May 20, 2008 / 12:54 PM / 10 years ago

RPT-UPDATE 1-US group says Herbalife products have too much lead

(Repeating with no change to text)

(Adds details on Barry Minkow)

By Martinne Geller

NEW YORK, May 19 (Reuters) - Six dietary supplements sold by Herbalife Ltd (HLF.N) contain dangerous amounts of lead if taken in the recommended dosages, according to information posted on Monday on a Web site linked to a long-time critic of the firm.

Herbalife disputed the claim, saying its weight-loss and nutrional products met regulatory requirements in all of its markets.

“The FDA hasn’t established a general limit on lead in foods, but we are certainly well within their suggested guidelines,” Herbalife spokesman George Fischer said in a telephone interview, referring to the U.S. Food and Drug Administration, which sets dietary guidelines.

The Fraud Discovery Institute posted a letter on its Web site on Monday attributed to Christopher Grell, an attorney in Oakland, California, who specializes in product liability cases.

The letter said recommended daily doses of six Herbalife products contained levels of lead that are dangerous and in excess of what California law allows under its Safe Drinking and Toxic Environment Act. It urged the state to order Herbalife to place “clear and reasonable warnings” on those products.

Barry Minkow, founder of the institute, has $50,000 invested in Herbalife “put” options, betting that the company’s shares will fall.

Minkow, a San Diego pastor who served more than seven years in jail for stock fraud, now works to uncover fraud through the institute. He has a history of criticizing Los Angeles-based Herbalife.

Minkow said in a telephone interview that his bet that the company’s shares will fall was only intended to finance his investigation.

California law requires businesses to warn consumers if their products contain chemicals known to cause cancer or reproductive toxicity.

The six products mentioned in the letter are the ShapeWorks Protein Drink Mix, Healthy Meal Nutritional Shake Mix, Tang Kuei Plus herbal tablets, Thermojetics Nature’s Raw Guarana instant tea mix, ShapeWorks Cell Activator and Multivitamin Complex.

The company says products are sold in 65 countries by a network of over 1.8 million distributors.

Herbalife shares closed down 4.2 percent at $40.17 on Monday on the New York Stock Exchange.

Grell said in an interview Monday that individual tablets may not exceed California’s 0.5 microgram limit on lead in dietary supplements, but he said the daily recommended dosage would result in lead exposure large enough to warrant a warning label.

A document purported to be an invoice from Analytical Laboratories in Anaheim Inc, based in Brea, California, for $5,820 for testing the six products was posted on Fraud Discovery’s Web site. Analytical Laboratories did not reply to calls and and an e-mail to discuss any tests.

Minkow previously uncovered a discrepancy in the biography of Gregory Probert, who was then Herbalife’s president and chief operating officer, that led to Probert’s resignation in April.

Probert had said he had earned an MBA degree at California State University. The company said he had been enrolled at the university during the 1980’s but never obtained a degree.

Herbalife’s market value, after Monday’s stock decline, was $2.61 billion. It had sales of $2.15 billion in 2007.

Last month, Herbalife said that Spain had issued an alert cautioning on the consumption of Herbalife products due to suspicious cases of liver damage. Herbalife said it was in discussions with the ministry.

“For more than 28 years, tens of millions of Herbalife consumers worldwide have been safely using Herbalife products with an extremely low incidence of serious adverse event reports citing liver function abnormalities,” the company said at the time. (Editing by Toni Reinhold & Kim Coghill)

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