Congresswoman From California Urges FTC to Probe Herbalife

According to an article written by Dan McCrum of the Financial Times, Linda Sanchez, a Democratic congresswoman from California has urged the Federal Trade Commission to investigate Herbalife HLF. Sanchez alleges that the nutrition supplement company is a pyramid scheme.

In a letter to Edith Ramirez, the current FTC chairwoman, Sanchez commented that she was, “troubled by allegations that this company may be harming consumers – especially those from our country's most vulnerable populations.”

Sanchez is a leading advocate in the U.S. Latino community and believes Herbalife is taking advantage of low income Spanish-speaking Americans. The FTC confirmed that it had received Sanchez's letter, but declined to comment on its contents.

This isn't the first time Herbalife has found itself in hot water. The CEO of Pershing Square Capital, Bill Ackman, is a prominent bear on the company. He has been shorting Herbalife since December and strongly believes the company is in fact a pyramid scheme.

Other organizations share Sanchez and Ackerman's concerns. The Hispanic Federation, a lobby group, wrote a letter of its own to the FTC urging its commission to investigate Herbalife's business practices. The National Consumers League, another lobby group, contacted the FTC in March. The letter noted that, “Low-income consumers, as well as African-Americans and Hispanics, were found to be especially vulnerable to pyramid schemes masquerading as legitimate business opportunities.”

Herbalife has denied all of these allegations. The company is currently undergoing a buying spree. Bulls in the market helped the stock rise almost 4 percent yesterday.

Herbalife closed Wednesday at $At the time of publication the company traded up 3.05 percent and trades at $46.65.