Herbalife Executives Charged in 'Brazen' Bribery Scheme in China
The two execs for the firm's Chinese subsidiary allegedly bribed Chinese officials for a decade. One also is accused of providing false testimony to the SEC and erasing files from his company-issued laptop.
November 15, 2019 at 01:36 PM
3 minute read
Two former executives for global marketing and dietary supplement maker Herbalife Nutrition have been charged with conspiracy to violate the Foreign Corrupt Practices Act in connection with a bribery scheme in China.
The Justice Department announced charges Thursday against Yanliang Li, also known as Jerry Li, and Hongwei Yang, also known as Mary Yang. Li served as the head and managing director of a Chinese subsidiary of Los Angeles-based Herbalife. Yang headed the subsidiary's external affairs department. Both are Chinese citizens.
Li and Yang allegedly paid bribes to national and local Chinese officials in exchange for licenses that allowed Herbalife's independent sales representatives to sell the company's products in certain provinces in China.
The scheme began in 2006 and by 2016 the Chinese subsidiary's sales had reached about $840 million, or 20% of Herbalife's worldwide net sales of more than $4 billion, according to a federal indictment filed in the Southern District of New York.
"Li and Yang allegedly led a brazen, decade-long corruption scheme, bribing foreign Chinese officials and then covering it up by providing false sworn testimony to the SEC and wiping clean computer files," Brian Benczkowski, assistant attorney general for the Justice Department's criminal division, said in a prepared statement.
Li and Yang also are accused of paying bribes to influence Chinese government investigations into Herbalife's compliance with Chinese laws and to prevent Chinese state-owned media from releasing negative reports about the company.
The pair allegedly obtained reimbursement for the bribe payments and circumvented the company's internal accounting controls by filing fraudulent expense claims.
During the U.S. investigation into the alleged scheme, Li made false statements under oath while testifying before the Securities and Exchange Commission and erased 200 files from his company-issued laptop, according to the indictment.
Herbalife representatives did not respond to requests for comment Friday.
In 2016, Herbalife agreed to pay $200 million settlement after the Federal Trade Commission accused the company of lying to its sales reps about how much money they could make from selling the firm's nutritional supplements, shakes and other products.
Last year, hedge fund manager Bill Ackman famously backed out of his short-sale bet on Herbalife, which he'd described as a pyramid scheme. The remark sparked a high-profile feud with billionaire investor Carl Icahn, who owns a large stake in Herbalife and is a former adviser to President Donald Trump.
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