Herbalife Chief Financial Officer John DeSimone and other company
representatives will host a session where Congressional staff
members can ask questions about how the company's direct selling
business works, according to an invitation sent by the lobbying firm
Raben Group and seen by Reuters.
An Herbalife spokesman confirmed the planned meeting and said: "We
look forward to educating Congressional staffers about the important
economic impact of the direct selling industry and our company, and
answering their questions."
The meeting suggests that Herbalife is stepping up its lobbying
efforts in Washington at the same time as Ackman is stepping up his
campaign against the company.
For more than a year, Ackman has been betting that Herbalife's share
price will collapse amid regulatory scrutiny, but so far his $1.16
billion short position has left him with paper losses as the stock
price has climbed.
Ackman's rivals, including Carl Icahn, have lined up against his
short bet by taking stakes in Herbalife.
Last month Senator Edward Markey, a Massachusetts Democrat, waded
into the battle by requesting details from Herbalife about its
business model, how members earn compensation, and whether it
targets minorities as civil rights groups have alleged.
Boston City Councilor Tito Jackson and Massachusetts state Senator
Sal DiDomenico have also called for an investigation into the
company, as have lawmakers from California, New Mexico, Nevada and
U.S. regulators have declined comment on whether they are conducting
investigations into Herbalife. Herbalife has repeatedly denied
running a pyramid scheme, a model in which participants are paid
solely to recruit more members into the scheme.
On its quarterly earnings call this week, Herbalife said it has
answered all of Markey's questions. The company sent a letter dated
February 18 in which it denied accusations it is running a pyramid
[to top of second column]
Markey's spokeswoman, Giselle Barry, said he is reviewing the
answers and waiting for responses from the Securities and Exchange
Commission and the Federal Trade Commission, whom he asked to probe
Herbalife's Johnson has said that the bulk of Herbalife distributors
join up to get discounts on products they use themselves and that
only 4 percent of them want to turn selling Herbalife products into
a full-time job.
Ackman has countered that claim, saying the company's videos suggest
that anyone can get rich quickly by selling Herbalife products and
they prompt many to spend thousands of dollars trying to build a
business that often fails.
Ackman told his investors at a dinner last week that his $12 billion
Pershing Square Capital Management began putting on its short
position against Herbalife on May 1, 2012 and that the stock has
appreciated by 23 percent since then, according to a presentation
seen by Reuters.
(Reporting by Svea Herbst-Bayliss;
editing by Richard Valdmanis and David Gregorio)
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