BOSTON Feb 20 Herbalife executives will meet
with U.S. lawmakers' staffs in Washington on Friday to explain
the business model of the nutrition company that has been
fending off accusations by billionaire investor William Ackman
that it is running a pyramid scheme.
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 New York.
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
On its quarterly earnings call this week, Herbalife said it
has answered all of Markey's questions. The company sent a
letter dated Feb. 18 in which it denied accusations it is
running a pyramid scheme.
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 the company.
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.