Herbalife Tangles with Prop 65, Testing Company 05/20/2008 SAN DIEGO-The Fraud Discovery Institute (FDI), a financial fraud watchdog group, released an alert May 19 on dangerously high levels of lead allegedly found in six common Herbalife (NYSE: HLF) products. FDI's investigation included product analysis by an FDA-registered lab and a review of medical literature, Herbalife's product literature and various peer reviewed medical journal articles of Herbalife products and possible hepatoxicity. Christopher Grell, co-founder of the Dietary Supplement Safety Committee and lawyer specializing in dietary supplement litigation, conducted the literature reviews. According to Grell, the six Herbalife products tested-ShapeWorks Protein Drink Mix, Healthy Meal Nutritional Shake Mix, Tang Kuei Plus herbal tablets, Thermojetics Nature's Raw Guarana instant tea mix, ShapeWorks Cell Activator and Multivitamin Complex-contained levels of lead that are both dangerous and that are in excess of what the law allows under California's Safe Drinking and Toxic Environment Act of 1994 (Prop. 65). FDI argued: "The Proposition was intended by its authors to protect California citizens and the State's drinking water sources from chemicals known to cause cancer, birth defects or other reproductive harm, and to inform citizens about exposures to such chemicals." Prop. 65 sets the maximum daily exposure at .5 mcg/d for chemicals that are known to cause developmental problems, and 15 mcg per day for chemicals that are known to cause cancer and/or birth defects or other reproductive harm. Lead is listed in both categories in California. FDI reported the following levels: Herbalife's Thermogetics, 0.663 mcg of lead per tablet, a total of 5.967 mcg/d if taken as recommended; and Herbalife's Shape Works Cell Activator, 0.294 mcg of lead per capsule, a total of 2.637 mcg/d when taken as recommended. In expressing confidence in the safety of its products, Herbalife responded, "It is irresponsible to equate Prop 65, which concerns disclosure, with the safety of our products." The company explained Prop 65 is a consumer disclosure and labeling statute requirement, which mandates disclosure of the presence of any of approximately 800 specified chemicals (including lead) under certain circumstances. "Our products fall within FDA-suggested guidelines for the amount of lead that consumers can safely ingest through their diet and the FDA sets specific limits on lead content in certain foods," the company countered. "Our products include natural ingredients, and trace levels of naturally occurring lead is present in virtually all natural ingredients." Herbalife added this is not a question of contamination resulting from the manufacturing process or unsafe handling, noting several common foods, such as chocolate, have come under question of Prop 65 in the past. The company further stated: "We follow established written quality assurance and quality control procedures. We stand behind the safety of our ingredients and products." Following FDI's release of the Herbalife test results, as well as numerous other releases attacking Herbalife, Reuters News published details about FDI's founder Barry Minkow's stock market bet that Herbalife would fail. Called a "put", the investment by Minkow totaled about $50,000 and stands to earn returns if Herbalife stock falls-HLF shares were down over 4 percent to $40.17 by the end of May 19, the date of FDI's press release. Minkow, a pastor who served seven years in jail for fraud, now leads FDI, which devotes much of its Web site homepage to going after Herbalife. A document posted on FDI's site shows the cost of lab services relative to the Herbalife lead investigation at around $5,820, far less than the $50,000 investment in HLF failure --

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