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  "documentTitle": "Herbalife, Ltd. (HLF)",
  "authorId": "01_Pershing_Square",
  "authorName": "Pershing Square Capital Management",
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  "presentationDate": "2013-04-09 00:00:00",
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  "notes": "This is a research note from Pershing Square Capital Management regarding Herbalife. It uses legal precedents and specific examples to build a case for deceptive business practices.",
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      "text": "We estimate that the probability of making $178,000 per year, the average income suggested by Herbalife’s published testimonials, is about 1-in-5000.",
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      "text": "In May 1998, Debra Valentine, former General Counsel of the FTC, issued a prepared statement to the IMF on “Pyramid Schemes.” Valentine warned consumers to “beware of exaggerated earnings claims.”",
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      "text": "Luring Recruits through Affiliates; Delayed Identification of Herbalife. Another way in which Herbalife is deceptive is how it recruits new participants. Distributors use the “curiosity approach” and lure new recruits to Opportunity Meetings or work-at-home websites before they reveal Herbalife’s true identity. Often, those considering the Herbalife business opportunity will be approached by seemingly different companies altogether (e.g., “Online Business Systems LLC” or “Financial Success Systems LLC”). For examples of how these affiliated companies recruit, visit our website: http://factsaboutherbalife.com/category/herbalife-recruiting-affiliate-videos/online-business-system. We believe these omissions and the delayed identification of Herbalife are deceptive.",
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      "text": "Pyramid schemes are said to be inherently deceptive. Herbalife deceives new participants in numerous ways.",
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      "text": "Exaggerated Representations of How Quickly One Can Succeed. As an example, in 2000, Herbalife entered Ireland. In an Herbalife magazine published that same year, John Tartol, a senior Herbalife distributor and a current member of Herbalife’s board of directors, was quoted as saying “distributors can make it [to President’s Team] even faster today than we did [that is, faster than three years].” (President’s Team is one of the highest levels in the Herbalife chain, with a median annual compensation of ~$337,000). Ten years later, not a single Irish distributor had even reached the rank of Millionaire Team (median income: ~$97,000).",
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      "text": "“More Money Than You Can Imagine.” Recall that Herbalife testimonials lead new participants to believe that earning ~$178,000 per year – or ‘more money than you can imagine’ – is reasonably achievable. We believe the average Herbalife distributor earns less than $100 per year (before expenses). Herbalife recruiting materials that market an opportunity to “achieve financial freedom” are a gross exaggeration of typical outcomes.",
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      "text": "Exaggerated Representations of What Level a New Recruit can Achieve. Herbalife marketing materials tell new recruits that “everything is really easy” and claim that “anybody can do it.” However, there is nothing easy about achieving the wealth and lifestyle new distributors are led to believe are possible. Because of low turnover amongst Herbalife’s senior-most ranks, it is effectively a closed system at the top. We estimate that the probability of making $178,000 per year, the average income suggested by Herbalife’s published testimonials, is about 1-in-5000.",
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      "text": "“distributors can make it [to President's Team] even faster today than we did [that is, faster than three years].” — John Tartol, senior Herbalife distributor and board member. “More Money Than You Can Imagine.” — Herbalife testimonials.",
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      "kind": "source-note",
      "text": "7 Webster v. Omnitrition, 79 F.3d 776 (9th Cir. 1996); Federal Trade Commission v. BurnLounge, Inc., No. CV 07-3654 (U.S.D.C., C.D. Cal); In re Koscot Interplanetary, Inc., 86 F.T.C. 1106, 1181 (1975), aff’d mem. Sub nom., Turner v. F.T.C., 580 F.2d 701 (D.C. Cir. 1978).",
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      "text": "Indicator #1: Deception regarding Likely Success",
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      "text": "Indicator #2: Exaggerated Earnings Claims",
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