Herbalife Denies Pyramid Scheme Allegations - Fox 2 News Headlines

Herbalife Denies Pyramid Scheme Allegations

Posted: Updated:

LOS ANGELES (FOX 11/CNS) - Herbalife has denied allegations in a lawsuit by a former salesmen who contends the nutritional supplement company is running an unlawful pyramid scheme, court papers obtained today showed.

In a 42-page answer to ex-Herbalife distributor Dana Bostick's complaint, the Los Angeles-based company also denies that class action certification is appropriate.

Bostick, a retired Los Angeles general contractor, alleges that Herbalife systematically pays bonuses to distributors based on their recruitment of new salespeople rather than sales.

In a recent ruling, U.S. District Judge Beverly Reid O'Connell denied Herbalife's motion to dismiss the case.

The judge wrote that Herbalife sales people "pay money for the right to sell Herbalife products" while "supervisors pay money to receive recruitment rewards which are unrelated to the sale of products to ultimate users."

If Bostick's assertions are proven, Herbalife could fall under the Federal Trade Commission's definition of an illegal pyramid scheme: one in which those at the top are paid with fees from those recruited at the bottom.

In its answer, filed Tuesday in Los Angeles federal court, Herbalife denies each of Bostick's allegations, even questioning whether the plaintiff is indeed a resident of California.

The company admits only that it is "a network marketing company and has a marketing plan through which individual independent distributors market, promote and sell Herbalife products," according to the filing.

Herbalife also agrees that it entered into a distribution agreement with Bostick in April 2012, but denies that he "accurately and completely summarized" the company's sales and marketing plan, or its policies and rules, in the lawsuit.

Bostick's attorney, Philip D. Dracht, said he was surprised at Herbalife's "seeming inability to admit the most basic facts about their marketing plan -- facts that have already been found by a prior court to be true."

Dracht said he and Herbalife were working out a schedule and expected O'Connell to set a series of court dates in the near future.

  • Los Angeles & SoCal NewsLos Angeles & SoCal NewsMore>>

  • Fox 11 Exclusive

    No Charges Against Deputy in Bicyclist’s Death

    No Charges Against Deputy in Bicyclist’s Death

    Wednesday, August 27 2014 11:46 PM EDT2014-08-28 03:46:04 GMT
    The L.A. County D.A. will not be charging the L.A. County Deputy who struck and killed former Napster executive Milton Olin as he was riding his bicycle on Mulholland Highway in Calabasas in December.
    The L.A. County D.A. will not be charging the L.A. County Deputy who struck and killed former Napster executive Milton Olin as he was riding his bicycle on Mulholland Highway in Calabasas in December.
  • USC's Josh Shaw Admits He Fabricated Story About Rescue

    USC's Josh Shaw Admits He Fabricated Story About Rescue

    Wednesday, August 27 2014 7:29 PM EDT2014-08-27 23:29:30 GMT
    USC Senior Cornerback Josh Shaw admits he lied. He told USC officials that he fabricated the story about rescuing his nephew in a pool in Palmdale, California. 
    USC Senior Cornerback Josh Shaw admits he lied. He told USC officials that he fabricated the story about rescuing his nephew in a pool in Palmdale, California. 
  • High Swells Cause Catalina Ferry To Return

    High Swells Cause Catalina Ferry To Return

    Wednesday, August 27 2014 6:55 PM EDT2014-08-27 22:55:47 GMT
    [PHOTO GALLERY] The Pebbly Beach boat yard east of Avalon Bay on Catalina Island suffered serious damage this morning because of the hurricane surge. According to Brian Bray, Avalon Bay harbor master, water pushed dozens of boats off their dry dock, damaging them.
    [PHOTO GALLERY] The Pebbly Beach boat yard east of Avalon Bay on Catalina Island suffered serious damage this morning because of the hurricane surge. According to Brian Bray, Avalon Bay harbor master, water pushed dozens of boats off their dry dock, damaging them.
Powered by WorldNow

WJBK-TV | Fox 2
16550 West Nine Mile Rd.
Southfield, MI 48075

Main Station: (248) 557-2000
Newsroom: (248) 552-5103

Didn't find what you were looking for?
All content © Copyright 2000 - 2014 Fox Television Stations, Inc. and Worldnow. All Rights Reserved.
Privacy Policy | New Terms of Service What's new | Ad Choices