to pay Herbalife whistleblowers' legal fees, not lost pay
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[April 25, 2014]
By Svea Herbst-Bayliss
BOSTON (Reuters) — Activist investor
William Ackman, who is betting more than $1 billion that Herbalife
is a pyramid scheme, will cover legal fees and damages for
whistleblowers who have spoken out against the company, but not lost
wages if they lose their jobs.
Ackman's $13 billion hedge fund Pershing Square Capital Management
had agreed to pay one whistleblower as much as $3.6 million if he
lost his job after turning against the company. But other
whistleblowers did not receive similar deals.
"With respect to indemnities provided by Pershing Square to other
whistleblowers, including those cooperating with government
agencies, these indemnities are limited to legal fees and damages
incurred in the event that these individuals are sued by Herbalife,
and do not provide for recoveries for lost wages," a spokeswoman for
Pershing Square said.
ABC News reported earlier this week that the New York-based fund
agreed to pay Giovanni Bohorquez, a former Herbalife executive who
has provided information about the company to certain government
agencies, up to $250,000 a year for 10 years, and make certain other
payments, should he lose his job.
Herbalife is being investigated in the United States by the Federal
Trade Commission, Securities and Exchange Commission, Department of
Justice, Federal Bureau of Investigation, as well as the Canadian
Competition Bureau following accusations by Ackman and some activist
groups that the company is running a pyramid scheme, in which
distributors earn more for bringing in new members than for selling
the product to retail customers. Attorneys General in New York and
Illinois are also probing the company.
Herbalife has steadfastly denied the accusations.
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Ackman unveiled his short bet against the company in December 2012.
Since then billionaire rivals like Carl Icahn and George Soros have
taken the other side by buying stakes.
Pershing Square has spent roughly $20 million on its campaign to
prove that the company is running an illegal business, two people
familiar with the fund said on Thursday. The money has been used to
pay for investigators to help find whistleblowers and a database
that logs Herbalife distributors, said the sources, who are familiar
with the payments but not authorized to discuss them publicly.
Last year Herbalife spent $2 million on federal lobbying while
Ackman spent $264,000 on lobbyists to press his case against the
company, government documents showed.
(Reporting by Svea Herbst-Bayliss; editing by Richard Valdmanis and
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