By Chris Bragg
Crain’s New York Business (July 11, 2014).
Facing a massive public relations campaign against it, the nutrition sales company Herbalife has adopted an intriguing strategy in recent months: Donating to local chapters of the Latino rights nonprofit whose national leadership is seeking its demise.
The Herbalife donations have sparked controversy within the charity, the League of United Latin American Citizens, the nation’s oldest and biggest Latino rights group with 1,000 chapters in the United States and Puerto Rico. LULAC is holding its ritzy week-long annual convention at the Hilton in midtown Manhattan this week, featuring appearances from Mayor Bill de Blasio and Michelle Obama, and boasting some 20,000 attendees.
Dissent has been brewing over the LULAC leadership’s aggressive fight against Herbalife, and questions about whether it fits into the broader mission of the nonprofit, founded in 1929, to fight discrimination against Hispanics. LULAC’s muscular response has been to crack down on Herbalife’s attempts to donate money to LULAC’s cash-starved state chapters.
“Frankly speaking, no, I don’t think that LULAC should be involved in this,” said Elia Mendoza, LULAC’s Texas state director. “We’ve got much bigger things to worry about.”
Herbalife’s donations came as the The New York Times reported in March that William Ackman, the founder of Pershing Square Capital Management, had placed a $1 billion bet on Herbalife’s stock price going down, and in tandem had launched a campaign portraying the company as a pyramid scheme. Mr. Ackman’s efforts against Herbalife included making a $10,000 donation to LULAC, whose leadership in Washington, D.C., took a position at the forefront of the anti-Herbalife campaign.
The $10,000 donation from Mr. Ackman has since been returned, and LULAC leaders have said the money played no role in the nonprofit’s taking up the anti-Herbalife cause. LULAC leadership charges that Herbalife, a multi-level marketing company that sells nutritional shakes and supplement, takes advantage of Hispanic immigrants who sell its products.
Herbalife has denounced Mr. Ackman’s well-funded campaign against the company, but Mr. Ackman has not been the only one making donations, attendees at this week’s conference told Crain’s.
In recent months, Herbalife has itself made donations to multiple local chapters of LULAC around the country, circumventing the national leadership. (Herbalife has also donated to other supportive Latino nonprofits.)
LULAC’s national executive director, Brent Wilkes, noted that Herbalife is criticizing spending by Mr. Ackman, when Herbalife is engaged in such practices.
“I do think it’s hypocritical to complain about donations from the opposition when they’re doing the same thing, and in fact the scale of what Herbalife is doing may be much larger,” Mr. Wilkes said. “And they never had a track record of giving to Latino organizations until this year.”
A Herbalife spokesman declined to say how much the company has donated to local Herbalife chapters this year.
“Herbalife is proud of its more than 30-year history of working in and with the Latino community,” said the company spokesman. “We have more than 225,000 Latino members in the U.S. and remain committed to supporting organizations that share our passion for healthy lifestyles and empowering the Latino community.”
The donations to local LULAC chapters and the national leadership’s response have set the stage for a floor fight among convention delegates on the convention’s last day Saturday. A resolution is set to be put forth expressing support for Herbalife, attendees said.
Wilkes believes that Herbalife has a full-time person at the convention whipping up support on behalf of the company ahead of Saturday’s vote. The company also took out a full-page ad in Spanish-language newspaper El Diario, he said. “They could succeed, with the size of the campaign and the way they’ve gone after our internal process,” Mr. Wilkes said. “They have $6 billion. I have a couple million.”
A competing resolution would embrace probes of Herbalife by the Federal Trade Commission and Illinois attorney general. A third resolution calls for LULAC to be neutral on the company.
LULAC’s national board passed a resolution earlier this year stating that separate state affiliates should not accept Herbalife donations while the company is under Federal Trade Commission investigation. (The investigation was sparked in part by Mr. Ackman’s campaign.)
The California state chapter of LULAC still accepted a $25,000 donation from Herbalife ahead of its state conference in mid-May. The money greatly helped defray the cost for LULAC members in attendance, according to Kathy Jurado, a local official of the nonprofit who organized it. Ms. Jurado said she knew many people who sold or used Herbalife, and all had reported good experiences.
As a result of her not returning the Herbalife donation, Ms. Jurado says she was “suspended” from her position in the midst of the California convention by national LULAC leadership, costing her a chance serve in the state chapter’s leadership. She claims she had previously gotten approval from LULAC’s national executive director to take the donation.
“They attempted to humiliate me,” Ms. Jurado said. “It’s a civil rights group that’s violating my civil rights.”
Mr. Wilkes said he initially went to the LULAC board to see if Ms. Jurado could keep the $25,000 donation from Herbalife as long as she didn’t engage in activity on Herbalife’s behalf. But the national board rejected this, and Ms. Jurado ended up writing a letter to Congress on Herbalife’s behalf, he said.
The Texas chapter of LULAC, meanwhile, accepted the $10,000 donation from Herbalife this spring. But under pressure from national leadership, the state director, Ms. Mendoza, publicly circulated a flyer at her group’s Texas convention in June saying she was returning the money, according to Anastacio Lopez, president of the nonprofit’s Austin chapter.
“National isn’t letting anyone take, or keep, money from Herbalife,” Mr. Lopez said. “My understanding is that you can’t hold a state or national office if you support Herbalife.”
Still, Mr. Lopez said he would gladly take money from Herbalife for his chapter, as it could defray the cost of the organization helping protect vulnerable immigrants.
Ms. Mendoza, the head of the Texas chapter, says she has no problem with Herbalife, but returned the $10,000 donation under pressure from the LULAC national leadership. “We’ve had the last two state directors removed,” Ms. Mendoza said. “I didn’t want to be the third.”
LULAC receives heavy donations from a number of interests, including such labor unions as the American Federation of Teachers, and Wal-Mart, which is a favorite target of labor. (In another twist, LULAC’s California chapter has boycotted Wal-Mart, Ms. Jurado said, even as the national leadership takes its money.) Wal-Mart is listed as a “diamond” sponsor of this year’s event on LULAC’s web, the only sponsor to attain such status.
McDonald’s, which is the target of a labor campaign seeking to raise its base wage to $15 an hour, takes up an entire wing of the sprawling two-floor exhibition at the Hilton set up for LULAC’s sponsors. Presenting sponsorships for the event start at $150,000. But Herbalife has found itself uniquely in LULAC’s cross-hairs.
Herbalife’s share price has actually increased since Mr. Ackman started its high-profile campaign against it.
But the Federal Trade Commission did announce in March that it would probe the company. That came after $130,000 in payments tied to Mr. Ackman went to the New York City nonprofits the Hispanic Federation and Make the Road New York, which launched campaigns to find victims of the company, The Times reported