CEO says Herbalife not a pyramid scheme

Dec. 24, 2012 at 1:47 PM

LOS ANG, Calif., Dec. 24 (UPI) -- The chief executive officer of Herbalife said the company from Los Angeles would defend itself against a claim it was a pyramid scheme.

"We're going to disabuse the financial community of a presentation that was based on falsehoods and a misunderstanding about our business," said CEO Michael Johnson, referring to a claim by hedge fund manager Bill Ackman of Pershing Square Capital Management in New York that Herbalife was a pyramid scheme.

The Los Angeles Times reported Monday that Herbalife has lost 40 percent of its share value since the claim was made. Share values dropped 5 percent Monday morning in a holiday-shortened trading session, the Times said.

The Times said Herbalife was a multi-level marketing firm with individual distributor in countries.

Multi-level marketing is a sales strategy in which sales persons get paid commission on their own sales and are also paid for sales made by persons they recruit to work for the company.

But Johnson said calling Herbalife a pyramid scheme was "so completely wrong."

The firm has scheduled a meeting with investors and market analysts for Jan. 10 to refute Ackman's claim against Herbalife, which markets vitamins and diet supplements.

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