Herbalife in advanced talks to settle FTC probe, issues remain

Thu May 5, 2016 8:28pm EDT
 
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By Subrat Patnaik

(Reuters) - Herbalife Ltd, which has been accused by billionaire investor William Ackman of being a fraud, said it was in advanced talks with the U.S. Federal Trade Commission to settle a probe into whether it runs a pyramid scheme.

But the company said that "a number of material open issues" could still prevent a settlement.

The health supplements maker also reported its first sales rise in six quarters.

The company estimated that a fine could be $200 million, which helped the company's shares rise 14.5 percent in extended trading on Thursday. (bit.ly/1TLHfvr)

In its quarterly regulatory filing, the company said there could be a range of outcomes including "the filing by the FTC of a contested civil complaint and further discussions leading to a settlement which would likely include a monetary payment and injunctive and other relief."

The FTC said a possible settlement could also require Herbalife to change certain business practices. Injunctive relief, a spokesman said, could be "just as significant as the money obtained for consumers and even more influential on a company's future operations."

Ackman unveiled a $1 billion short bet against Herbalife in 2012 accusing the company of running a pyramid scheme which pays members more for recruiting new members than for selling its products. The company has repeatedly denied the allegations and Ackman has so far lost money on his position.

In March the company said a database error caused it to overstate new member growth. Active new members worldwide, excluding China, grew 3.4 percent during 2015, not 8.3 percent as it said originally.   Continued...

 
An Herbalife logo is shown on a poster at a clinic in the Mission District in San Francisco, California April 29, 2013. REUTERS/Robert Galbraith