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Latino Organization Says Herbalife Unfair Toward Latino Distributors

Published On: Jan 30 2014 10:47:26 AM CST

The League of United Latin American Citizens, or LULAC, is claiming that distributors of the Herbalife products are being compensated for acquiring new distributors, not for how much of the product they sell.

"They're pulled into this dream and unfortunately they have come to a nightmare," said LULAC central coast representative Carlos Ramos.

When Herbalife's low-income Latino distributors go to work, they're losing more money distributing than they are selling the product.

It's what's being called a "pyramid scheme" where the name of the game is to find new distributors, not new customers. That way a cut of the pay goes down the line back to the previous distributor and eventually back to Herbalife.

"What we're trying to do is assess what has Herbalife done since the mid-80s," said Ramos.

And that's where this story begins,1986, where the Santa Cruz Country District Attorney's office partnered with the California Attorney General to issue a permanent injunction against Herbalife for bad business practices.

"We need to carefully look at what the bad business practices were then and what bad business practice are now," Ramos said.

Section 5-A says Herbalife participants cannot receive compensation for recruiting new distributors, which is something Herbalife is being accused of doing 28 years later.

Herbalife said this is all completely false, saying that LULAC doesn't understand its business model. Herbalife said 73% of its members buy the product to use for themselves and if they do sell it, the members make commission from the sale.

LULAC said Herbalife is costing members a fortune to buy the product. Herbalife said the cheapest membership package they offer is $60 and is refundable within 90 days.

Herbalife also defended the accusations saying members don't make any additional money if they recruit new members, they only make money off of selling the product.