SEC Closes Investigation Of Herbalife

Re-posted with permission from Len Clements (MarketWave Alert # 96):

On October 29th Barry Minkow published a
report claiming Herbalife, like Usana (see
Rebuttal
Report) was breaking Chinese law by
illegally conducting MLM business within
mainland China. Twenty seven pages of this 90
page report was an arid, repetitive attempt
by über-anti-MLM zealot Robert FitzPatrick to
convince the regulatory recipients listed on
the report that Herbalife was a "Penny Stock,
Pump & Dump, Ponzi Scheme". That list
included the FBI and, of course, the SEC. On
October 30th Minkow launched a web site
called "Doomed by Design" where he attempted
to make the same case, only with more
colorful and dramatic pictures.

One day later, on November 1st of 2007, the
SEC, which had already begun an investigation
into insider trading a month earlier,
notified Herbalife that they were expanding
their investigation. The new issues they were
looking into was the amount of product being
personally consumed by Herbalife
distributors. Within FitzPatrick’s portion of
Minkow’s report he spent the bulk of his
efforts on making a case that Herbalife was a
pyramid scheme because not enough product was
actually moving to bona-fide end user
customers. In spite of crystal clear evidence
to the contrary, Fitzpatrick is still touting
a mythical "51%" of commissions coming from
retail sales to non-participants as the FTC’s
established benchmark for legality. There
could be no other reason for the SEC to be
reviewing such internal consumption activity
than to also be evaluating their status as a
legal, legitimate network marketing company.

Well, today the SEC closed their
investigation of Herbalife, and guess what?
They found nothing requiring any
"enforcement action". No evidence of an
illegal pyramid scheme (apparently the FTC
forgot to tell the SEC about that 51% deal),
no concern about misbegotten revenue from
China, no insider trading… nothing!

To read a press release regarding this
notice, see:

http://biz.yahoo.com/bw/080625/20080625006284.html?.v=1

By the way, here’s where Team Minkow
supporters, such as head cheerleader Tracy
Coenen and the Yahoo! board bashers, will try to
claim that just because the SEC "does not
intent to recommend any enforcement action be
taken against the company" (the SEC’s exact
words) this doesn’t mean that they
didn’t find any evidence of wrongdoing. Which
leaves us to ponder why, after investigating
Usana for ten months, and Herbalife for eight
months, and in spite of actually
finding signs of illegal activity, the
SEC just, as one Team Minkow supporter has
suggested, "didn’t have the will" to take action.

This would be funnier if it wasn’t for the
mainstream media’s full and unchallenged
support of Minkow’s original accusations, but
complete silence when his targets are vindicated.

Wall Street Journal? Forbes? Anyone?
            

Len Clements
MarketWave,
Inc.