Ackman’s accusations against Herbalife
Ackman stated that Herbalife’s distributors primarily earned their incomes through the recruitment of other new distributors and not through the sales of the company’s products. He claimed that the company had lied to its distributors about its sales model leading to great losses that were incurred by a majority of the distributors. Ackman accused Herbalife of false reporting in its financial statements and overstatement of the retail sales made by its distributors (Albert, 2015). He further accused Herbalife of understating the rewards that distributors gained from recruiting new distributors into the company. He argued that the company made fewer sales than it had stated in its financial statements.