After coming under the scanner of the Federal Trade Commission for running a pyramid scheme, Herbalife Ltd. (NYSE:HLF) has appointed former FTC official to head its compliance department.
Pamela Jones Harbour, FTC Commissioner during 2003 and 2010, is said to be the senior vice president of global member compliance and privacy team for the company. She will be responsible for 300-member compliance team of Herbalife Ltd. (NYSE:HLF) and coordinate compliance activities at a global level. FTC announced an investigation against the weight-management manufacturer earlier this year claiming it to be a pyramid scheme company.
In addition to the FTC, William Ackman, Pershing Square Capital Management, was the first one to unveil similar claims against Herbalife and he even disclosed his $1 billion short bet against the company claiming that its share would fall. Ackman further gave a presentation in July to disclose the pyramid scheme run by the company, although the presentation wasn’t successful and the company rejected any such claims.
Herbalife has requested SEC to investigate the alleged manipulation of the market by the short-sellers. The company has lost nearly 35% of its share value since the beginning of 2014 and currently trades at $44.61.
Harbour has a challenging road ahead as the head of compliance committee of Herbalife. She said, “I will develop and enhance training programs, develop and ensure consistent enforcement of rules. The challenge that I have is making sure that (distributors) don’t make claims above and beyond what they should make.” She further added that she has been using Formula 1 shake from the company since 2004 with positive results.
Harbour would have to ensure that the distributors of the company stay clear from making extraordinary claims about the weight-loss products. As of now, nutritional manufacturers in the United States are not allowed to market their products under weight lose label unless they have a scientific study supporting it. Herbalife Ltd. (NYSE:HLF) offers its products in nearly 91 countries with as many as 3.9 million independent distributors.
This article has been written by Prakash Pandey.