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Herbalife

Herbalife admits it overstated membership figures

Nathan Bomey
USA TODAY

Nutrition company Herbalife acknowledged Thursday that it had overstated its membership figures in an admission that could fuel more scrutiny of the company's business model.

The company said in a U.S. Securities and Exchange Commission filing that it had misreported "active new member" figures.

Herbalife has faced multiple federal investigations over its business practices and accusations from hedge fund investor Bill Ackman that the company is running an illegal pyramid scheme. Herbalife has denied those allegations and accused Ackman of stock manipulation.

The company blamed its misstated membership figures on "database scripting errors" and "quarterly aggregation issues."

Herbalife stock (HLF) fell 7.4% in afternoon trading to $52.20.

The drop came after investors last week drove the shares skyward after Herbalife said it was negotiating a resolution to the Federal Trade Commission's probe.

Herbalife shares rise on news of FTC talks

The company said worldwide new active members rose 3.2% in the fourth quarter of 2015, compared with a year earlier, not 16.7% as it reported last week. It said U.S. active new members rose 30.7% during the same period, not the 71% it previously stated.

Altogether, Herbalife corrected 28 different statements tied to the new active member figures but said it did not affect its financial reports. The company said the "non-financial metric" was new, which made it difficult to calculate past figures.

"The company did not discover these errors earlier because it had limited visibility into the likely rate of change in this metric upon its first use," the company said in a statement. "The company has taken corrective action regarding these issues."

The report came after Ackman said last month that he's not relinquishing his bet against Herbalife shares despite major losses.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.

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