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Herbalife Falls After N.Y. State Senator Proposes Crackdown

Herbalife Ltd. shares declined 2.5 percent after a New York state senator and public advocate called the company a pyramid scheme and proposed cracking down on its sales practices.

State Senator Jeff Klein, working with Public Advocate Letitia James and advocacy group Make the Road New York, said in a report on Tuesday that they compiled data on 56 victims who filed complaints against Herbalife since 2004. The investigation also looked at 60 so-called nutrition clubs -- the groups that help sell Herbalife’s weight-loss shakes and supplements -- in the Bronx, Queens and Brooklyn. Klein and James plan to introduce a bill in the coming weeks that will impose stricter regulations on multilevel marketing firms like Herbalife, which rely on independent distributors.

Herbalife “needs to be held accountable,” according to the report. “For too long the company has masked an illegal pyramid scheme.”

Pershing Square

Herbalife’s foes also include billionaire hedge fund manager Bill Ackman, who began calling the company an illegal pyramid scheme in 2012. Ackman’s firm, Pershing Square Capital Management, bet $1 billion against the stock at...