Background on Herbalife-Related Businesses

• Maurice and Sandra Smith (the “Smiths”) operate Total Business Machine (“TBM”), an online recruiting business that offers distributors direct marketing tools, lead generation, and instructional videos. Available at http://www.totalbusinessmachine.com.^[1] Although the domain for Total Business Machine is associated with Platinum Synergy Group Inc., a business whose connection with the Smiths is unclear, the Smiths repeatedly appear in promotional materials for the company and list themselves as “Founders” on their Facebook profile. See Smith Exhibit A and Smith Exhibit B.

• The Smiths also operate Live Well Be Free (www.livewellbefree.com/founders), a purportedly health-centered program that refers distributors to the Total Business Machine website. The Smiths use the “Live Well Be Free” moniker in recruiting videos.
• The Smiths own and operate Nutrition 101 LLC, an Herbalife nutrition club located in Tempe, Arizona. Smith Exhibit C.

• The Smiths owned Prosperity Masters International, Inc., a Nevada registered company involved in “direct sales,” according to corporate records. Smith Exhibit D. It is unclear what Prosperity Masters International, Inc. did, but it became inactive in 2009. Id.
• In 2009, The Smiths also formed World Prosperity Team LLC, a Nevada registered company involved in “business services,” according to corporate records. Smith Exhibit D1 .
• The Smiths were also involved in President Team member Leah Singleton’s Cash By Mail lead-generation program as early as October 2000, and are pictured on the front page of one of the system’s URLs – www.beteachable.com. According to one page on the site, they were one of the Top 20 earners. Smith Exhibit D2.

Primary Source Data on Business Practices

Videos^[2]

• The Smiths produced and appear in a series of videos on the TBM website that promote the Herbalife business opportunity through deceptive income testimonials and encouraged TBM members to concentrate their efforts on recruiting new distributors into the scheme.
• One video begins with a slow pan across the Smiths’ luxury home immediately followed by a shot of Mr. Smith pulling his BMW 7-Series into the driveway. The video then tells viewers that the combination of certain “global mega trends” with the TBM system create an “unlimited potential for building life-long wealth.” Available at https://youtu.be/of4nIzY2wL0, (13:26-13:32).^[3]

• As the Smiths tell it, their lifestyle was not always as luxurious as the opening sequence might suggest. Rather, Mr. Smith tells viewers that before Herbalife, “I felt like I was going to die before I ever had a chance to live my life. And you might be feeling that way, too.” (3:55-4:02.) But he says that all changed when he “made a decision to find a better way” and become an Herbalife distributor. (4:03-4:05.)
• The Smiths introduce viewers to the importance of creating “residual income” as a means of improving one’s lifestyle. Using the “systems, tools, methods, and training” offered by TBM, viewers are told they can be paid “for years to come.” (1:50-1:59.) In fact, “once [an Herbalife distributorship] is set up,” it allows you to “focus on operating to generate cash flow on demand.” (5:55-6:05.)
• The video identifies the three “Global Mega Trends,” that, “if you can effectively combine all three areas” there is “unlimited potential for building life-long wealth.” (13:26-13:36.)

• In an effort to distinguish TBM from the other recruiting systems available to prospective Herbalife distributors, the Smiths stress that “the Total Business Machine is a duplicatable (sic) model.” “And it is in that duplication that personal wealth is generated.” (14:08-14:14.) The Smiths claim that TBM’s “lead generation and database marketing methods” will allow their members to make a substantial amount of money. (Although Herbalife previously embraced lead generation systems, it now purports to forbid their use by Herbalife distributors.)
• Another video produced by the Smiths under the Live Well Be Free brand contains a litany of misleading income testimonials from distributors. After telling viewers that “if you’re looking for income, you can trust your future to this incredible company,” available at https://youtu.be/io4_HYsbPRU(2:11-2:17), distributors make the following claims:
  • “Within three months, I was making enough to pay my rent.” (6:13-6:17.)
  • “We watched our 401k’s turn into 201k’s” but after becoming Herbalife distributors “we made $3300 our first month.” (6:50-7:00.)
  • Herbalife “set our family up to reach a six figure residual income in only 14 months. And today we enjoy an unbelievable lifestyle: Working the business as a family, designing and creating our dreams every single day.” (7:34-7:50.)

Conference Calls

• The Smiths also utilize conference calls to recruit new distributors and to motivate distributors in their downline to continue purchasing products.
• One call features a testimonial from President’s Team member Zac Tartol (whose uncle John is a member of the Herbalife board of directors and of the Herbalife Chairman’s Club).^[4] Tartol begins by stating that he “was a client first,” neglecting to mention that his parents (President’s team members Jim & Nancy Tartol) and his aunts and uncles (John & Lori Tartol and Mary Holloway) were among the most senior distributors in the Herbalife scheme. Available at http://www.totalbusinessmachine.com/files/Call%20Library/Team%20Calls/2013/2%20February%202013/Team%20Opportunity%20Call%2002%2011%2013.mp3,(1:35-1:37). He claims that his success was the result of Herbalife’s “phenomenal network” and all he had to do was “plug [himself] into it.” (2:26-2:32.) To have the success that he had, Tartol instructs distributors to construct a 90-day plan and to make that plan “crystal clear . . . so others can copy your plan.” (8:05-8:10.) Tartol’s emphasis on duplication—a euphemism for recruiting new victims into the pyramid—goes as far as to instruct distributors to fake enthusiasm at Herbalife pitch meetings in order to convince prospective recruits to join Herbalife:You gotta fake it until you make it, right? And I know some of you guys have heard that before so in this case what we’re talking about is you know, maybe you’ve heard something in an Herbalife Opportunity Meeting before or a group training session and you have new people there, and they’re hearing it for the very first time, and the same person is on stage, and they’re saying the same joke 20 times over, and it’s like the 20th time you’ve heard the joke, right? Fake it- okay? Laugh like crazy – so that’s how this whole deal works…That is how you build an organization the easy way. (14:58-15:35) (emphasis added).

• To bring the point home, Tartol introduces a newly-qualified supervisor, who tells listeners that “everything is great ever since Herbalife. I really didn’t know that life could be all good all the time.” (10:33-10:39.)
• In another conference call, distributors are pressured to order large volumes of Herbalife products in order to immediately qualify as a Supervisor and to push their recruits to do the same: “certainly if you or anyone in your team is not yet to the supervisor level you want to look at making that happen here over the next 48 hours.” Available at http://www.totalbusinessmachine.com/files/Call%20Library/Business%20Blaster%20Series/Business%20Blaster%20wk%201%20-%2009%2028%2011.mp3, (36:40-36:53).
  • The same call also paints the potential success of Herbalife distributors as merely a function of preference and effort. Distributors are told to “write out your desired lifestyle, . . . identify how much income it will need for you to have that lifestyle,” and then simply “determine the place in the Herbalife marketing plan that will get you there. . . . If you need eight to fifteen thousand dollars a month, that would be Millionaire Team, and if your desired lifestyle needs twenty thousand dollars or more per month? Then that’s the President’s Team…” (9:44-11:20.) Unfortunately for distributors, succeeding with the Herbalife business opportunity is nowhere near as simple as the call leads them to believe. Fewer than 0.5% of distributors make President’s Team and over 90% of distributors fail within the first year, wasting hundreds, if not thousands, of dollars on the purported tools that senior distributors like the Smiths peddle.
• One conference call begins with Sandra Smith claiming that Herbalife products cured her of an array of physical and emotional conditions. “Within the first six weeks” of using Herbalife products, Sandra’s doctors took her off all of her prescription medications, which included anti-depressants and drugs regulating her blood sugar and blood pressure. Available at http://www.totalbusinessmachine.com/files/Call%20Library/Business%20Blaster%20Series/Business%20Blaster%20wk%202%20-%2010%2005%2011.mp3, (1:05-1:15). The resort to these sorts of bogus claims about the supposed health benefits of Herbalife products only highlights the lack of genuine retail demand for those products.
• Another call stresses to listeners that “you are your best customer” and that you need to use the products to be able to sell them to others. One senior distributor, who had only joined Herbalife to earn money, relayed her experience with the product: “After one short week on the products . . . my arthritis pain in my fingers, hand and knee joints that had locked up on me multiple times a day, excruciatingly painful, was gone.” Available at http://www.totalbusinessmachine.com/files/Call%20Library/Business%20Blaster%20Series/Business%20Blaster%20wk%205%20-%2010%2026%2011.mp3, (9:58, 11:58-12:20). Of course, the continued use of Herbalife products by new distributors generates revenues for distributors above them in the pyramid.
• A conference call directed at teaching distributors how to “package” their income story instructs them to “present a concise and clear picture of the income opportunity.” Available at http://www.totalbusinessmachine.com/files/Call%20Library/Business%20Blaster%20Series/Business%20Blaster%20wk%2010%20-%2012%207%2011.mp3 (2:47-2:53). Distributors are encouraged to lead prospective recruits to believe that “anybody that will do the business can make money that first month,” and they are told to claim that they made money in their first month—that’s “the story you’re looking for.” (5:55-6:03.) After offering distributors examples of effective income testimonials, the speaker reiterates that they have “shared some other ideas—uh, stories I should say” for the distributors to consider. (8:00-8:07.)

Other Recruiting Tools

• The TBM website offers Herbalife distributors who pay a fee an array of recruiting tools, including scripts, template emails, and presentations to lure additional recruits into the scheme.
  • One email template that Herbalife distributors can use to “get the word out about your new business” directs those distributors to tell recipients that their “coach” asked them to practice their pitch with people before moving forward with a new business. The email template then encourages recipients to watch a “short video” that attempts to sell the Herbalife business opportunity. Smith Exhibit E, available at www.totalbusinessmachine.com/files/LWBFFastAndFreeEmail.doc.
  • The TBM website also provides a script for making follow-up phone calls to prospective recruits. The script begins by reminding Herbalife distributors to drink “Lift Off” or “Herbal Tea” (Herbalife products) before calling leads to “be energetic and confident.” Smith Exhibit F, available at http://www.totalbusinessmachine.com/files/LiveWellBeFree/LWBF%20Scripts.pdf. These instructions, like the many other forms of consumption that are ubiquitous in systems run by top Herbalife distributors, create artificial demand for Herbalife products. The script then directs distributors to “maintain control of . . . the conversation by not jumping around following [recruits] with their questions.” Rather, distributors should respond to questions by saying “let me ask you just a couple of things real quick so I can best answer everything for you – okay? (more of a statement than a question).” The script also tells members to obscure the cost of TBM membership, instructing members to explain, if a recruit asks about the cost of TBM membership, that “marketing websites and tools” are available “for a low monthly subscription” and then “don’t ask [the recruit] if they understand or like this, just move on.”
  • In addition to scripts and email templates, the TBM website provides members with tools for “advertising offline,” including business cards and “pull tabs” pitching a business opportunity to earn “$2,500-$10,000” with “training, bonuses” and vacations, and with “no door to door selling, no telemarketing.” See Smith Exhibit G, available at http://www.totalbusinessmachine.com/files/Team%20Center/Advertising%20Offline/Pulltabs/Work%20From%20Home%20Pulltab%20BLANK.pdf and Smith Exhibit H, available at http://www.totalbusinessmachine.com/files/Team%20Center/Advertising%20Offline/Business%20Card%20Flyers/Back_02.pdf.
• The TBM website also hosts a presentation introducing members to the “2-4-1 Plan,” which is sold as a means of quickly ascending the Herbalife pyramid by recruiting 2 distributors per month, who each recruit 4 customers per month, and attending 1 training per month.^[5] Smith Exhibit I, available at http://www.totalbusinessmachine.com/files/Team%20Center/Team%20Building/2-4-1%20Training.pdf.

• The presentation touts the potential for “exponential growth” and suggests to members that using the 2-4-1 plan will allow them to reach the Millionaire Team within six months of starting with Herbalife. Id. The presentation does not disclose that less than one percent of all Herbalife distributors ever reach the Millionaire Team.
• The TBM website also provides Herbalife distributors with a worksheet to keep track of the pyramid of downline distributors they are trying to build below them using the 2-4-1 plan. Smith Exhibit J, available at http://www.totalbusinessmachine.com/files/Team%20Center/Team%20Building/2-4-1%20Plan%20Worksheets.pdf.

• The TBM website is a repository of presentations replete with deceptive income testimonials. In one, the Smiths rehearse their rags-to-riches story and emphasize the wealth that is supposedly attainable for anyone through the TBM system. Smith Exhibit K, available at http://www.totalbusinessmachine.com/files/Maurice’s%20Presentations/Maurice%20&%20Sandra%20Story,%20Product%20Follow%20Up.ppt.
  • At first, supposedly, the Smiths struggled, as Maurice worked at a factory and Sandra stayed at home in their drab split-level house in rural Indiana.

• But after joining Herbalife, they were able to purchase a house whose “penthouse suite” was “bigger than their first apartment.”

• The presentation also features the Smiths collection of luxury cars.

• After a brief discussion of how to succeed as an Herbalife distributor, the presentation concludes by comparing the Smiths’ life before and after Herbalife.

• Unfortunately, the “dream” the Smiths have been living may not have been a sustainable one.
  According to public records, the Smiths had federal tax liens filed against them in 2009, 2010 and 2011. Exhibits K1 and K2. Notices of the federal liens were sent to at 1081 N. Parkside Dr., Apt. 402 in Tempe, Arizona, pictured below – a far cry from the mansion where they shot the TBM decision pack video (see above).

Nutrition Clubs^[6]

• The Smiths own Nutrition 101, a nutrition club in Tempe, Arizona. They encourage their downline distributors to open nutrition clubs of their own. The TBM website hosts audio recordings of conference calls and presentations that misleadingly discuss the supposed ease of opening a nutrition club and the amount of income that a nutrition club can generate. See, e.g., Smith Exhibit L (excerpted below), Smith Exhibit M, http://www.totalbusinessmachine.com/files/Team%20Center/Nutrition%20Clubs/Startup/Overcoming%20Challenges%20in%20NC%20Startup%2001%2021%2012.mp3 and http://www.totalbusinessmachine.com/files/Team%20Center/Nutrition%20Clubs/Nutrition%20Clubs%20-%20Brad%20Harris.mp3.

• The presentation claims that by opening a nutrition club and building a downline, members can achieve an annual income of $295,500. Smith Exhibit L.

• The presentation concludes by asking viewers:

Does your facility offer you generational wealth?

• The Smiths provide TBM members with promotional materials to use in trying to bring people into their nutrition clubs. See, e.g. Smith Exhibit N (compilation of articles that purport to offer nutritional device directed at promoting nutrition clubs) and Smith Exhibit O.

Links to Other Senior Distributors

• The Smiths with President’s Team members Ryan and Stephanie Swanson.

• Maurice Smith (right) with President’s Team members Donte and Trina Andry (far left and fourth from left) Craig and Caroline Tsutakawa (second and third from left).

• Maurice Smith (first on left) with President Team members Zachary Tartol (first on right), David Hayes, Kris Bickerstaff and Tim Files (superimposition of names original).

Links to Herbalife Corporate Leadership

• The Smiths have been repeatedly honored in Herbalife Today, a magazine published by Herbalife. Starting in 1999, the Smiths have been featured no fewer than four times.
  • In 1999, the Smiths were recognized for reaching the Global Expansion Team. Smith Exhibit P .
  • In 2001, Herbalife marked the Smiths qualification for the Millionaire Team. The article told readers that before Herbalife, Maurice “had to work 12 to 14 hour shifts, six to seven days a week” and that Maurice “really felt like [his employer] owned” him. But since starting with Herbalife, the “happy couple earns $8,000 a month” and conduct “staff meetings on lawn chairs in their backyard.” Smith Smith Exhibit Q.
  • By 2005, the Smiths had qualified for President’s Team and were once more featured in Herbalife Today. The article rehashes the Smiths’ rags-to-riches story, noting that “[b]efore finding Herbalife, Maurice and Sandra Smith were struggling to make a living in their rural community.” But “[t]hese days, Sandra and Maurice are earning up to $14,000 a month and they are searching for their next home.” At the conclusion of the article, Maurice tells readers that “[i]f an ex-factory worker and a stay-at-home mom in the middle of nowhere can get to the top, anyone can!” Smith Exhibit R.
  • In 2011, the Smiths were honored in Herbalife Today for achieving 1 million lifetime Volume Points. In the article, the Smiths emphasize that “the Herbalife business oppotunity (sic) has allowed us to have close bonds with each of our children.” Smith Exhibit S .

• Herbalife has featured the Smiths at “pin-changing” events (where top distributors are recognized for ascending to new levels of the pyramid), as well as Success Training Seminars and Leadership Development Weekends. See Smith Smith Exhibits T, Exhibit U, and Exhibit V.

[1] A referral is required to access the main website (to ensure that the distributor who recruited the individual gets credit for that recruitment), but a directory of the files cited in this profile is available at http://www.totalbusinessmachine.com/files/.

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

[3] Although the Smiths do not mention Herbalife at all during the video, members of TBM are Herbalife distributors and the “residual income” to which the Smiths refer is comprised of the variety of recruiting rewards offered by Herbalife.

[4] For additional information on John Tartol’s business practices, see https://dev-facts-about-herbalife.pantheonsite.io/the-facts/the-perpetrators/john-tartol/.

[5] Dan Waldron, who Pershing Square believes to be in the Smiths’ upline, also markets a 2-4-1 Plan, purporting to offer distributors the ability to make President’s Team in one year. See https://factsaboutherbalife.com/the-facts/the-perpetrators/dan-waldron/.

[6] Further detail on the business practices of Herbalife nutrition clubs can be found at http://factsaboutherbalife.comcontent/uploads/2016/01/Nutrition_Club_Presentation_The_Big_Lie_7.22.14.pdf.