Former Herbalife (NYSE:HLF) Director of Venezuela and Columbia comes forward with fraud claims
Herbalife (NYSE:HLF) whistleblower says Illegal acts likely responsible for region’s dramatic supervisor growth.

San Diego, California May 9, 2008

Herbalife (NYSE:HLF) executives identified Venezuela as a “Top 10” market for the company in their May 2, 2008 conference call, and indeed, triple digit new supervisor growth was reported there in the first quarter. However, according to former Herbalife Director of Venezuela and Columbia, Ricardo Hollander, all is not as it seems in Venezuela. According to an unsolicited written statement from Mr. Hollander to the Fraud Discovery Institute, he became suspicious of what appeared to be a common practice of supervisors living in Venezuela but changing their addresses of record to Columbia or Panama to avoid the currency controls imposed by the Venezuelan government. The supervisors changed their addresses on file with Herbalife in Los Angeles while still living in Venezuela in order to be paid in currencies more freely traded than the Venezuelan Bolivar. This practice is a violation of both Venezuelan law and the Herbalife ethics policy, and Mr. Hollander states that after several months of observation he finally brought these acts to the attention of his superiors at Herbalife. But to his utter surprise, he was immediately and without cause fired.

Mr. Hollander immediately wrote a letter to the Herbalife human resource department (www.frauddiscovery.net) explaining his attempts to adhere to the code of ethics, and was shrugged off with a response that they would not put anything in writing regarding his employment. The motive and potential for fraud are clear: As Herbalife struggles to recruit new distributors in established markets like the United States and Europe, countries like Venezuela are targeted for growth to make up the difference. In the most recent quarter, U.S. recruitment of new supervisors showed no growth compared to 2007, while just a year earlier there was 18% growth in the U.S. Herbalife’s new supervisor figures for Europe showed a drop of almost 15% in the most recent quarter when compared to 2007, and a year earlier they were down 16%.

“Start up a business where you can get your hands on desirable US dollars via the Herbalife residency money laundering scam through the funneling of profits outside the scope of the Venezuelan government by making it appear like you live in Columbia or Panama while never leaving the country of Venezuela.”

There is no guess work in why Herbalife continues to target these areas as the ease of cheating is apparent, and the goal of increasing new supervisors is met at the cost of violating any rule or law. Mr. Hollander also states the problem has only increased since he has left and even provides an audit trail for the outside auditors to corroborate his money laundering claims. When a highly qualified employee (as evidenced by Herbalife’s press release when Mr. Hollander was hired also on the FDI web site) is fired rather than the illegal behavior corrected, the company appears to be aiding and abetting these illegal activities. Instead of stopping the rogue supervisors, Herbalife trumpets the financial results achieved through the cheating of these supervisors because new supervisor growth is the key metric for Wall Street analysts when valuating the company stock price which Herbalife insiders cannot sell fast enough while simultaneously repurchasing shares through leveraged, borrowed money on the company balance sheet.

“To that end, the Fraud Discovery Institute has asked the government of Venezuela to immediately shut down Herbalife operations in that country.”