Belgium only country to deem Herbalife a pyramid scheme

Belgium remains the only country in the world to find health products giant Herbalife guilty of running a pyramid scheme, writes the News Tribune. Yesterday, Herbalife spoke out against claims made by hedge-fund manager William Ackman that the business amounted to a pyramid scheme. Herbalife executives looked to refute Ackman’s allegations during a meeting earlier in the day, laying out everything from how the business operates to who its customers are. Critics have questioned the company’s business model, which uses a network of distributors to sell its nutritional supplements and weight-loss products in more than 80 countries. Yesterday’s defence comes a few weeks after Ackman alleged that the company was a pyramid scheme and that he was shorting the stock. Short-sellers make money when the shares they’re betting against decline. Under a pyramid scheme, a company makes most of its money by recruiting new salespeople, rather than on the products that they sell. Aside from Ackman, Greenlight Capital’s David Einhorn had also raised concerns about Herbalife’s business in May. Herbalife president Desmond Walsh said that over its 32-year history, only one court had ruled that the company ran an illegal pyramid scheme. The ruling, which occurred in Belgium, is being appealed. Walsh said the ruling had not hurt Herbalife’s business in the country. He also denied Ackman’s claims that Herbalife uses a ‘pop-and-drop’ approach to the markets it serves – entering a market, making money as fast as it can and then pulling out and moving on to new markets. Walsh said much of Herbalife’s growth came from markets it has served for more than 10 years.