BOSTON, March 11 Billionaire investor William
Ackman renewed his attack on Herbalife on Tuesday, saying he has
evidence showing the nutrition and weight loss company is
breaking direct-selling laws in China, its fastest growing
The company said it follows local laws.
Ackman, who has placed a $1 billion short bet against
Herbalife, said the company is breaking the law in China by
making new recruits pay an entry fee and by letting distributors
recruit fresh members. He made the claim on a conference call
that lasted more than two hours and drew some 300 listeners.
He was joined on the call by one of his lawyers, David
Klafter, and Aaron Smith-Levin, whose OTG research firm
conducted interviews with Herbalife distributors in China.
"Yes, they are violating both civil and criminal law" in
China, Klafter, a senior counsel at Ackman's hedge fund Pershing
Square Capital Management, said on the conference call.
Ackman has charged Herbalife with running a pyramid scheme,
in which members make more money recruiting new members than
selling the actual product. He made that claim public in
December 2012 when he unveiled a $1 billion short position in
the company's shares. So far he has lost money on the bet as
rivals like Carl Icahn took the other side.
On Tuesday, he said he is sticking to his bet and that
recent fresh media attention should help galvanize regulators
into reviewing the matter. Herbalife said it remains confident
in its business in China and said it is in compliance with local
laws. The company says its business is not a pyramid scheme.
Herbalife's share price closed down 1.16 percent at $65.39.