industry direct selling founded february 1980 ; 36 years ago 1980 02 los angeles california u.s. founder mark hughes headquarters l.a. live los angeles california u.s. key people michael o. johnson chairman and ceo products weight management nutritional supplements personal care sports nutrition . revenue us 3.825 billion 2014 1 operating income us 661.447 million 2012 2 net income us 308.7 million 2014 3 total assets us 1.703 billion 2012 2 total equity us 420.755 million 2012 2 number of employees 7 800 2014 website www.herbalife.com coordinates 33 51 26 n 118 17 31 w 33.857195 n 118.291855 w 33.857195 ; 118.291855 herbalife international is an american multinational multi level marketing corporation that develops markets and sells nutrition supplements weight management sports nutrition and personal care products . the company was founded by entrepreneur mark hughes in 1980 and it employs around 7 800 people worldwide . herbalife reported net sales of us 3.825 billion in 2014 a 21 % decrease over 2013 and net income of 308.7 million . 1 4 it incorporated in the cayman islands 2 and its corporate headquarters are there . 5 the company operates internationally and distributes its products in 95 countries as of july 2015 through a network of approximately 3.2 million independent distributors 2 some of whom earn profit on product sales and additional commission from a multi level marketing mlm compensation structure . the mlm compensation structure consists of commissions royalties and bonuses on sales done by a distributor s downline the people they have sponsored as new recruits . out of about 526 000 total members in the us at the beginning of 2014 about 62 000 received bonuses of some kind from herbalife 7 385 1.4 % received over 5 000 in bonuses per year this translates to an average of 417 per month and 1 304 0.25 % received over 50 000 4 167 per month average . these figures do not include income from product sales nor do they include any costs incurred by distributors . 6 the company has been criticized by among others hedge fund manager bill ackman of pershing square capital who claimed that herbalife operates a sophisticated pyramid scheme 7 8 after taking a 1 billion short position in herbalife stock . 9 the company denies the allegations . 10 however in march 2014 herbalife came under investigation by the u.s. federal trade commission . 11 in july 2016 herbalife agreed to pay 200 million in a settlement with the ftc . 12 contents 1 history 2 products 3 adverse effects 3.1 ephedrine 3.2 allegations of lead contamination 3.3 herbalife and liver disease inquiries 4 business model 5 pyramid scheme allegations 5.1 short sales 5.2 allegations of running a pyramid scheme 5.3 ftc investigation 6 sports sponsorships 7 see also 8 references 9 external links history edit in february 1980 mark hughes began selling the original herbalife weight management product from the trunk of his car . hughes often stated that the genesis of his product and program stemmed from the weight loss concerns of his mother joanne whose premature death he attributed to an eating disorder and an unhealthy approach to weight loss though according to an article from los angeles times this depiction of the story is not accurate 13 . his stated goal was to change the nutritional habits of the world . his first product was a protein shake designed to help people manage their weight . he structured his company using a direct selling multi level marketing model . in 1985 the california attorney general sued the company for making inflated claims about the efficacy of its products . the company settled the suit for 850 000 without admitting wrongdoing . 14 in 1986 herbalife became a publicly traded company on the nasdaq and in 1996 herbalife reached us 1 billion in annual sales . mark hughes died at age 44 on may 20 2000 . 15 the los angeles county coroner autopsy results ruled that the entrepreneur had died of an accidental overdose of alcohol and doxepin an anti depressant . 16 the company continued to grow after his death and in 2002 was acquired for us 685 million by j.h. whitney & company and golden gate capital which took the company private again . in april 2003 michael o. johnson joined herbalife as ceo following a 17 year career with the walt disney company most recently as president of walt disney international . 14 on december 16 2004 the company had an initial public offering on the nyse of 14 500 000 common shares at 14 per share . 2004 net sales were reported as 1.3 billion . on april 9 2013 the company s long time auditor kpmg resigned after the kpmg executive who oversaw herbalife audits admitted to providing insider information to a golfing friend about at least five companies including herbalife and skechers . 17 18 the company hired pricewaterhousecoopers as its auditor on may 21 2013 . 19 on may 7 2014 the company announced that it entered into a deal with bank of america merrill lynch to repurchase 266 million of its stock . 20 products edit herbalife s products include protein shakes ; protein snacks ; nutrition energy and fitness supplements ; and personal care products . 21 the formula 1 protein shake a soy based meal replacement shake is the company s number one product and was one of the first products it sold . other products include products for heart health digestive health skin care and the new 24 sports line released in 2011 . some products are vegetarian kosher allergen free 22 or halal and herbalife provides testimonials and advice from health professionals as part of their product marketing . according to the 2009 form 10 k many of herbalife s weight management nutritional and personal care products are manufactured by third party manufacturing companies with the exception of products distributed in and sourced from china where they have their own manufacturing facility and several products are produced in its manufacturing facility in lake forest california renovated in 2011 23 . herbalife is modifying its recently acquired manufacturing facility in order to increase capability and capacity ; after completion of these modifications it expects to increase self manufacturing . 24 16 in june 2013 herbalife announced the opening of a plant in winston salem north carolina in a facility previously occupied by dell ; the facility was expected to open in 2014 and employ 500 people . 25 in october 2010 herbalife held a groundbreaking ceremony in changsha hunan province china for a botanical extraction facility for its inner and outer nutrition products . the new facility opened in early 2013 . 26 it purchases botanicals directly from farms in hunan province china and other regions ; performs extraction and other conversion processes ; and then sends the processed raw materials directly to herbalife s manufacturing facilities in suzhou china and lake forest california or to its third party manufacturers throughout the world . the new extraction plant produces botanical extracts including teas guarana chamomile broccoli and bilberry for use in many of the company s products . 27 the specialists of the german society for nutrition de concluded that the use of herbalife products alone does not solve weight problems . 28 in independent studies made by the german magazine konsument zeitschrift kotest 11 2003 the products of herbalife were found to be among the most expensive healthy eating products . 29 adverse effects edit ephedrine edit some of the original herbalife weight loss products included herbs containing ephedrine ephedra sinica ma huang and sida cordifolia . ephedrine suppresses appetite ; it is closely related to pseudoephedrine and like the latter compound it acts as a nasal decongestant and can increase the heart rate . plant sources of ephedrine were removed from herbalife products in 2002 after several u.s. states banned supplements containing such herbs . 30 15 31 the u.s. food and drug administration banned supplements containing ephedrine in 2004 . 32 allegations of lead contamination edit in may 2008 an organization known as the fraud discovery institute reported that laboratory test results of herbalife products showed lead levels in excess of limits established by law in california under proposition 65 . 33 the fraud discovery institute was founded by barry minkow ; it dissolved in 2011 after minkow pleaded guilty to an insider trading charge not related to herbalife . 34 multiple independent labs reported finding lead in herbalife products . 35 36 37 38 herbalife responded by stating its products met federal fda requirements 39 40 and claimed that they had commissioned independent laboratory tests showing that the products did not exceed proposition 65 limits . 34 according to court documents herbalife settled with minkow and paid him us 300 000 . 41 in august 2008 minkow retracted all accusations against herbalife and removed any mention of the company from his web site . 42 on may 10 2008 a suit was filed on behalf of a woman who developed lead related liver complaints that she claimed were a reaction to a combination of herbalife products . 34 43 the suit was filed by lawyer christopher grell cofounder of the dietary supplement safety committee and an ally of barry minkow . 34 on june 17 2008 the suit was expanded to add distributors who had supplied the woman with the herbalife products with grell launching a website to offer persons who believe they were harmed by herbalife products the chance of redress . 44 herbalife and liver disease inquiries edit in 2004 israel s health minister began an investigation into herbalife s products after four persons using herbalife s products were found to have liver problems . 45 herbalife was accused of selling products containing toxic ingredients such as qua qua kompri and kraska . the products were sent to bio medical research design ltd b.r.d to a private u.s. laboratory and to israel s forensic research laboratory . a study of the cases funded by the israeli ministry of health concluded that a causative relationship 46 is suggested by the evidence which included the temporal association between exposure to herbalife products and the development of liver injury the negative evaluation of other potential causes of liver injury the normalization of liver function when herbalife products were discontinued and the return of liver injury symptoms in three patients who resumed using herbalife products after recovery . herbalife withdrew one product which was only marketed in israel but not all of the israeli patients had consumed this specific herbalife product . 47 herbalife s sec 10 q filings state that the israeli ministry of health did not establish a causal relationship between the product and liver ailments . the israeli ministry of health advises individuals with compromised liver function to avoid dietary supplements . 48 in 2009 an israeli woman sued herbalife international and herbalife israel claiming that her liver damage resulted from the use of herbalife products . 49 scientific studies in 2007 by doctors at the university hospital of bern in switzerland and the liver unit of the hadassah hebrew university medical center in israel found an association between consumption of herbalife products and hepatitis . 45 50 in response the spanish ministry of health issued an alert asking for caution in consuming herbalife products . 51 herbalife stated they were cooperating fully with spanish authorities 52 and after investigation the agency determined no action was required and removed the alert . hospitals in israel spain switzerland iceland argentina and the united states had reported liver damage in a number of patients some of whom had used herbalife products . 45 50 53 54 55 56 57 58 59 some patients recovered after they had stopped taking the products while in others the disease continued and two patients died . several authors considered it certain that herbalife products were the cause of