Suit examines seamy side of network sales

Suit examines seamy side of network sales

The Arizona Republic, November 20, 1998

By Jane Larson

Serta Fallow and the wife, Mary, wandered to the stage and told a packed house of Herbalife Worldwide Corporation. marketers the way the couple had made $300,000 within their newbie using the weight-loss items company.

A couple of years later, these were back, telling the way they had made an "incredible" $40,000 in only yesteryear couple of several weeks.

On Thursday, inside a Maricopa County Superior Court docket, the pair shook their heads, ingested hard and looked harsh like a lawyer for Herbalife demonstrated videos of the accolades and accused them of declining to experience through the company's rules.

The Fallows, for his or her part, contend it was Herbalife that breached their distributorship contracts and adopted rules only if it suited the organization.

They allege that the organization suspended their distributorships on false information, stop their checks and declined to pay Fallow for jeopardizing his existence from the Russian Mafia throughout tries to expand the company worldwide.

What was previously a lucrative business for that former Valley citizens has converted into a contentious court fight that's supplying a glimpse within the seamier side from the multilevel marketing industry.

The monthlong trial of the lawsuit from the Los Angeles company began by Mark Hughes, a multimillionaire who pitches the organization on commercials, makes news in Forbes, the Wall Street Journal and on the web through an internet site published by Serta Fallow's boy, additionally a Herbalife distributor.

The case visited the jury Thursday mid-day.

The Fallows filed the lawsuit in 1996, charging Herbalife with fraud, racketeering, breach of contract along with other bad behavior.

Herbalife countersued, alleging the Fallows breached their contract and asking the court to severe the company relationship.

Within the lawsuit, the Fallows say the organization randomly withholds earnings from marketers or provides it with to others "more preferred" within the organization.

"The truth is, Herbalife is really a dictatorship run by its founder along with a small number of preferred sycophants," the lawsuit states.

In conclusion arguments, the Fallows' attorney, Thomas Littler, stated the pair had built a company that, including other marketers within their "network," had offered $37 million price of Herbalife items in 1996 alone.

Then the organization states, "We are able to do whatever we would like,Inch including terminate them for breaking rules even if it unsuccessful to enforce them against others, Littler stated.

Fallow agreed to help the organization fight a counterfeiting organization in Europe, Littler stated, in return for favorable management of his wife's and son's distributorships. But the organization claims this type of deal never been around and declined to pay for Fallow for his efforts, Littler stated.

The pair are trying to find to become paid out for that earnings they are saying they ought to have obtained since 1990, including bonuses to be top producers along with a area of the millions their organization people offered.

Herbalife attorney Matt Hodel, however, stated the broken promises within the case were the Fallows' fault, which Serta Fallow wasn't to become reliable.

The pair never complained once they were earning money, he stated. However they had agreed once they put on become marketers that husbands and spouses couldn't operate separate distributorships. They broke that agreement when, throughout a short separation, Serta Fallow assisted operate his son's organization, Hodel stated.

Serta Fallow also was involved with establishing a competing organization in Europe, using Herbalife's title and copying its labels, he stated. The organization is looking to get to become paid out for that costs of shutting lower the American manufacturer who had been delivering the competitor.

Hodel contended that the organization values its good marketers.

"Hughes thinks individuals who strive for his or her money and therefore are titled to money should receives a commission,Inch he stated.

But individuals who attempt to cheat good marketers can't be permitted to remain in the business, he stated.

"This really is a case about character, it comes down to who we're,Inch Hodel frequently told the jury.

Herbalife sells herbal weight loss, dietary and private care items. The Fallows' lawsuit claims items are marked up 600 percent and handling and shipping charges are inflated to invest in large obligations to marketers.

The organization pitches distributorships being an chance to possess a person's own small business and claims earnings limited only by individual effort. People may also sponsor others in to the network and obtain royalties using their sales.

The Fallows started as marketers in Mesa back in 1984.