NEW YORK, May 9, 2014 /PRNewswire/ -- Pomerantz LLP announces the filing of a class action lawsuit against Herbalife Ltd. ("Herbalife" or the "Company") (NYSE: HLF) and certain of its officers. The class action, filed in United States District Court, Central District of California and docketed under 2:14-cv-02850, is on behalf of a class consisting of all persons or entities who purchased or otherwise acquired securities of Herbalife between May 4, 2010 and April 11, 2014 both dates inclusive (the "Class Period"). This class action seeks to recover damages against the Company and certain of its officers and directors as a result of alleged violations of the federal securities laws pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.
If you are a shareholder who purchased Herbalife securities during the Class Period, you have until June 13, 2014, to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at [email protected] or 888.476.6529 (or 888.4-POMLAW), toll free, x237. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and number of shares purchased.
Herbalife is a network marketing company that sells weight management, nutritional supplement and personal care products. The Company sells its products globally through a network of independent distributors, which are typically individuals with little marketing expertise that were induced by the Company to purchase the Company's products in the hope that they would be able to resell the product to other consumers or distributors. Herbalife also sells literature and promotional materials to these distributors.
The Complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) the Company's operations were based on a pyramid scheme whereby its distributors generate revenue by recruiting other distributors rather than selling Herbalife's diet and nutritional products to the general public; (ii) the Company engaged in deceptive trade practices where it unduly pressured its members to purchase more products to resell as one of its "distributors"; and (iii) as a result of the above, the Company's financial statements were materially false and misleading at all relevant times.
On December 19, 2012, CNBC reported that Bill Ackman ("Ackman"), Founder and Chief Executive Officer of Pershing Square Capital Management, L.P. ("Pershing") considers Herbalife to be a pyramid scheme after spending a year researching the Company's fundamentals. On this news, Herbalife stock declined $5.16 per share, or over 12%, to close at $37.34 per share on December 19, 2012.
On December 20, 2012, Ackman conducted a presentation concerning Herbalife at the Sohn Investment Conference where he affirmed his conclusion that Herbalife is a pyramid scheme as its distributors make more money by recruiting other distributors than selling the Company's products to the general public. Specifically, Ackman alleged that since the founding of the Company, approximately 1.9 million distributors have failed to make any money from selling Herbalife products, costing them a net loss of $3.8 billion. On this news, Herbalife stock declined an additional $10.07 per share, or over 27%, over the next two trading sessions, to close at $27.27 per share on December 21, 2012.
On January 9, 2013, the New York Times reported that the Securities and Exchange Commission had opened an investigation into the Company.
On January 23, 2014, U.S. Senator Edward J. Markey of Massachusetts sent letters to federal regulators, including the SEC and the FTC, urging them to investigate Herbalife. Mr. Markey also sent a letter to Herbalife's CEO, Michael O. Johnson, asking several questions about the company's business, including pointed requests that reflected the concerns raised by Ackman in December 2012. Some of the questions asked in the letter to Herbalife include: (1) "How much profit (net earnings after expenses) can the average distributor expect to make from retailing to non-distributors (i.e., people who are not directly involved in Herbalife themselves)?"; and (2) "What's the correct number of sales outside the network as a percentage of total sales" for each of the last five years and information on these sales measured by product, quantity and dollars.
Senator Markey urged both the FTC and SEC to examine whether Herbalife was a legitimate multilevel marketing Company, whose revenues are ultimately generated by sales to the general public; or whether Herbalife was a pyramid scheme, whose revenues were dependent on continuous recruitment of other distributors, which were ultimately left sustaining substantial losses on their purchases of the Company's weight loss products. To highlight evidence that Herbalife may indeed operate as a pyramid scheme, Senator Markey pointed to instances where residents of Massachusetts suffered crushing financial setbacks as a result of the Company's marketing practices. On this news, Herbalife stock declined $7.61 per share, or over 10%, to close at $65.92 per share on January 23, 2014.
On April 11, 2014, the Financial Times reported that the United States Department of Justice and Federal Bureau of Investigation had opened a criminal probe of Herbalife. On this news, shares of Herbalife spiraled downward from $59.84 to $51.48, more than 13%.
The Pomerantz Firm, with offices in New York, Chicago, Florida, and San Diego, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz Firm pioneered the field of securities class actions. Today, more than 70 years later, the Pomerantz Firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members.
Robert S. Willoughby
SOURCE Pomerantz LLP