--- title: "Distributor Suicide and Headquarters Investigation: Herbalife Entangled in Pyramid Scheme Allegations" description: "Direct-selling giant Herbalife is facing turbulent times: management instability in China, a new SEC anti-corruption investigation after paying a $200 million settlement, and public outcry over a distributor's suicide. The 22-year-old distributor, who had invested heavily and recruited her younger brother, jumped to her death, raising questions about the company's practices." author: "New Distribution" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2017-07-02" language: "en" canonical: "https://xinjignxiao.com/en/articles/distributor-suicide-and-headquarters-investigation-herbalife-entangled-i-80cb9298/" markdown: "https://xinjignxiao.com/en/articles/distributor-suicide-and-headquarters-investigation-herbalife-entangled-i-80cb9298.md" original_source: "https://mp.weixin.qq.com/s/6WNTu7cOit6QIyXEuuMn3g" translation: "https://xinjignxiao.com/zh/articles/%E7%BB%8F%E9%94%80%E5%95%86%E8%B7%B3%E6%A5%BC-%E6%80%BB%E9%83%A8%E9%81%AD%E8%B0%83%E6%9F%A5-%E5%BA%B7%E5%AE%9D%E8%8E%B1%E9%99%B7%E4%BC%A0%E9%94%80%E7%96%91%E4%BA%91-80cb9298.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/distributor-suicide-and-headquarters-investigation-herbalife-entangled-i-80cb9298/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # Distributor Suicide and Headquarters Investigation: Herbalife Entangled in Pyramid Scheme Allegations > Direct-selling giant Herbalife is facing turbulent times: management instability in China, a new SEC anti-corruption investigation after paying a $200 million settlement, and public outcry over a distributor's suicide. The 22-year-old distributor, who had invested heavily and recruited her younger brother, jumped to her death, raising questions about the company's practices. > Direct-selling giant Herbalife is having a rough time lately. Not only is its China management in turmoil, but its US headquarters, after just paying a $200 million settlement, is now facing an SEC anti-corruption investigation. And recently, a distributor's suicide has once again stirred public controversy. Certificate of the deceased Zhang for attending a Herbalife course Direct-selling giant Herbalife is having a rough time lately. Not only is its China management in turmoil, but its US headquarters, after just paying a $200 million settlement, is now facing an SEC anti-corruption investigation. **Recruited Brother, Spent Family Savings: 22-Year-Old Herbalife Distributor Commits Suicide** List of products purchased by the deceased Zhang from Herbalife Around 2:30 AM on June 8, 2017, in Zhengzhou's Erqi District, at the Sheng Long Century Garden Xiao Li Zhuang (Zone 3) on Qingfeng Street, 22-year-old Zhang jumped from a rooftop and died. According to her father (hereafter referred to as Zhang's father), the incident is suspected to be related to her involvement in Herbalife's "direct selling" business. Police have intervened. According to China Quality Miles (中国质量万里行), the deceased Zhang was a first-level service provider for Herbalife. Since joining Herbalife's direct selling industry in November 2016, Zhang was immersed in the rosy vision of training, learning, hard work, and earning money. In her training diary, dozens of pages were filled with "training insights" and "business skills," summarized as "simple, believe, follow," along with instructions on how to invite new people: starting with relatives, friends, and classmates, how to address their pain points, and how to motivate others and oneself. Soon, Zhang brought her 17-year-old younger brother into the direct selling industry. However, Zhang's rosy vision did not last long. On June 5, when her brother asked for money from home to buy direct selling products, he learned from their father that they had already sent 60,000-70,000 yuan to Zhang in recent months, and the family could no longer support both siblings in direct selling. When the brother returned to Zhengzhou, he relayed this to Zhang. On June 7, Zhang's phone was turned off and she lost contact. On the morning of June 8, the brother called her phone and a police officer answered, saying Zhang had an accident and the family should come quickly. According to the father, Zhang had repeatedly cried to her brother before the incident, saying she was sorry to their parents. But her 17-year-old brother did not grasp her psychological state, and tragedy struck soon after. According to reports, the deceased, who had been a distributor for 7 months, left behind only her phone, personal ID, and a 1-yuan note as personal effects. **Paid $200 Million to Settle: "We Didn't Say Herbalife Is a Pyramid Scheme, Nor Did We Say It Isn't"** In fact, Herbalife distributors losing money and quitting is not unique to China. In December 2016, ABC produced a 1-hour-40-minute documentary chronicling the tragic direct selling careers of some Herbalife distributors. According to ABC News, 90% of new Herbalife distributors quit each year, and 89% earn no money from the company. ABC statistics: 90% of new Herbalife distributors quit each year, and 89% earn no money from the company. In 2014, the largest Latino organization in the US (LULAC) successfully lobbied the US Federal Trade Commission (FTC) to investigate whether Herbalife was engaged in pyramid scheme activities. However, rather than focusing on whether Herbalife violated regulations, the FTC was more concerned with obtaining compensation for consumers. In 2016, after a two-year investigation, Herbalife chose to settle, agreeing to pay $200 million to consumers and promising to adjust its national business structure. Herbalife US distributor testifies: Lost $25,000 in just 10 months. When major media pressed FTC Chair Edith Ramirez on whether Herbalife was a pyramid scheme, she made a telling remark: "The word pyramid scheme is not in our complaint. That's true. But they also have not been found not to be a pyramid scheme. I'll leave that to the reader to draw their own conclusions." In the settlement agreement, the FTC required Herbalife to modify a series of unreasonable practices, such as compensation standards based on products actually sold to consumers (retail sales) rather than products purchased by distributors, no rewards for recruiting distributors, no misleading statements about distributors' potential or possible income, and specifically no claims that joining allows one to quit their job or otherwise enjoy a superior lifestyle. However, Herbalife later stated that it "will not change its business model as a direct selling company," and that the settlement terms apply only to the US, which contributes only about 20% of Herbalife's net sales. Herbalife believes: "The settlement is an acknowledgment that our business model is sound." US netizens leave comments under YouTube videos accusing Herbalife. **Criticism and Sales Soar Together: Herbalife's Decade of Direct Selling** Direct selling companies frequently face controversy in China, and this will likely continue. In 1998, China imposed a blanket ban on direct selling, nearly eliminating the industry. After laws and regulations were improved in 2005, direct selling companies began to re-enter the Chinese market. In 2005, China promulgated the "Regulations on the Administration of Direct Selling" and the "Regulations on the Prohibition of Pyramid Schemes." These regulations allow single-level direct selling but explicitly prohibit multi-level direct selling. Article 7, Item 3 of Chapter 2 of the "Regulations on the Prohibition of Pyramid Schemes" clearly stipulates that organizers or operators who develop personnel, require those personnel to develop others, form an up-line/down-line relationship, and calculate and pay up-line remuneration based on down-line sales performance to obtain illegal profits constitute pyramid scheme behavior. On February 23, US time, Herbalife announced its 2016 financial results. The report showed Herbalife's 2016 sales were $5.6 billion, up 5% year-over-year. By region, in 2016, Herbalife's net sales in North America were $955.7 million, up 9% (including FX); Asia Pacific net sales were $913 million, down 3% (including FX); Europe, Middle East, and Africa net sales were $815.6 million, up 8% (including FX); Mexico net sales were $446.6 million, down 7%; South and Central America net sales were $488.7 million, down 14%. China net sales were $868.8 million (approximately RMB 5.887 billion), up 3%, accounting for about 15.51% of total. -END- --- ## Copyright and AI use This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL. Contact: zhaobo258@gmail.com · +86 158 5481 7671