BOSTON Activist investor William Ackman, who is betting more than $1 billion that Herbalife is a pyramid scheme, will cover legal fees and damages for whistleblowers who have spoken out against the company, but not lost wages if they lose their jobs.
Ackman's $13 billion hedge fund Pershing Square Capital Management had agreed to pay one whistleblower as much as $3.6 million if he lost his job after turning against the company. But other whistleblowers did not receive similar deals.
"With respect to indemnities provided by Pershing Square to other whistleblowers, including those cooperating with government agencies, these indemnities are limited to legal fees and damages incurred in the event that these individuals are sued by Herbalife, and do not provide for recoveries for lost wages," a spokeswoman for Pershing Square said.
ABC News reported earlier this week that the New York-based fund agreed to pay Giovanni Bohorquez, a former Herbalife executive who has provided information about the company to certain government agencies, up to $250,000 a year for 10 years, and make certain other payments, should he lose his job.
Herbalife is being investigated in the United States by the Federal Trade Commission, Securities and Exchange Commission, Department of Justice, Federal Bureau of Investigation, as well as the Canadian Competition Bureau following accusations by Ackman and some activist groups that the company is running a pyramid scheme, in which distributors earn more for bringing in new members than for selling the product to retail customers. Attorneys General in New York and Illinois are also probing the company.
Herbalife has steadfastly denied the accusations.
Ackman unveiled his short bet against the company in December 2012. Since then billionaire rivals like Carl Icahn and George Soros have taken the other side by buying stakes.
Pershing Square has spent roughly $20 million on its campaign to prove that the company is running an illegal business, two people familiar with the fund said on Thursday. The money has been used to pay for investigators to help find whistleblowers and a database that logs Herbalife distributors, said the sources, who are familiar with the payments but not authorized to discuss them publicly.
Last year Herbalife spent $2 million on federal lobbying while Ackman spent $264,000 on lobbyists to press his case against the company, government documents showed.
(Reporting by Svea Herbst-Bayliss; Editing by Richard Valdmanis and Richard Chang)