attached, usually linoleic acid.
It probably resembles the phosphatidylcholine found in soya. In addition, each capsule contains 6 mg of vitamin B1, 6 mg of vitamin B2, 6 mg of vitamin B6, 6 mcg of vitamin B12, 30 mg of nicotinamide and 6 mg of vitamin E.
The Greeks, who by the way have also done research on the psychological effects of anabolic steroids, did an experiment with three hundred and twenty athletes.
Half of them, one hundred and sixty athletes, used steroids. Of these chemical athletes, the researchers gave forty Essentiale forte: All of the chemical athletes took steroids and the researchers monitored them for eight weeks.
The list below gives you an idea of what the Greek bodybuilders were using. Yes, the list puzzled us too. And where are the 'new' designer steroids? Surely athletes in Greece use products like 1-Test and Madol too?
The more enzymes in the blood, the harder a time the liver is having. The figure below shows what happened to the liver enzyme concentrations.
They suspect that the mixture strengthens the membranes of the liver cells. The livers of steroids users have to work hard to break down all the extra substances they are subjected to. The liver gets fattier because the liver cells are no longer burning fat well [beta-oxidation — Ed. The supplement helps the liver cells to perform these functions. Reading between the lines you can also see that the Greeks had trouble getting their study published.
More damaged livers from superdrol and madol. Liver specialists at the Henry Ford Hospital in Detroit have reported another three cases of bodybuilders who developed liver damage as a result of using designer supplements. The Superdrol user was He was nauseous, had stopped eating, had jaundice and itched all over.
When the symptoms had got worse after two weeks, the doctors gave him prednisone. The anti-inflammatory worked and after another six weeks, he'd made a pretty good recovery. Superdrol is a steroid whose structure and synthesis resemble those of oxymetholone. It was also developed and tested in the late fifties by the makers of oxymetholone, the American pharmaceutical company Syntex.
Although superdrol [see structural formula below] looked like a promising anabolic steroid in animal tests, in subsequent tests potential side effects showed up. The effects of this move are clearly seen in the medical journals. In doctors in Phoenix, Arizona published an article on the case of bodybuilder who became fatally ill after using superdrol. What patient 2 used was not clear, but it contained at least DHEA. Of the three men referred to in the study, number 2 got off the most lightly.
He recovered spontaneously a couple of weeks after he had stopped using the supplement. Patient 3 used M-Test 2, a designer supplement containing the steroid madol.
Madol was also developed by Syntex, a manufacturer that carried out promising animal tests on it in the sixties. Not much is known about the side-effects of madol. It is not carcinogenic, say German researchers. But they did discover that it enlarged the heart muscle in animal tests. The enlargement itself was not dangerous, but the researchers were not entirely convinced. In the bodybuilding circuit however there are few stories around of users who have developed liver problems as a result of using madol.
The sick madol user had to be given prednisone in the end, after which he recovered. The doctors did not test the preparation the patient had used. And we wonder quite honestly if it only contained madol.
According to the study, the bodybuilder became ill after he had taken 57 capsules over a period of a few weeks. That would be impossible with. The Canadian government has issued warnings about these. Maybe something went wrong during the production of M-Test 2. Or perhaps the doctors got it wrong that Patient 3 used the BMF product. The doctors also read a couple of articles written by colleagues and summarized the information they found. This resulted in the table you see here below.
Liver specialists should get extra training on designer supplements that contain oral anabolic steroids, the article concludes. Published online November Abstract We report three cases of patients with acute liver injury induced by weight-loss herbal supplements. One patient took Hydroxycut while the other two took Herbalife supplements. Liver biopsies for all patients demonstrated findings consistent with drug-induced acute liver injury.
To our knowledge, we are the first institute to report acute liver injury from both of these two types of weight-loss herbal supplements together as a case series. The series emphasizes the importance of taking a cautious approach when consuming herbal supplements for the purpose of weight loss. Hydroxycut, Herbalife, Hepatotoxicity, Herbal, Weight-loss. We have seen a significant increase in the popularity and usage of over the counter herbal supplements over the past few years[ 1 ].
Unfortunately, the majority of these herbal supplements are not regulated by drug administrations worldwide. Many herbal supplements contain compounds that carry potentially severe side effects including hepatotoxicity.
We report three cases of acute liver injury induced by weight-loss herbal supplements. Hydroxycut is a popular dietary supplement consisting of a variety of herbal mixtures that claims to enhance the weight loss process[ 2 ].
Acute liver injury associated with Hydroxycut use has been previously reported, but only one case had liver biopsy data showing cholestasis and portal inflammation[ 3 - 6 ].
Similarly, Herbalife weight-loss dietary products are popular supplements consisting of a variety of herbal mixtures that claim to facilitate weight reduction[ 7 ]. Cases of acute liver injury after consumption of Herbalife products have been previously reported, with two patients developing fulminant liver failure requiring liver transplantation.
The first patient survived while the second died[ 8 - 11 ]. In all of our cases, we were able to demonstrate drug-induced acute liver injury on liver biopsy specimens. Case 1 A year-old woman presented to our hospital complaining of 2-wk history of fatigue, jaundice, and nausea.
She denied any prior medical or surgical conditions, family history of liver disease, and acetaminophen or prescription medication use. She further denied history of blood transfusion, tattoo, alcohol use, or recreational drug use. She had been taking Hydroxycut for one year to enhance her weight loss. She had been taking the recommended dose of 2 tablets twice a day. The patient was afebrile with normal hemodynamics upon presentation. Her physical examination was remarkable for generalized jaundice, scleral icterus, and mild upper quadrant tenderness to palpation without rebound or guarding.
Given these findings, patient was admitted to the hospital for a higher level of care. Serum acetaminophen and urine toxicity screens were negative. Serum ceruloplasmin, ferritin, iron studies, and immunoglobulins were all within the normal range. Right upper quadrant ultrasound showed diffuse echogenicity of the liver.
Liver biopsy showed extensive patchy areas of multilobular necrosis with only bile ducts remaining, extensive ductal metaplasia, severe lymphocytic and macrophages infiltration of portal tracts and lobular parenchyma and patchy plasma cell infiltrates. She did not develop evidence of hypoglycemia or portal-systemic encephalopathy.
Her jaundice and scleral icterus resolved over the following 2-wk. Her liver tests gradually improved within the following few months. Case 2 A year-old woman presented to our hospital with a 1-mo history of diffuse abdominal pain, mild nausea, and painless jaundice.
She denied any past medical or surgical history, family history of liver disease, or any alcohol or illicit substance abuse. She admitted that she had been taking Herbalife dietary supplements for the past 3-mo in an attempt to lose weight.
The patient was afebrile with normal vital signs on presentation. Her physical exam was noticeable for bilateral scleral icterus and generalized jaundice.
Her abdominal exam revealed a non-tender, non-distended abdomen with no stigmata of liver disease.