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Herbalife Shares Bounce Off Lows Following $123M Corruption Settlement

Herbalife Shares Bounce Off Lows Following $123M Corruption Settlement

Shares of multi-level marketing company Herbalife Nutrition Ltd (NYSE: HLF) were briefly halted on Friday after news broke of criminal charges against the company related to corruption in China.

What Happened? On Friday, Herbalife agreed to settle a U.S. criminal case against the company alleging that Herbalife bribed Chinese government agencies and media outlets to help it improve its business prospects in China, which accounted for 19% of the company’s total sales as of 2016. As part of the settlement, Herbalife will pay the U.S. Justice Department and the U.S. Securities and Exchange Commission $123 million in penalties.

Herbalife shares opened at $49.74 on Friday before dropping as low as $43.01 after news of the charges broke. After a brief trading halt for pending news, shares bounced back to $48.78 following the settlement headlines.

Why It’s Important: Herbalife had previously said back in May it had agreed in principle to a settlement with the DoJ and the SEC over charges the company had violated the U.S. Foreign Corrupt Practices Act by paying off Chinese officials as part of a decade-long bribery scheme aimed at gaining favorable coverage in Chinese state media outlets and obtaining direct selling licenses in China.

The alleged misconduct reportedly took place between 2007 and 2016. Herbalife previously paid a $20 million settlement related to fraud charges by the SEC that the company had misled investors about its China business.

Benzinga’s Take: Herbalife has long been a controversial company due to charges by Bill Ackman and others that its multi-level marketing model closely resembles a pyramid scheme. While the stock has performed relatively well in the past few years, bribery and fraud settlements certainly don’t instill much confidence in the company or its management.

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