UPDATE 1-Fund manager Ackman promised Herbalife whistleblower as much as $3.6 mln -ABC

Tue Apr 22, 2014 6:28pm EDT

(Adds details on detail, background on Ackman/Herbalife dispute)

By Mark Hosenball and Diane Bartz

WASHINGTON, April 22 (Reuters) - Hedge fund manager William Ackman, who placed a $1 billion bet against Herbalife, said that he had promised a former Herbalife executive who became a whistleblower against the company up to $3.6 million, ABC News reported on Tuesday.

ABC said on its website that Ackman's payments would come if Giovanni Bohorquez, the former executive, lost the job he took after leaving Herbalife.

Ackman's firm, Pershing Square Capital Management, so far has paid Bohorquez $80,000 already. ABC quoted Ackman as saying "it was the right thing to do."

ABC said Ackman agreed to the deal after Bohorquez balked at blowing the whistle on Herbalife for fear it could make it difficult for him to find work afterwards.

Bohorquez worked at Herbalife, a multi-level marketing company that sells skin-care and weight loss products, but left in 2011 and began work at a chain of laundromats. He lost that job because of the stress of being a whistleblower, ABC said.

Bohorquez initially denied being paid by Ackman when talking to ABC News but later acknowledged it.

The network said that Ackman gave ABC a copy of an agreement with Bohorquez under which he agreed to pay the former Herbalife executive up to $250,000 a year for 10 years, and make certain other payments, should he lose his job with the laundromat company because he was a whistleblower.

In the agreement, Bohorquez says that he has provided information about Herbalife to "certain government agencies."

That confidential agreement was signed in June 2013. Two months later, the New York Times published an article alleging problems at an Herbalife plant in 2011 that was based on company documents provided by a "former employee." Herbalife has alleged that Bohorquez was the source of the documents, ABC News said.

"Giovanni could not afford to take the company on," Ackman told ABC News. "Being a whistleblower is a very dangerous thing to do if you want to get a job."

Ackman has called Herbalife a fraud. Several civil rights groups have alleged that it is a pyramid scheme, which is a company that makes more from signing up recruits than for selling products or services.

The company denies the allegations, and high-profile investors such as Carl Icahn, George Soros and Daniel Loeb have supported the company in the past by taking stakes.

The Federal Trade Commission, Federal Bureau of Investigation, New York State Attorney General Eric Schneiderman and Illinois Attorney General Lisa Madigan all have investigations underway into Herbalife.

Carl Icahn is Herbalife's biggest investor and was recently promised three more board seats, paving the way for him to eventually control five seats on the 13-person board.

Attempts to contact a spokeswoman for Ackman were not immediately successful. Herbalife declined to comment. (Reporting by Mark Hosenball and Diane Bartz; Editing by Ros Krasny and Sandra Maler)

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