In re HERBALIFE NUTRITION

 
UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 89704 / August 28, 2020 
 
ACCOUNTING AND AUDITING ENFORCEMENT  
Release No. 4165 / August 28, 2020 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-19948 
 
 
In the Matter of 
 
HERBALIFE NUTRITION 
LTD.,  
 
Respondent. 
 
 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, MAKING 
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER  
  
 
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
Exchange Act of 1934 (“Exchange Act”), against Herbalife Nutrition, Ltd. (“Herbalife” or 
“Respondent”).   
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, Respondent admits the Commission’s 
jurisdiction over it and the subject matter of these proceedings, and consents to the entry of this 
Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities 
Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set 
forth below. 
 

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III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that:  
 
Summary 
 
1. This matter concerns violations of the books and records and internal accounting 
controls provisions of the Foreign Corrupt Practices Act (“FCPA”) by Herbalife, a direct selling 
company incorporated in the Cayman Islands with headquarters in the United States. 
 
2. From 2006 to 2016, Herbalife’s Chinese subsidiaries (“Herbalife China”) engaged 
in a scheme to offer corrupt payments and other improper benefits to Chinese government officials.  
Between 2012 and 2016, Herbalife China employees, including Herbalife China’s then-Managing 
Director (“Managing Director”) and Herbalife China’s then-Director of External Affairs (“EA 
Director”), provided improper benefits of cash, gifts, travel, alcohol, meals, and entertainment to 
Chinese government officials.  Certain Herbalife executives received reports of high travel and 
entertainment spending in China and violations of Herbalife’s internal FCPA policies, but failed to 
detect and prevent improper payments and benefits and falsifications of expense reports.  By 2016, 
Herbalife China was responsible for approximately twenty percent of Herbalife’s worldwide net 
sales.  The improper benefits provided by Herbalife China were not accurately reflected in 
Herbalife’s books and records, and Herbalife failed to devise and maintain a sufficient system of 
internal accounting controls.   
 
3. As a result, Herbalife violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the 
Exchange Act. 
 
Respondent 
 
4. Herbalife is a direct selling company incorporated in the Cayman Islands with 
headquarters in the United States.  Herbalife’s common stock is registered with the Commission 
pursuant to Section 12(b) of the Exchange Act.  At all relevant times, its stock has been listed on 
the New York Stock Exchange (Ticker:  HLF), and it has been an “issuer” within the meaning of 
the FCPA.       
 
Relevant Entity and Persons 
 
5. Herbalife China is a group of wholly-owned, China-based subsidiaries of 
Herbalife.  Throughout the relevant period, Herbalife China’s financial statements were 
consolidated with those of Herbalife.  
 
                                                 
1
  The findings herein are made pursuant to Respondent's Offer of Settlement and are not 
binding on any other person or entity in this or any other proceeding.   
 

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6. Managing Director is a Chinese national residing in China and was Herbalife 
China’s Managing Director from December 2007 to May 2017.  Prior to becoming Managing 
Director, he was the Director of Sales for Herbalife China in 2006 and 2007.   
 
7. EA Director is a Chinese national who resides in China.  From 2006 to May 2017, 
she served as the head of the External Affairs department (“External Affairs”) for Herbalife China.   
 
Facts 
 
Herbalife China Provided Improper Benefits to Chinese Government Officials in 
Connection with Licenses   
 
8. From at least 2006, External Affairs, headed by EA Director, was responsible for 
obtaining direct selling licenses from the Chinese government – a prerequisite for Herbalife China 
to conduct its direct selling business in China.  External Affairs was also responsible for promoting 
Herbalife China’s interests to the Chinese government, responding to inquiries and investigative 
requests from the Chinese government, and marketing Herbalife China through the Chinese media.   
 
9. In late 2006, Herbalife China submitted an application to the Chinese government 
for its first direct selling license, which was ultimately granted for two cities in one province (the 
“Province”).  To facilitate approval of its license application, Herbalife China provided improper 
benefits, including payments, to government officials including those employed by Chinese 
Government Agency 1, the agency responsible for awarding direct selling licenses in China.  For 
example, in a January 10, 2007 telephone call, Managing Director (serving then as the Director of 
Sales for Herbalife China) asked EA Director whether Herbalife China had “taken care of” an 
official at Chinese Government Agency 1 (“Official 1”).  Managing Director then asked, “We have 
given the money to [Official 1], haven’t we?” to which EA Director replied, “Of course we have.”  
Managing Director then stated, “The money works well on him.”
2
  
 
10. In March 2007, Chinese government officials informed Herbalife China that it 
would receive its first direct selling license for the two cities in the Province.  During a March 22, 
2007 telephone call, Herbalife China’s Managing Director at the time (“Former MD”) 
congratulated EA Director on acquiring the license.  EA Director told Former MD, “I will take 
care of those people.  I will still have to invite them out for dinner next time I come anyway.”  
Former MD responded, “Right, good idea.  We will talk later about how you are going to take care 
of them.”  Later that day, during a call, EA Director spoke with a senior manager of External 
Affairs (“Senior Manager”).  EA Director told Senior Manager to “grab a pen and write down the 
gift list.”  After listing the names of 17 individuals, including Chinese Government Agency 1 
officials who were involved in application process for  Herbalife China’s pending direct selling 
license application, EA Director told Senior Manager to “go and get 260,000 yuan (approximately 
$33,700) and then divide the money among them, with a total of approximately 60,000 yuan 
(approximately $7,800) distributed to 16 Chinese Government Agency 1 officials”   
                                                 
2
  The telephone discussions between Herbalife China employees described in this Order 
were in Chinese, and the quoted excerpts are English translations of those discussions. 

4 
 
11. During a telephone call later that same day, Former MD told Managing Director 
(serving then as the Director of Sales for Herbalife China) that Former MD wanted to talk “about 
what I spent to take care of things for our license.”  Managing Director told Former MD that 
Managing Director had withdrawn over 200,000 yuan, and Former MD responded that EA 
Director “is pressing me about that.  I already took [100,000 yuan] out of the bank and gave it to 
[EA Director].” 
 
12. The following day, on March 23, 2007, Former MD spoke with a (now former) 
senior Herbalife executive in the U.S. (“Senior Executive”).  During that call, Former MD 
complained about Herbalife’s internal policy of limiting dinners with any Chinese government 
official to six dinners per year.  Former MD said that he was concerned about this limitation 
“because the people that does [sic] your license are those people, okay.  You have far more than 
just six dinners.”  Former MD told Senior Executive that this policy will put the onus on U.S. 
executives to approve any dinners in excess of six times per year, “I can always write back to you 
folks and ask for approvals but then it’s like putting the onus back on you folks to answer future 
questions.”  Former MD stated that he “disagree[d] that having dinners with officials, that you will 
influence them but it’s just part of the way of doing business.”  Senior Executive told Former MD 
that “I am sure there are a lot of government officials, you can put different names down...but I 
didn’t tell you that.”  After Former MD explained that “with the license process, you know, it is 
tough for me to use all the names,” Senior Executive responded, “How would anybody ever 
know?”  Former MD said he understood, and Senior Executive told Former MD, “All an auditor is 
going to do is pick up your receipts, your expense report, oh he did Mr. X, Mr. A, Mr. B, Mr. C, 
Mr. D., and if he did a few of these guys a couple times but that was it.”         
 
13. Thereafter, Herbalife China provided improper benefits to a Chinese government 
official in connection with a license.  On September 8, 2009, Managing Director spoke with an 
official from a government agency responsible, at least in part, for enforcing compliance with 
Chinese laws applicable to direct selling licenses (“Official 2”).  Managing Director thanked 
Official 2 for helping Herbalife China in connection with a license:  “You have certainly helped us 
to get this done.”  Official 2 asked to be a “consultant” for Herbalife to help pay for his “son’s 
house purchasing fund,” but Official 2 also said that he did not “want to discuss too much [ ] over 
the phone.”  
 
14. Herbalife China employees continued to influence government officials through 
lavish meals and gifts.  Consistent with the lack of commitment to compliance and accurate record 
keeping demonstrated by Senior Executive, Herbalife China employees funded those meals and 
gifts through falsified expense reimbursements until 2016.  
 
Herbalife China Provided Chinese Government Officials with Improper Benefits 
including Cash, Gifts, Meals, and Entertainment 
 
15. Herbalife China provided improper benefits of cash, gifts, meals, and entertainment 
to Chinese government officials.  For example, during a call on March 15, 2007, Managing 
Director (serving then as the Director of Sales for Herbalife China) and EA Director discussed 
paying certain provincial officials.  Managing Director told EA Director that he had been told to 
pay 35,000 yuan (approximately $4,500) to the officials.  Managing Director then asked, “Do you 

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think we should give more?”  EA Director responded that, “Okay.  But he has to guarantee this...to 
be effective.”  Managing Director explained that “we need to build the connection...I was thinking 
it is better to spend money beforehand than spending money afterwards.  This money is a small 
sum after all, and if we were to be penalized, the figure will be much greater.” 
 
16. Herbalife China continued to influence Chinese government officials with improper 
gifts of meals and entertainment.  An Herbalife China External Affairs manager (“EA Manager”) 
developed a relationship with a municipal government official (“Official 3”).  During telephone 
conversations, EA Manager and Official 3 discussed treating Chinese government officials to 
expensive meals, alcohol, karaoke, and luxury gifts.  For example, on January 11, 2012, EA 
Manager told Official 3 that EA Manager had entertained several government officials with 
dinners, karaoke, and alcohol.  EA Manager said that one government official who coordinated a 
dinner had been direct about his expectations:  “He was straight forward to me, because I’m not 
going to go invite people for dinner empty-handed...He said, ‘you be prepared.’  I said I 
understood.  I can’t leave him empty-handed.”  EA Manager also said that he had “taken care” of 
other Chinese government officials. 
 
17. On March 31, 2012, EA Manager told Official 3 that EA Manager treated Chinese 
government officials to expensive meals with alcohol.  EA Manager said that one evening was “so 
expensive, my hands were shaky.”  Later, EA Manager asked Official 3 for names of government 
officials that EA Manager could write on his expense reports because he spent so much money that 
he needed to add names to get under the company’s per head spending limitation.  
 
18. Other Herbalife China External Affairs employees also falsified expense reports to 
collect reimbursement for purported gifts and meals to Chinese government officials.  For 
example, on January 11, 2012, an External Affairs employee spoke with the External Affairs 
assistant manager responsible for processing expense reimbursement requests (“EA Assistant 
Manager”).  EA Assistant Manager asked the employee to submit falsified reimbursement requests 
supported by false meal and gift invoices totaling 577,000 yuan (approximately $91,000).       
 
19. Herbalife China also provided improper benefits, including payments, to Chinese 
government officials, to curtail government investigations of Herbalife China and to prevent or 
reduce fines issued to Herbalife China by the Chinese government.  For example, on August 8, 
2012, Managing Director and EA Director discussed an investigation in Nanjing.  EA Director told 
Managing Director that a Chinese government official had helped stop an investigation involving 
Herbalife China, and that EA Director was going to obtain the interview records and police report 
for the investigation.  Managing Director told EA Director to thank the government official, and 
she responded that she had already done so when he came to Beijing.  Managing Director told EA 
Director to give the government official the money that the company otherwise would have paid as 
a penalty, “Let’s give the fine to him.”  EA Director responded that they should not discuss this 
over the phone. 
 
20. The above-described conduct by External Affairs employees continued until 2016.  
According to internal audit reports, Herbalife China employees continued excessive spending on 
gifts, meals, and entertainment for Chinese government officials.       
 

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Herbalife China Provided Improper Benefits to Chinese State-Owned Media to 
Remove Negative Media Coverage of Herbalife China 
 
21. Herbalife China also provided improper benefits to government officials at state-
owned media outlets in China to delete negative media coverage of Herbalife China.  For example, 
in January 2013, a state-owned media outlet (“Media Outlet 1”) published a negative article about 
Herbalife China.  In an April 22, 2013 telephone call, EA Director told Managing Director that she 
had met with an official of Media Outlet 1 (“Media Official 1”) and asked him to remove the 
negative article.  EA Director told Managing Director:  “He already took what he should take, ate 
what he should eat, drank what he should drink, and used what he should use.  It’s up to him.”  
Managing Director responded:  “It is time for him to get to work, right?”  EA Director told 
Managing Director that she told Media Official 1 that “if you destroyed us, where could you get 
money?” to which Media Official 1 laughed and agreed to remove the negative articles.  Managing 
Director praised EA Director:  “You have done a great job!” 
 
22. In 2013, another state-owned media outlet (“Media Outlet 2”) published several 
negative articles about Herbalife China.  In an August 28, 2013 telephone call, EA Manager told 
Managing Director that he had met with a senior editor of Media Outlet 2 (“Media Outlet 2 
Editor”), who “had agreed that they would stop after publishing two articles and we would start to 
negotiate collaboration.”  EA Manager told Managing Director that when Media Outlet 2 Editor 
escorted him out, EA Manager “put our ‘goodwill’ on the desk.  He pretended he did not see it.  
This should not be a problem.”   
 
Herbalife China Employees Submitted and Approved False Expenses  
 
23. External Affairs employees submitted fake invoices and false expense reports to get 
reimbursed for improper benefits they provided to government officials.  For example, on January 
31, 2012, EA Manager asked Official 3 for names of government officials that EA Manager could 
list on a falsified expense report.  EA manager told Official 3 that a local government official had 
called EA Manager to ask EA Manager to pay for a meal for the official and his family during a 
family road trip.  EA Manager explained that the official “knows that [EA Manager] can arrange 
for any place all over the country.”  EA Manager said that the official “has helped [EA Manager] a 
lot before.”  EA Manager asked for names of officials that he could list on the expense report 
because “it’s not appropriate for [EA Manager] to write down [the official’s] name too many 
times.”        
 
24. During a telephone call on April 6, 2012, EA Manager told Official 3 that he went 
to buy fake receipts “to cover the gifts” for government officials, bags that were “very expensive 
by Prada.”  During a call on August 1, 2013, EA Manager and EA Director discussed whether to 
purchase fake meal invoices or fake gift invoices to best avoid internal audit oversight.  They also 
discussed how EA Manager’s usual fake invoice supplier was no longer available and his other 
sources could not provide enough fake invoices. 
 
25. During a telephone call on March 21, 2014, two External Affairs employees 
discussed how to submit falsified expense reports for 20,000 yuan for claimed expenses regarding 
gifts to government officials.  The two employees discussed splitting the gift expenses into two 

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applications and revising the list of purported participants because the original list of 20 supposed 
deputy directors was not realistic.   
 
26. In 2015 and 2016, Managing Director approved several expense applications 
submitted by an External Affairs employee for a reimbursement of approximately $150,000 
claimed to have been paid to a farm, purportedly for shipping fruit and vegetable gifts to Chinese 
government officials and media, including state-owned media officials.  The amount of produce 
purportedly purchased at the farm would have weighed approximately 34.5 metric tons, or 135 
pounds per purported gift recipient, and, thus, could not have been the actual purpose of the 
$150,000 reimbursed.  The expense applications and attached invoices were false, and the 
expenditures was improperly recorded in Herbalife’s financial records.   
 
27. Between 2012 and 2016, Herbalife China failed to accurately record gifts, meals, 
entertainment, and other expenditures provided for government officials on its books, records and 
accounts. 
 
28. Herbalife China’s financial statements were consolidated into Herbalife’s reported 
financial statements, which were filed in the United States.  Therefore, these falsified and/or fake 
expenses recorded by Herbalife China were incorporated into Herbalife’s financial statements.  
  
Herbalife Executives Received Internal Audit Reports Showing High Spending in 
China and Violations of Internal Policies 
 
29. At all relevant times, Herbalife’s Internal Audit department (“IA”) was headed by 
Herbalife’s Senior Vice President, Internal Audit (“IA Director”), who reported directly to 
Herbalife’s Audit Committee.  The IA in China (“China IA”), which reported directly to IA 
Director, audited External Affairs’ expenses approximately twice a year.  At the conclusion of each 
audit, China IA reported its results to IA, which then circulated a revised version of this report to 
Managing Director and Herbalife’s management (“EA Audit Report”).  The EA Audit Reports 
showed large expenses and identified violations of Herbalife China’s internal policies regarding 
compliance with FCPA, including fake receipts and verbal approval of expenses when prior, 
written approval had been required. 
 
30. For example, in 2014, an EA Audit Report covering expenses for the last six 
months of 2012 found that, during this six-month period, EA Director had been reimbursed over $1 
million on claimed meals and gifts for Chinese government officials and media, including state-
owned media officials.  According to the report, EA Director submitted expenses claiming to have 
attended 239 such meals, with a total of 4,312 participants, averaging $3,232 per meal.  These 
numbers were extraordinarily high, as there were only 184 days (including weekends) during those 
six months.  According to the EA Audit Report, during those six months, External Affairs, as a 
whole, submitted expenses claiming to have treated 30,076 Chinese government officials and 
media members to meals, and was reimbursed, as a whole, a total of approximately $3.7 million 
for claimed meals, gifts, and entertainment of government officials and media, including state-
owned media officials. 
 

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31. In March 2016, another EA Audit Report covering expenses for the first six months 
of 2015 stated that EA Director submitted expenses claiming to have attended 115 restaurant meals 
with Chinese government officials and media, including state-owned media officials, during that 
six-month period.  The average cost per meal was $1,472.  During that same period, according to 
the EA Audit Report, EA Director submitted expenses claiming to have provided gifts to 828 
government officials and media, including state-owned media officials, totaling $146,485.  The 
report stated that “vendor receipts were replaced when problems were found,” highlighting 
Herbalife China’s practice of allowing External Affairs to replace problematic receipts, and failing 
to highlight those problems on the final reports.  Despite this practice of replacing problematic 
receipts, the report still found violations, such as restaurant receipts submitted by different 
employees with very close transaction times in the same restaurant.  The report also found that 
External Affairs had expended a total of $811,465 without the corporate approvals required for 
those particular expenses, and that seven External Affairs employees (including EA Director) had 
relied solely upon verbal approvals for more than 50% of their expense applications, despite 
Herbalife China’s internal policy that such verbal approval could be used only for emergency 
expenditures. 
 
32. After receiving the March 2016 IA report, a member of Herbalife’s Board of 
Directors emailed the Audit Committee and IA Director asking whether the high spending by 
China EA was reasonable.  Another Board member responded:  “Please note I have questioned this 
every year I have been on the board, and the company has defended its position that these are 
reasonable within FCPA guidelines.”  IA Director responded that “the findings are the typical 
issues in these audits” and are within “tolerance.”  
 
33. Between 2012 and 2016, Herbalife reimbursed External Affairs employees for over 
$7.2 million in questionable External Affairs meal and gift expenditures in connection with 
Chinese officials and media, including state-owned media officials.  Herbalife obtained 
approximately $58.7 million in benefit based on the conduct described above.    
 
Legal Standards and Violations 
 
34. Under Section 21C of the Exchange Act, the Commission may impose a cease-and-
desist order upon any person who is violating, has violated, or is about to violate any provision of 
the Exchange Act or any rule or regulation thereunder, and upon any other person that is, was, or 
would be a cause of the violation, due to an act or omission the person knew or should have known 
would contribute to such violation. 
 
35. As a result of the conduct described above, Herbalife violated Section 13(b)(2)(A) 
of the Exchange Act, which requires issuers that have a class of securities registered pursuant to 
Section 12 of the Exchange Act and issuers with reporting obligations pursuant to Section 15(d) of 
the Exchange Act to make and keep books, records, and accounts which, in reasonable detail, 
accurately and fairly reflect their transactions and disposition of their assets.  [15 U.S.C. § 
78m(b)(2)(A)]. 
 
36. As a result of the conduct described above, Herbalife violated Section 13(b)(2)(B) 
of the Exchange Act, which requires issuers that have a class of securities registered pursuant to 

9 
 
Section 12 of the Exchange Act and issuers with reporting obligations pursuant to Section 15(d) of 
the Exchange Act to devise and maintain a system of internal accounting controls sufficient to 
provide reasonable assurances that (i) transactions are executed in accordance with management’s 
general or specific authorization; (ii) transactions are recorded as necessary (I) to permit 
preparation of financial statements in conformity with generally accepted accounting principles or 
any other criteria applicable to such statements, and (II) to maintain accountability for assets; (iii) 
access to assets is permitted only in accordance with management’s general or specific 
authorization; and (iv) the recorded accountability for assets is compared with the existing assets at 
reasonable intervals and appropriate action is taken with respect to any differences.  [15 U.S.C. § 
78m(b)(2)(B)]. 
 
Herbalife’s Cooperation and Remedial Efforts 
 
37. In determining to accept the Offer, the Commission considered remedial acts 
promptly undertaken by Respondent and cooperation afforded the Commission staff.  Herbalife’s 
remediation included terminating employees involved in the violative conduct, hiring a dedicated 
Chief Compliance Officer, enhancing internal accounting controls and compliance functions, and 
adopting a new compliance structure.  Herbalife’s cooperation included timely sharing of facts 
developed during the course of an internal investigation and voluntarily producing documents. 
 
Undertakings 
 
38.   Respondent has undertaken to: 
  
(1) Report to the Commission staff periodically during a three-year term, the 
status of its remediation and implementation of compliance measures, particularly as to the 
areas of due diligence on prospective and existing third-party consultants and vendors, 
FCPA training, and the testing of relevant controls including the collection and analysis of 
compliance data. 
 
(2) During this period, should Herbalife discover credible evidence, not already 
reported to the Commission staff, that questionable or corrupt payments or questionable or 
corrupt transfers of value may have been offered, promised, paid, or authorized by 
Herbalife, or any entity or person acting on behalf of Herbalife, or that related false books 
and records have been maintained, Herbalife shall promptly report such conduct to the 
Commission staff.   
 
(3) During this three-year period, Herbalife shall:  (1) conduct an initial review 
and submit an initial report and (2) conduct and prepare two follow-up reviews and reports, 
as described below: 
 
a. Herbalife shall submit to the Commission staff a written report 
within 365 calendar days of the entry of this Order setting forth a complete 
description of its FCPA and anti-corruption related remediation efforts to date, its 
proposals reasonably designed to improve Herbalife’s policies and procedures for 
the purpose of compliance with FCPA and other applicable anticorruption laws, and 

10 
 
the parameters of the subsequent review (the “Initial Report”).  The Initial Report 
shall be transmitted to Gerald A. Gross, Assistant Regional Director, United States 
Securities and Exchange Commission, New York Regional Office, 200 Vesey 
Street, Suite 400, New York, New York 10128.  Herbalife may extend the time 
period for issuance of the Initial Report with prior written approval of the 
Commission staff. 
 
b. Herbalife shall undertake two follow-up reviews, incorporating any 
comments provided by the Commission staff on the previous report, to further 
monitor and assess whether Herbalife’s policies and procedures are reasonably 
designed to detect and prevent violations of the FCPA and other applicable anti-
corruption laws (the “Follow-Up Reports”). 
 
c. The first Follow-up Report shall be completed by no later than 365 
days after the Initial Report. The second Follow-up Report shall be completed by 
no later than 700 days after the completion of the Initial Report. Herbalife may 
extend the time period for issuance of the Follow-up Reports with prior written 
approval of the Commission staff. 
 
d. The periodic reviews and reports submitted by Herbalife will likely 
include confidential financial, proprietary, competitive business or commercial 
information.  Public disclosure of the reports could discourage cooperation, 
impede pending or potential government investigations or undermine the 
objectives of the reporting requirement.  For these reasons, among others, the 
reports and the contents thereof are intended to remain and shall remain non-
public, except (1) pursuant to court order, (2) as agreed to by the parties in writing, 
(3) to the extent that the Commission determines in its sole discretion that 
disclosure would be in furtherance of the Commission’s discharge of its duties and 
responsibilities, or (4) is otherwise required by law. 
 
e. During this three-year period of review, Herbalife shall provide its 
external auditors with its annual internal audit plan and reports of the results of 
internal audit procedures and, subject to attorney-client privilege and attorney 
work product protections, its assessment of its FCPA compliance policies and 
procedures. 
 
f. During the three-year period of review, Herbalife shall provide 
Commission staff with any written reports or recommendations provided by 
Herbalife’s external auditors in response to Herbalife’s annual internal audit plan, 
reports of the results of internal audit procedures, and its assessments of its FCPA 
compliance policies and procedures.   
 
(4) Certify, in writing, compliance with the undertakings set forth above.  The 
certification shall identify the undertakings, provide written evidence of compliance in the 
form of a narrative, and be supported by exhibits sufficient to demonstrate compliance.  
The Commission staff may make reasonable requests for further evidence of compliance, 

11 
 
and Respondent agrees to provide such evidence.  The certification and supporting material 
shall be submitted to Gerald A. Gross, Assistant Regional Director, United States Securities 
and Exchange Commission, New York Regional Office, 200 Vesey Street, Suite 400, New 
York, New York 10128, with a copy to the Office of Chief Counsel of the Enforcement 
Division, no later than sixty (60) days from the date of the completion of the undertakings. 
 
39. Respondent undertakes to do the following:  in connection with this action and any 
related judicial or administrative proceeding or investigation commenced by the Commission or to 
which the Commission is a party, Respondent (i) agrees to appear and be interviewed by 
Commission staff at such times and places as the staff requests upon reasonable notice; (ii) will 
accept service by mail or facsimile transmission of notices or subpoenas issued by the Commission 
for documents or testimony at depositions, hearings, or trials, or in connection with any related 
investigation by Commission staff; (iii) appoints Respondent's undersigned attorney as agent to 
receive service of such notices and subpoenas; (iv) with respect to such notices and subpoenas, 
waives the territorial limits on service contained in Rule 45 of the Federal Rules of Civil Procedure 
and any applicable local rules, provided that the party requesting the testimony reimburses 
Respondent's travel, lodging, and subsistence expenses at the then-prevailing U.S. Government per 
diem rates; and (v) consents to personal jurisdiction over Respondent in any United States District 
Court for purposes of enforcing any such subpoena. 
 
In determining whether to accept the Offer, the Commission has considered the 
undertakings set forth in Paragraph 39. 
 
Deferred Prosecution Agreement 
 
40. Herbalife has entered into a three-year deferred prosecution agreement with the 
United States Department of Justice that acknowledges responsibility for criminal conduct relating 
to certain findings in the Order.    
  
Non-Imposition of a Civil Penalty 
 
41. Herbalife acknowledges that the Commission is not imposing a civil penalty based 
upon the imposition of a $55,743,093 criminal fine as part of its resolution with the Department of 
Justice. 
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent Herbalife’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 21C of the Exchange Act, Respondent Herbalife cease and desist 
from committing or causing any violations and any future violations of Sections 13(b)(2)(A) and 
13(b)(2)(B) of the Exchange Act.  
 

12 
 
 B. Respondent shall comply with the undertakings enumerated in Paragraph 38 above. 
 
C. Respondent shall, within 10 days of the entry of this Order, pay disgorgement of 
$58,669,993.00 and prejudgment interest of $8,643,504.50 to the Securities and Exchange 
Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act 
Section 21F(g)(3).  If timely payment is not made, additional interest shall accrue pursuant to SEC 
Rule of Practice 600. 
 
Payment must be made in one of the following ways:   
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
  

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Payments by check or money order must be accompanied by a cover letter identifying 
Herbalife as a Respondent in these proceedings, and the file number of these proceedings; a copy 
of the cover letter and check or money order must be sent to Sanjay Wadhwa, Senior Associate 
Director, New York Regional Office, Securities and Exchange Commission, 200 Vesey Street, 
Suite 400, New York, NY 10281-1022.     
 
 By the Commission. 
 
 
Vanessa A. Countryman 
Secretary 
 
 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 89704 / August 28, 2020 

 

ACCOUNTING AND AUDITING ENFORCEMENT  

Release No. 4165 / August 28, 2020 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-19948 

 

 

In the Matter of 

 

HERBALIFE NUTRITION 

LTD.,  

 

Respondent. 

 

 

 

 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 21C OF THE SECURITIES 

EXCHANGE ACT OF 1934, MAKING 

FINDINGS, AND IMPOSING A CEASE-

AND-DESIST ORDER  

  

 

I. 

 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 

Exchange Act of 1934 (“Exchange Act”), against Herbalife Nutrition, Ltd. (“Herbalife” or 

“Respondent”).   

 

II. 

 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, Respondent admits the Commission’s 

jurisdiction over it and the subject matter of these proceedings, and consents to the entry of this 

Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities 

Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set 

forth below. 

 



2 

 

III. 

 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  

 

Summary 

 

1. This matter concerns violations of the books and records and internal accounting 

controls provisions of the Foreign Corrupt Practices Act (“FCPA”) by Herbalife, a direct selling 

company incorporated in the Cayman Islands with headquarters in the United States. 

 

2. From 2006 to 2016, Herbalife’s Chinese subsidiaries (“Herbalife China”) engaged 

in a scheme to offer corrupt payments and other improper benefits to Chinese government officials.  

Between 2012 and 2016, Herbalife China employees, including Herbalife China’s then-Managing 

Director (“Managing Director”) and Herbalife China’s then-Director of External Affairs (“EA 

Director”), provided improper benefits of cash, gifts, travel, alcohol, meals, and entertainment to 

Chinese government officials.  Certain Herbalife executives received reports of high travel and 

entertainment spending in China and violations of Herbalife’s internal FCPA policies, but failed to 

detect and prevent improper payments and benefits and falsifications of expense reports.  By 2016, 

Herbalife China was responsible for approximately twenty percent of Herbalife’s worldwide net 

sales.  The improper benefits provided by Herbalife China were not accurately reflected in 

Herbalife’s books and records, and Herbalife failed to devise and maintain a sufficient system of 

internal accounting controls.   

 

3. As a result, Herbalife violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the 

Exchange Act. 

 

Respondent 

 

4. Herbalife is a direct selling company incorporated in the Cayman Islands with 

headquarters in the United States.  Herbalife’s common stock is registered with the Commission 

pursuant to Section 12(b) of the Exchange Act.  At all relevant times, its stock has been listed on 

the New York Stock Exchange (Ticker:  HLF), and it has been an “issuer” within the meaning of 

the FCPA.       

 

Relevant Entity and Persons 

 

5. Herbalife China is a group of wholly-owned, China-based subsidiaries of 

Herbalife.  Throughout the relevant period, Herbalife China’s financial statements were 

consolidated with those of Herbalife.  

 

                                                 
1  The findings herein are made pursuant to Respondent's Offer of Settlement and are not 

binding on any other person or entity in this or any other proceeding.   

 



3 

 

6. Managing Director is a Chinese national residing in China and was Herbalife 

China’s Managing Director from December 2007 to May 2017.  Prior to becoming Managing 

Director, he was the Director of Sales for Herbalife China in 2006 and 2007.   

 

7. EA Director is a Chinese national who resides in China.  From 2006 to May 2017, 

she served as the head of the External Affairs department (“External Affairs”) for Herbalife China.   

 

Facts 

 

Herbalife China Provided Improper Benefits to Chinese Government Officials in 

Connection with Licenses   

 

8. From at least 2006, External Affairs, headed by EA Director, was responsible for 

obtaining direct selling licenses from the Chinese government – a prerequisite for Herbalife China 

to conduct its direct selling business in China.  External Affairs was also responsible for promoting 

Herbalife China’s interests to the Chinese government, responding to inquiries and investigative 

requests from the Chinese government, and marketing Herbalife China through the Chinese media.   

 

9. In late 2006, Herbalife China submitted an application to the Chinese government 

for its first direct selling license, which was ultimately granted for two cities in one province (the 

“Province”).  To facilitate approval of its license application, Herbalife China provided improper 

benefits, including payments, to government officials including those employed by Chinese 

Government Agency 1, the agency responsible for awarding direct selling licenses in China.  For 

example, in a January 10, 2007 telephone call, Managing Director (serving then as the Director of 

Sales for Herbalife China) asked EA Director whether Herbalife China had “taken care of” an 

official at Chinese Government Agency 1 (“Official 1”).  Managing Director then asked, “We have 

given the money to [Official 1], haven’t we?” to which EA Director replied, “Of course we have.”  

Managing Director then stated, “The money works well on him.”2  

 

10. In March 2007, Chinese government officials informed Herbalife China that it 

would receive its first direct selling license for the two cities in the Province.  During a March 22, 

2007 telephone call, Herbalife China’s Managing Director at the time (“Former MD”) 

congratulated EA Director on acquiring the license.  EA Director told Former MD, “I will take 

care of those people.  I will still have to invite them out for dinner next time I come anyway.”  

Former MD responded, “Right, good idea.  We will talk later about how you are going to take care 

of them.”  Later that day, during a call, EA Director spoke with a senior manager of External 

Affairs (“Senior Manager”).  EA Director told Senior Manager to “grab a pen and write down the 

gift list.”  After listing the names of 17 individuals, including Chinese Government Agency 1 

officials who were involved in application process for  Herbalife China’s pending direct selling 

license application, EA Director told Senior Manager to “go and get 260,000 yuan (approximately 

$33,700) and then divide the money among them, with a total of approximately 60,000 yuan 

(approximately $7,800) distributed to 16 Chinese Government Agency 1 officials”   

                                                 
2  The telephone discussions between Herbalife China employees described in this Order 

were in Chinese, and the quoted excerpts are English translations of those discussions. 



4 

 

11. During a telephone call later that same day, Former MD told Managing Director 

(serving then as the Director of Sales for Herbalife China) that Former MD wanted to talk “about 

what I spent to take care of things for our license.”  Managing Director told Former MD that 

Managing Director had withdrawn over 200,000 yuan, and Former MD responded that EA 

Director “is pressing me about that.  I already took [100,000 yuan] out of the bank and gave it to 

[EA Director].” 

 

12. The following day, on March 23, 2007, Former MD spoke with a (now former) 

senior Herbalife executive in the U.S. (“Senior Executive”).  During that call, Former MD 

complained about Herbalife’s internal policy of limiting dinners with any Chinese government 

official to six dinners per year.  Former MD said that he was concerned about this limitation 

“because the people that does [sic] your license are those people, okay.  You have far more than 

just six dinners.”  Former MD told Senior Executive that this policy will put the onus on U.S. 

executives to approve any dinners in excess of six times per year, “I can always write back to you 

folks and ask for approvals but then it’s like putting the onus back on you folks to answer future 

questions.”  Former MD stated that he “disagree[d] that having dinners with officials, that you will 

influence them but it’s just part of the way of doing business.”  Senior Executive told Former MD 

that “I am sure there are a lot of government officials, you can put different names down…but I 

didn’t tell you that.”  After Former MD explained that “with the license process, you know, it is 

tough for me to use all the names,” Senior Executive responded, “How would anybody ever 

know?”  Former MD said he understood, and Senior Executive told Former MD, “All an auditor is 

going to do is pick up your receipts, your expense report, oh he did Mr. X, Mr. A, Mr. B, Mr. C, 

Mr. D., and if he did a few of these guys a couple times but that was it.”         

 

13. Thereafter, Herbalife China provided improper benefits to a Chinese government 

official in connection with a license.  On September 8, 2009, Managing Director spoke with an 

official from a government agency responsible, at least in part, for enforcing compliance with 

Chinese laws applicable to direct selling licenses (“Official 2”).  Managing Director thanked 

Official 2 for helping Herbalife China in connection with a license:  “You have certainly helped us 

to get this done.”  Official 2 asked to be a “consultant” for Herbalife to help pay for his “son’s 

house purchasing fund,” but Official 2 also said that he did not “want to discuss too much [ ] over 

the phone.”  

 

14. Herbalife China employees continued to influence government officials through 

lavish meals and gifts.  Consistent with the lack of commitment to compliance and accurate record 

keeping demonstrated by Senior Executive, Herbalife China employees funded those meals and 

gifts through falsified expense reimbursements until 2016.  

 

Herbalife China Provided Chinese Government Officials with Improper Benefits 

including Cash, Gifts, Meals, and Entertainment 

 

15. Herbalife China provided improper benefits of cash, gifts, meals, and entertainment 

to Chinese government officials.  For example, during a call on March 15, 2007, Managing 

Director (serving then as the Director of Sales for Herbalife China) and EA Director discussed 

paying certain provincial officials.  Managing Director told EA Director that he had been told to 

pay 35,000 yuan (approximately $4,500) to the officials.  Managing Director then asked, “Do you 



5 

 

think we should give more?”  EA Director responded that, “Okay.  But he has to guarantee this…to 

be effective.”  Managing Director explained that “we need to build the connection…I was thinking 

it is better to spend money beforehand than spending money afterwards.  This money is a small 

sum after all, and if we were to be penalized, the figure will be much greater.” 

 

16. Herbalife China continued to influence Chinese government officials with improper 

gifts of meals and entertainment.  An Herbalife China External Affairs manager (“EA Manager”) 

developed a relationship with a municipal government official (“Official 3”).  During telephone 

conversations, EA Manager and Official 3 discussed treating Chinese government officials to 

expensive meals, alcohol, karaoke, and luxury gifts.  For example, on January 11, 2012, EA 

Manager told Official 3 that EA Manager had entertained several government officials with 

dinners, karaoke, and alcohol.  EA Manager said that one government official who coordinated a 

dinner had been direct about his expectations:  “He was straight forward to me, because I’m not 

going to go invite people for dinner empty-handed…He said, ‘you be prepared.’  I said I 

understood.  I can’t leave him empty-handed.”  EA Manager also said that he had “taken care” of 

other Chinese government officials. 

 

17. On March 31, 2012, EA Manager told Official 3 that EA Manager treated Chinese 

government officials to expensive meals with alcohol.  EA Manager said that one evening was “so 

expensive, my hands were shaky.”  Later, EA Manager asked Official 3 for names of government 

officials that EA Manager could write on his expense reports because he spent so much money that 

he needed to add names to get under the company’s per head spending limitation.  

 

18. Other Herbalife China External Affairs employees also falsified expense reports to 

collect reimbursement for purported gifts and meals to Chinese government officials.  For 

example, on January 11, 2012, an External Affairs employee spoke with the External Affairs 

assistant manager responsible for processing expense reimbursement requests (“EA Assistant 

Manager”).  EA Assistant Manager asked the employee to submit falsified reimbursement requests 

supported by false meal and gift invoices totaling 577,000 yuan (approximately $91,000).       

 

19. Herbalife China also provided improper benefits, including payments, to Chinese 

government officials, to curtail government investigations of Herbalife China and to prevent or 

reduce fines issued to Herbalife China by the Chinese government.  For example, on August 8, 

2012, Managing Director and EA Director discussed an investigation in Nanjing.  EA Director told 

Managing Director that a Chinese government official had helped stop an investigation involving 

Herbalife China, and that EA Director was going to obtain the interview records and police report 

for the investigation.  Managing Director told EA Director to thank the government official, and 

she responded that she had already done so when he came to Beijing.  Managing Director told EA 

Director to give the government official the money that the company otherwise would have paid as 

a penalty, “Let’s give the fine to him.”  EA Director responded that they should not discuss this 

over the phone. 

 

20. The above-described conduct by External Affairs employees continued until 2016.  

According to internal audit reports, Herbalife China employees continued excessive spending on 

gifts, meals, and entertainment for Chinese government officials.       

 



6 

 

Herbalife China Provided Improper Benefits to Chinese State-Owned Media to 

Remove Negative Media Coverage of Herbalife China 

 

21. Herbalife China also provided improper benefits to government officials at state-

owned media outlets in China to delete negative media coverage of Herbalife China.  For example, 

in January 2013, a state-owned media outlet (“Media Outlet 1”) published a negative article about 

Herbalife China.  In an April 22, 2013 telephone call, EA Director told Managing Director that she 

had met with an official of Media Outlet 1 (“Media Official 1”) and asked him to remove the 

negative article.  EA Director told Managing Director:  “He already took what he should take, ate 

what he should eat, drank what he should drink, and used what he should use.  It’s up to him.”  

Managing Director responded:  “It is time for him to get to work, right?”  EA Director told 

Managing Director that she told Media Official 1 that “if you destroyed us, where could you get 

money?” to which Media Official 1 laughed and agreed to remove the negative articles.  Managing 

Director praised EA Director:  “You have done a great job!” 

 

22. In 2013, another state-owned media outlet (“Media Outlet 2”) published several 

negative articles about Herbalife China.  In an August 28, 2013 telephone call, EA Manager told 

Managing Director that he had met with a senior editor of Media Outlet 2 (“Media Outlet 2 

Editor”), who “had agreed that they would stop after publishing two articles and we would start to 

negotiate collaboration.”  EA Manager told Managing Director that when Media Outlet 2 Editor 

escorted him out, EA Manager “put our ‘goodwill’ on the desk.  He pretended he did not see it.  

This should not be a problem.”   

 

Herbalife China Employees Submitted and Approved False Expenses  

 

23. External Affairs employees submitted fake invoices and false expense reports to get 

reimbursed for improper benefits they provided to government officials.  For example, on January 

31, 2012, EA Manager asked Official 3 for names of government officials that EA Manager could 

list on a falsified expense report.  EA manager told Official 3 that a local government official had 

called EA Manager to ask EA Manager to pay for a meal for the official and his family during a 

family road trip.  EA Manager explained that the official “knows that [EA Manager] can arrange 

for any place all over the country.”  EA Manager said that the official “has helped [EA Manager] a 

lot before.”  EA Manager asked for names of officials that he could list on the expense report 

because “it’s not appropriate for [EA Manager] to write down [the official’s] name too many 

times.”        

 

24. During a telephone call on April 6, 2012, EA Manager told Official 3 that he went 

to buy fake receipts “to cover the gifts” for government officials, bags that were “very expensive 

by Prada.”  During a call on August 1, 2013, EA Manager and EA Director discussed whether to 

purchase fake meal invoices or fake gift invoices to best avoid internal audit oversight.  They also 

discussed how EA Manager’s usual fake invoice supplier was no longer available and his other 

sources could not provide enough fake invoices. 

 

25. During a telephone call on March 21, 2014, two External Affairs employees 

discussed how to submit falsified expense reports for 20,000 yuan for claimed expenses regarding 

gifts to government officials.  The two employees discussed splitting the gift expenses into two 



7 

 

applications and revising the list of purported participants because the original list of 20 supposed 

deputy directors was not realistic.   

 

26. In 2015 and 2016, Managing Director approved several expense applications 

submitted by an External Affairs employee for a reimbursement of approximately $150,000 

claimed to have been paid to a farm, purportedly for shipping fruit and vegetable gifts to Chinese 

government officials and media, including state-owned media officials.  The amount of produce 

purportedly purchased at the farm would have weighed approximately 34.5 metric tons, or 135 

pounds per purported gift recipient, and, thus, could not have been the actual purpose of the 

$150,000 reimbursed.  The expense applications and attached invoices were false, and the 

expenditures was improperly recorded in Herbalife’s financial records.   

 

27. Between 2012 and 2016, Herbalife China failed to accurately record gifts, meals, 

entertainment, and other expenditures provided for government officials on its books, records and 

accounts. 

 

28. Herbalife China’s financial statements were consolidated into Herbalife’s reported 

financial statements, which were filed in the United States.  Therefore, these falsified and/or fake 

expenses recorded by Herbalife China were incorporated into Herbalife’s financial statements.  

  

Herbalife Executives Received Internal Audit Reports Showing High Spending in 

China and Violations of Internal Policies 

 

29. At all relevant times, Herbalife’s Internal Audit department (“IA”) was headed by 

Herbalife’s Senior Vice President, Internal Audit (“IA Director”), who reported directly to 

Herbalife’s Audit Committee.  The IA in China (“China IA”), which reported directly to IA 

Director, audited External Affairs’ expenses approximately twice a year.  At the conclusion of each 

audit, China IA reported its results to IA, which then circulated a revised version of this report to 

Managing Director and Herbalife’s management (“EA Audit Report”).  The EA Audit Reports 

showed large expenses and identified violations of Herbalife China’s internal policies regarding 

compliance with FCPA, including fake receipts and verbal approval of expenses when prior, 

written approval had been required. 

 

30. For example, in 2014, an EA Audit Report covering expenses for the last six 

months of 2012 found that, during this six-month period, EA Director had been reimbursed over $1 

million on claimed meals and gifts for Chinese government officials and media, including state-

owned media officials.  According to the report, EA Director submitted expenses claiming to have 

attended 239 such meals, with a total of 4,312 participants, averaging $3,232 per meal.  These 

numbers were extraordinarily high, as there were only 184 days (including weekends) during those 

six months.  According to the EA Audit Report, during those six months, External Affairs, as a 

whole, submitted expenses claiming to have treated 30,076 Chinese government officials and 

media members to meals, and was reimbursed, as a whole, a total of approximately $3.7 million 

for claimed meals, gifts, and entertainment of government officials and media, including state-

owned media officials. 

 



8 

 

31. In March 2016, another EA Audit Report covering expenses for the first six months 

of 2015 stated that EA Director submitted expenses claiming to have attended 115 restaurant meals 

with Chinese government officials and media, including state-owned media officials, during that 

six-month period.  The average cost per meal was $1,472.  During that same period, according to 

the EA Audit Report, EA Director submitted expenses claiming to have provided gifts to 828 

government officials and media, including state-owned media officials, totaling $146,485.  The 

report stated that “vendor receipts were replaced when problems were found,” highlighting 

Herbalife China’s practice of allowing External Affairs to replace problematic receipts, and failing 

to highlight those problems on the final reports.  Despite this practice of replacing problematic 

receipts, the report still found violations, such as restaurant receipts submitted by different 

employees with very close transaction times in the same restaurant.  The report also found that 

External Affairs had expended a total of $811,465 without the corporate approvals required for 

those particular expenses, and that seven External Affairs employees (including EA Director) had 

relied solely upon verbal approvals for more than 50% of their expense applications, despite 

Herbalife China’s internal policy that such verbal approval could be used only for emergency 

expenditures. 

 

32. After receiving the March 2016 IA report, a member of Herbalife’s Board of 

Directors emailed the Audit Committee and IA Director asking whether the high spending by 

China EA was reasonable.  Another Board member responded:  “Please note I have questioned this 

every year I have been on the board, and the company has defended its position that these are 

reasonable within FCPA guidelines.”  IA Director responded that “the findings are the typical 

issues in these audits” and are within “tolerance.”  

 

33. Between 2012 and 2016, Herbalife reimbursed External Affairs employees for over 

$7.2 million in questionable External Affairs meal and gift expenditures in connection with 

Chinese officials and media, including state-owned media officials.  Herbalife obtained 

approximately $58.7 million in benefit based on the conduct described above.    

 

Legal Standards and Violations 

 

34. Under Section 21C of the Exchange Act, the Commission may impose a cease-and-

desist order upon any person who is violating, has violated, or is about to violate any provision of 

the Exchange Act or any rule or regulation thereunder, and upon any other person that is, was, or 

would be a cause of the violation, due to an act or omission the person knew or should have known 

would contribute to such violation. 

 

35. As a result of the conduct described above, Herbalife violated Section 13(b)(2)(A) 

of the Exchange Act, which requires issuers that have a class of securities registered pursuant to 

Section 12 of the Exchange Act and issuers with reporting obligations pursuant to Section 15(d) of 

the Exchange Act to make and keep books, records, and accounts which, in reasonable detail, 

accurately and fairly reflect their transactions and disposition of their assets.  [15 U.S.C. § 

78m(b)(2)(A)]. 

 

36. As a result of the conduct described above, Herbalife violated Section 13(b)(2)(B) 

of the Exchange Act, which requires issuers that have a class of securities registered pursuant to 



9 

 

Section 12 of the Exchange Act and issuers with reporting obligations pursuant to Section 15(d) of 

the Exchange Act to devise and maintain a system of internal accounting controls sufficient to 

provide reasonable assurances that (i) transactions are executed in accordance with management’s 

general or specific authorization; (ii) transactions are recorded as necessary (I) to permit 

preparation of financial statements in conformity with generally accepted accounting principles or 

any other criteria applicable to such statements, and (II) to maintain accountability for assets; (iii) 

access to assets is permitted only in accordance with management’s general or specific 

authorization; and (iv) the recorded accountability for assets is compared with the existing assets at 

reasonable intervals and appropriate action is taken with respect to any differences.  [15 U.S.C. § 

78m(b)(2)(B)]. 

 

Herbalife’s Cooperation and Remedial Efforts 

 

37. In determining to accept the Offer, the Commission considered remedial acts 

promptly undertaken by Respondent and cooperation afforded the Commission staff.  Herbalife’s 

remediation included terminating employees involved in the violative conduct, hiring a dedicated 

Chief Compliance Officer, enhancing internal accounting controls and compliance functions, and 

adopting a new compliance structure.  Herbalife’s cooperation included timely sharing of facts 

developed during the course of an internal investigation and voluntarily producing documents. 

 

Undertakings 

 

38.   Respondent has undertaken to: 

  

(1) Report to the Commission staff periodically during a three-year term, the 

status of its remediation and implementation of compliance measures, particularly as to the 

areas of due diligence on prospective and existing third-party consultants and vendors, 

FCPA training, and the testing of relevant controls including the collection and analysis of 

compliance data. 

 

(2) During this period, should Herbalife discover credible evidence, not already 

reported to the Commission staff, that questionable or corrupt payments or questionable or 

corrupt transfers of value may have been offered, promised, paid, or authorized by 

Herbalife, or any entity or person acting on behalf of Herbalife, or that related false books 

and records have been maintained, Herbalife shall promptly report such conduct to the 

Commission staff.   

 

(3) During this three-year period, Herbalife shall:  (1) conduct an initial review 

and submit an initial report and (2) conduct and prepare two follow-up reviews and reports, 

as described below: 

 

a. Herbalife shall submit to the Commission staff a written report 

within 365 calendar days of the entry of this Order setting forth a complete 

description of its FCPA and anti-corruption related remediation efforts to date, its 

proposals reasonably designed to improve Herbalife’s policies and procedures for 

the purpose of compliance with FCPA and other applicable anticorruption laws, and 



10 

 

the parameters of the subsequent review (the “Initial Report”).  The Initial Report 

shall be transmitted to Gerald A. Gross, Assistant Regional Director, United States 

Securities and Exchange Commission, New York Regional Office, 200 Vesey 

Street, Suite 400, New York, New York 10128.  Herbalife may extend the time 

period for issuance of the Initial Report with prior written approval of the 

Commission staff. 

 

b. Herbalife shall undertake two follow-up reviews, incorporating any 

comments provided by the Commission staff on the previous report, to further 

monitor and assess whether Herbalife’s policies and procedures are reasonably 

designed to detect and prevent violations of the FCPA and other applicable anti-

corruption laws (the “Follow-Up Reports”). 

 

c. The first Follow-up Report shall be completed by no later than 365 

days after the Initial Report. The second Follow-up Report shall be completed by 

no later than 700 days after the completion of the Initial Report. Herbalife may 

extend the time period for issuance of the Follow-up Reports with prior written 

approval of the Commission staff. 

 

d. The periodic reviews and reports submitted by Herbalife will likely 

include confidential financial, proprietary, competitive business or commercial 

information.  Public disclosure of the reports could discourage cooperation, 

impede pending or potential government investigations or undermine the 

objectives of the reporting requirement.  For these reasons, among others, the 

reports and the contents thereof are intended to remain and shall remain non-

public, except (1) pursuant to court order, (2) as agreed to by the parties in writing, 

(3) to the extent that the Commission determines in its sole discretion that 

disclosure would be in furtherance of the Commission’s discharge of its duties and 

responsibilities, or (4) is otherwise required by law. 

 

e. During this three-year period of review, Herbalife shall provide its 

external auditors with its annual internal audit plan and reports of the results of 

internal audit procedures and, subject to attorney-client privilege and attorney 

work product protections, its assessment of its FCPA compliance policies and 

procedures. 

 

f. During the three-year period of review, Herbalife shall provide 

Commission staff with any written reports or recommendations provided by 

Herbalife’s external auditors in response to Herbalife’s annual internal audit plan, 

reports of the results of internal audit procedures, and its assessments of its FCPA 

compliance policies and procedures.   

 

(4) Certify, in writing, compliance with the undertakings set forth above.  The 

certification shall identify the undertakings, provide written evidence of compliance in the 

form of a narrative, and be supported by exhibits sufficient to demonstrate compliance.  

The Commission staff may make reasonable requests for further evidence of compliance, 



11 

 

and Respondent agrees to provide such evidence.  The certification and supporting material 

shall be submitted to Gerald A. Gross, Assistant Regional Director, United States Securities 

and Exchange Commission, New York Regional Office, 200 Vesey Street, Suite 400, New 

York, New York 10128, with a copy to the Office of Chief Counsel of the Enforcement 

Division, no later than sixty (60) days from the date of the completion of the undertakings. 

 

39. Respondent undertakes to do the following:  in connection with this action and any 

related judicial or administrative proceeding or investigation commenced by the Commission or to 

which the Commission is a party, Respondent (i) agrees to appear and be interviewed by 

Commission staff at such times and places as the staff requests upon reasonable notice; (ii) will 

accept service by mail or facsimile transmission of notices or subpoenas issued by the Commission 

for documents or testimony at depositions, hearings, or trials, or in connection with any related 

investigation by Commission staff; (iii) appoints Respondent's undersigned attorney as agent to 

receive service of such notices and subpoenas; (iv) with respect to such notices and subpoenas, 

waives the territorial limits on service contained in Rule 45 of the Federal Rules of Civil Procedure 

and any applicable local rules, provided that the party requesting the testimony reimburses 

Respondent's travel, lodging, and subsistence expenses at the then-prevailing U.S. Government per 

diem rates; and (v) consents to personal jurisdiction over Respondent in any United States District 

Court for purposes of enforcing any such subpoena. 

 

In determining whether to accept the Offer, the Commission has considered the 

undertakings set forth in Paragraph 39. 

 

Deferred Prosecution Agreement 

 

40. Herbalife has entered into a three-year deferred prosecution agreement with the 

United States Department of Justice that acknowledges responsibility for criminal conduct relating 

to certain findings in the Order.    

  

Non-Imposition of a Civil Penalty 

 

41. Herbalife acknowledges that the Commission is not imposing a civil penalty based 

upon the imposition of a $55,743,093 criminal fine as part of its resolution with the Department of 

Justice. 

 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent Herbalife’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

 A. Pursuant to Section 21C of the Exchange Act, Respondent Herbalife cease and desist 

from committing or causing any violations and any future violations of Sections 13(b)(2)(A) and 

13(b)(2)(B) of the Exchange Act.  

 



12 

 

 B. Respondent shall comply with the undertakings enumerated in Paragraph 38 above. 

 

C. Respondent shall, within 10 days of the entry of this Order, pay disgorgement of 

$58,669,993.00 and prejudgment interest of $8,643,504.50 to the Securities and Exchange 

Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act 

Section 21F(g)(3).  If timely payment is not made, additional interest shall accrue pursuant to SEC 

Rule of Practice 600. 

 

Payment must be made in one of the following ways:   

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

  

http://www.sec.gov/about/offices/ofm.htm


13 

 

Payments by check or money order must be accompanied by a cover letter identifying 

Herbalife as a Respondent in these proceedings, and the file number of these proceedings; a copy 

of the cover letter and check or money order must be sent to Sanjay Wadhwa, Senior Associate 

Director, New York Regional Office, Securities and Exchange Commission, 200 Vesey Street, 

Suite 400, New York, NY 10281-1022.     

 

 By the Commission. 

 

 

Vanessa A. Countryman 

Secretary