John And Susan Peterson


p1Dates of Herbalife Distributorship: 1984 – present (Susan); 1984 – 2013 (John – deceased)
Status in Herbalife: Founder’s Circle
Business Methods: Training Videos, Calls and Presentations; Recruiting Scripts; Online Recruiting Businesses; Focus Groups

All statements in the report are made pursuant to Pershing Square’s disclaimer available at dev-facts-about-herbalife.pantheonsite.io.

Background on Herbalife-Related Businesses

p2

    • Craig Fortson (the only other officer of WFH) is also the managing member of Latino Marketing LLC, a Nevada limited liability company.  See Peterson Exhibit B.  Among the shareholders of Latino Marketing LLC is Taylor Marketing, Inc., a Texas-registered corporation affiliated with senior Herbalife distributor Dan Waldron, who is the subject of his own profile, available at https://www.herbalifepyramidscheme.com/perpetrators/dan-waldron/.
  • Susan Peterson and her two children run FAB-U-LIFE Nutrition, a nutrition club that recently relocated from Tucson, Arizona (where Susan’s son John just graduated from college) to Houston, Texas (where Susan’s daughter Jennifer lives).  See Peterson Exhibit C and Peterson Exhibit D.  Both Jennifer and John Jr. are members of the Herbalife Millionaire Team.
  • Susan Peterson serves at the administrator of FAB-U-LIFE’s Facebook page.  See Peterson Exhibit E.

p3

  • The girlfriend of John Peterson Jr. (John and Susan’s son), Alehandra Orduño, is an Herbalife distributor at the level of World Team.  When the new FAB-U-LIFE location opened in Houston, she posted on Jennifer Peterson’s Facebook page that she would “help with the Latino population.” See infra and Peterson Exhibit F.

p4

Primary Source Data on Business Practices

Videos [1]

  • The Petersons appear in numerous videos promoting the Herbalife business opportunity and teaching distributors how to recruit new distributors into the scheme.  In particular, their WFH business, discussed in greater detail below, charged distributors $399 for access to a series of “training videos” that deceptively portrayed the ease with which one could earn money in the WFH system.
  • In a WFH Decision Pack video from 2000, the Petersons (along with other senior Herbalife distributors) repeatedly told recruits that the WFH program was “easy” and “idiot proof.”  The video did not mention that the business opportunity being pitched was Herbalife.  A copy of the video is available at https://vimeo.com/user24651359/review/102870014/94008aefc6.

p5

 

    • In the 2000 Decision Pack video, Susan Peterson told recruits that “it doesn’t matter what your background is.  And it doesn’t matter what you’ve been doing.”  Peterson told recruits to just “look at your bank account and say to yourself ‘do I want to have the same amount of money today in my bank account next week, next month, next year?’ And if you say to yourself ‘no I don’t want to do the same, I want to do better,’ you need to look at what we’ve got developed, because this is so easy . . . and the best part is that this happens very quickly.”  (11:20-12:00.)
    • The testimonials in the 2000 Decision Pack video included a variety of deceptive income claims, including a couple who supposedly made over £700 (approximately $1150) in their first month, and another couple who made $500 in their first two weeks “working an hour a day.”  (1:54-2:09; 1:00-1:08.)  The video concluded with a testimonial from two formerly “broke ranchers” who found the WFH system—which was “so simple”—and whose “lifestyle has changed completely” as a result of signing up.  “We’re not broke anymore” they told viewers, “we get to travel the world.”  The video ended with one of the formerly broke ranchers imploring viewers: “I urge you, if you’ve got a decision to make, today is the day; do not waste time.” (16:25-17:09.)

p6

  • Another WFH video, also replete with deceptive income claims, began with the pro forma disclaimer:  “[t]he income testimonials presented in this tape are not intended to represent that all or any representatives will earn income at the stated amount.”  A copy of the video is available at https://vimeo.com/user24651359/review/102870011/7e1a3c529f.  The disclaimer was followed immediately by a slow pan across a majestic estate, photos of the luxury cars owned by the Petersons, an action shot of the Petersons in their helicopter, and for good measure, several more pictures of mansions presumably owned by the Petersons.

p9p8p7

    • Then, the video features 41 minutes of misleading income testimonials, such as:

 

  • “We’re just explaining to you how we found a simple way to make millions of dollars by working from home.” – John Peterson (2:20-2:28).
  • “An extra 1,000 a month, that’s not much.  But times 12, that’s $12,000.  $500 a month, that’s $600,000 extra dollars a year.  [Note math error]  Maybe it helps put your child through school.” – John Peterson (31:00-31:20)
  • “After the third month, I was actually making $8,000 a month.” – John Peterson (31:30-31:42).
  • “That first month we profited over $1,000.” – Lisa and J. Curtis (39:40-39:50).
  • “The company has paid us over $3 million.” – Lisa and J. Curtis (40:28-40:35).
  • “By the sixth month, as I was graduating from high school, I was up to 2,500 [dollars a month] part-time.” – Carmel Osborne (40:45-40:55).
    • The Petersons also repeatedly told recruits that the WFH system was “so easy it’s kind of like . . . paint by number.  Anybody can do it if you’ve got the paint, and you’ve got the brush, and you’ve got the number . . . and we’re gonna provide that for you.”  (22:45-23:20.)
  • Another WFH video from 2006, which also begins with a pro forma disclaimer followed by flashy depictions of extraordinary wealth, contains numerous unsubstantiated medicinal claims concerning Herbalife products.  These nutritional claims seem designed to convince prospective recruits that they can easily make a profit selling Herbalife products at retail.

p10

    • Interviewee Brenda Adams claims that her doctor “cut [her] blood pressure medication in half and completely [took her] off of [her] cholesterol medication” after she started using Herbalife products.  (7:05.)  Adams also claims that her “triglycerides actually dropped four to five points” and that she lost 20 pounds after being on Herbalife products for just nine weeks.  (7:10.)
    • Interviewee Larry Hulsey, a President’s Team member, claims that after taking Herbalife products his “asthma and bronchitis completely went away.”  (8:08.)
    • Interviewee Heather Hulsey claims that she took Herbalife products to her doctor during her first pregnancy.  Heather claims that her doctor told her that “there is absolutely nothing I could give you that would be better for you and the baby.” (8:50.)
    • Interviewee Francey Pistono, a Millionaire Team member, claims that she “sailed through [her] last two chemo sessions” after using Herbalife products.  (10:13.)

Recruiting Materials

  • The Petersons’ WFH website, which exposed viewers to a slew of deceptive income testimonials, included a “Business Center” where aspiring Herbalife distributors could download various tools and scripts that they could use to recruit new distributors into their downlines.  Access to the business center cost $399.  Peterson Exhibit G.

p11

    • In one recruiting script, the Petersons told WFH participants “how to package their story,” emphasizing “key phrases” such as “Before Herbalife, I was . . . then I got on the Ultimate program and lost ______ in ______ weeks/months, etc.”  The script advised WFH participants to tell recruits that “[i]f you don’t have a lot of time, then you cannot afford to profit only 25% for the 3 hours that it takes you to get a customer.”  In this way, the Petersons put pressure on recruits to order large volumes of Herbalife products in order to qualify immediately for Supervisor status.  Peterson Exhibit H.
    • Peterson Exhibit I is a worksheet purporting to teach WFH participants how to promote their business through “flyering.”  The worksheet states that “flyers get the phone ringing – both retail and recruiting,” and asserts that “the magic number for massive action is 1000 [flyers] a day.”  “The hardest part is getting started,” the worksheet states, but it assures WFH participants that “the results will follow.”  Id.  The materials do not explain that distributing 1000 flyers per day, combined with the same distribution of 1000 flyers per day by other distributors, will cover the entire relevant population in short order.
    • Peterson Exhibit J, available at http://web.archive.org/web/20030724114749/http://www.mybcenter.com/wfh/content/cashenus/cf013ENUS-NEW.doc, is a memorandum telling WFH participants that using a “video and product catalog drop . . . can put money in your pocket right away!”  By handing out the “Personalize Your Program” video provided by WFH along with a product catalog, WFH participants were told that they could “develop instant cash flow.”  The memorandum is a classic example of the pyramidal nature of Herbalife recruiting: “[Distributor Vicky] passed out 32 videos and got 15 customers.  If those 15 customers each pass out five videos to their friends, now she has 75 people with that video . . . Talk about a never-ending list of leads!”  Each video costs recruits $2, while a set of 20 catalogs is $7.
    • Peterson Exhibit K, available at http://web.archive.org/web/20040123041054/http://www.mybcenter.com/wfh/webmaker/docs/STS%20Letter.doc, is a form letter that WFH participants could send to recruits aimed at enticing them to attend a Success Training Seminar (known as an STS).  The letter asks recruits whether they are “looking to make an extra $1000 a month, a week, or PER DAY?”

p12

Focus Groups

  • As explained by the Petersons in a June 2002 article in Networking Times, an online publication about multilevel marketing, WFH focus groups are “weekly one-hour trainings conducted via interactive teleconference . . .  Each call is limited to no more than six or seven people.  There are literally thousands of focus groups happening at any given time, nationally and internationally.”  The Petersons said they mined the focus group calls for testimonials they could highlight on a weekly “national training call” to “keep the sizzle going.”  Peterson Exhibit O.
    • The Petersons provided “team leaders” of focus groups with scripts to keep WFH participants engaged and excited.  In Week 1, WFH participants were told that the objective of the 12-week focus group program was to “learn the skills necessary to create a career level, walk-away residual income.”[2]  Peterson Exhibit P, available at http://web.archive.org/web/20040121062002/http://www.mybcenter.com/wfh/content/focusenus/fg002ENUS.pdf.
    • The focus groups also provided WFH participants with “Tracking Sheets” they could use to “track your results and improve upon previous statistics.”  Id.  The Focus Group Tracking Sheet, a copy of which is attached as Peterson Exhibit Q and available at http://web.archive.org/web/20031127073813/http://www.mybcenter.com/wfh/content/focusenus/fg014ENUS.pdf, detailed the kinds of marketing efforts that the Petersons told WFH participants they should engage in in order to reach their goals.  These efforts included spending “$200-400/week” on advertisements, distributing 300-500 “hot pockets/pull-tabs”3 and 3,000-5,000 flyers per week, and making ten presentations per week to their “COI” (“circle of influence”).4  The materials do not explain that following these instructions would rapidly flood and exhaust the relevant market, especially when considered against the efforts of other distributors who were instructed to undertake the same initiatives.
    • WFH participants were also told they should be tasked with purchase three to five “wheel slots” every two weeks.  This referred to “leads” that supposedly identified persons genuinely interested in becoming Herbalife distributors.  See Peterson Exhibit R.  These expenses were in addition to the $399 WFH participants had to pay to access the WFH business center.  Greater detail about the Petersons’ “wheel slots” is provided below.
    • The Tracking Sheet also asked WFH participants to record, on a daily basis, how many prospects they called, how many booklets and decision packs they sent out, and their “retail profit,” “sponsoring profit” and total personal volume.  Peterson Exhibit Q.
    • In Week 2, WFH participants were directed to distribute their “income story” to everyone else in their focus group—notwithstanding that many of these WFH participants had only been Herbalife distributors for a few weeks.  Peterson Exhibit S, available at http://web.archive.org/web/20040121062017/http://www.mybcenter.com/wfh/content/focusenus/fg003ENUS.pdf.
    • By Week 3, WFH participants were exhorted to attend trainings “EVERY month . . . no matter what,” review “all training materials provided” in the $399 pack, pay for and attend each monthly Success Training Seminar, and attend all Herbalife quarterly events.  Peterson Exhibit T, available at http://web.archive.org/web/20040121062031/http://www.mybcenter.com/wfh/content/focusenus/fg004ENUS.pdf.
    • In Week 3, WFH participants also were introduced to the concept of “Duplication – The secret of the RICH.”  Id.  In order to duplicate, WFH participants were taught the “first steps of sponsoring,” including most prominently that they must “CREATE URGENCY” in the minds of prospective recruits.  Once WFH participants sponsored a new distributor, they were directed to “MAINTAIN URGENCY” in order to pressure the new distributor to buy ever-increasing volumes of Herbalife products and to focus on building his or her own downline.
    • In Week 5, WFH participants were taught how to mentor three types of downline distributors:
      • Consumer:  Loves the products enough to commit to buying at least 100vp each month for the rest of his or her life.
      • Volume Producer:  A Distributor or Supervisor who produces volume by successfully building a “Consumer” group.
      • Business Builder:  A Supervisor who is successfully training members within the three distributor groups in his or her own business.

Peterson Exhibit W, available at http://web.archive.org/web/20030724154734/http://www.mybcenter.com/wfh/content/focusenus/fg006ENUS.pdf; see also Peterson Exhibit X, available at http://web.archive.org/web/20040121062821/http:/www.mybcenter.com/wfh/content/focusenus/fg018ENUS.pdf.  All of this is a prelude to Week 6.

    • In Week 6, WFH participants were taught that although the different types of distributors in their downline have different needs, “Supervisor makes sense for all three” because “it is the gateway to the marketing plan.”  Peterson Exhibit Y, available at http://web.archive.org/web/20030724152410/http://www.mybcenter.com/wfh/content/focusenus/fg007ENUS.pdf.  WFH participants were told that when counseling their downline distributors they should “emphasize VALUE vs. COST: 50% vs. 25% profit.  Double the money for the same effort.  Where else can you recover your investment and make $1,700 in 2-8 weeks?”  Id.  WFH participants were further told to emphasize to their downline distributors that “[a]ll of Herbalife’s promotions are for Fully Qualified Supervisors.”  Id.
    • Weeks 7-12 emphasized duplication (“make everything 100% duplicable.  If not, it won’t duplicate past the 2nd level”) and the importance of attending events and calls hosted by the Petersons.  See:

Peterson Exhibits Z
Peterson Exhibits AA
Peterson Exhibits BB
Peterson Exhibits CC
Peterson Exhibits DD. 5

Lead Generation

  • Among the suite of recruiting tools offered in the WFH Business Center were “ad wheels.”  The role of such “wheels” in recruiting new Herbalife distributors is explained in Pershing Square’s profile of Harry Lee and Candyce Johnson, available at https://www.herbalifepyramidscheme.com/perpetrators/harry-lee-candyce-johnson.  “The wheel is a simple concept that will allow you to receive leads from our established online and offline marketing efforts.  We are currently advertising through the Internet, and Direct mail at this time but will be adding Newspapers, Radio, Billboards, and Television as the wheel grows. . . . We drive traffic to the main website.  Every time a visitor goes to the site, a different slot, representing a different person’s website will be displayed.  One media share equals one slot on the wheel.  For example if you buy 5 shares you will have 5 slots on the wheel.”  Johnson Exhibit H.
    • WFH participants were instructed to purchase wheel slots, which were available in the WFH’s business center.  See, e.g., Peterson Exhibit EE and Peterson Exhibit FF.
    • When a lead was placed in a WFH participant’s slot, the WFH website automatically generated the initial correspondence between the WFH participant and the lead, sending an email to the lead and shipping the lead a Decision Pack and cover letter.  Peterson Exhibit R and Peterson Exhibit GG.  Consistent with the Petersons’ instruction to WFH participants that they “CREATE URGENCY” in the minds of prospective recruits,  see supra, the email generated by the WFH website told the lead that “we will be closing the training group in your area, most likely in the next few days,” and that “[w]e have just a small number of slots left in your area so I may be able to squeeze you in.”  Peterson Exhibit GG.
    • WFH provided specific instructions that WFH participants were told to follow “EXACTLY” in working leads.  Peterson Exhibit R.  WFH participants were instructed to wait “AT LEAST 3-5 DAYS” for the “prospect” to call.  Id.  If no call was forthcoming, WFH participants were instructed to send the “Sense of Urgency” email, a template of which was provided on the WFH website.  The “Sense of Urgency” email was “designed to create urgency so that the prospect will contact you for more information.”  Peterson Exhibit HH.  The Sense of Urgency email misleadingly told recruits that “there is a special opportunity in your area as it is one of the busiest in the country,” and that the opportunity “is available for only three people.”  Id.  This email would be sent to every prospect who did not respond within three to five days of receiving the Decision Pack, regardless of where they lived or how many other people had already responded to the initial entreaty from the WFH participant.
    • Finally, if the prospect did not respond to the “Sense of Urgency” email, WFH participants were told to send the “Good News Email,” which again falsely told the prospect that “we are opening our last public training group in your area” and that “[w]e can only work with three people and one of the slots was filled a few hours ago.”  Peterson Exhibit R and Peterson Exhibit II.  “Don’t let this slip through your hands,” prospects were told, “we are leaving your areas after the training group is completed.”
    • In addition to providing WFH participants with form emails to send leads they had purchased, the WFH website also furnished WFH participants with a script for their initial telephone conversations with prospects.  The script was rife with misleading statements concerning the profit opportunity provided by an Herbalife distributorship.  WFH participants were directed to tell recruits that “75% of [Herbalife’s] growth has not yet taken place” and that “there has never been a better time to be involved with Herbalife.”  Peterson Exhibit JJ, available at http://web.archive.org/web/20030820044232/http:/www.mybcenter.com/wfh/content/royaltiesENUS/ri033ENUS.pdf.  WFH participants were also directed to tell prospects that “[o]ur part time people are earning between $500-1500 a month and our full time people are earning $3,000 and up!”  Id.  It is only on the telephone call that prospects were informed that “the package that puts you in business” costs $399.  Id.

Links to Other Senior Distributors

p13

  • Both John and Susan Peterson were associated with Chairman’s Club member Dan Waldron, who was featured in an audio recording on the WFH website stating that the Petersons were “the number one distributors in all of the world of Herbalife” and were “brilliant, genius network marketers.”  Peterson Exhibit KK at 19:20.

p14

  • Susan Peterson with Founder’s Circle member and former Herbalife board member Leslie Stanford (left) and Chairman’s Club member Dan Waldron and his wife Vicki.

p15

  • John Peterson mentored President’s Team member Steven Jong.

p16

  • Founder’s Circle members Geri Cvitanovich, Susan Peterson and John Peterson with Fernanda Peterson (his second wife).

p17

  • Total Business Machine, a recruiting system run by President’s Team members Maurice and Sandra Smith, paid a visit to the Petersons’ Tucson Nutrition Club FAB-U-LIFE in 2012.
  • In 1996, Herbalife International was sued in Arizona for, inter alia, arbitrarily assigning the plaintiff’s downline to the Petersons.  Fallow v. Herbalife Int’l, Inc., No. CV 96-03558 (Ariz. Super. Ct. 1996).  The plaintiff alleged that John and Susan Peterson were permitted by Herbalife to establish a distributorship in Mexico “in advance of allowing competition from other distributors.”  Am. Compl. ¶ 45, attached as Peterson Exhibit LL.  The plaintiff also alleged that his entire downline was wrongfully transferred to the Petersons, allowing them to earn as much as $175,000 a month from distributors the plaintiff had recruited.  Am. Compl. ¶ 45.  Indeed, according to the plaintiff, Herbalife began withholding money owed to him in order to “send to the Petersons.”  Am. Compl. ¶ 74.  Press reports indicate that a jury returned a verdict for the Fallows against Herbalife in November 1998, awarding them more than $600,000 in damages.6
  • Herbalife has repeatedly honored the Petersons as top distributors since at least 1998.  According to a 1998 edition of Herbalife Today, a magazine published by Herbalife, the Petersons were the first distributors to ever receive a $1,000,000 bonus from the company.  Peterson Exhibit MM.  In 1999, the Petersons were again paid the highest bonus ever—this time $1.25 million— and were honored by Mark Hughes as the top distributors in the world.  Peterson Exhibit NN.  In the Herbalife Today article announcing the award (which was awarded at an Herbalife Extravaganza), John Peterson was quoted as telling the crowd that he “never expected this would happen to us” and that “[f]or everyone in the audience, if you have the right perspective you can be right up here with us one day . . . The biggest money to be earned in this incredible company hasn’t even started yet!”  Id.

Links to Herbalife Corporate Leadership

    • In the May 2002 edition of Herbalife Today, the Petersons were hailed again as the “#1 Distributors in the world” in an article entitled “Reaching the Pinnacle of Success.”  Peterson Exhibit OO.  The article boasted of the Petersons’ downline of 250,000 people in 51 countries.
    • In 2005, when the Petersons were named the “#1 Distributors in the world” for the eighth year in a row, they were again profiled in Herbalife Today.7  The article told the story of each Peterson’s introduction to Herbalife, noting that “[l]ike so many other Distributors, Susan Peterson and John Peterson each began their journey with a dream.  Now look where they are!”  Peterson Exhibit PP.
  • John Peterson was also profiled on the Herbalife Broadband Network, a network run by Herbalife.  The video, available at http://factsaboutherbalife.comjohn-peterson-founders-circle/, chronicles the luxurious lifestyle that John Peterson was able to enjoy as a result of his participation in the Herbalife scheme.  “As a result of Herbalife, I’ve been able to share not just do what I want to do but be able to share the experiences that most people never experience.”  (3:00-3:11.)  The video also downplayed the amount of work necessary to succeed in pursuing the Herbalife business opportunity:  “So I’ve got a boat now that goes 60 miles an hour and gets me right where the fish are.  I might go out and spend half the day fishing.  If I do that one day and I golf the next,  I might be horseback riding on the beach.  I might be playing tennis.  And then the rest of the day I am generally up in my office keeping up with my Herbalife business.”  (5:25-5:37.)
  • p18

p19

p20

  • Susan Peterson received a Mark Hughes bonus of $1.6 million from Herbalife in 2013.

p21

  • Susan Peterson with Herbalife CEO Michael Johnson (right) and Herbalife Senior Vice President Robert Levy.

p22

  • Susan Peterson was a featured presenter at the 2010 Herbalife North America Extravaganza, where she delivered a presentation on the “10 Commandments of Wildly Successful Herbalife Distributors.”

p23

p24

Peterson Exhibit QQ

 

[1] To the extent that any of the videos in this report requires a password, the password is “peterson”.

[2] All emphasis appears in the original documents unless otherwise noted.

[3] A “hot-pocket” is “an envelope sealed and then cut in half so that you have two pockets that can now hold 5-10 flyers each.”  See Peterson Exhibit U for a diagram.

[4] See e.g., Peterson Exhibit V.

[5] At this time, Pershing Square does not have a copy of the script for week 8 but has no reason to believe that it deviates from the emphasis placed in weeks 7, 9, 10, 11, and 12.

[6] See, e.g., http://www.caic.org.au/commercial/Herbalife/herbdist%20wins%20suit.htm.

[7] Pershing Square understands that the Petersons were divorced but remained business partners until John Peterson’s suicide in 2013.