OP-ED | Time for Investigation of Pyramid Scheme that Preys on Financially Vulnerable
A tough economy hurts individuals and families in many different ways. One particularly repugnant abuse of power wielded by corporations is a supposed employment opportunity that preys upon people already struggling financially and desperate for relief, and lures people into a “business opportunity” with the promise of easy income. But in reality, this company coerces them into participating in a pyramid scheme designed to gain profit for the corporation, not the individual.
Herbalife Limited is one such corporation showing its greedy side by doing just that. This company preys on people’s needs by promising a level of success that they have little chance of achieving. Through the use of deceptive recruiting practices such as websites like incomeathome.com, this company entices individuals into believing that what they offer is an easy opportunity. One with lots of money to be made without much effort needed. Instead, once people join, they quickly learn they have laid out their own cash to purchase products they need to sell. But selling those products is not what will earn them the money they need. To make money they will need to learn how to recruit new distributors and convince others like them to also give up cash they can scarcely afford.
Herbalife maintains its position of wealth by forcing new “sales leaders” to make significant investments that they can often ill afford. By pushing their recruits to focus on recruiting more people, creating their own “downline” networks, rather than actually selling their products to the general public, Herbalife creates a situation that fits the exact definition of a pyramid scheme. After having invested a minimum of $100 to become a distributor, in order to be able to recruit your own distributors, another investment of up to $4,000 is required to become a “sales leader”. In reality, an overwhelming number of distributors are not able to recruit more than one or two new participants, if any at all.The few new recruits then fall prey to the exact same tactics, bringing the company more money and the distributors more expenses. This arrangement takes money from the many at the bottom of the pyramid and puts it in the pockets of the very few at the top.
It takes only a bit of exploring the company’s own website to encounter advertising that preys on peoples’ fears of increasing unemployment and deteriorating economic conditions. Their advertising promises you people better future by “taking control of your own financial situation”. The lofty promises do not include any messaging that educates possible recruits about the fact that approximately 80% of their distributors make absolutely no profit of their own. Rather, they incur more and more expenses by purchasing the products themselves.
Even more insidious is Herbalife’s practice of targeting communities of color. Executives in the corporation have already admitted to targeting minority groups, openly boasting about the company’s “African American Initiative” and “Latino business.” The high cost of the company’s program is never readily apparent and most of the people involved have little or no business experience, making them even more susceptible to the company’s deceitful practices. The chances to make a profit under this model are minimal, often leaving families in debt.
In an age where ethical behavior by individuals and corporations is needed most, Herbalife Limited’s strategies amount to outright deceit. The lack of transparency is particularly astonishing. The company claims not to track how much revenue it derives from sales to the outside public, as opposed to sales coming strictly from their own distributors, making it impossible to ascertain the true extent of the abuse. Highly respected organizations and leaders such as the Hispanic Federation and Congresswoman Linda Sanchez are challenging the company by asking that the Federal Trade Commission (FTC) investigate Herbalife’s practices.
Now is the time for the enforcement authorities to blast open the practices of this abusive corporation.
Evelyn Mantilla is the principal in Mantilla Leadership Solutions and former State Representative