Fourteen months after hedge fund investor Bill Ackman denounced Herbalife’s business model as an elaborate scheme preying upon consumers, The New York Times has brought forward extensive information on Ackman’s carefully orchestrated campaign and its tactics.
As an efficient means of driving down Herbalife stock, Ackman has pressed state and federal regulators to investigate the company’s practices. In addition, Ackman has widely publicized letters written to regulators and pointed to Latino groups that rallied against Herbalife, while failing to disclose his own firm’s instigation and guidance in those efforts.
Calls to action regarding Herbalife have raised red flags in the minds of some officials. Connecticut Attorney General George Jepsen received five letters from separate individuals, and each letter sported nearly identical text, claiming “Herbalife is a complex and abusive pyramid scheme” and “Herbalife unfairly targets minority groups and falsely markets itself as an easy business opportunity.” One individual represented a government relations group hired by one of Ackman’s lobbying firms, while some declined to comment on who asked them to write the letter, and yet another claimed he neither wrote the letter signed with his name nor knew anyone harmed by Herbalife.
Ackman’s campaign to discredit the company has begun to resemble “an effort to move the price rather than spread the truth,” according to Harvey L. Pitt, a former Chairman of the Securities and Exchange Commission. “If you are trying to spread the truth, that is O.K.,” Pitt told the Times. “If you are trying to move the price of a stock to vindicate your investment philosophy, that’s not O.K.”
