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First on CNBC: CNBC Transcript: Herbalife CFO John DeSimone Speaks with CNBC's Scott Wapner Today on "Squawk on the Street"

WHEN: Today, Tuesday, July 22nd

WHERE: CNBC's "Squawk on the Street"

Following is the unofficial transcript of a FIRST ON CNBC interview with Herbalife CFO John DeSimone on CNBC's "Squawk on the Street" today. Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000294580.

All references must be sourced to CNBC.

CARL QUINTANILLA: THIS MORNING IN NEW YORK, PERSHING SQUARE'S BILL ACKMAN WILL HOST A PRESENTATION ON HERBALIFE THAT HE SAYS WILL EXPOSE INCREDIBLE FRAUD AND EXPLAIN WHY THE COMPANY WILL COLLAPSE. HERBALIFE IS FIGHTING BACK. OUR SCOTT WAPNER IS AT HQ WITH THE CFO IN A FIRST ON CNBC INTERVIEW. GOOD MORNING, SCOTT.

SCOTT WAPNER: GOOD MORNING, CARL. JOHN DeSIMONE IS SITTING HERE WITH ME. JOHN IT IS GOOD TO SEE YOU.

JOHN DeSIMONE: THANK YOU, SCOTT.

WAPNER: AT THIS VERY MOMENT, BILL ACKMAN AND MORE THAN 500 PEOPLE ARE INSIDE A THEATER IN MIDTOWN MANHATTAN, BILL IS GETTING READY TO GIVE HIS LATEST PRESENTATION, AND THEY ARE WATCHING THIS INTERVIEW LIVE. HE SAYS, IN HIS WORDS, HE'S GOING TO EXPOSE INCREDIBLE FRAUD AT HERBALIFE TODAY. WHAT DO YOU EXPECT?

DeSIMONE: YOU KNOW, WE KNOW THIS M.O. THIS IS NOT THE FIRST TIME. MATTER OF FACT, THIS HAS BEEN 18 MONTHS OF ALWAYS THE – ITS ALWAYS THE BARK IS WORSE THAN THE BITE. HE LIKES TO, YOU KNOW, I REALLY DON'T WANT TO TALK TOO MUCH ABOUT BILL ACKMAN, I'D LIKE TO GO BACK TO THE SUBSTANCE OF NUTRITION CLUBS AND HERBALIFE, BUT THE REALITY IS THERE IS –

WAPNER: BUT THAT IS WHAT TODAY IS ABOUT.

DeSIMONE: RIGHT. SO WE HAVE TO FRAME THE EVENT TODAY. AND IT'S VERY SIMILAR TO SOME PRIOR EVENTS THAT HE'S HAD. EVERYTHING IS A GOT-YOU UNTIL IT'S NOT A GOT-YOU ANYMORE. HE HAS DONE SOME – HE HAS MADE SOME OUTRAGEOUS STATEMENTS, HE HAS MADE 435 ACCUSATIONS OVER THE LAST 18 MONTHS, EACH ONE IS THE LATEST AND GREATEST UNTIL IT'S PROVEN NOT TO BE. HE'S WENT AFTER BELGIUM WHEN BELGIUM LOOKED LIKE IT WAS GOING IN HIS FAVOR, AND WHEN BELGIUM CAME OUT IN OUR FAVOR, ACTUALLY DISCREDITING ACKMAN'S THESIS, IT WAS NO LONGER IMPORTANT. HE DID EVERYTHING IN HIS POWER TO CLEAR THE AUDIT, HE EVEN WENT PUBLIC AND SAID HOW CAN PEOPLE INVEST WHEN THERE'S NO AUDIT, AND HE PREDITED THE AUDIT WOULDN'T BE DONE, AND THEN WHEN IT WAS, IT WAS NOT IMPORTANT ANYMORE.

WAPNER: BUT HE CLAIMS TODAY HE HAS HUNDREDS OF HOURS OF VIDEO, AUDIO, DOCUMENTS TO SUPPORT HIS CLAIMS. ON SOME LEVEL YOU MUST BE WORRIED ABOUT WHAT COULD HAPPEN TODAY, AREN'T YOU?

DeSIMONE: I'M NOT WORRIED ABOUT THE SUBSTANCE OF WHAT HE HAS. YOU KNOW, THERE'S NO DOUBT THAT HE'S MISSING THE REAL ANALYSIS, THE REAL RESEARCH. THIS IS ANECDOTAL, IT'S VERY PROPAGANDA BASED. I'M NOT EVEN SURE HE COMPLETELY UNDERSTANDS CLUBS, BUT WE'LL LISTEN. WHAT HE IS MISSING THAT FUNDAMENTALLY WE HAVE MILLIONS OF CUSTOMERS THAT ENJOY THE PRODUCT, THAT USE THE PRODUCT, THAT'S INDISPUTABLE. WE ACTUALLY HAD A RELEASE TODAY FROM A FORMER FTC ECONOMIST THAT CONCLUDED, THAT IN FACT, WE ARE A BENEFICIAL MULTILEVEL MARKETING COMPANY, AND THAT FORMER ECONOMIST HAD ACCESS TO ALL OF OUR DATABASE, THEY HAD ACCESS TO ALL OF THE STUDIES, THEY CREATED THEIR OWN STUDIES TO COME UP TO THAT CONCLUSION.

WAPNER: A STUDY YOU COMMISSIONED?

DeSIMONE: IT IS A STUDY WE COMMISSIONED, BUT IT'S AN INDEPENDENT PERSON THAT HAD NO TIES TO HERBALIFE UNTIL WE COMMISSIONED IT. BUT WE COMMISSIONED IT SO THAT A FORMER FTC ECONOMIST WOULD LOOK AT OUR BUSINESS, THE ECONOMICS OF OUR BUSINESS IN THE LIGHT SIMILAR TO HOW THE FTC WOULD LOOK AT IT.

WAPNER: SO YOU SAY THAT ACKMAN HAS MADE THESE UNSUBSTANTIATED CLAIMS AND PUT MISINFORMATION OUT THERE AMONG OTHER THINGS. THE COMPANY IS INVESTIGATED BY THE FTC. AT LEAST ONE STATE THAT WE KNOW OF, A U.S. SENATOR HAS WRITTEN A LETTER TO REGULATORS ASKING THEM TO TAKE A LOOK AT YOUR BUSINESS MODEL. SO ARE WE TO BELIEVE, GIVEN ALL OF THAT THAT'S SWIRLING AROUND HERBALIFE, THAT THE COMPANY IS OPERATING AS IT IS SUPPOSED TO BE OPERATING UNDER THE LAW?

DeSIMONE: ABSOLUTELY. WE HAVE COMPLETE CONFIDENCE IN OUR COMPLIANCE AS IT RELATES TO REGULATIONS. I THINK THE FTC INQUIRY WILL ACTUALLY BE SOMETHING THAT KIND OF PUTS THIS BEHIND US, THERE'S A LOT OF MISINFORMATION THAT IS OUT THERE IN THE MARKETPLACE, AND BILL ACKMAN, ACTUALLY, WHEN HE PRESENTS UNOPPOSED, HE SOUNDS COMPELLING. HE'S VERY CONFIDENT, YOU KNOW, HE COMES ACROSS AS THOUGH HE KNOWS THE FACTS, AND IT CAN BE SCARY. AND I THINK HAVING A REGULATORY BODY THAT'S OBJECTIVE LOOK AT THE COMPANY WILL BENEFIT US.

WAPNER: WELL, UNOPPOSED, I MEAN, LOOK, LET'S BE HONEST, YOU'RE SITTING HERE TODAY, BUT MICHAEL JOHNSON, THE CEO, HAS BEEN VIRTUALLY SILENT ON THIS ISSUE FOR THE LAST 18 MONTHS. YOU'VE LET BILL ACKMAN CONTROL THE NARRATIVE, HAVEN'T YOU?

DeSIMONE: SO MICHAEL'S JOB – KEY ROLE, AND MATTER OF FACT, OUR KEY ROLE AS MANAGEMENT, IS TO DELIVER RESULTS. AND THAT'S WHAT WE FOCUSED ON. AND WHEN BILL CAME OUT 18 MONTHS AGO, WE DIVIDED THE COMPANY INTO TEAMS AND DECIDED THAT MICHAEL, THAT DES WALSH, OUR PRESIDENT, THAT RICH GOUDIS, OUR COO, WILL DO NOTHING BUT FOCUS ON PERFORMANCE AND THAT IS WHAT MICHAEL'S JOB IS. AND I DO THINK THAT WE'VE PROBABLY GIVEN MR. ACKMAN TOO MUCH OF THE PODIUM. BUT THAT IS GOING TO CHANGE. YOU KNOW, I THINK THERE'S AN ORGANIC DRIVE WITHIN THE COMPANY. WE HAVE 550,000 DISTRIBUTORS AND MEMBERS IN THE U.S., 54,000 THAT RECEIVED A CHECK LAST YEAR FROM THE COMPANY, THERE'S AN ORGANIC DRIVE WITHIN THAT GROUP FOR US TO TELL THE TRUTH ABOUT HERBALIFE.

WAPNER: THERE HAVE BEEN INSTANCES, AND I'M SURE YOU'LL READILY ADMIT WHERE DISTRIBUTORS OF HERBALIFE HAVE MADE CLAIMS ABOUT THE PRODUCT THAT MAY NOT HAVE BEEN TRUE. HAVE SAID THINGS THAT YOU, AS A COMPANY, HAD WISHED THEY HADN'T. YOU STARTED RETRAINING PEOPLE AS A RESULT. CORRECT?

DeSIMONE: SO LET'S PUT IT IN CONTEXT BECAUSE WE HAVE A FOUR-PRONG APPROACH TO COMPLIANCE. AND IT'S INTEGRATED. AND THE FIRST – SO WE HAVE 550 MEMBERS IN THE U.S. WE HAVE MORE THAN 3.5 GLOBALLY. WITHIN THAT GROUP, THE OVERWHELMING VAST MAJORITY WANT TO BEHAVE IN ACCORDANCE WITH OUR RULES. SO THE FIRST PRONG IS WE HAVE TO EDUCATE AND TRAIN TO MAKE SURE THAT THEY KNOW HOW TO BEHAVE. SECONDLY, FOR THOSE THAT WANT TO CUT CORNERS, OF THOSE 3.5 MILLION PEOPLE, WE HAVE TO BE ABLE TO DETECT AND DETER THAT BEHAVIOR. AND WE DO THAT VERY WELL. AND WE ACTUALLY HAVE SOME CUTTING-EDGE TECHNOLOGY THAT WE'LL USE ON WORD RECOGNITION AND VOICE RECOGNITION WITHIN VIDEOS THAT WILL HELP US GET BETTER, BUT THE REALITY IS, 3.5 MILLION PEOPLE IS LIKE A BIG CITY.

WAPNER: SURE.

DeSIMONE: AND WITH 3.5 MILLION PEOPLE, THE POLICE DOESN'T ALWAYS KNOW WHAT'S GOING ON.

WAPNER: BUT YOU HAVE HAD TO REPRIMAND SOME PEOPLE.

DeSIMONE: WE HAVE, BUT I WANT TO GO TO THE NEXT TWO BECAUSE I THINK THE NEXT TWO ARE THE FAIL SAFES IN THIS. SO EDUCATE AND TRAIN, DETER AND DETECT, BUT MOST IMPORTANTLY, WHEN SOMEBODY SIGNS UP, WE HAVE TO HAVE A VOICE WITH THEM. BECAUSE WE CAN'T BE ON EVERY PHONE CALL A MEMBER MIGHT MAKE TO SOMEBODY THEY ARE RECRUITING. SO WE MAKE SURE THAT WE COMMUNICATE WITH EACH NEW MEMBER. IT USED TO BE PUSH – WE PUSH ALL THE MATERIALS TO THEM, NOW WE PULL THEM TO THE MATERIALS WHERE THEY HAVE TO ACKNOWLEDGE THEY ARE AWARE OF IT. AND THEN LAST, AND BY FAR, THE MOST IMPORTANT FAIL SAFE, IS NO MATTER WHAT SOMEBODY'S EXPECTATIONS ARE COMING IN, WE HAVE THE PROTECTIONS TO GIVE THEM A COMPLETE MONEY-BACK GUARANTEE. WE HAVE A 90-DAY 100%, WE WILL PAY FOR RETURN SHIPPING GUARANTEE ON THE STARTER KIT, WHICH IS THE LOW PRICED STARTER KIT AND IF ANY TIME DURING AN HERBALIFE MEMBER'S LIFE AT HERBALIFE, THEY WISH TO LEAVE BECAUSE IT DIDN'T WORK OUT FOR THEM, WE WILL BUY BACK AT 100% THE PURCHASE PRICE, PLUS WE PAY FOR THE SHIPPING OF ALL PRODUCTS THAT THEY HAVE NOT SOLD. IT'S LOW RISK.

WAPNER: WE EXPECT TODAY THAT ACKMAN IS GOING TO TALK ABOUT YOUR NUTRITION CLUBS.

DeSIMONE: YES.

WAPNER: AND THE CRITICS OF THOSE CLUBS WOULD ASK QUESTIONS SUCH AS, WHY ARE THERE SO MANY? WHY ARE THEY LOCATED IN SUCH A – TREMENDOUS AMOUNT IN VERY CONCENTRATED AREAS? WHY ARE THEY UNMARKED ON THE OUTSIDE? WHY ARE THEY SECRETIVE? THAT'S WHAT THE CRITICS WOULD SAY. HOW DO YOU RESPOND TO THAT? YOU'VE HEARD THAT CRITICISM BEFORE.

DeSIMONE: ABSOLUTELY. SO IT'S NOT SECRETIVE, BUT I THINK THERE IS SOME FOUNDATION THAT NEEDS TO BE DISCUSSED FIRST SO PEOPLE CAN UNDERSTAND WHAT IS CLUB IS AND HOW IT OPERATES. AND IT'S FROM A CONSUMER SIDE AND FROM AN OPERATORS STANDPOINT. THINK OF A CLUB – IT STARTED IN PEOPLE'S HOMES. IT'S NO DIFFERENT THAN AVON, TUPPERWARE, PAMPERED CHEF. IT'S A SOCIAL GATHERING WHERE PEOPLE TAKE PRODUCT IN A SETTING THAT HELPS THEM LOSE WEIGHT. BECAUSE SOCIAL SUPPORT AND ENCOURAGEMENT HELPS PEOPLE LOSE WEIGHT. AND PICTURE A LIVING ROOM OR A DINING ROOM WHERE PEOPLE ARE GATHERING. AND THEN BECAUSE WEIGHT LOSS REQUIRES CONSISTENT USE OF THE PRODUCT, THEY TOOK THAT MODEL, AND THEY MOVED IT -- THINK OF PICKING UP THAT LIVING ROOM AND MOVING IT TO A COMMERCIAL LOCATION. IT'S NOTHING MORE THAN A LIVING ROOM OR A DINING ROOM OF ONE OR TWO OR MULTIPLE MEMBERS WORKING TOGETHER TO CREATE THAT SOCIAL NETWORK TO HELP PEOPLE LOSE WEIGHT. SO WHEN YOU THINK OF MULTIPLE LOCATIONS, THESE ARE PEOPLE'S LIVING ROOMS THAT HAPPEN TO NOW BE IN A COMMERCIAL ESTABLISHMENT. NOW WHY THERE'S NO SIGNAGE? THAT'S AN IMPORTANT POINT – IT HAS BEEN VERY MISUNDERSTOOD. INDIRECT SELLING. THERE'S A CONCEPT CALLED PROTECT THE OPPORTUNITY FOR THE SECOND SALE. THIS IS ALL CHANNEL PROTECTION. FOR, SCOTT, IF YOU WERE TO SELL HERBALIFE, WHEN YOU SELL IT THE FIRST TIME, YOU WANT TO HAVE AN OPPORTUNITY FOR THAT SECOND SALE. IF YOU KNEW THAT YOUR CUSTOMER CAN GO TO WALMART AND BUY THE PRODUCT, YOU WOULDN'T HAVE THAT OPPORTUNITY. YOU WOULD BE DEMOTIVATED, RIGHT? SO PEOPLE WHO OFFER PRODUCTS THROUGH DIRECT SELLING DON'T OFFER IT THROUGH FOOD-DRUG MASS. AVON TRIED, IT FAILED. TUPPERWARE TRIED THROUGH TARGET, IT FAILED.

WAPNER: RIGHT.

DeSIMONE: SO WE ARE TRYING NOT – SO WE HAVE 550,000 MEMBERS. THIS IS IMPORTANT. ONLY 5,000 CLUBS, RIGHT? SO THE MAJORITY OF OUR MEMBERS DON'T DO CLUBS. SO TO PROTECT THEIR BUSINESS, THERE HAS TO BE A LEVEL PLAYING FIELD, IT CAN'T APPEAR AS THOUGH THERE'S 35 CLUBS IN A STATE. SO WE MAKE IT SO THAT IT'S STILL THAT PERSON'S LIVING ROOM, IT'S THAT PERSON-TO-PERSON SELLING.

WAPNER: RIGHT.

DeSIMONE: SO IT'S CHANNEL PROTECTION ONLY.

WAPNER: I MENTIONED IT'S AN INCREDIBLY BUSY MORNING ON THE EARNINGS FRONT. WE ARE GOING TO HAVE TO LEAVE IT THERE. JOHN DeSIMONE, I REALLY APPRECIATE YOUR TIME. I ALSO WANT TO LET YOU KNOW THAT AS BILL ACKMAN GIVES HIS PRESENTATION, IF YOU WANT TO COME BACK LATER TODAY ON THE HALFTIME SHOW AND RESPOND OR REFUTE ANYTHING THAT MR. ACKMAN SAYS IN THAT ROOM TODAY, WE'D LIKE TO HAVE YOU BACK.

DeSIMONE: GREAT, WELL THANK YOU.

WAPNER: ALRIGHT. JOHN DeSIMONE IS THE CFO OF HERBALIFE.

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