Yesterday, the non-profit website PlainSite.org released an extensive report detailing a history of drug-use, drug trafficking, and money laundering over Herbalife’s 30 year history. The news comes on the heels of Carl Icahn reducing his stake in Herbalife last week and a $200 million fine by the FTC in 2016.
Details from the report include:
- Founder Mark Hughes’ cocaine habit was well-documented in an FBI investigation in 1985.
- The FBI received an anonymous tip in 1985 that Herbalife was trafficking cocaine and heroin into the United States, hidden among their herbal supplies.
- Various distributors imported and sold Herbalife products in countries where the company was not yet legally allowed to operate and used shell companies to funnel the money off-shore.
- Congress and the Attorney General of California separately investigated Herbalife in 1985 after receiving numerous complaints about fraudulent business practices and its use of ephedrine in its products.
- In 1987, Senator Orrin Hatch shut down an impending FBI raid on Herbalife distribution centers (reasons are unknown) and the company hired Paul Manafort (currently under investigation by the federal government for numerous money laundering, tax fraud, and corruption charges) to help settle the California Attorney General’s investigation for $850,000.
- In 1994, 238 kilos of cocaine packaged in Herbalife boxes was seized by Nevada State Patrol; another 48 kilos were seized by U.S. customs agents in Georgia; and 201 kilos were found by the Texas Police Department in Beaumont.
- Mary Jo White, a former United States Attorney for New York, filed a complaint in 1994 against Tohmes Peter, one of the most successful money launderers for the Cali Cartle, in which she accused him and 20 other defendants of moving more than $100 million of drug money around the world. Peter used a variety of suppliers to cover his tracks, including Herbalife.
- A 1997 investigation found that distribution of Herbalife products in Russia were controlled by the Russian Mafia.
- In 2000, Mark Hughes was found dead in his Beverly Hills mansion after consuming a “toxic cocktail of alcohol and anti-depressants.”
- in 2002, Herbalife was forced to halt sales of its popular weight loss products containing ephedrine due to health and regulatory concerns.
- In 2004, Eduardo Salazar, the creator of the Herbalife Nutrition Club model, was gunned down in Mexico City in a dispute with a known drug cartel.
- In 2008, Herbalife board member Pedro Cardoso was charged by the Brazilian government for embezzling $10.4 million.
- In 2008, Herbalife paid $300,000 to Barry Minkow to stop his series of accusations about the company’s pyramid scheme structure and dangerous products. This fact was only uncovered 4 years later in 2012.
- Until 2010, HSBC was one of Herbalife’s primary banking partners, helping Herbalife cut checks and issue pre-paid cards to its distributors around the world. HSBC paid a $1.9 billion fine for helping terrorists and criminals move funds for decades, becoming synonymous with drugs and organized crime.
- In 2012, the Brazilian government arrested several members of a narcotrafficking ring that used Herbalife as its cover for importing cocaine.
- Due to a variety of relationships with payment vendors like hyperWallet, ProPay, EarthPort, and PayNearMe, a considerable amount of Herbalife transactions occur in cash or electronic form outside of the visibility of U.S. government regulators, opening up opportunities for money laundering across the world.
This report is extensive and well worth a read (you can download a copy here). The conclusion is clear—Herbalife has either actively used, or turned a blind-eye to, known criminals, drug traffickers, and money launderers to help extend its business interests across the world. We’ll update this article as we learn more.
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