Herbalife CEO Michael Johnson sometimes refers to a UCLA lab as if it’s… (Mark Boster, Los Angeles…)
Herbalife International says it's all about helping people "pursue healthy, active lives." UCLA's Geffen School of Medicine likes to think of itself as being in the forefront of medical research and modern healthcare.
But the curious relationship between these two supposed champions of healthful living should turn your stomach.
Herbalife is the Los Angeles nutritional supplement firm that has become the centerpiece of a ferocious Wall Street tug of war. The major player is hedge fund manager Bill Ackman, who contends that Herbalife is a scam to sell overpriced products by fooling people into becoming Herbalife "distributors" by implying the business will make them rich. He says he's shorted $1 billion in Herbalife shares as a bet that the company is destined to collapse. On the other side are investors who either believe Herbalife will stay a highflier, or who just want to squeeze Ackman dry. (He's not a popular chap.)
PHOTOS: Inside Herbalife
One of Ackman's accusations against the company is that it exaggerates the scientific research behind its powders and pills. That's where UCLA comes in, because Herbalife has exploited its "strong affiliation" with the medical school to give its products scientific credibility.
Those words were uttered by Herbalife CEO Michael Johnson during a 2007 conference call. In fact, Johnson seldom lets an investor event pass without mentioning UCLA, specifically the Mark Hughes Cellular and Molecular Nutrition Lab at the medical school's Center for Human Nutrition. Herbalife says it has contributed $1.5 million in cash, equipment and software to the lab since 2002. (The lab is named after Herbalife's founder, who died in 2000 after a four-day drinking binge — not the greatest advertisement for healthful, active living.)
That's not much of an investment for a company that collected $2 billion in profits over the same period. But Johnson sometimes refers to the lab as if it's an Herbalife facility. "Our product development stems out of our own research and development labs," he told an investor conference in 2008. "It comes from UCLA where we have the Mark Hughes Cellular Lab there."
Nor does Johnson shrink from the admission of what he hopes to gain from the UCLA connection. In 2007, explaining how he inculcates Herbalife's distributors with respect for the firm's protein powders and other supplements, he said: "We bring these great minds from UCLA to join us, to give them confidence in these products."
That brings us to Herbalife's prime UCLA trophies, David Heber and Louis Ignarro.
Heber is director of the Center for Human Nutrition and a professor at the medical school. He's a well-known obesity specialist with hundreds of scientific articles and four popular diet books to his name. He's also chairman of Herbalife's "Nutrition Advisory Board," a collection of credentialed experts who supposedly meet once a year and sometimes make appearances at Herbalife events. Ignarro and two other UCLA medical school faculty members, dermatologist Jenny Kim and psychiatrist and aging specialist Gary Small, are also on the board. (None replied to my requests for comment.)
The board members traditionally have been paid as much as $60,000 annually, plus a per diem of up to $3,000 for event appearances. (This year, the company said it cut them back to $20,000 a year and $1,500 per diem).
Heber has a special deal, however. A firm he's "affiliated with" collects an annual payment of $300,000 from Herbalife, according to Herbalife disclosures. He also received Herbalife stock grants in 2005, 2010, 2011 and 2012. Herbalife refuses to say how much those grants were worth, and Heber refused to talk with me.
What was he paid for? According to a company spokesman, "for the use and promotion of the nutritional philosophies, theories and concepts contained in his bestselling books," as well as to lend luster to the company's products. In a 2009 promotional video, Johnson introduced Heber as a UCLA faculty member and as "a good friend, a pal and a mentor of Herbalife in all things nutrition." Together they bemoaned the nutritional catastrophe of fast-food burger and fries and offered up an Herbalife protein shake as though it's the only sensible alternative.
Ignarro is an even bigger catch. A professor at the medical school's department of pharmacology, he shared the 1998 Nobel Prize in physiology or medicine for work on the role of nitric oxide in cardiac health. Herbalife soon put him on its payroll. Since 2003, according to corporate disclosures, it has paid a consulting firm connected to Ignarro a total of $17.8 million.