USA TODAY International Edition
Ackman turns up heat against Herbalife
Activist hedge fund manager Bill Ackman on Wednesday reiterated his bearish investment bet on Herbalife, saying the nutrition supplement company’s $ 200 million regulatory settlement found evidence of a pyramid scheme — even though the agreement didn’t include that allegation.
Intensifying the more than three- year financial siege, Ackman said he will urge overseas regulators to examine last week’s U. S. Federal Trade Commission findings against Herbalife ( HLF ) and pursue their own enforcement actions.
“Herbalife has actually been shut down by the FTC; they just haven’t realized it yet,” the billionaire businessman said during an investor conference call about secondquarter results of Pershing Square Holdings, the publiclytraded security of his hedge fund.
The company’s year- to- date return is down 18.3% as of Tuesday, according to data on the Pershing Square website. Part of the loss stems from Ackman’s investment in Valeant Pharmaceuticals International ( VRX), which faces multiple investigations of its drug pricing and distribution actions.
Alan Hoffman, Herbalife’s executive vice president for global corporate affairs, challenged Ackman’s claim. “We would not have settled unless we had the greatest confidence in our ability to comply with the agreement and grow our business, and we believe this will be proven,” he said.
The high- stakes showdown focuses on opposing views of Herbalife’s business structure and whether it represents an improper scheme in which a company’s new recruits provide income that goes to previous arrivals.
The FTC court complaint said the company did not focus on retail sales of nutritional, diet and personal care products. Instead, Herbalife’s structure encouraged salespeople, known internally as members, to bring in hundreds of thousands of others who were told they could reap big profits selling Herbalife merchandise.