It's not uncommon for executives to fall out with their old owners, but the Chinese executive of a U.S. dropshipping company has now been filed criminal charges by the U.S. Department of Justice after claiming more than 400,000 yuan from Herbalife, saying it is "still at large"!
Author 丨 City Boundary Feng Chenchen
Edited by 丨 Lang Ming
Herbalife, a direct selling company, was involved in a bribery case of 175 million, and the "old hero" who opened the Chinese market became a fugitive.
According to Reuters, the U.S. Department of Justice recently filed criminal proceedings against Herbalife's former president of China and senior global vice president Li Yanliang and former head of external affairs Yang Hongwei: over a decade, bribes were paid to obtain sales licenses and win business, and to evade regulatory scrutiny. A spokesman for the New York Department of Justice said it announced, "The two are still at large." ”
The U.S. judicial department said in court documents that employees of the foreign affairs department frequently entertained and gave gifts at banquets and other occasions, and from 2007 to 2016, the Group of Chinese subsidiaries managed by Li Yanliang reimbursed more than 25 million U.S. dollars for employees of the Foreign Affairs Department, or about 175 million yuan of hospitality and gift expenses.
The mining uncle tried to contact the head of Herbalife China to understand the situation, and the customer service told him that it was not possible to transfer the responsible department at present, and there would be feedback at least two working days.
There is not much public information about Li Yanliang, but he can be said to be the core figure of Herbalife's opening of the Chinese market, and he has helped Herbalife's performance in China grow nearly tenfold. After the "departure of the fans" in 2017, Li Yanliang also sued Herbalife in court for 480,000 yuan in compensation, and finally won the lawsuit.
Born in Yantai, Shandong In 1968, Li Yanliang began to leave home to study at the age of 13. In 1990, after graduating from Shandong University, Li Yanliang began to engage in foreign trade import and export work.
In May 1997, Li Yanliang joined Amway by chance, formally contacted the sales of health care products, moved all the way from business director to manager, and finally sat in the position of senior manager in Shandong, responsible for business operations in Shandong. This work experience has provided him with a wealth of experience in the direct selling industry.
In 2003, Li Yanliang chose to study again and successfully graduated from the Guanghua School of Management of Peking University. After obtaining his master's degree, Li Yanliang joined Tiens Group in November of the same year and became the general manager of Tiens Indonesia, the second largest overseas market. However, Li Yanliang did not have a long tenure at Tiens Group.
Only one year later, Li Yanliang once again chose to "jump ship" to Herbalife, not only participating in the preparation and establishment of the company, but also successively serving as the director of East China Central China, the senior director of the northern region, the vice president of sales, the general manager and other positions. It can be seen that Li Yanliang's starting point after arriving at Herbalife is completely different from that of his previous time at Amway.
In 2007, Li Yanliang was appointed President of Herbalife China and was named Herbalife Global Senior Vice President. Some media began to report that this successful person from the "grassroots" background, Li Yanliang, who started from the grassroots level of direct sales management, became the only local Chinese head among the world's five major direct selling companies, including Avon, Amway, Ruxin, Mary Kay, etc.
Also in 2007, Herbalife China finally obtained a direct selling license approved by the Ministry of Commerce. Li Yanliang did have a few brushes, and during his time at the helm of the China business, Herbalife China's direct sales performance sang all the way. Until 2016, Herbalife China's annual performance even reached 7.52 billion yuan, an increase of nearly ten times in China.
In 2017, Herbalife China had revenue of US$886 million, and sales exceeded the US$840 million in the North American market, ranking second in the global region after Asia Pacific.
"Why did you leave?" Even Herbalife insiders can't understand this.
On May 23, 2017, during a conference call from Herbalife, Herbalife's U.S. headquarters announced that Li Yanliang, president of China, would no longer serve as president. For this Yi Shuai move, Herbalife's US headquarters did not disclose any original commission, while Herbalife China executives and distributors were tight-lipped and did not accept interviews from the outside world.
Li Yanliang, who has been at the helm of Herbalife China for ten years, suddenly left his job, and this personnel change was like a thunderclap in the direct selling industry. According to the China Economic Network, some insiders believe that "Li Yanliang may have been deposed, and the reason for the dismissal should be a disagreement with the US headquarters." Of course, this veteran who has been engaged in direct sales for 20 years is not without a way back.
In 2018, Li Yanliang joined Henderson Daily Health Products (Shanghai) Co., Ltd. Interestingly, after Li Yanliang joined Henderson, the company received a direct sales license within 1 month. To this end, the ten-year "old hero" of Herbalife has also had a lot of contradictions with the former owner, and has twice gone to court for a compensation of 480,000 yuan.
The incident began when Li Yanliang asked Herbalife for additional compensation of 482,000 yuan after leaving his post. However, Herbalife refused to pay on the grounds that Li Yanliang had leaked confidential information to competing companies. Subsequently, Li Yanliang took Herbalife to court.
The court ruled in the first instance that Herbalife must pay Li Yanliang an additional economic compensation of 482,000 yuan, and Li Yanliang won the case. Herbalife appealed against the verdict, but the Shanghai Second Intermediate Court ultimately upheld the first-instance judgment.
"The Chinese market is the lifeblood of any direct selling company."
This is the attitude of a veteran of the direct selling industry in an interview. Due to the large population base and large elderly population in China, it has long become a fragrant feast for direct sales enterprises mainly health care products. But marketers can get an extra piece of the pie, which can also cause problems such as "false publicity".
According to the first financial report, an industry regulator who did not want to be named said that for a long time, direct selling enterprises rely on dealers and a large number of direct salesmen to shop and sell, a large number of direct salesmen before being promoted to become formal sales personnel, and the company does not have a formal contract, and the cultural level, business literacy is uneven, personal subjective factors, sales assessment pressure and attractive bonus system, easy to lead to direct sales staff exaggerated, false or even illegal sales.
But there are exceptions, as early as 2017, there have been news that school students fantasized about joining Herbalife to "get rich overnight" and committed suicide without success.
In the early morning of June 8, 2017, a 22-year-old girl in Zhengzhou, Henan Province, who was in the midst of the flower season, fell to her death. According to the father of the person concerned, the young girl had spent 68,000 yuan to obtain the herbalife dealer qualification, and was constantly instilled in the idea of getting rich overnight, but because of the excessive cost but did not make money, resulting in a psychological collapse and chose to jump off the building to commit suicide. Herbalife said the incident was not related to the company and there was no precedent for liability.
Today, direct selling companies, including Herbalife and others, are not doing well in China. Since the beginning of this year, affected by the "Quanjian Incident", direct selling enterprises have ushered in a great purge. According to the latest list of direct sales products and direct sales trainers review and registration published on the website of the Ministry of Commerce, in addition to Quan Jian and Hualin, who have been convicted, a total of 89 registered direct selling enterprises have completed the review and registration.
Among them, the number of direct sales filing products decreased from 4304 before the review to 2387, a decrease of 44.5%; the number of direct sales trainers decreased from 2935 to 2457, a decrease of 16.3%; the number of direct sales personnel decreased from 3.918 million to 3.267 million, a decrease of 16.6%. The number of recorded products is close to the waist, and the number of direct sales trainers and direct sales personnel has dropped sharply, which will undoubtedly affect the performance of direct selling enterprises in China.
In the first three quarters of 2019, Avon's revenue was $1.18 billion, down 16% from $1.4 billion in the same period in 2018, while new group revenue fell 12.6% to $590 million, Chinese mainland market revenue fell 23.2%. The same goes for Herbalife.
While sales from the Asia-Pacific region rose 18.3 percent, sales from China fell 21.7 percent. According to Herbalife's third quarter 2019 financial report, its net sales in china in the first three quarters were $546 million, compared to $765 million in the same period last year, a decrease of about $220 million, or about 1.5 billion yuan.