Jeff Ifrah Discusses the Ongoing Investigation into Herbalife

The Herbalife case could constitute a valuable opportunity to define its rules on what constitutes a pyramid scheme.

Despite recent news that federal agencies have opened an investigation into the practices and sales within the Los Angeles-based company Herbalife Ltd., renowned attorney Jeff Ifrah says the lack of knowledge about the investigation within the company suggests the statement from the federal bureau may be a scare tactic. When faced with the news, Herbalife said in a statement: “We have no knowledge of any ongoing investigation by the DOJ or the FBI, and we have not received any formal nor informal request for information from either agency.” According to Jeff Ifrah, founder of Ifrah Law in Washington, D.C. that might well be the case. “If Herbalife is unaware of the investigation, it's possibly a sign that the probe has not yet reached a critical stage.”

When Maura Possley, a spokeswoman for the Illinois Attorney General Lisa Madigan confirmed that her office would join New York Attorney General Eric Schneiderman and the Federal Trade Commission in probing Herbalife, the company pledged to cooperate. “We are confident in the integrity of our long-standing business and the Company's compliance with applicable laws and regulations,” Herbalife said in a statement. “We look forward to working with the Illinois Attorney General's office to resolve the consumer complaints it has received.” The investigations are a result of consumer complaints and an attack by hedge fund manager Bill Ackman, who alleged Herbalife in December of 2012 of being a pyramid scheme. Ackman claimed the majority of the company’s distributors ended up losing money while only a few early members made huge profits from collecting bonuses.

For the Federal Trade Commission the Herbalife case could constitute a valuable opportunity to define its rules on what constitutes a pyramid scheme and what a multi-level marketing (MLM) company, as pointed out by David Deitch and Jeff Ifrah on the law firm’s blog. There the two attorneys explain that the only FTC guidelines for MLM companies that are currently in effect stem from litigation in 1979 when Amway, a direct selling company, was accused of running an illegal pyramid scheme. With the ongoing growth of the MLM industry – according to a study it was worth approximately $30 billion in 2012 – an increasing number of companies is facing the challenge of protecting itself against pyramid scheme accusations. Aside from the guidelines following the Amway case and a staff advisory opinion in 2004, the FTC has provided little to no further definition on what constitutes a pyramid scheme and how companies can show that their operations are legitimate and legal.

Thanks to his extensive experience Jeff Ifrah is ideally suited to advise companies that get involved in enforcement matters with the Federal Trade Commission or other state agencies and helps them to establish company policies that show their good faith effort. Jeff started his career as a trial lawyer and officer in the U.S. Army’s Judge Advocate General’s Corps and as trial counsel to the U.S. Army Communications-Electronics Command at Fort Monmouth. He then served as a special assistant U.S. attorney in the U.S. Attorney’s office in New Jersey and worked for the global law firms Paul Hastings and Greenberg Traurig before he established his own law firm in Washington D.C.

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