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Media Facilitates Herbalife's 14 Day Cover Up

|Includes: Herbalife Ltd. (HLF)

On November 13, 2014 Reuters reported: "Herbalife board member a target in long running Brazilian fraud case"

The reporting sets out that (NYSE: HLF) Herbalife Board Member, Distributor and Chairman's Club Member, Mr. Pedro Cardoso was charged by Brazilian Prosecutors with "Money Laundering in 2008 for allegedly participating in an embezzlement scheme a decade earlier that siphoned 26.7 million Brazilian reais ($10.4 Million) from the state government in Espirito Santo"

In the same reporting, Reuters states: "Cardoso said in a statement dated this week emailed to Reuters by an Herbalife official that the lawsuit was a private matter dating back to 1998 which had no bearing on his work for the company, and that he was unaware he was being sought in the case" and that Cardoso added "I have received no official notification of any kind in regards to this matter".

Here are some questions for the "Herbalife official" and Herbalife generally (including you Pamela Jones Harbour):

  1. Mr. Cardoso states he was unaware he was being sought in the case. He does not state he was unaware of the case.Hence, where are the disclosures to the SEC in this matter? From what I can discern no notices have been provided from 2009 to the date of this article to the SEC or the public.
  2. Mr. Cardoso stated he has not received "official notification of any kind". Fair enough. How about unofficial notifications.We know for a fact that 12 parties are charged. Is it reasonable to believe that not a single one of those parties reached out to Cardoso and said: "Hey, you are named and charged in this also and they are looking for you". Somewhat hard to believe.

Let's move on to Reuters:

Here are some questions:

  1. Who was the "Herbalife official" that provided this email?
  2. Will Reuters publish this email?

I would certainly like to hear back from Reuters Journalists, SVEA HERBST-BAYLISS, JEFFREY DASTIN AND MARCELO TEIXEIRA on this.

So, is Pedro Cardoso even important in the Herbalife big picture?

Some ambitious Herbalife longs have tried to paint this as a non-issue and/or argue Pedro Cardoso is a very small part of Herbalife and not particularly important.

Herbalife Corporate disagrees. Here is how they describe Cardoso in their 14A filed March 17, 2010:

Pedro Cardoso , age 43, has been an independent Herbalife distributor for 18 years and a member of the Company's Chairman's Club since 2005. Mr. Cardoso has built a successful organization of Herbalife independent distributors in more than 20 countries. He has been active in training Herbalife distributors around the world, and is a member of various strategy and planning groups for Herbalife. He is also an active volunteer for the Herbalife Family Foundation. Prior to joining Herbalife, Mr. Cardoso served as the Transportation Supervisor of the Avon Company from 1990 to 1992. He received his degree in applied mathematics from the Autonomous University of Lisbon. Mr. Cardoso's qualifications to serve on our Board of Directors include his 18 years of experience as an Herbalife distributor, which brings a first-hand understanding of the function and specific needs of our independent distributors, the ultimate drivers of our business, to the Board.

Note, this states he is a member of various strategy and planning groups for Herbalife. An NYSE listed company has a Board Member, charged with Money Laundering as a member of strategy and planning groups!

Imagine for a moment, the press released information that a Board Member of Apple, GM or GE had been charged with Money Laundering. How long would that Board Member's position survive?

Accordingly, here are some questions for Pamela Jones Harbour (who it now appears is definitively big on talk of ethics and transparency and completely light on action for same):

  1. Why has Herbalife not immediately required Pedro Cardoso resign from the Board?
  2. Why has Herbalife not announced an immediate and thorough review and investigation of all of Pedro Cardoso's activities as a Distributor and his down line to ensure that NYSE listed Herbalife is not a party to money laundering in and throughout Mr. Cardoso's channel?
  3. Why has Herbalife not issued any public press releases on this matter? Herbalife is certainly aware of the charges now?
  4. Why has Herbalife not made any disclosures to the SEC on this matter? Once again, denial of existence is no longer available.

Now to the Media. CNBC, Bloomberg, Reuters, Financial Times and many others for whatever reason appear to have given Herbalife a pass on this (as well as other matters generally). There exists a desperate need for "follow up Journalism". Printing a headline, throwing it out there and hoping it gains traction and then possibly some resolution is fine. When this does not happen however, we need REAL Journalists to doggedly pursue the Corporation for follow up and beam sunshine onto the matter forcing Corporate action and accountability. When Company's like Herbalife and NuSkin only let friendly Analysts on calls and are fed inane softball questions, Journalism needs to be the voice of Shareholder, the hammer if you will.

Finally, I move to Mr. Carl Icahn. Perhaps one of the most important figures in this mess and one I hopes exits his position while he can.

Many are familiar with Mr. Icahn's Shareholders' Square Table.

It has truly one of the greatest pics ever drawn on Corporations/Boards.

It's Mission Statement is as follows:

The Shareholders' Square Table (SST) is a platform from which we can unite and fight for our rights as shareholders and steer towards the goal of real corporate democracy.

As a member of SST, you'll receive emails with timely information on the movement, and have full access to our website containing:

  • In depth reports about activism and various companies we are involved in
  • Insights on business
  • Commentary and criticism of certain actions by boards and CEOs
  • 'No-brainers' and 'Absurdities'

Most importantly, our periodic posts will discuss what can be done to change our current, dysfunctional system of corporate governance.
While there are many good CEOs and boards there are far too many ineffectual ones that are strangling shareholders and the economy.

For Mr. Icahn my questions would be:

  1. Why have you not required Herbalife to immediate remove Pedro Cardoso from the Board?
  2. How do you square (pun intended) your inaction here with your Mission Statement on Shareholders' Square Table?
  3. Why have you abandoned everything you stand for in as you put it "fighting Corporate tyranny" in exchange for your $600M+ investment in Herbalife? Is your legacy worth this?
  4. If Herbalife won't act to remove Mr. Cardoso immediately (as it apears), file disclosures with SEC, provide a full and accurate press release to the Public/Shareholders and have a full investigation conducted into Mr. Cardoso's activities as a 22 year Distributor with Herbalife, will you call for same publicly?IF NOT, WHY NOT?

Disclosure: The author is short HLF.