NEW YORK – Hedge fund manager William Ackman is applauding a consumer group’s push for the Federal Trade Commission to investigate whether Herbalife is a pyramid scheme.
The National Consumers League said that it wants the FTC to investigate the claims against Herbalife as well as the vitamin and supplement products company’s responses.
Ackman alleged in December that Herbalife was a pyramid scheme and made a bet the stock would fall, arguing that the company makes most of its money by recruiting new salespeople rather than on the products they sell. Herbalife disputes that.
In a statement late Tuesday, Pershing Square Capital Management’s Ackman said that he was pleased that the NCL was requesting an FTC investigation and believes it will show that the company is a pyramid scheme.
On Wednesday, Herbalife said in a statement that “We regret that the National Consumers League has permitted itself to be the mechanism by which Pershing Square continues its attack on Herbalife.”
The company said that perhaps Ackman’s Pershing Square should be investigated, saying “its actions are motivated by a reckless $1 billion bet against the company based on knowingly false statements about Herbalife.”
Herbalife maintains that it is a financially strong company that has created meaningful value for shareholders.
Last month Herbalife Ltd. denied a media report that it was the target of a law enforcement investigation. At that time the FTC would not confirm or deny whether any government agency was investigating Herbalife.
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