Herbalife May Come to Haunt the Kamala Harris Campaign

The Story:

Kamala Harris, the US Senator from California now running for President, received support in her 2016 Senate campaign (at a time when she was her state’s Attorney General) from Heather Podesta, a lobbyist who has connections with the multi-level marketing firm Herbalife, and this fact may cause difficulties for Harris’ campaign.

Background:

A multi-level marketing firm is one that sells a product through a non-salaried workforce, at least some of whose participants also sell the opportunity to sell that product. In other words, although salespeople in such a firm sell product directly to consumers, they are also incentivized to create a separate stream of income by recruiting others to join the same firm’s distribution chain.

At their worst, MLM firms can shade into “pyramid schemes,” where the underlying product is just a pretext, because recruiting people who will recruit people who will recruit people is the chief commercial activity. These schemes inevitably collapse when the supply of recruits dries up, and most of those who have been recruited lose money. Pyramid schemes are illegal, and the line between pyramids on the one hand and legitimate MLM operations on the other can be a fine one.

Yahoo News reported recently that, in 2015, prosecutors sent Harris, as state AG, a memorandum alleging that Herbalife, a well-known MLM of nutritional supplements, may have crossed this line and that it ought to be investigated. Harris chose not to pursue such an investigation. Soon thereafter, she received the first of what would be three donations to her campaign for the US Senate from Ms Podesta.

The Thing to Know:

There is an ethnic element to the controversy over Herbalife in general, and Harris’ non-investigation of it specifically. Herbalife’s sales ranks consist largely of Hispanics. In 2013 it held what it called an “Extravaganza Latina,” a targeted recruiting event, in Los Angeles. In response to that event that some Hispanic civil rights organizations began pressing for investigations, leading eventually to that memo to Harris from the San Diego prosecutors, mentioned above.

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