Confirmation was provided by Bill Ackman that the contractor hired to attack Herbalife is being investigated by the Federal Bureau of Investigations (FBI). Federal investigators have subpoenaed a contractor working on Ackman’s campaign against Herbalife LTD in an effort to determine if any market manipulation occurred regarding the company’s stock.
Ackman gave an interview in which he stated that Global Strategy Group, a research and public relations group but also representatives of the contractor, were in fact issued a subpoena last summer from the Department of Justice. He also said that interviews of several employees had already taken place.
Following the latest allegations against Herbalife, shares tumbled. According to Ackman, he had not personally been contacted by Federal agents, nor has he or anyone associated with the campaign been involved in any wrongdoing against the nutritional products company.
Ackman stressed that views about Herbalife were carefully formed and showed that the company is nothing more than a pyramid scheme. Reporters reached out to Preet Bharara, US Attorney in Manhattan, as well as representatives of Global Strategy Group but no comments have been issued.
The Federal probe was first reported yesterday at which time unnamed sources were cited as saying that investigators were working to determine if employees of the contractor had provided regulators with false information as a way to shut down Herbalife.
Ackman, who is the manager of Pershing Square Capital Management, a hedge fund group out of New York, has made strong accusations that Herbalife is a scheme that focuses primarily on Latino immigrants who are currently in the United States illegally, as well as other individuals who purchase Herbalife products for distribution.
Alan Hoffman, spokesman for Herbalife released his own statement saying that there is a $1 billion bet against Herbalife by Ackman. Hoffman also stressed that Ackman has a direct financial investment in bringing the company down.
According to Hoffman, Ackman has been on a two-year campaign during which time more than $75 million has been invested in fabricating the truth about the company, all for the purpose of personal gain. Hoffman confirmed that statement by saying that more than $1 billion has already been shorted in company stock so that if stock prices fall, he profits.
As part of Hoffman’s statement, he stressed that the fundamentals of Herbalife’s business model are strong and that the company remains 100% dedicated to improving nutrition although he also expected for some time that Ackman’s real goal would one day be exposed.
The high-profile attack on Herbalife started in 2012 after Ackman completed in-depth research about the company’s operations. At that time, he set a goal of having regulators close the company.
Sources within law enforcement confirmed that because of last year’s campaign, separate investigations in the Herbalife’s operations have been opened by both the FBI and the US Justice Department. In addition, a civil inquiry into the company was launched last year by the Federal Trade Commission (FTC).