Convicted charlatan puts Herbalife in his cross hairs: Minkow contends that children's shake has high lead content.

Five years ago, former ZZZZ Best carpet cleaning charlatan Barry Minkow was released from prison after serving a sentence for fraud, racketeering and tax evasion.

Since then, the one-time San Fernando Valley resident has reinvented himself, first as a minister and now as an unlikely champion of corporate governance reform.

His latest target?

Herbalife Ltd., the nutritional supplement maker and multilevel marketing phenomenon that five years ago also set about reforming its less-than-stellar public image.

The Century City-based company was handed over to Michael Johnson, a slick Walt Disney Co. executive who sought to improve the product line and leave behind its history of marketing abuses--not without some success.

But Minkow, who now lives in San Diego, doesn't buy it.

He considers the marketer of vitamins and weight-loss shakes little more than a pyramid scheme hiding behind the respectability of a NYSE ticker symbol and $2.5 billion market cap--not to mention what he claims is a purveyor of unsafe products.

"Herbalife is what we call a fully disclosed fraud," Minkow said. "Everything is there but you have to read between the lines. And when you look at the turnover you can see the model can't sustain itself, except for the people at the very top."

A corporate gadfly with Minkow's past might easily be dismissed, but at least one of his barbs hit the bull's-eye.

Last month, he conducted a credentials check of top company managers and directors and discovered the chief operating officer, Greg Probert, hadn't completed requirements for the M.B.A. listed on his resume. Probert, also a former Disney executive and longtime friend of Johnson, resigned less than a week after the story broke.

Then on March 28, Minkow published his latest attack on the Web site of his San Diego-based Fraud Discovery Institute. The post contended that he had hired an independent lab to test several Herbalife products and had found what he contends to be unsafe levels of lead in the children's version of a meal-replacement shake.

As a result, the company is in the process of testing lead and other contaminant levels in all 61 products sold in the United States. Herbalife contends early results show lead levels far lower than what Minkow claims.

Sliding Shares

After rising to a 52-week high of $51.09 on April 4, Herbalife shares have fallen 24 percent as a steady stream of troubling news, much of it generated by Minkow, appeared to spook investors.

While he admits to a short position in Herbalife's stock, Minkow contends that's his way of financing continued investigation of the company.

Last month, he said he informed local FBI and Securities and Exchange Commission officials what he was doing, and provided access to his online trading account so they could monitor his actions.

Herbalife officials admit Minkow was right about Probert's past, but insist that their adversary twists and stretches facts in a misguided effort to scare off investors and encourage regulatory and law enforcement scrutiny.

"We have a gentleman here who has some facts but not all of the facts," said Herbalife Chief Financial Officer Richard Goudis.

Johnson declined to comment for this story.

In 1989, Minkow was pleading guilty to multiple counts of fraud and was sent to prison. In 1995, Minkow became a senior pastor at Community Bible Church in San Diego, where he lives with his wife and two adopted children.

Deborah Crowe is a reporter for the Los Angeles Business Journal, a sister newspaper, where this story first appeared June 2.