Herbalife Ltd. (HLF:US), the nutrition company being investigated by the Federal Trade Commission over allegations that it’s a pyramid scheme, hired a PepsiCo Inc. (PEP:US) executive to take on a newly created public-affairs job.
Alan Hoffman, a former aide to U.S. Vice President Joe Biden, will become executive vice president of global corporate affairs at Herbalife, the Los Angeles-based company said today in a statement. He’ll oversee public policy, corporate communications, government affairs, community relations and philanthropy as part of the job, which starts Aug. 25.
Herbalife, facing both regulatory scrutiny and attacks by billionaire hedge-fund manager Bill Ackman, plans to make its case more strongly to Washington and the general public. Earlier this week, Ackman gave a presentation purporting to show that Herbalife was a fraud that takes advantage of low-income people by promising them lucrative business opportunities. Ackman, a short seller betting against Herbalife’s stock, failed to convince other investors and the shares jumped more than 25 percent in a single day.
“I look forward to ensuring that the public more clearly understands the critical role the company plays in advancing good nutrition,” Hoffman, who was senior vice president for global public policy at PepsiCo, said in the statement. “I also look forward to promoting the economic opportunities that this global nutrition company provides for hard-working people in communities everywhere.”
As part of the move, Barbara Henderson, senior vice president of global corporate communications, will step down. She informed the company last year that she wanted to retire at age 67, Herbalife said. Before joining PepsiCo, Hoffman, 48, was Biden’s deputy chief of staff and deputy assistant to President Barack Obama.
Ackman’s firm, Pershing Square Capital Management LP, accuses Herbalife of misleading distributors, misrepresenting sales figures and selling a commodity product at inflated prices. The FTC and law enforcement are investigating the allegations.
With an initial $1 billion bet against Herbalife, Ackman is trying to profit from a drop in the share price. As part of a $50 million two-year campaign to shut down the nutrition company, Pershing investigated 240 of Herbalife’s clubs in several countries, Ackman said this week. He said he plans to pursue the company “to the end of the earth.”
Ackman, who compared Herbalife to Enron Corp. in television appearances, likened the company to a mafia operation and said its distributor-owned clubs lose $12,000 each per year, on average. He said he calculated that unpaid, recruited trainees are fleeced out of more than $3,000, which they must spend on weight-loss shakes to qualify to open such a club.
Pershing’s campaign has included lobbying regulators to close Herbalife, and Ackman has restructured his initial short against the company with options, details of which he has declined to disclose.
Herbalife has released an analysis arguing that it’s not a pyramid scheme as Ackman asserts. According to research by Walter H. A. Vandaele, an economist at Navigant Economics LLC, 97 percent of Herbalife’s products are purchased for end-use consumption, the company said.
Herbalife disclosed in March it was under investigation by the FTC, and people familiar with the matter told Bloomberg News in April that the Federal Bureau of Investigation also is investigating its practice.
U.S. Senator Ed Markey, a Massachusetts Democrat, asked both the FTC and the U.S. Securities and Exchange Commission to investigate the company.
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