Billionaire hedge-fund manager Bill Ackman said former top distributors for Herbalife have gone to investigators to back up his claim that the nutritional-product maker operates an illegal pyramid scheme.
“A lot of the former Herbalife employees, top distributors, are going state’s evidence,” Ackman said in an interview with Bloomberg Television today. “They are also going to Pershing Square.”
Ackman, who has led a two-year campaign against the company, reiterated that government prosecutors are closing in on Herbalife, without being more specific. His firm, Pershing Square Capital Management, initially bet $1 billion against Herbalife, which Ackman has called a “criminal enterprise.” The company, based in Los Angeles, has repeatedly denied being a pyramid scheme.
During today’s interview, Ackman also provided a video from 2005, saying it shows a top Herbalife distributor acknowledging that the company operates a pyramid scheme. Pershing has agreed to protect some of the purported whistle-blowers from lawsuits, he said.
Alan Hoffman, a spokesman for Herbalife, didn’t immediately have a comment.
The investor is renewing his Herbalife criticism after months of letting the shares tumble without any high-profile, flashy attacks. The stock has slumped about 40 per cent in the past five months, hurt in part as Herbalife made changes to its sales policies, while he has largely kept his mouth shut. In contrast, when Ackman made a highly publicized anti-Herbalife presentation in July, the stock actually rose 25 per cent in a single day.
Herbalife’s business practices are being reviewed by the Federal Trade Commission, an investigation that followed Ackman’s initial attacks. While Herbalife has said that it expects to be vindicated, the probe has weighed on the stock. Herbalife also has imposed stricter selling rules on itself, aiming to blunt criticism from Ackman. That has contributed to slowing growth.
Bloomberg News, edited by ESM
