(Adds company comment)
By Svea Herbst-Bayliss
BOSTON, April 17 Illinois Attorney General Lisa
Madigan's office said on Thursday it is investigating Herbalife
Ltd, joining other state and federal probes of
allegations that the weight loss and nutrition company is
running a pyramid scheme.
Herbalife shares fell 0.3 percent to close at $55.10,
reversing earlier gains.
Madigan's office was urged to look into the company months
ago by civil rights groups, which claimed it was a pyramid
scheme targeting minorities. Hedge fund manager William Ackman
was the first to call Herbalife a fraud and placed a $1 billion
bet against the company in 2012.
The company denies the allegations, and high-profile
investors such as Carl Icahn, George Soros and Daniel Loeb have
supported the company in the past by taking stakes.
Herbalife said it has more than 15,000 members and many more
thousands of "satisfied customers" in Illinois. The company
noted that it is confident in its business and that it complies
with appropriate laws and regulations.
"We look forward to working with the Illinois Attorney
General's office to resolve the consumer complaints it has
received," it said in a statement.
Madigan's office joins the Federal Trade Commission, Federal
Bureau of Investigation and New York State Attorney General Eric
Schneiderman in mounting a probe.
A pyramid scheme typically pays its members more to sign on
more recruits than for selling a product or service to retail
The FBI has reached out to former Herbalife distributors and
is probing their business documents, according to sources.
Carl Icahn is Herbalife's biggest investor and was recently
promised three more board seats, paving the way for him to
eventually control five seats on the 13-person board.
(Reporting by Svea Herbst-Bayliss; Editing by Richard
Valdmanis, Steve Orlofsky and Richard Chang)