Coalition to Stop Herbalifes Letter to Jim Hood

June 19, 2014

National Association of Attorneys General (NAAG)
NAAG President & Mississippi Attorney General Jim Hood
2030 M Street NW, 8th Floor
Washington, D.C. 20036

Dear Attorney General Jim Hood:

We write to ask that the members of the National Association of Attorney Generals
take immediate action to protect thousands of vulnerable people in their states from
the deceptive practices of Herbalife, a multi-level marketing company that we
believe is actually a pyramid scheme. Herbalife Ltd. (NYSE:HLF) recruits
hundreds of thousands of people a year in the United States into a business
opportunity using testimonials that feature six and seven figure incomes and
lavish lifestyles. Yet the vast majority of new Herbalife distributors lose money
and 90% of them quit within a year of signing up.

Last February, dozens of Latino and consumer advocates gathered in Washington,
D.C. to meet with the Federal Trade Commission (FTC) about this issue. In March,
the FTC issued a Civil Investigative Demand to Herbalife and is actively
investigating the company. The FTC is taking seriously our allegations that
Herbalife is using unfair and deceptive acts and practices to recruit new
distributors in the United States on a massive scale.

The FTC did not enter into this issue lightly and they are opening a full
investigation into the claims against Herbalife Ltd. (NYSE:HLF). While the FTC
investigation is an important step in protecting our community, we strongly urge
NAAG and attorneys general from across the country to join this effort. Pyramid
schemes are among the most insidious and damaging consumer frauds facing our
communities and we believe that they are one of the significant causes of income
inequality in the United States because they often target low income people.

Many attorneys general have expansive consumer protection powers, and with
hundreds of thousands of potential victims at stake, we are urging you to join with
the FTC, the Securities and Exchange Commission (SEC), the Federal Bureau of
Investigation (FBI), the Department of Justice (DOJ) and your colleagues New
York Attorney General Eric Schneiderman and Illinois Attorney General Lisa As
you may know, Herbalife Ltd. (NYSE:HLF) is a six billion dollar multi-level
marketing company that sells supplements of dubious nutritional value. Yet former
distributors and victims of this pyramid scheme have repeatedly told us that the
only way a distributor can successfully make money in Herbalife is to recruit
hundreds, if not thousands, of other people to become distributors underneath them
rather than through retail salesone of the hallmarks of a pyramid scheme.
Herbalife now claims that 73% of its distributors are merely discount customers
just like Costco or other buyers clubs. Yet every year, the vast majority of
Herbalifes distributors do not renewunusual behavior for a buyers club in our
opinion.

Herbalife has also refused to provide any data about its retail sales, even though all
traditional consumer product companies and even legitimate multi-level marketing
companies track this information rigorously. According to the companys own
Statement of Average Gross Compensation Paid by Herbalife Ltd. (NYSE:HLF) to
U.S. Members in 2013, 88% of Herbalifes distributors earned no payments from
Herbalife in 2013, and only 0.47% received more than $25,000 for the entire year
gross. Factoring in operating expenses, the vast majority of Herbalifes distributors
lose money even after working long hours, full time. Although Herbalife tells
consumers that it is the best business opportunity in direct sales and a chance to
achieve their dreams and financial freedom while working from home, the
reality is that almost none of their distributors make a net profit by actually selling
Herbalifes products.

We are also deeply concerned that Herbalife targets minority and new immigrant
communities with their business opportunity pitch, knowing full well, that these
communities are the least likely to complain to NAAG members after losing
money to the scheme. The company has created videos, marketing materials and
recruiting events tailored to specific minority communities and even hosts a
nationwide Latin Extravaganza every year that draws over 10,000 Latino
recruits. The company even admits that 60% of its U.S. distributors filled out the
Spanish language version of its distributor application, but it doesnt report the
additional percentage of U.S. distributors who are English speaking Latinos or
African American.

In addition to business opportunity fraud, we believe Herbalife Ltd. (NYSE:HLF)
distributors routinely make false medical claims about their supplements through
testimonials and even go so far as to prescribe Herbalife products for medical
conditions such as diabetes, cancer, anemia, etc.

Finally, we think the bizzaare rules governing Herbalifes nutrition clubs which
prohibit club owners from displaying the Herbalife logo on the outside of the store,
posting prices for their products, having an open/closed sign, having the clubs
interior visible from the outside and advertising are an effort by the company to
create the false impression that these clubs are not retail food establishments in
order to skirt the business, health code and franchise laws that NAAG members
enforce.

As Latino and community advocates, we cannot stand by while Herbalife Ltd.
(NYSE:HLF) continues to deceive hundreds of thousands of people every year.
We are actively assisting regulators and law enforcement agencies who have
already announced investigations into the company when requested; however, the
scope of this fraud demands much wider action.

We respectfully ask that the members of the National Association of Attorney
Generals take immediate action in their states to investigate Herbalife and
determine if the company is violating state laws and regulations and if so to take
the appropriate actions to address these violations and to protect the residents of
your states.

Thank you for your consideration of this important matter. Please let us know if
you would like to receive more information about our concerns or have any
questions.

Sincerely,

The Coalition to Stop Herbalife and affiliated members

Brent Wilkes, League of United Latin American Citizens, Executive Director
Amy Hinojosa, MANA- A Latina Organization, Executive Director
Yanil Tern, Center for Latino Progress, Executive Director
Angelica Salas, Coalition for Humane Immigrant Rights of Los Angeles, Director
Adrian Dove, Congress of Racial Equality California
Mayra Esquilin, Hartford Areas Rally Together, Executive Director
Omar Duque, Illinois Hispanic Chamber of Commerce, President and CEO
Andres Mendoza, League of United Latin American Citizens Nevada, Deputy
Director
August Sallas, Little Village Community Council, President
Horace Small, Union of Minority Neighborhoods, Executive Director