Bloomberg News

Herbalife Detractors Meet With FTC on Ackman Pyramid Claims (1)

February 06, 2014

Herbalife

A woman walks past Herbalife Ltd. signage displayed outside of Herbalife Plaza in Torrance, California. Photographer: Patrick T. Fallon/Bloomberg

A Latino advocacy group supporting hedge-fund manager Bill Ackman’s claim that Herbalife Ltd. (HLF:US) is a pyramid scheme said it met with a federal regulator yesterday to push for an investigation of the nutrition maker.

The League of United Latin American Citizens, or LULAC, met with U.S. Federal Trade Commission Chairwoman Edith Ramirez to detail alleged abuses, it said. At an earlier press conference, LULAC said Herbalife deceives Latinos and other disadvantaged consumers with false promises of wealth and success. Peter Kaplan, a spokesman for the agency, declined to comment or confirm the meeting’s content.

“She’s not going to tip her hand one way or another,” LULAC National Executive Director Brent Wilkes said of Ramirez after the meeting. “I can tell you she is concerned about the stories she hears and I’m sure as the agency looks at all this they’ll take into consideration our testimony.”

Herbalife has denied Ackman’s allegations it’s a pyramid scheme and won the support of such investors as Carl Icahn and Post Holdings Inc. Chief Executive Officer Bill Stiritz.

“We would welcome the opportunity to educate the group assembled by LULAC, in order to correct the misinformation and misperceptions they may have been given about Herbalife, and to review and understand the details of those who cite a bad experience with Herbalife,” Julian Cacchioli, an company spokesman, said in an e-mailed statement.

Ackman Short

Ackman’s Pershing Square Capital Management LP initially sold short at least 20 million Herbalife shares. Ackman has since reduced the equity short position in the company while maintaining his bet through options. He has urged U.S. regulators, elected officials and community activists, including LULAC, to help shut it down.

Pyramid-scheme operators typically seek to make money by recruiting new members who pay fees to existing members rather than relying entirely on selling goods and services. The FTC has said modern pyramid schemes can use products to hide their true intent.

Herbalife climbed 0.1 percent to $67.99 at 10:28 a.m in New York. Through yesterday, the Cayman Islands-based company had declined 14 percent this year after more than doubling in 2013.

To contact the reporters on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net; David McLaughlin in Washington at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • HLF
    (Herbalife Ltd)
    • $58.35 USD
    • -9.13
    • -15.65%
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