Union Call On New Jersey AG To Probe Herbalife

The action stems from allegation that the company is preying on unemployed workers in casino industry.

A Herbalife logo is shown on a poster at a clinic in the Mission District in San Francisco

Herbalife, Ltd. (NYSE:HLF) is likely to come under scrutiny from the New Jersey Attorney General, amidst calls from the union that represents the workers in the New Jersey gambling hub of Atlantic City, who have express concerns that the nutrition supplements company is “preying” on the unemployed workers in the casino industry.

The union, dubbed as ‘Unite Here Local 54’, is one of the latest among many union groups to call on officials to probe into widespread allegations that Herbalife is operating a pyramid scheme and is luring them through force or coercion to invest their savings into this scheme to make a buck for their bang.

The Los Angeles based company brushed off those claims, saying that there is not a single evidence to suggest the accusation is true. However, they are ready to cooperate with authorities in a constructive manner to give their version of this story.

The gambling industry in the state has taken a hit, as other northeastern states are also stepping into the field of legalized gambling, giving a tough competition to New Jersey casino operators, which has led to the closure of multiple gambling ‘dens’, a trend which started around the 2010.

Not surprisingly, this has translated into a huge number of workers downsized, leaving them very few options to find work elsewhere, other than heading to other competitive states with a strong gambling industry.

Meanwhile, Herbalife’s share price has dropped by 1.50%, closing in at $45.92, following the allegations, despite the rebuttal from the company itself. That is not a surprise, because the Cayman Islands based global nutrition company has been under this spotlight since 2010, when the billionaire investor, William Ackman, was accused of fraud and betting a billion dollars that put would put Herbalife under a tight nose in front of regulatory authorities.

State attorneys from the states of New York and Illinois are already scrutinizing the organization for the union’s pyramid scheme accusation. The U.S. Securities and Exchange Commission, Federal Trade Commission, Federal Bureau of Investigation, and Department of Justice, have stepped in too. The company stated last week that the Justice Department sought information from it regarding its members and business practices.

Detractors of the company have long accused it of trying to woo in new, mostly unemployed, men and women into its new get-rich-quick scheme by selling its products. Herbalife though, says that it is transparent by pointing out that not all members can earn quickly while selling its product in a realistic way.

Spokesperson for the union and the healthy foods company were not available for comment when contacted until the filing of this report.

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