Tags: Ackman | Herbalife | pyramid | scheme

Food Safety Concerns Prolong Herbalife-Ackman Spat

Tuesday, 13 Aug 2013 03:55 PM

A former employee of Herbalife Ltd has been subpoenaed by the New York State attorney general to produce documents regarding a 2011 safety concern about the company's nutritional shakes, the New York Times reported.

The ex-employee, who is seeking whistleblower status with the Securities and Exchange Commission, asked to remain anonymous, the Times said. The attorney general's office declined to comment.

The employee first approached the Food and Drug Administration with concerns about product safety before getting in touch with anti-Herbalife activist investor Bill Ackman, who offered to pay his legal fees, according to the Times.

A spokeswoman from Global Strategy Group, which represents Ackman, did not provide immediate comment.

The health concern in question dates to 2011, when fine shards of metal were detected in some of Herbalife's nutrition shakes at a plant in California, according to the newspaper.

The problem was resolved within several weeks, the Times said.

A spokesman from Joele Frank, a firm that represents Herbalife, said in a statement on Tuesday that "only safe products were shipped to consumers."

He added that Herbalife received no complaints from consumers and that California state authorities have regularly audited the factory and found "no serious violations."

Herbalife has been the subject of intense scrutiny for many months, with several major investors betting for or against the stock.

In late 2012, Ackman, who runs the hedge fund Pershing Square Capital Management, took a short position on Herbalife stock and loudly accused it of being a pyramid scheme.

Ackman's view has been challenged by other Wall Street titans, including investor Carl Icahn, a major stakeholder in the company, and billionaire investor George Soros, who have both taken long positions on Herbalife shares.

Soros said he would withdraw all of his fund's money from Pershing, Reuters reported last week.

Amid the controversy, the company's stock price has soared this year. Herbalife was trading around $65, down from almost $66 mid-morning but still more than double its close at $32.94 on Dec. 31, 2012.

The company also posted better-than-expected second-quarter earnings and revised its outlook upwards on July 29, citing a fast-growing distributor network and strong demand for its products.

© 2017 Thomson/Reuters. All rights reserved.

 
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A former employee of Herbalife Ltd has been subpoenaed by the New York State attorney general to produce documents regarding a 2011 safety concern about the company's nutritional shakes, the New York Times reported.
Ackman,Herbalife,pyramid,scheme
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2013-55-13
Tuesday, 13 Aug 2013 03:55 PM
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