Investigative Unit 2014: Going Undercover in Herbalife

PHOTO: Herbalife Ltd. products are arranged for a photograph in New York, Jan. 10, 2013.PlayScott Eells/Bloomberg/Getty Images
WATCH Herbalife Investigation Part 1: American Dream for Sale?

[As 2014 comes to a close, the ABC News Brian Ross Investigative Unit looks back on some major reports over the last year.]

Top executives in the Los Angeles corporate headquarters of Herbalife have touted their success at building the massive nutrition and diet shake brand through the company’s worldwide army of distributors, even as a well-known Wall Street billionaire has trashed the company as a deceptive and illegal scam.

A year-long investigation, in which ABC News sent two reporters undercover as Herbalife recruits, revealed in April a company that has struggled to prevent its distributors from embellishing the financial prospects of a sales career there and hyping the health benefits of its products.

ABC News found that nearly 600 independent distributors of the diet and nutrition sales brand Herbalife had been disciplined in 2013 for making medical claims when selling the company’s weight-loss shakes and supplements, despite company policies aimed at preventing such tactics.

In one instance, a Staten Island, N.Y., Herbalife distributor even told a potential customer -- who was actually an ABC News reporter wearing a hidden camera -- that a woman with a brain tumor became symptom free after starting on Herbalife products.

“She used to shake like this because she lost control of her motor skills to the tumor and she said part of her cerebellum was deteriorated,” he said. “If you see her now, she’s like one of us here... Whatever it is that the product did, it helped her a lot.”

Herbalife executives told ABC News that the company had taken pains to prohibit such tactics.

“I am appalled to hear you say this,” said Herbalife President Des Walsh, when confronted with ABC News findings in an interview. “What is happening there is a complete and absolute violation of our rules.”

The company’s most vocal critic, billionaire short seller William Ackman, cited similar findings during a series of presentations intended to spur government scrutiny of the company and drive down the stock price.

In response to the ABC News report, Herbalife officials announced a “significant re-training initiative."

“In direct response to the interview where Brian Ross brought to light instances of members making unauthorized product claims, the company began a significant re-training initiative,” Herbalife spokeswoman Barb Henderson said in an email.