GO
Loading...

Ackman Defends Calling Herbalife a ‘Pyramid Scheme’

Javier E. David | Special to CNBC.com
Thursday, 20 Dec 2012 | 9:31 AM ET
Ackman: Why I Am Shorting Herbalife
In a live interview on CNBC, investor Bill Ackman accuses Herbalife of running an illegal pyramid scheme and says he is shorting the stock, with profits going to charity. Kate Kelly then reports a strong denial from the company.

Hedge Fund guru Bill Ackman strongly defended his characterization of Herbalife as a "pyramid scheme" on Thursday, telling CNBC that the nutrition company was luring "millions of low income people around the world" into a system he called "fraudulent."

In an interview on "Street Signs", Ackman reiterated the reasons why he's shorted Herbalife's stock for the past seven months, saying he would press his case with the Securities and Exchange Commission. He also promised to donate any profits from his negative bet on the company to charity.

"I don't want to make money off of this," Ackman said. "It's not a happy thing."

(Read More: Herbalife Under Fire: Clubs, Hopes and Losses.)

On Wednesday, the nutrition company's CEO Michael Johnson appeared on CNBC to defend his company, disputing claims that he ran a "pyramid scheme" and accusing Ackman of "market manipulation."

Herbalife CEO: This is a Legitimate Company
HerbaLife CEO Michael Johnson responds to Bill Ackman's short position on HerbaLife's stock.

But Ackman, founder of Pershing Square Capital Management, said in Thursday's interview that he was trying to make the company more transparent, adding that Herbalife was misleading its customers and marketing agents.

"You've had millions of low income people around the world that have gotten their hopes up in an opportunity" to get rich, he said. "They've been duped…every day, new distributors are being attracted into this scheme…it's a pyramid scheme."

(Read More: Selling the American Dream: Investigations Inc.)

In a statement to CNBC after Thursday's interview, Herbalife again disputed Ackman's claims and said it would respond in more detail later.

A Beglium court has ruled that Herbalife was an illegal pyramid scheme. The company, however believes its marketing plan was misunderstood and is appealing the ruling. (Read More: Herbalife CEO: We're Not a Pyramid Scheme)

  Price   Change %Change
HLF
---

Featured

Contact Hedge Funds

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

NetNet