Minkow Drops Campaign Against Herbalife

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Herbalife Ltd. has convinced former fraudster-turned-consumer advocate Barry Minkow into retracting his accusations about the safety of Los Angeles nutritional supplement maker’s products.

The Los Angeles supplement maker and Minkow, who reinvented himself into a consumer advocate several years ago after his release from prison on charges he defrauded investors of his ZZZZ Best carpet cleaning company, released a joint statement Friday.

The statement said that Minkow, who has admitted shorting the stock, retracted the claims to “avoid litigation.” It goes on to say that Minkow no longer believes Herbalife’s products are harmful.

“Upon further investigation, (Minkow’s) Fraud Discovery Institute became convinced that Herbalife employs systematic internal controls, including the use of outside, independent laboratory testing, which ensures their products are manufactured safely and in compliance with California law,” said the release.

“It is evident to the Fraud Discovery Institute that Herbalife produces products that are safe, and that the company strives for continuous improvement in product quality,” the statement continued, noting that Minkow’s group also retracted criticisms about the alleged unfairness of Herbalife’s multi-level marketing business model.

Minkow earlier this year hired an independent lab to test several Herbalife products and said it found levels of lead in several products that he alleged should require product safety labeling under California’s Proposition 65. Herbalife countered with its own third-party testing that it said showed the products to have safe levels of lead.

The Web site of the San Diego-based institute has been scrubbed of any mention of its investigation. There also was no mention of the status of a lawsuit filed by a Rosemead woman in June, which blamed Herbalife products for her lead-related liver problems. The woman’s attorney is a San Francisco consumer advocate who has assisted Minkow in past investigations.

Minkow has acknowledged shorting Herbalife stock but claims he needed to do so to fund his investigation. He could not be reached for comment early Friday. Minkow served more than seven years in jail for stock fraud, but since his release has become a minister, started the fraud institute and served as a consultant to law enforcement agencies.

Shares of Herbalife were up $1.67, or 3.6 percent, to $48.32 in morning trading on the New York Stock Exchange.

The share price is up 33 percent from where it was in June at the height of Minkow’s media campaign, but is still down 6 percent from its 52-week high in early April. Herbalife earlier this month reported second quarter earnings and gave guidance that beat Wall Street expectations.

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