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>>

  • Deal or No Big Deal Monday July 28

    Deal or No Big Deal Monday July 28

    Deal or No Big Deal Monday July 28

     Topics today include Another Presidential Impeachment? The Grey Lady is Pro-Pot; Sarah Palin's New Channel in Deal or No Big Deal Monday July 28
     Topics today include Another Presidential Impeachment? The Grey Lady is Pro-Pot; Sarah Palin's New Channel in Deal or No Big Deal Monday July 28

  • Judge Rules Shelly Sterling Acted Appropriately

    Judge Rules Shelly Sterling Acted Appropriately

    Monday, July 28 2014 5:50 PM EDT2014-07-28 21:50:08 GMT
    Clippers owner Donald Sterling repeatedly consented to his wife selling the Clippers while facing the prospect of being stripped of the team by the NBA, then suddenly changed his mind and disregarded the terms of the family trust, Shelly Sterling's attorney told a judge today.
    Shelly Sterling acted properly in removing her husband as a director of the family trust that owns the Los Angeles Clippers, and she has the authority to sell the team despite Donald Sterling's objections, a judge tentatively ruled on Monday.
  • Lightning And Thunderstorm Safety Tips

    Lightning And Thunderstorm Safety Tips

    Monday, July 28 2014 5:43 PM EDT2014-07-28 21:43:37 GMT
    With thunderstorms still possible in the Southland, and in the aftermath of a fatal lightning strike at Venice Beach, county officials issued a series of storm safety tips.
    With thunderstorms still possible in the Southland, and in the aftermath of a fatal lightning strike at Venice Beach, county officials issued a series of storm safety tips.
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 | Terms of Service | Ad Choices