Activist investor Bill Ackman acknowledged Friday that a contractor working for him on his campaign against Herbalife Ltd. has been subpoenaed by federal investigators looking into possible market manipulation of Herbalife stock.
In an interview on the financial network CNBC, Ackman said representatives of the contractor, Global Strategy Group, had received a subpoena from the Department of Justice last summer and that a "handful" of its employees had been interviewed by FBI agents. A spokesman for Ackman later said he had meant the GSG employees had been interviewed by investigators from the Manhattan U.S. attorney’s office.
FOR THE RECORD
March 13, 11:34 a.m.: The headline on an earlier version of this story said Ackman had confirmed that the FBI was investigating the contractor. Ackman said the firm had been subpoenaed and questioned in connection with a probe into possible market manipulation of Herbalife stock.
Ackman said he hadn't been contacted himself and that neither he nor anyone connected to his short-selling campaign against the Los Angeles-based nutritional-products company had done anything wrong.
"Absolutely not," he said. "We have very carefully formed views... Let me be clear, Herbalife is a pyramid scheme."
In a statement issued later Friday morning by the New York-based hedge-fund firm he runs, Pershing Square Capital Management LP, Ackman said: “Since our initial presentation on Herbalife, Herbalife has been petitioning the government to investigate Pershing Square in connection with our short position in the company. We are not aware of any statements that we have made that are untrue, nor are we aware of any unlawful conduct on our part or by any consultants that we have hired.”
In a statement, a spokesman for Global Strategy Group, a Washington-based public relations and research firm, denied it was being investigated:
“It is our clear understanding that we are not a target of any investigation, and we are confident that all our work surpasses the highest legal and ethical standards. We spoke with the government and provided full transparency into all of our efforts. GSG has never made false statements about Herbalife, nor do we believe anyone else has either.”
A spokesman for the New York bureau of the FBI declined to comment. A spokesman for the Manhattan U.S. attorney, Preet Bharara, didn't return a telephone call.
News of the federal probe was first reported Thursday night by the Wall Street Journal, which cited unnamed sources who said federal investigators were looking into whether the contractor's employees had made false statements to regulators in an effort to get them to crack down on Herbalife. Ackman accuses Herbalife of being a pyramid scheme that preys on Latino immigrants in the country illegally and others who buy in to distribute its products.
In a statement Thursday night, Alan Hoffman, an Herbalife spokesman, said, "Mr. Ackman has a $1 billion bet against Herbalife and a direct financial interest in hurting our company. For more than two years, he has spent over $75 million orchestrating a false and fabricated attack against Herbalife, all in an effort to enrich himself. We are confident in the strong fundamentals of our business model and have remained committed to helping people and communities improve their nutrition, while knowing that one day his tactics would be exposed."
Ackman launched his high-profile attack on Herbalife in December 2012, saying he had concluded after extensive research that the company operates a pyramid scheme that will ultimately be shut down by regulators. He said he had shorted more than $1 billion of the company's stock, a move that would allow him to profit if Herbalife's stock price fell.
Amid Ackman’s campaign last year, law enforcement sources confirmed that the Justice Department and the FBI had opened a separate investigation into Herbalife. The Federal Trade Commission confirmed last year that it was conducting a civil inquiry into the company. The California attorney general's office also confirmed it was meeting with Herbalife critics, including some former distributors. Herbalife has previously disclosed that the Securities and Exchange Commission was investigating the company.
Shares in Herbalife jumped more than 8%, or $2.82, to $35.96, in early trading Friday on the New York Stock Exchange.