Herbalife — the controversial nutritional products company caught in a Wall Street tug-of-war — has suspended a distributor accused of running a cult-like operation in Israel.
Tzachi Gozali, 46, has been accused of using humiliation, threats and sexual abuse to recruit an obedient group of followers who sell and use Herbalife’s diet protein shakes, according to a bombshell report.
The allegations against the man who calls himself the “No. 1 Herbalife person in Israel” has renewed scrutiny of the company’s network of independent contractors, who profit by recruiting their own “downline” sales team.
Herbalife said it is investigating the accusations against Gozali, which were detailed earlier this month in Israeli newspaper Haaretz.
“If these allegations are true, it’s in violation of our rules and totally unacceptable,” the company said in a statement.
Several former Herbalife distributors who worked under Gozali told the paper they endured weekly “rituals of confession and humiliation” and took out hefty bank loans to buy Herbalife products.
According to one former follower, Gozali also tried to recruit people who had recently left the Israeli Defense Forces to get them to turn over their sizeable discharge check.
Several women said Gozali forced them to be celibate and later to have sex with him.
“He tells me to undress,” said one of the women interviewed. “Now this is Tzachi, you can’t say no.”
Herbalife said Gozali, who could not be reached for comment, is not its top salesperson in Israel.
Herbalife doesn’t have retail stores and relies on independent contractors to sell its products and bring new people into the business.
The company has a team of 250 to monitor its distributors, but the accusations against Gozali underscore the difficulties of policing a global network of 2.5 million distributors.
Herbalife became the focus of a money-fueled controversy after activist hedge fund manager Bill Ackman called it a pyramid scheme and placed a $1 billion bet against the stock.
Since then, Herbalife has reined in some of its distributors’ practices. It recently forbade those in the US to sell Internet business tools such as lead generation businesses that were the source of numerous consumer complaints to the Federal Trade Commission.