U.S. investigating Herbalife over foreign bribery in China

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By Sarah N. Lynch

<span class="articleLocation”>The U.S. government is investigating dietary
supplement maker Herbalife over whether it violated
foreign bribery laws while conducting business in China, the
company revealed in a regulatory filing on Friday.

Herbalife, in which a billionaire investor and adviser to
President Donald Trump is the single largest shareholder, said
that the U.S. Securities and Exchange Commission had asked the
company for records as part of its civil anti-corruption probe.

The company is conducting its own independent review, and it
has also separately discussed the matter with the U.S. Justice
Department, which is responsible for investigating criminal
violations of the Foreign Corrupt Practices Act (FCPA).

“The company is cooperating with the SEC’s investigation and
cannot predict the eventual scope, duration or outcome of the
matter at this time,” Herbalife said.

The probe into Herbalife’s overseas activities comes as Carl Icahn, who owns more than $1.2 billion worth of Herbalife
shares, or a 24.18 percent stake, will be serving as an unpaid
special adviser on regulatory reform to Trump.

Icahn previously helped Trump’s transition team weigh
candidates such as Treasury Department nominee Steve Mnuchin,
and he is expected to help guide the new administration on
regulatory reforms, including potentially Wall Street
regulations.

Trump has also referred to the FCPA, which is at the heart
of the SEC’s Herbalife probe, as a “horrible law” that he said
puts U.S. companies at a disadvantage.

The general counsel for Icahn Enterprises could not
immediately be reached for comment.

The SEC’s probe of Herbalife comes on the heels of a July
settlement with the Federal Trade Commission, which ordered the
company to pay $200 million to resolve charges it deceived
consumers into believing they could earn a lot of money by
selling the company’s products.

Prior to the FTC settlement with Herbalife, hedge fund
activist investor William Ackman had repeatedly accused
Herbalife of being a pyramid scheme and placed a $1 billion
short bet on the stock in 2012.

Ackman also previously said he had evidence that Herbalife
was violating the law in China by making recruits pay an entry
fee and by letting distributors recruit new members.

Icahn has clashed for years with Ackman over Herbalife and
its value as a company.

In September, Icahn said he wanted to seek permission to
acquire an even bigger chunk of stock. Most recently, in
November, he told Reuters he believed it was undervalued and
that the company would help spur jobs.

Herbalife’s shares dropped 3.4 percent to $51.31 in early
trading on Friday and remained unchanged at the close. (Additional reporting by Sayantani Ghosh and Ankur Banerjee in
Bengaluru)



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