 But it just did, now likely pitting the FBI against congressional Democrats who
intervened with the Federal Trade Commission on behalf of Ackman’s effort to
destroy Los Angeles-based Herbalife Ltd.
Ackman has characterized his campaign against Herbalife as a social justice
fight.
The Wall Street Journal reports the FBI is investigating whether representatives
of Ackman’s Pershing Square Capital Management made false claims to federal
regulators and others in order to benefit from a decline in Herbalife’s stock
price.
As Watchdog.org has reported, Ackman shorted Herbalife stock, betting $1 billion
the stock would tank. Most such stock predictions are based on a hard-headed
analysis that a company’s business model will implode on its own. Not Ackman’s.
He launched an expensive media blitz to announce his bid to destroy Herbalife,
claiming the company’s multi-level marketing strategy unfairly targets Latinos
by offering them a home-based business that can’t make money.
The media effort failed, occasionally even boosting the company’s stock, and
Ackman moved on to Plan B. He lobbied high-profile congressional Democrats,
successfully persuading several that his campaign against Herbalife is a battle
for social justice. Several Democrats used their positions — or more precisely
their letterhead — to demand the Federal Trade Commission investigate Herbalife.
Most of Ackman’s Capitol Hill ground game has been handled by outside firms. But
Ackman reportedly personally lobbied California U.S. Rep. Linda Sanchez,
D-California, and U.S. Sen. Edward J. Markey, D-Massachusetts.
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 On June 5, 2013, Sanchez wrote to FTC Chair Edith Ramirez, an
Obama appointee, expressing her “concern about the marketing and
business practices of Herbalife, Ltd. In particular, I am troubled
by allegations that this company may be harming consumers —
especially those from our country’s most vulnerable populations.”
Following his meeting with Ackman, Markey became the only member
of the U.S. Senate to call for a FTC probe of Herbalife. The
company’s stock dropped after Markey’s complaint went public, and
dropped again when the FTC announced that it would investigate
Markey’s charges. A Boston Globe investigation concluded that
Markey’s letter to the FTC overstated constituent complaints against
Herbalife.
Ackman denies he is motivated by personal profit. Speaking on CNBC,
he called Herbalife’s profits “blood money,” and said he would give
any of his own profits on his billion-dollar bet to charity.
He said Friday no one in his firm has been contacted by the FBI.
“We haven’t encouraged anyone to make false statements and we don’t
need them to,” he said.
“It’s terrifying,” said Veronique de Rugy, a senior research fellow
at the free-market Mercatus Center at George Mason University in
Virginia.
“This is the danger of a government that is almost limitless in its
power and reach,” she said. “It gives private actors the incentive
to use government influence to manipulate the marketplace.”
[This
article courtesy of
Watchdog.]
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