Herbalife,

A $40 Million Cocaine Bust, and Why the DEA Should Investigate the Company
Immediately
An abstract prepared by 10/10 Research
23 October 2016

The Rabbit Hole Goes Deeper Than Most Think
We bet you didnt know that one of Herbalifes top distributors and top earners; a Colombian
national named Socrates Valencia that the company almost never mentions or talks about publicly,
was arrested in connection with the seizure of $40 to $50 million of cocaine by federal officials in
the 1980s.1 Mr. Valencia and a gentleman named Mr. Tomas Troncoso were sharing a taxi. In the
trunk of the taxi was their suitcases, which combined contained 25 kilos of cocaine. Mr. Troncoso
was later found to have another 36 kilos of cocaine in his Edgewater apartment. At the time, it was
reported as the largest amount of cocaine ever confiscated in New Jersey.
What if we also told you Socrates brother and fellow Herbalife distributor, Arquimedes Valencia,
registered a domestic business corporation in 1994 with someone who collected drug money for
the Cali cartel, according to the New York Times. When this individual was stopped on the Spain
Brook Parkway by authorities in the 1990s, he told the police that money and records found on
his person were part of his work as an independent distributor of Herbalife International health
care products?2
What if we told you that as recent as 2012, individuals in Brazil were charged with laundering
money through weight loss clubs and what if we told you that just last year, a current member of
Herbalifes Board of Directors was revealed to be a named defendant in a money laundering
complaint in Brazil? Today, in our first public research note ever, 10/10 Research wants to blow
open an angle to potential fraud at Herbalife that has yet to be investigated by short sellers or the
media. We think the DEA needs to investigate Herbalife immediately based on the evidence we will
put forth today; if they arent already investigating the company.

A $40 Million Cocaine Bust
Back in the 1980s, in conjunction with the above mentioned $40 million cocaine bust, Socrates
Valencia was arrested with a man by the name of Tomas Troncoso, per the New York Times. Mr.

1http://www.nytimes.com/1985/01/03/nyregion/theregion2heldinjerseyincocaine
seizure.html
2 http://www.nytimes.com/1995/10/30/nyregion/calidrugcartelusingusbusinesstolaunder
cash.html?pagewanted=all


Troncoso was found to have $1 million in cash in small bills in his luxury apartment in Edgewater
at the time.3
Did you know that just a couple of years after this seizure of 134.2 pounds of cocaine and after
Valencia was released from prison in 1985, Valencia then decided to become a Herbalife
distributor? Would you believe that Mr. Valencia has also apparently found tremendous success
with Herbalife over the last 30 years? You would be hard pressed to find anyone that thinks 134.2
pounds of cocaine doesnt speak to a serious and direct connection to major cocaine producers.
Socrates Valencia appears to still have very close ties to the company, despite the company not
mentioning him at Extravaganzas and touting his success like it does with other successful
distributors. Mr. Valencia appears to have been a donor to the Herbalife Family Foundation in both
2011 and 20124. We have found a litany of photographs and documents that tie Valencia to
Herbalife.
We believe Socrates Valencia is either now a current Presidents Team member or a current
Chairmans Club member. We cant figure out which it is. Perhaps the company can weigh in on the
situation and clarify. Regardless, Mr. Valencias involvement with the company cant be disputed.
Heres a recent picture of him with Zac Tartol, nephew of current board member John Tartol.

Those inclined to search YouTube and Google for Mr. Valencia can easily find numerous
associations to Herbalife. This website shows a slew of photographs linking Valencia and his
brother to Herbalife as recent as 2015. We would encourage regulators and sleuths at home to
cache these pages, as we expect them to be taken down quickly.

3 http://www.nytimes.com/1985/01/03/nyregion/theregion2heldinjerseyincocaine

seizure.html
4http://www.herbalifefamilyfoundation.org/document.doc?id=38


We believe that Mr. Valencias brother, Arquimedes Valencia, still currently lives in New York based
on his Facebook profile and what appears to be his sons Facebook profile. Unlike Socrates,
Arquimedes seems to be unaffected and unrestricted on where he lives.
Even more interesting? Arquimedes Valencia opened a domestic business corporation in 19945
with a man by the name of Hector Gualteros.

Hector Gualteros was then arrested in 1995. The NY Times stated that Gualtero was part of a group
that laundered about $4 million in six months for the CALI Drug Cartel. The Times wrote in 1995:
Inside a black 1985 Chevrolet Camaro a state police trooper discovered $40,000 in
small bills, postal money orders worth $16,000 and records of extensive financial
transactions with Colombia. The driver, Hector Fabio Gualteros, told the police the
money and records were part of his work as an independent distributor of Herbalife
International healthcare products.
Agents with the State Organized Crime Task Force and the Federal Customs Service placed
Mr. Gualteros under surveillance, eventually monitoring 22 telephone lines, 8 beepers and
13 fax lines. In weeks, their suspicions were confirmed.
As described in court papers and interviews, the ring collected drug money for the Cali
cartel and paid it to small New York City companies exporting costume jewelry and
watches. Cash was often left in brown paper bags.
Seven companies that received the drug money were identified in court papers as High Top
Enterprises, Almar Sales, Axelrod Inc., Proyectos Z Corp., Ruby International, AAA Watch
and Royal Watch Company, but none was charged with wrongdoing because officials
concluded they were unaware of the scheme. Some of the companies were in nondescript

5 http://www.nycorporatelist.com/corp/2208809.html


offices on Broadway and Seventh Avenue, while four other companies receiving such
tainted cash were in Miami and Los Angeles.
The investigation ended earlier this year with the arrest of six people, including Mr.
Gualteros and Libardo Moncado, a Colombian importer, who was arrested on a trip to
Miami. All pleaded guilty in Federal Court in Brooklyn. Prosecutors said Herbalife was not
implicated.
Records show that payments were directed to the companies by coded fax and beeper
messages from Cali bosses in Colombia. The authorities say the operation laundered
about $4 million in six months.
Maybe things have changed since the mid 1990s, Herbalife is likely to say. We find this unlikely and
well explain why.
First, lets recap:

Mid 1980s Valencia caught with Troncoso with $40 million in Cocaine in New York and
leaves the United States to move back to Colombia.
Late 1980s Socrates becomes a Herbalife Distributor with his New York based Brother
Arquimedes
1990s Arquimedes sets up Corporation with Partner (Hector) in New York. Hector gets
caught with a group laundering $4 million over six months, according to the New York
Times. He claims money on his person is related to his work as an independent distributor
of Herbalife International healthcare products.

Obviously, Socrates and Arquimedes must be doing pretty poorly given their connection to some
very serious Federal crimes. Moreover, Herbalife, as a publicly traded NYSE company surely had to
(or now has to) cut ties with them given their knowledge of these serious Federal crimes.
WRONG.
Today, Socrates Valencia is within the Herbalife coterie of top ranking Presidents Team or
Chairmans Club members.
More importantly, he is close friends with Herbalife Board Member John Tartol (picture below) and
Chairmans Club Member Susan Peterson (pictures below).

Life is good for Socrates and indirectly Arquimedes, as seen from their social media accounts, which
show luxury homes, pools, vacations, dirt bike trips and dinners.

Did we mention Socrates also owns his own soccer team?

Equally, things are good for his Son with their Nutrition Club Business also as seen from his
Twitter page https://twitter.com/socrates1693. It contains pictures of Christian Louboutin shoes,
Extravagant vacations, buying high end watches, drinking Champagne and telling the typical MLM
stories of how much he sacrificed made this all worth it.

So, what continues to fund Socrates Valencias lavish lifestyle? The answer here appears to be
many Herbalife Nutrition Clubs being run through his Company Professional De Bienstar. See
http://centralwellnessclubs.com and http://clubcentraldebienestar.com/
These clubs are described as a System of Central Wellness Clubs and they exist across Panama,
Colombia, Peru, Ecuador, Costa Rica and Mexico.


Central Wellness Clubs website, which shows a Bienstar lecture taking place, also lists a Sunrise,
Florida mailing address.

Given that Valencia moved out of the United States in the 80s related to a major federal crime, does
the Federal Government know that Socrates is now involved with selling/operating and deriving
financial benefit from nutrition clubs based in the United States (Florida)? You can see pictures of
his presence in South Florida through another Valencia relatives Twitter account
https://twitter.com/rogervalencia and a link to their video promos for the Central Wellness Clubs.

It Isnt Just a 1980s or 1990s Problem
This angle of the Herbalife story doesnt get nearly the media attention that it deserves.


For example, little to no media coverage in the U.S. took place when in 2012, six people were
arrested in Brazil for running a money laundering ring out of what appear to be Herbalife affiliated
weight loss clubs.6
Heres a photo from the bust of the Herbalife containers that were used to hold drugs.

Here also is a DEIC slide talking about the involvement of the Herbalife brand in the bust.

http://www.aranoticia.com/2012/12/ultimaspoliciacivilapresenta.html
http://www.alagoas24horas.com.br/573990/desbaratadaquadrilhaqueusavaclinicascomofachadapara
traficodedrogas/

Then theres information obtained through FOIA request, including anonymous tips to the FBI
dating back to the 1980s that the company smuggles cocaine and heroin into the United States.

Did you also know that current Herbalife board member Pedro Cardoso has been linked to a
money laundering scheme and was charged with money laundering by Brazilian prosecutors in a
complaint from 2008?7
According to a 2014 comment letter8 filed with the SEC, when the company was made aware of this
criminal complaint naming a board member as a defendant, the company commenced a responsive
and full investigation.
Herbalife then played judge and jury, telling the SEC that reports of criminal allegations of money
laundering and/or embezzlement against Mr. Cardoso appear entirely without basis. They then
stated that their investigation is currently ongoing.
When the SEC asked the company about this current Board Member and lawsuit9, the company
answered in May of 2015 that it did not think the circumstances surrounding this Director were
material, based on the fact that Mr. Cardoso had not been served a copy of the lawsuit and because

7 http://finance.yahoo.com/news/herbalifedirectorlinkedmoneylaundering142920084.html
8https://www.sec.gov/Archives/edgar/data/1180262/000119312514442965/filename1.htm
9https://www.sec.gov/Archives/edgar/data/1180262/000119312515165176/filename1.htm


the company had been advised by [their] Brazilian counsel that the statute of limitations will also
expire at year end.

Whats Really Going on at Herbalife?
For years, it has been speculated by critics that Herbalife could have a layer of fraud to it that
usurps and transcends the pyramid scheme allegations of late. Specifically, the companys success
in countries like Mexico and Colombia and the immense amount of undocumented cash that trades
hands at the over 40,000 nutrition clubs between the two countries could make for a perfect
environment for wrongdoing involving cash.
In theory, Herbalife makes for a great vehicle for money laundering. Signing up as a distributor is
easy and requires little documentation. Its probably very easy to set up fake accounts under a main
distributor, giving the cash a chain of individuals to work its way up and through, while the top
distributor uses cash purchases of product below him to collect recruiting rewards. 10/10
Researchs internal estimates lead us to believe that between 40% and 60% of cash invested by top
distributors can then come back to them. The fact that Herbalife recognizes revenue in local
currencies and pays out to distributors using U.S. dollars could make the company an obvious
target for those wanting to take local currencies acquired through questionable means and turn
them into fresh U.S. legal tender.
We suspect this small, yet weighty, collection of evidence is only the tip of the iceberg. We believe
these revelations about one of Herbalifes top distributors and a Board Member should lead media
and investigative journalists to introduce a line of questioning regarding potential money
laundering at the company that we think the DEA will be very interested in
Consider the following:

Colombia in the 80s and 90s supplied 90% of the Cocaine that came into the U.S.
When Pablo Escobar was killed the Medillin Cartel collapsed and the the Cali Cartel
took over, they too however soon collapsed and the power moved to the Sinaloa
Cartel in Mexico.
From the late 1990s to present, Mexico supplies 80% of all Cocaine bound for the
United States.
In the early 2000s, the Herbalife Nutrition Club concept was conceived in Mexico.
In 2013 Herbalife had 37,000 Nutrition Clubs in Mexico. To put that in perspective,
Burger King at the time had 449 locations, McDonalds 397 locations and Starbucks
403 locations in all of Mexico. Mexico in 2013 had a population of 117 million people.
Herbalife has at least one Nutrition Club for every 3,162 people in Mexico. Burger
King in contrast has one location for every 260,579 people, McDonalds one location
for every 294,710 people and Starbucks one location for every 290,323.

For the media and those interested in following down a path that we think could lead to more
answers, we humbly submit the following questions for you to ponder:


1. Should the DEA contact and speak to current and former members of Herbalifes
compliance department to ascertain whether or not complaints regarding the illegal
laundering of money have been reported to the company?
2. Will the company itself come out publicly and answer the following questions:
a. Has the company been contacted by, or corresponded with, the DEA over the last
four (4) years?
b. Has the company ever been made aware of money laundering concerns?
c. Is the company aware of Valencias past?
d. In the companys history, how many total compliance complaints have been lodged
having to do with potential illegal money laundering and how many have been acted
on?
e. What is the current status of both Pedro Cardoso and Socrates Valencia within the
company?