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By Jeffrey Dastin and Daina Beth Solomon
Reuters

New York hedge fund manager William Ackman says Herbalife can be a pyramid scheme that exploits poor people. They have taken a $1 billion bet against the company\’s stock and spent millions on research to address the nutritional supplements seller, including generating a video showing former distributors who claim these people were deceived and lost money promoting its products.

Yet checking out several of the clubs that have been created to dispense the business\’s shakes, teas and other items, largely towards the Hispanic community from the U.S., demonstrates there are fans. These are generally consumers who stress their has improved and distributors who are thankful to offer the possiblity to run their own businesses.

In conversations at 10 such clubs that Reuters reporters visited in recent weeks inside the California area, New York and Newark, New Jersey, above 20 people said they\’d lost considerable weight while consuming Herbalife products. These claims could hardly be verified by Reuters but if true content cast a good light on Herbalife\’s products, especially as Hispanics have problems with higher rates of obesity versus the overall U.S. population.

While some individuals running the clubs were incapable of pay, most were optimistic about being distributors with the products. Notably, women with children said we were looking at pleased with flexible hours along with the possiblity to bring their kids to work at the appropriate time.

Two customers sipping shakes from a club in Boyle Heights over the east side of L . a ., Silvia Lopez and Ana Montenegro, were usual for those who recommend the products.

“When I met her, her stomach was up to here,” Lopez said, holding support over Montenegro’s belly. “And I said, ‘Let’s go. We can easily take action.\’”

“She lost 30 pounds!” Lopez said.

“Forty,” Montenegro corrected her. Both said they have no affinity for selling Herbalife products, just consuming them.

Ruth Lozano, 41, who also runs an organization in Boyle Heights, claims that they dropped eight sizes by way of Herbalife products and her blood choleseterol levels dropped.

And Angel Perez, a 29-year-old daughter of Mexican immigrants, says she will make a \”decent, honest living\” selling Herbalife products, earning about $3,000 to $4,000 per 30 days. Her club in Inglewood, just west of New york, encourages a genial, cafe-like environment, with monthly weight-loss challenges.

She resents the attacks from Ackman. “I am not an inadequate, dumb, Hispanic person, and I am not attempting to take full advantage of people,” she said. “I\’ve found that insulting. I’m looking to help our community.”

SATURATION WARNING

Herbalife recommends that joggers hoping to shed extra pounds replace a few their three meals every single day with shakes, which can be made using a powder that contains protein and vitamins that could be then when combined soy or nonfat milk plus some other ingredients based on the flavor desired.

Some doctors allied with Herbalife back you can actually diet claims.The U.S. Food and Drug Administration, though, has never evaluated those claims.

Ackman\’s main distinctive line of attack is actually not around the quality of the products and if they operate in controlling weight or improving health. Instead, bigger argued which the whole Herbalife method is a pyramid scheme which do not survive C that it is based on recruiting new distributors to pay for existing distributors (their incomes are based on their own individual sales and on the sales of people they recruit) knowning that the industry could possibly get saturated weight loss clubs are in place often near existing ones.

His team has produced videos certainly where an series of former Herbalife distributors say they spent 1000s of dollars on Herbalife products and training but were left with losses and products they couldn\’t sell. “These are generally pretend businesses,” said David Klafter, senior counsel at Ackman\’s Pershing Square Capital Management. The hedge fund estimates that sellers an average of lose about $12,000 each year once rent for any clubs is looked at.

Partly as a result of lobbying by Ackman, there are a compilation of state and federal investigations into whetherHerbalife is a pyramid scheme and related questions. It really is unclear just what precise information on those probes are, and it\’s not clear whether or not will result in any action against Herbalife and in what ways serious any such action may be.

Herbalife along with its supporters believe it is a legitimate multi-level marketing company which has been growing cell phone 34 years, sells things that will be in demand, so it helps most of its 3.7 million distributors worldwide to produce a living. \”The overwhelming largest part of our consumers and members are already delighted by their Herbalife experiences,\” an agency spokesman said.

SOME COMPLAINTS

On the visits to the clubs during the U.S. there was a minority of distributors who are skeptical about the business on the list of gotten into.

One distributor in South Chicago says she spends about $1,200 thirty days on Herbalife products but only earns enough to assist cash rent at her exercise studio.

An 18-year-old Guatemalan-born mother who would only present her with name as Mary currently works nearly half daily for no pay for a club in Newark, though she does get free shakes. She\’s got also paid a $110 registration fee to be a member and it\’s taking classes for additional details on the goods as she would like to turn into a distributor.

Some from the distributors interviewed said they made a very good living.

One 27-year-old, who only gave his name as Alex, pulled out a wad of cash within a club inside the Bronx for example the way he claimed to do.

The clubs range between relatively sophisticated exercise studios that sell and distribute Herbalife products to sensitive rooms merely a number of chairs from a circle to encourage people to relax and socialize, sometimes watching Spanish-language soap operas researching after their kids.

John Hempton, an Australian hedge fund manager, who says he owns the stock and features visited Herbalifeclubs within australia and also the U.S., sees the clubs creating a communal feeling. \”The device is real, also it fulfills fairly real human need. It\’s really a support group for losing fat,\” he recently told Reuters.

Still, some distributors warn it clearly isn\’t a job for just anyone. Delmy Ruiz says she produces a couple thousand dollars a month selling Herbalife beyond a golf in Canoga Park in the San Fernando Valley nevertheless the 64-year-old\’s make an attempt to get her son to undertake identical failed. \”He did things i did detail by detail, but he didn\’t cause it to be,\” said Ruiz, adding that his heart wasn\’t there. \”You are faulty, you do not get paid.\”

(Additional reporting by Svea Herbst-Bayliss in Boston and Anjuli Athavaley in Los angeles)