By Svea Herbst-Bayliss and Jennifer Ablan
BOSTON/NEW YORK Aug 29 In the battle of
investors who've made opposite bets on the shares of Herbalife
, both sides - including firms led by billionaires Bill
Ackman and George Soros - have consulted a New Jersey college
professor and studied his research.
For decades, William Keep, dean of the School of Business at
the College of New Jersey, has pursued a relatively obscure
marketing specialty known as multilevel marketing businesses, or
MLMs. But as a new go-to adviser for some of Wall Street's
biggest players, Keep has been suddenly thrust into the
In December, Ackman placed a $1 billion short bet against
Herbalife, citing the professor's research. Since then, Soros
bought a large block of the company's shares around the time his
firm was seeking out Keep's research and personal insights.
Through it all, Keep insists he has remained neutral to the
investment implications of his studies.
"As my agenda has to do with MLMs and pyramid schemes, this
sideshow is a distraction," he said of the attention he's
received from investors and the media.
Multilevel marketers pay their sales force not only for the
products they sell but also for recruiting other sales people. A
pyramid scheme occurs where a company's sales team earns more
for finding new distributors than they get for selling the
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Ackman cited a paper co-authored by Keep in his December
presentation when he lambasted Herbalife's business model.
Months later, Ackman called Keep and spoke to him on the phone,
though it is not clear what the two discussed.
Herbalife has repeatedly rejected Ackman's characterization
of the company as a pyramid scheme that will eventually go bust.
Keep told Reuters in an interview that he has not voiced an
opinion one way or another on whether Herbalife is a pyramid
scheme. He makes clear to investors he isn't giving them
Keep said that in his discussions with investments managers
he never gets an indication of how they will react to his
"Once I leave the room, they could say, 'this is silly'. I
don't know what kind of investment decisions they will make."
But investors still seek him out. Keep has been invited as a
guest speaker at several hedge fund events and even visited the
offices of Soros' family office.
During the summer, Keep met with some of Soros's investment
staff, including portfolio manager Paul Sohn, to give them a
tutorial on his research. Keep said Soros's investment team
wanted to know how he thinks the epic battle over Herbalife will
Keep declined to tell Reuters what he specifically told the
Soros team, but said they had one burning question: Are
regulators going to take action against Herbalife - something
Ackman has been counting on in betting the company's shares will
He also declined to handicap the outcome of any potential
regulatory investigation, saying only that it would take a long
time and cost a lot of money.
Keep visited Soros in June and again in July. Regulatory
filings show Soros Fund Management purchased 5 million shares of
Herbalife in the second quarter, becoming the latest
high-profile investor to line up against Ackman and his Pershing
Square Capital Management fund.
Another manager investing for Soros, East Side Capital, had
a long position on Herbalife long before Ackman made his
December presentation and still ranks as Herbalife's
Besides meeting with the Soros team, Keep said he also spoke
at a luncheon sponsored by research firm DeMatteo Monness for
its hedge fund clients and at an event sponsored by research
firm Hedgeye in recent months.
Keep has often been called as an expert witness when the
government, including the Federal Trade Commission, has
investigated pyramid schemes. And because of his specialist
knowledge, Keep has frequently been featured in the media. Even
as he was preparing for a new school semester, he said, he has
been swamped by calls from reporters.
For months, the battle of the future of Herbalife has
fascinated Wall Street, given the number of high-profile
investors lining up to bet against Ackman.
Ackman's most notable and outspoken critic has been Carl
Icahn, Herbalife's biggest shareholder, who got into the stock
shortly after Ackman unveiled his big short positions.
So far, Ackman and his $11 billion Pershing Square have been
losers in this contest of Wall Street billionaires, with
Herbalife shares rising 83 percent this year. Pershing Square
has incurred at least $300 million in paper losses on its