Herbalife Nutrition Ltd. was a California-based multi-level marketing corporation that sold health care, personal care, and other products in more than 90 countries around the world, including China. While multi-level marketing is legal in the United States, it is prohibited under Chinese law, which allows only "direct selling," i.e. selling a company's products through independent sales representatives. Herbalife operated in China through a group of wholly-owned subsidiaries, collectively known as the China Subsidiary. The China Subsidiary acted as a division of Herbalife rather than a separate and independent entity.
Yanliang Li, aka “Jerry Li,” a Chinese citizen, was the Director of Sales and/or Sales Vice President and later the Managing Director of the China Subsidiary. He also held the title of Senior Vice President at Herbalife.
Hongwei Yang, aka “Mary Yang,” a Chinese citizen, was the former head of the external affairs department as well as a high level executive of the China Subsidiary. Li was Yang's direct supervisor.
According the documents in this case, from 2007 through February 2017, Li, Yang, and others agreed to pay and paid bribes to Chinese officials for the purpose of obtaining and retaining licenses for Herbalife to operate as a direct-selling enterprise in provinces throughout China. Additionally, it is alleged that they paid bribes to influence Chinese governmental investigations into Herbalife’s compliance with Chinese laws and to further influence Chinese state-owned media for the purpose of suppressing negative media reports about the company. The bribes allegedly took a variety of forms, including direct cash payments, travel expenses, meals, shopping sprees, entertainment, and in one case, providing a positive internship review for the son of an official despite the son never having interned with the company.
On November 14, 2019, the DOJ announced that it had filed a three count indictment in the Southern District of New York against Li and Yang alleging (1) conspiracy to violate the anti-bribery and internal controls provisions of the FCPA, (2) perjury, and (3) destruction of records in a federal investigation. This case is ongoing.
In a related proceeding, on November 14, 2019, the SEC filed a civil complaint against Li in the Southern District of New York alleging violations of the anti-bribery, books and records, and internal controls provisions of the FCPA.
