Vice President Kamala Harris ignored recommendations while attorney general of California to investigate an alleged pyramid scheme at a company linked to her husband, according to documents obtained by The New York Post.
The Post reported on Saturday that it had documents showing that Harris discounted recommendations from staff to investigate Herbalife in 2015 over pyramid scheme suspicions at the same time her husband Doug Emhoff worked at a law firm that represented Herbalife. Herbalife is a Los Angeles based dietary supplement company that was sued by the Federal Trade Commission in 2016 over accusations that the company was lying to customers about how much money they could make selling Herbalife products.
While she was attorney general, Harris was given a memo from her staff saying that Herbalife was “engaging in a number of tactics designed to maximize the number of distributors selling its products, which results in cash flow back to those at the top of the organizational pyramid,” according to a March 2015 document obtained by the Post.
The memo was written by Supervising Deputy Attorney General Judith Fiorentini and Deputy Attorneys General Sanna Singer and Jinsook Otha. They said that there was a “need for formal investigative authority” to look into whether Herbalife was trying “to skirt around” product distribution regulations.
Harris’ staff wanted to interview former Herbalife distributors, subpoena company documents, and begin an undercover investigation. They wanted two deputy attorneys allocated to look into the company.
“Conducting an investigation of Herbalife at this juncture will send the message that this office takes continued monitoring and enforcement of its existing judgements very seriously,” the memo reads. “In addition, it will ensure that Herbalife is held accountable for the acts of its distributors.”
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Despite her staff’s urging, Harris did not open up an investigation into Herbalife. Meanwhile, Emhoff worked at Venable LLP, which represented Herbalife after it was sued by the FTC. Emoff did not personally represent Herbalife, though he was head of the Los Angeles branch of Venable.
In 2016, Herbalife settled with the FTC, agreeing to pay customers $200 million and restructure its business.
Pershing Square CEO Bill Ackman, who previously shorted Herbalife back in 2012, pointed out on Thursday the ties between Emhoff and Herbalife. He also critiqued Harris’s decision not to investigate the company.
“As a result, her staff leaked its memo to us and the media at that time. Unfortunately, by then no one was interested in the story,” he said. “Interestingly, at that same time, AG Harris’ husband was a partner at Venable, one of HLF’s top law firms. HLF has always been very savvy about managing its regulatory and legal risks.”
“The whole situation is an incredibly damning indictment of how our regulatory enforcement apparatus works,” Ackman said of the settlement with the FTC and Harris’s ignoring of the memo.
