A federal investigation of alleged stock manipulation related to activist investor Bill Ackman's attack on Herbalife Ltd. has turned to his claims in a presentation last year that the company is breaking China's laws.
Ackman's company, Pershing Square Capital Management, said Wednesday that it welcomes the scrutiny, denies wrongdoing and believes Herbalife's business practices violate Chinese law.
"We are pleased that regulators are reviewing Pershing Square’s presentation on Herbalife’s business practices in China," Ackman's company said in a statement.
"Pershing Square is confident that Herbalife is violating Chinese law prohibiting direct selling and pyramid sales."
Ackman has alleged for more than two years that Herbalife operates a worldwide pyramid scheme that victimizes its independent sales people, claims the Los Angeles nutritional products company strongly denies.
Ackman has said he had shorted Herbalife's stock by more than $1 billion, a bet that would pay off if the company's stock price fell. He has repeatedly predicted that regulators would shut down Herbalife and drive its stock price to zero.
Since the attack began, Herbalife's stock has fluctuated wildly, gaining sharply in 2013 and falling more than 50% last year. The Federal Trade Commission said last year that it is investigating the company's business practices, a probe that is continuing.
Ackman's allegations have focused on Herbalife's compensation of its independent sales members. He has said most make little or no money, while a fortunate few -- at the top of the pyramid -- make millions in recruiting bonuses.
Herbalife President Des Walsh said Wednesday he's pleased that regulators are examining Ackman's tactics.
"We feel that the tide is turning," Walsh told The Times. "We believe this renewed scrutiny of the Ackman campaign shows that the world is realizing there's something amiss here."
Word of the stock-manipulation probe surfaced last month. Ackman said that a Washington public relations firm working on his campaign against Herbalife received a subpoena last summer and that a "handful" of its employees had been questioned by investigators from the office of U.S. Atty. Preet Bharara in Manhattan, N.Y.
He said he does not believe the federal investigation will lead to criminal charges.