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FBI Investigating Herbalife, Sources Say

The news about the nutrition and weight loss company sent its stock price down sharply Friday.
Image: Herbalife ticker is seen at the post where its stock is traded on the floor of the New York Stock Exchange
Herbalife is being investigated by the FBI, sources told Reuters.BRENDAN MCDERMID / Reuters
/ Source: Reuters

The FBI is investigating Herbalife Ltd., the nutrition and weight loss company that hedge fund manager William Ackman has called a pyramid scheme, sources familiar with the investigation said Friday.

The news, first reported by the Financial Times, sent the company's stock price down nearly 14 percent.

Herbalife is being investigated by the FBI, sources told Reuters.BRENDAN MCDERMID / Reuters

One source briefed on the matter said that the investigation has been going on for some time, but declined to give further details. A spokesman for the Federal Bureau of Investigation in Boston declined to confirm or deny the investigation. No charges have been filed.

Former Herbalife distributors reached by Reuters said they had been contacted by agents who were interested in finding out more about the multilevel marketing company's business practices, including how it recruits new members into its distribution scheme.

FBI agents are also reviewing Herbalife documents obtained from former distributors, two other sources familiar with the matter said.

Herbalife said Friday that the company has not received any inquiries from the FBI or the Justice Department about any investigation.

The company has steadfastly denied running a pyramid scheme, where distributors earn more money for recruiting new members into it than they do by selling products to consumers.

The news comes roughly a month after Herbalife confirmed that the Federal Trade Commission had issued a civil investigative demand to the company to look more closely at how it works.

The company employs a vast network of independent distributors who sell its powders and shakes in more than 80 countries, including China, the company's fastest growing market.