The former head of
Herbalife Nutrition Ltd.
’s China subsidiary has been ordered to pay about $550,000 after he failed to respond to U.S. Securities and Exchange Commission allegations that he bribed Chinese officials.
also known as Jerry Li, was ordered by a Manhattan federal court judge to pay a civil penalty after defaulting in an SEC lawsuit against him, the agency announced on Monday.
The SEC and federal prosecutors filed separate sets of charges against Mr. Li in 2019, accusing him of paying bribes, a violation of the Foreign Corrupt Practices Act, as he sought to expand Herbalife’s operations in China. The scheme allegedly ran from 2006 to 2016, the SEC said.
The SEC didn’t respond to an inquiry on whether it expected the fine would actually be paid—Mr. Li hasn’t been arrested by U.S. authorities and remains at large. Nor did he send an attorney to defend himself in the SEC case, though the agency said it dispatched legal papers to Mr. Li’s residence in Shanghai in late 2020.
Herbalife, a publicly traded company based in Los Angeles, sells dietary supplements, largely through a multilevel marketing model. By 2016, the Herbalife’s China unit brought in about 20% of the company’s global sales, according to an indictment filed by prosecutors.
Mr. Li was involved in paying bribes to help obtain licenses necessary for Herbalife to operate in China and to fend off government investigations, the SEC alleged. In a 2007 recorded phone call described in the SEC lawsuit, Mr. Li noted after paying officials that it is “better to spend money beforehand than spending money afterwards.
“This money is a small sum after all, and if we were to be penalized, the figure will be much greater,” he said after doling out about $4,500 in bribes, according to the SEC.
Mr. Li was also allegedly involved in paying off officials at Chinese state-owned media to quash negative coverage of the company, the SEC said.
Mr. Li’s sole co-defendant in the criminal case, former Herbalife China executive
also remains at large. Neither Mr. Li nor Ms. Yang could be reached for comment.
Herbalife itself agreed in 2020 to pay about $123 million to settle FCPA actions brought by the SEC and federal prosecutors.
The year before, the company agreed to pay $20 million to settle SEC allegations that it had misled investors on whether it used a multilevel marketing sales model in China, a practice that is illegal under Chinese law.
Herbalife didn’t immediately respond to a request for comment Tuesday.
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