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Herbalife is like a leopard trying to change its spots.
The embattled distributor of nutritional and weight loss supplements is expected to make two changes to its business model — moves aimed at making it less vulnerable to charges that it is a pyramid scheme.
The first change, announced in a memo to its US distributors, will ban all Internet recruiting through sales leads and other forms of advertising.
The memo, a copy of which was reviewed by The Post, said the ban would take effect June 30.
The move is aimed at preventing possible predatory recruitment practices — charges leveled against companies accused of being pyramid schemes.
The second change may involve reclassifying as many as 350,000 distributors, a group of so-called “single-level distributors” who have purchased Herbalife products but haven’t recruited others.
This change, which Herbalife said it would announce by the end of April, is aimed at highlighting the percentage of distributors who are end users.
Court rulings have held that any company must sell 70 percent of its product to end users to avoid being considered a pyramid scheme.
Last year, Herbalife’s 350,000 single-level distributors accounted for 71 percent of its US sales force.
“The jury is out on Herbalife,” famed short-seller James Chanos said in a CNBC interview last week in which he framed the issue as: “Is [Herbalife’s] product really selling or are you just selling it to your distributors?”
The Los Angeles company has been ensnared in controversy since December, when hedge fund activist Bill Ackman accused it of being a pyramid scheme.
Ackman placed a $1 billion short bet on Herbalife on the belief regulators will shut it down.
Herbalife has called Ackman’s claim bogus.
It is not known what effect the proposed changes will have on the company’s bottom line.
Herbalife reports firstquarter results on Monday.
The online recruitment offers drew hundreds of consumer complaints to the Federal Trade Commission.
Some of Herbalife’s most productive distributors could leave the company if they are no longer able to recruit online.
“That’s the peace that they’re going to have to make,” said Phil Dracht, the lawyer representing former Herbalife distributor Dana Bostick, who sued Herbalife on April 8.
Some critics, like Robert FitzPatrick, the president of Pyramid Scheme Alert, said changing the classification of single-level distributors is merely window-dressing.
He said the 70 percent rule is about the percentage of sales — not percentage of salespersons.
“You don’t know how much volume this 71 percent accounts for,” he said.
FitzPatrick noted that Herbalife’s single-level distributors have to sign a contract that they won’t work for other multi-level marketing companies, among other restrictions — which aren’t normal for consumers.
A Herbalife spokesman said it’s unclear what rules will apply to the new customer category.
Herbalife shares closed yesterday at $38.27, up 0.8 percent.