Herbalife Said to Face FBI Investigation

WASHINGTON—Herbalife Ltd. is under investigation by the Federal Bureau of Investigation, sources have told a number of media outlets, the latest development in the 16-month-old drama surrounding the marketer of nutritional and weight-management products.

On Friday, the London-based Financial Times first reported the FBI and U.S. Department of Justice were investigating Herbalife, citing "people familiar with the matter."

Following the news, the stock price (HLF: NYSE) reportedly sank 14 percent Friday.

Herbalife said it is not aware of an investigation and neither the FBI nor Justice Department had requested information from the company.

"We take our public disclosure obligations very seriously. Herbalife does not intend to make any additional comments regarding this matter unless and until there are material developments," Herbalife added in a statement.

Sources also told Reuters the FBI is investigating Herbalife. Former distributors told the news agency the FBI has contacted them, seeking to learn more about the company's business practices including how it recruits members into its distribution network.

The latest development comes on the heels of last month's revelation that the FTC is investigating Herbalife, which has been accused by hedge fund manager Bill Ackman of operating a pyramid scheme that exploits low-income distributors and heavily rewards distributors based on their recruitment rather than actual sales of weight-loss shakes and other products to customers outside the network. Herbalife has steadfastly denied the pyramid scheme allegations and questioned the credibility of Ackman, who bet $1 billion the company would collapse. 

Herbalife was trading late morning at $55.56. That is down substantially from a 52-week high of $83.51 on Jan. 8, 2014, several weeks before news of the FTC probe broke last month.  

The company is scheduled to hold its annual shareholders meeting on April 29. During the meeting, Herbalife plans to nominate three representatives affiliated with billionaire investor Carl Icahn to its 13-member board. Icahn, who already has two representatives on Herbalife's board, has publicly defended the company.

Other wealthy men who have backed Herbalife include William Stiritz and George Soros.