Top Herbalife salesman acknowledges high failure rate in video
A top Herbalife salesman said that most people who sell the company's weight loss and nutrition products are doomed to fail, adding fresh grist to accusations by a hedge fund manager that the company is a fraud.
"We sell people on a dream business that they can make it yet deep down inside what do we really know? Yeah we know that the reality is that most of them are not going to make it," Stephan Gratziani said at a 2005 distributor training session.
Gratziani is a member of Herbalife's elite Chairman's Club sales team.
The video of that training session was released publicly on Wednesday on hedge fund Pershing Square Capital Management's website Facts about Herbalife. (www.factsaboutherbalife.com/)
The video would appear to bolster long-running accusations from Pershing Square's founder William Ackman that Herbalife is running an illegal pyramid scheme where members make more money in bringing in new members than they do in selling the actual product. Herbalife has denied allegations that it is a fraud.
A Herbalife spokesman was not immediately available for comment.
Several federal and state agencies, including the Federal Trade Commission and Securities and Exchange Commission, are probing the Herbalife and its business practices, Reuters and other media have reported.
Herbalife distributors can be seen on other videos on the Internet telling potential recruits that it is easy to live a life filled with fast cars, big mansions and yachts if they follow a simple blueprint for selling the products.
In its 2013 statement of average gross compensation paid to members, Herbalife said: "There is no shortcut to riches, no guarantee of success" but added that the opportunity for "attractive" part-time or full-time income exists.
It said that the majority of members earn between $1 and $1,000 and that only 0.3 percent of the distributors make more than $250,000.