"We're a five-year-old company, and we didn't do a lot of homework on government relations and public relations," he avers. "But the game is not over yet. This set us back a year, but I think we're finally growing up and developing our own political power.
"It was never Mark's intention to deceive," Rosen continues. "All we have ever been guilty of is aggressive sales." The company has always cooperated with federal and state officials, he says, and will continue to do so. He promises that Herbalife will make whatever changes need to be made no comply with the law, just as it has in the past. In 1983, for example, the company revised the Career Book. A disclaimer has been added to the Herbalife magazine as well: "Reports by and referring to large earnings of successful Herbalife distributors, actually selling Herbalife products are not representative of what you may earn. . . ." They will probably even list caffeine as an ingredient in their N.R.G. product, although they are not strictly required to do so.
In the meantime, company officials try to cloak themselves in martyrdom. "Any innovative program which brings new health ideas into the marketplace will always have controversy around it," explains Dr. David Katzin, head of Herbalife's medical advisory board. "This whole thing reeks of special interest groups that feel threatened, economic interests that are being threatened."
"It's an attempt by the health care industry to get control of things people should have freedom of choice in," agrees Perry Turner, corporation counsel. "As to whether it is a concerted conspiracy, that is up for grabs."
Hughes himself, in time-honored fashion, blames the media for the company's problems. The press has been "telling America untrue things," he charges in a written statement, harming "more than 750,000 Herbalife distributors whose livelihood depends on their integrity, diligence, and honesty." Take the 1982 Career Book -- talk about "digging up old skeletons." Or take the suggestion that the herbal ingredients in Herbalife could help cure everything from cancer to herpes -- that was merely a report on the history of the healing power of herbs, although "we didn't make it clear enough that those same healing powers would not necessarily result from using Herbalife products." The media have never treated him fairly, Hughes complains: "They imply that I'm sick, that perhaps I'm a flimflam man, and that I'm definitely too young and far too undereducated to run a $500-million company."
How about the reports of deaths from Herbalife's products? The Senate subcommittee hearings, says Hughes, did not find evidence that anyone died from taking his products -- not "conclusive evidence," anyway. And the press never made that clear.
Finally, the charges that Herbalife is a "pyramid that's ready to collapse" are dismissed by Hughes as "gross oversimplications." "Almost every company has layers of management," he explains. "Big companies have dozens of layers. Herbalife has essentially three -- not much different than the multilevel-marketing plans of Amway or Mary Kay cosmetics."
Inside the company, the California fraud complaint is largely discounted. Corporate counsel Turner told INC. twice that the suit was about to be settled. The charge that the company operates an endless chain, he says, "is based on the fact that they had not analyzed our marketing plan sufficiently," and would probably be withdrawn. Indeed, he expressed optimism that the entire matter would soon be settled "to the satisfaction of both sides."
In the California attorney general's office, there's rather a different view. "That's the impression they've been trying to give the press since day one," says Albert Shelden of the AG's office. "I don't know the basis for that statement," agrees his colleague, Herschel Elkins. "Our action is pending, and we regard this as a very significant case."
However the case should turn out, the company still has some cards up its sleeve. Stories from Washington suggest that some Administration officials believe the FDA overstepped its bounds, and that the agency will pull back from its investigations of Herbalife. (In fact, according to an October 15 "Talk Paper" issued by the agency, the FDA is continuing its investigations of Herbalife's labeling practices and promotional claims, but has decided that "the present Herbalife product line does not contain concentrations of herbs or recommended usage levels that pose a risk of health hazard to consumers.") Some critics are being silenced: Although he was willing to testify in front of the Senate subcommittee, for example, the Dean of the School of Pharmacy and Pharmacal Sciences at Purdue University now refuses to discuss the company on the record. They are "extremely litigious," he says. "Shortly after I gave my testimony, Purdue officials received threats of lawsuits."
Then there's the charismatic Hughes himself. Month after month he works the road, 20 to 25 days month, rally after rally. In September alone he visited Dallas, Houston, Orlando, London, San Diego, Phoenix, Chicago, Minneapolis, Detroit, Toronto, Boston, Atlanta, and Valley Forge, Pa. Two rallies in each town, with a rally in Los Angeles broadcast by satellite to gatherings around the world.
He has to keep it up, of course, just as he promised that night in Atlanta. There is too much at stake to fold up and move on. And the image of stability is all-important: The company can never hope to win the public back, let alone attract the new distributors it needs, if it looks as if it's about to go under. To every allegation of misconduct or misrepresentation, Hughes and his cohorts point to their thousands of satisfied customers.
For all the expressed optimism, however, for all the willingness to change what they must and defend the rest, the meteoric rise of Herbalife is already history. Without public trust, no fad diet -- let alone a multilevel-marketing scheme -- can grow.The American landscape is filled with the skeletons of Herbalife's predecessors: liquid protein, grapefruits, the Cambridge Diet, and so on.
But the evangelist who took hucksterism to a new state of the art won't give up yet. "Lose weight now," he preaches. "Ask me how."
It has taken the American public five years to learn the answers.
