First on CNBC: CNBC's Andrew Ross Sorkin Speaks with Bill Ackman, Pershing Square Capital Management CEO and Portfolio Manager, Today on CNBC

WHEN: Thursday, December 20, 2012

WHERE: CNBC

Following is the unofficial transcript of a FIRST ON CNBC interview with Bill Ackman, Pershing Square Capital Management CEO and Portfolio Manager, today on CNBC. Following is the link to the interview on CNBC.com: http://video.cnbc.com/gallery/?play=1&video=3000136735. All references must be sourced to CNBC.

SORKIN: AND THANK YOU BILL ACKMAN, FOR BEING HERE TODAY.

ACKMAN: SURE.

SORKIN: WE HAVE BEEN WATCHING YOUR PRESENTATION PRETTY MUCH OF IT ON CNBC THROUGHOUT THE DAY WITH A NUMBER OF REPORTS THAT KATE KELLY HAS BEEN DOING. WE HAVE A NUMBER OF FOLLOW-UP QUESTIONS. THE FIRST REALLY THOUGH KNOW ABOUT YOUR SHORT POSITION IN THIS COMPANY. WHEN DID YOU START THE POSITION, AT WHAT PRICE, AND WHEN DOES IT END? THE REASON I ASK IS BECAUSE MICHAEL JOHNSON, CEO HAS SAID PUBLICLY THAT HE BELIEVES YOU HAVE PUTS THAT EXPIRE ON FRIDAY.

ACKMAN: SURE. VERY CLEAR, WE OWN NO PUTS ON HERBALIFE. WE ARE SHORT THE STOCK, ONLY. WE ARE NOT SHORT ANY OTHER COMPANY IN THE INDUSTRY. JUST HERBALIFE. WE SHORTED THE STOCK, I WOULD SAY, SEVEN MONTHS AGO OR SO, AND WE'VE HAD OUR POSITION SINCE THEN AND HAVE BUILT IT UP OVER TIME.

SORKIN: AT WHAT POINT WOULD YOU CONSIDER THIS A SUCCESS IN TERMS OF GETTING OUT OF THE POSITION?

ACKMAN: SUCCESS HERE, LOOK, THE COMPANY CAN SURVIVE IN A MIDDLE GROUT. IF IT IS FOUND TO BE A PYRAMID SCHEME, IT IS A ZERO.

SORKIN: AND YOU BELIEVE IT IS A PYRAMID SCHEME. YOU SAID REPEATEDLY AT ONE POINT IF YOU SUCCEED, YOU ARE DONATING THE MONEY, BY THE WAY, TO CHARITY. YOU CALLED IT BLOOD MONEY.

ACKMAN: YES. I DON'T WANT TO MAKE MONEY OFF OF THIS.

SORKIN: BECAUSE --

ACKMAN: IT IS NOT A HAPPY THING. RIGHT? YOU'VE HAD MILLIONS OF LOW INCOME PEOPLE AROUND THE WORLD. WHO'VE GOTTEN THEIR HOPES UP THAT THERE'S AN OPPORTUNITY FOR THEM TO BECOME MILLIONAIRES OR HUNDRED THOUSAND-AIRES OR SO NUMBER LIKE THAT AND THEY'VE BEEN DUPED. AND I DON'T WANT TO PROFIT FIRST OF ALL A COUPLE OF THINGS ONE THING I'VE LEARNED THAT IN SHORT SELLING, EVERYONE'S SAID PARTICULARLY IF YOU GO PUBLIC ABOUT IT, EVERYONE'S SAID WELL YOU BELIEVE WHAT HE SAYS BECAUSE HE'S SHORT THE STOCK HE'S GOING TO PROFIT FROM IT SO YOU CAN'T TRUST HIM. SO BY TAKING THE ECONOMIC PART OUT OF MY INVESTMENT AND GIVING THE MONEY AWAY, IT IS HARDER TO MAKE THAT ARGUMENT.

SORKIN: THIS PRESENTATION WAS TO ME MUCH LESS, ALMOST AIMED AT INVESTORS AS IT WAS AIMED AT THE PUBLIC. THIS WAS ALMOST A SUGGESTION OF DECEPTIVE MARKETING, DECEPTIVE PRACTICES ALMOST LIKE A PUBLIC SAFETY PRESENTATION.

ACKMAN: CORRECT.

SORKIN: WHY NOT GO DIRECTLY TO THE FTC WITH THIS.

ACKMAN: OH WE WILL. WE'RE GOING TO BE TALKING.

SORKIN: WHY NOT GO TO THE FTC WITH THIS BEFORE GOING PUBLIC? WHY NOT GO TO THE SCC WITH THIS BEFORE GOING PUBLIC?

ACKMAN: SURE. THE ANSWER IS FIRST OF ALL WE ARE IN THE INVESTMENT BUSINESS, NOT REGULATORY BUSINESS. BUT SECOND OF ALL, WE THINK THE WAY TO MEANINGFULLY INCREASE THE PROBABILITY THAT THE REGULATORS PAY ATTENTION TO THE COMPANY IS TO MAKE THIS A PUBLIC ISSUE. AS IMPORTANTLY, EVERYDAY DISTRIBUTORS, NEW DISTRIBUTORS, NEW PEOPLE ARE BEING ATTRACTED INTO THE SCHEME AND WE THINK THE --

SORKIN: YOU CALLED IT A SCHEME MULTIPLE TIMES.

ACKMAN: YES.

SORKIN: YOU REALLY THINK IT IS A SCHEME IN THIS SENSE.

ACKMAN: YES, OF COURSE. IT IS A PYRAMID SCHEME. A SCHEME. PYRAMID SCHEME.

SORKIN: DO YOU LOOK AT OTHER MULTILEVEL MARKETING ORGANIZATIONS, LIKE AVON, AMWAY, AS PYRAMID SCHEMES?

ACKMAN: NO. I HAVEN'T STUDIED CAREFULLY AMWAY OR AVON, BUT I THINK THEY ARE LEGITIMATE MULTILEVEL MARKETING COMPANIES. WE AREN'T SAYING ALL MULTILEVEL MARKETING COMPANIES ARE SCHEMES, BUT SOME ARE. AND HERBALIFE IS.

SORKIN: AND WHEN MICHAEL JOHNSON SAYS THAT YOU ARE TRYING TO MANIPULATE THE MARKET BY GOING PUBLIC YOU SAY WHAT?

ACKMAN: NO WE ARE SIMPLY TRYING TO CREATE TRANSPARENCY AROUND THE COMPANY, WHICH IS SOMETHING THEY HAVE DONE THEIR BEST TO MUDDLE, SO THE MARKET CAN DECIDE WHAT THE RIGHT PRICE IS FOR THIS COMPANY. WE DON'T BENEFIT BY THE STOCK GOING UP OR DOWN IN THE SHORT TERM. WE'RE NOT GOING TO DAY TRADE THIS THING. WE ARE SHORT THE STOCK.

SORKIN: HOW MUCH CONTACT IF ANY DID YOU HAVE WITH HERBALIFE PRIOR TO THIS PRESENTATION ABOUT YOUR ANALYSIS?

ACKMAN: NONE, OTHER THAN WE'VE LISTENED TO OR READ MANY TIMES THE CONFERENCE CALL TRANSCRIPTS, ANALYST TRANSCRIPTS --

SORKIN: YOU NEVER WENT TO THEM AND SAID, LOOK, THIS IS OUR POSITION. WE HAVE SOME QUESTIONS. WE WANT SOME ANSWERS.

ACKMAN: CORRECT.

SORKIN: WHY NOT.

ACKMAN: BECAUSE SHORT SELLERS YOU SAW WHAT HAPPENS TO -- SINCE DAVID EINHORN ASKED THE QUESTIONS ON HIS CONFERENCE CALL, THEY HAVE SEVERELY RESTRICTED THE ACCESS TO OTHER PEOPLE'S QUESTIONS ON THE CONFERENCE CALL. THIS COMPANY'S GOAL IS TO KEEP THINGS HIDDEN AS OPPOSED TO MAKE THINGS TRANSPARENT. THIS IS THE MOST TRANSPARENT WE COULD POSSIBLY BE. THIS IS A PUBLIC PRESENTATION. THE ONLY PEOPLE WE DIDN'T ALLOW IS, THE CFO CALLED AND SAID, CAN WE BE PART OF YOUR PRESENTATION? WE SAID NO, THIS IS OUR PRESENTATION. THEY SENT PEOPLE FROM HERBALIFE AND WE HAD THE ASSISTANT CORPORATE SECRETARY AND SOME OTHER PEOPLE FROM HERBALIFE IN THE AUDIENCE, AND THEY ARE WELCOME TO PARTICIPATE. AND I TOLD THE CFO WE WERE GOING TO WEBCAST THE PRESENTATION. WE HAD 900 PEOPLE I DON'T HAVE A LIST YET WHO WAS ON THE WEBCAST, BUT WE WILL ALSO MAKE A RECORDING AVAILABLE FOR PEOPLE WHO MISSED IT OR CAN'T SEE IT. BUT I SUSPECT ANYONE WHO CARES ABOUT THIS ISSUE WILL ULTIMATELY LEARN ABOUT IT THROUGH BOTH THE PUBLIC PRESENTATION AND WHAT COMES AFTER.

SORKIN: THERE IS ALREADY A LOT OF SHORT INTEREST IN HERBALIFE. DAVID EINHORN OBVIOUSLY HAVE YOU DISCUSSED THIS IDEA WITH OTHERS, INCLUDING DAVID?

ACKMAN: NO, I DON'T KNOW IF DAVE IS SHORT THE STOCK. I REALLY DON'T. I'VE NEVER SPOKEN TO DAVID. WE ARE THE VAST MAJORITY OF THE SHORT INTEREST IN HERBALIFE.

SORKIN: WHEN YOU THINK ABOUT A PYRAMID SCHEME ONE OF THE STATISTICS THAT PEOPLE WHO ARE LONG THE STOCK WILL COME BACK AND SAY, LOOK, THE UNSOLD PRODUCTS THAT HERBALIFE SELLS ONLY .5% OF THEIR SALES COME BACK.

ACKMAN: RIGHT.

SORKIN: HOW CAN THAT BE A PYRAMID SCHEME?

ACKMAN: IF THE ANSWER IS, IF YOU CAN ACTUALLY RETURN THE PRODUCT, THAT WOULD BE A GOOD ANSWER. BUT YOU CAN'T RETURN THE PRODUCT. SO MANY DIFFERENT CONDITIONS AND TERMS THEY MAKE IT EITHER UNECONOMICALLY OR UNDER THEIR SYSTEM ILLEGAL TO RETURN THE PRODUCT. BASICALLY WHEN THE PEOPLE WHO HAVE ANY KIND OF MEANINGFUL AMOUNT OF PRODUCT ARE PEOPLE WHO ARE SALES LEADERS. AND SALES LEADERS, EVERY TIME THEY GET A ROYALTY CHECK FROM THE COMPANY, HAVE TO FILL OUT A FORM, WHICH HAS A LITTLE AFFIDAVIT IN IT THAT SAYS, I'VE SOLD PRODUCT -- 75% OF MY PRODUCT TO PEOPLE, YOU KNOW, OUTSIDE THE SYSTEM. IN EFFECT I HAVE SOLD TEN OR MORE CONSUMERS. THEY DON'T SAY IF IT IS A TINY AMOUNT TO THE SAME TEN PEOPLE EVERY MONTH BUT THEY HAVE TO SIGN THE AFFIDAVIT. IF THEY DON'T SIGN THE AFFIDAVIT, THEY DON'T GET THE CHECK. SO PEOPLE SIGN THE AFFIDAVIT TO GET THE CHECK. LET'S SAY YOU DECIDE TO MOVE ON FROM THE SCHEME. AND NOW THE COMPANY DECIDES TO AUDIT YOUR COMPLIANCE. GIVE US A LIST OF ALL THE CUSTOMERS YOU'VE SOLD TO. NOW ONE OF THE INTERESTING THINGS IS YOU ARE REQUIRED BY THE RULES OF HERBALIFE AS A DISTRIBUTOR PART OF THE DISTRIBUTOR AGREEMENT THAT YOU'VE SIGNED THAT YOU KEEP A LIST OF EVERY CONSUMER YOU'VE SOLD THE PRODUCT TO, NAME, ADDRESS, AMOUNT AND PRODUCT. SO THE COMPANY SAYS THEY HAVE NO IDEA WHAT THE ULTIMATE SALES ARE TO CONSUMERS YET THEY CAN SIMPLY ASK THEIR DISTRIBUTOR BASE, PLEASE PROVIDE THE LIST OF CUSTOMERS YOU HAVE SOLD TO.

SORKIN: HOW MUCH OF THEIR BOTTOM LINE NUMBERS WOULD YOU CONTEND ARE A FRAUD.

ACKMAN: I THINK THEIR ACCOUNTING IS -- IT IS NOT THAT THEY ARE NOT SELLING -- THAT PEOPLE AREN'T WRITING A CHECK TO THEM TO BUY A PRODUCT FROM THEM.

SORKIN: SO THIS IS NOT A FRAUD THEN?

ACKMAN: THIS IS A PYRAMID SCHEME. BY THE WAY THERE IS A LOT THAT'S WRONG WITH THEIR NUMBERS. AND SHANE WENT THROUGH A LOT OF THAT

SORKIN: YOU SPENT A LOT OF TIME ON THAT.

ACKMAN: THERE ARE ITEMS THAT THEY CALL SALES -

SORKIN: WHEN YOU SAY PYRAMID SCHEME, MOST PEOPLE THINK CRIMINAL ENTERPRISE – IS THAT WHAT YOU ARE SUGGESTING THIS IS?

ACKMAN: PYRAMID SCHEMES ARE INHERENTLY FRAUDULENT AND PENALTIES ARE SEVERE.

SORKIN: LET ME ASK YOU TWO OTHER QUESTIONS AS PART OF THIS. DID YOU PARTICIPATE OR DID ANYONE ON YOUR TEAM PARTICIPATE AS A DISTRIBUTOR THROUGHOUT THIS THING?

ACKMAN: NO. WE WANTED TO BUT WE WOULD THEN HAVE TO SIGN A DISTRIBUTOR AGREEMENT. AND IF YOU SIGN A DISTRIBUTOR AGREEMENT YOU AGREE TO A CONFIDENTIALITY STIPULATION. WE OBVIOUSLY COULD NOT AGREE TO THAT. SO WE DID NOT.

SORKIN: YOU HAVE GONE THROUGH LOTS OF THESE BATTLES BEFORE. MBIA IS ONE OF THEM.

ACKMAN: NOT LOTS ON THE SHORT SIDE VERY FEW. THIS IS REALLY MY SECOND BIG SHORT IDEA OF MY CAREER.

SORKIN: THIS IS SOMEWHAT DEPENDENT ON THE FTC TAKING ACTION. IF THEY DON'T, WHAT HAPPENS.

ACKMAN: I THINK THE FTC IS GOING TO TAKE A VERY HARD LOOK. BUT I THINK MOST IMPORTANTLY THE NEW DISTRIBUTOR SOMEONE TRYING TO SUCK INTO THE SCHEME WILL BE BETTER INFORMED AND THIS IS WHERE THE MEDIA COMES IN. THIS IS WHERE, I DON'T KNOW HOW MANY DISTRIBUTORS WATCH CNBC, I'M SURE SOME DO, BUT WE HAVE A MUCH BROADER I THINK 50 PLUS MEMBERS OF THE MEDIA HERE, MUCH BROADER COLLECTION OF THE MEDIA LIKE CNN, ET CETERA, THAT WILL REACH A MUCH BROADER COMMUNITY. I THINK ULTIMATELY THINK ABOUT A PYRAMID SCHEME --

SORKIN: WHAT WOULD YOU SAY TO THOSE WHO WOULD SAY YOU ARE TRYING TO ADVERTISE YOURSELF ON ONE SIDE OF THIS. YOU ARE TRYING TO MANIPULATE THE SUCCESS OF THE COMPANY AND THEREFORE THE STOCK PRICE.

ACKMAN: FALSE. WE SIMPLY WANT THE TRUTH TO COME OUT. IF DISTRIBUTORS KNEW THE PROBABILITY OF MAKING $95,000 A YEAR, WHICH IS THE MILLIONAIRE TEAM AS THEY CALL IT, LEVEL, WAS A FRACTION OF 1%, NO ONE WOULD EVER SIGN UP FOR THIS. AND WE SIMPLY EXPOSE THAT FACT. THE COMPANY HAS DONE THEIR BEST TO TRY AND HIDE THAT FROM THE GENERAL PUBLIC. SO WE ARE PROVIDING THE FACTS. YOU KNOW THE SAME WAY THE MEDIA PLAYS. WHAT DOES THE MEDIA DO IT EXPOSES FACTS ABOUT THINGS LIKE PYRAMID SCHEMES AND ULTIMATELY CONSUMERS MAKE THEIR OWN DECISION. PYRAMID SCHEMES THEMSELVES ARE INHERENTLY UNSTABLE BECAUSE TO SUPPORT THE PYRAMID.

SORKIN: IF THIS IS A PYRAMID SCHEME, IT LASTED 32 YEARS. WHY DO YOU THINK WE ARE AT THE BREAKING POINT IF THAT'S THE CASE?

ACKMAN: FIRST OF ALL, THEY ARE RUNNING OUT OF COUNTRIES. AS I MENTIONED IN MY PRESENTATION, THEY ENTERED GHANA REMEMBER THEY ARE SELLING WEIGHT LOSS PRODUCT. THEY ARE IN GHANA. COUNTRIES IN AFRICA ZAMBIA. THESE ARE NOT COUNTRIES WHERE WEIGHT LOSS PRODUCTS AND DIGESTIVES ARE BIG PRODUCTS.

SORKIN: WHAT DO YOU EXPECT WE WILL HEAR FROM THE COMPANY?

ACKMAN: I DON'T KNOW HOW THEY CAN RESPOND.

SORKIN: IS THERE ANYTHING THEY HAVE DONE RIGHT IN THE PAST YEAR WHERE YOU SAY MAYBE THEY ARE TAKING THE RIGHT KIND OF STEPS?

ACKMAN: NO.EVERYTHING I HAVE SEEN ABOUT THIS COMPANY IS SIMPLY BEEN AN AFFIRMATION OF WHAT WE BELIEVED AT THE VERY BEGINNING. WE HAD A SUPPOSITION AT THE BEGINNING WE'VE BEEN ABLE TO PROVE OVER A LONG PERIOD OF TIME --

SORKIN: WHY SHORT IT BEFORE DOING THE RESEARCH?

ACKMAN: NO WE DIDN'T SHORT IT DURING -- WE CONCLUDED BY MAY, OR WHENEVER WE STARTED SHORTING THE STOCK, IT WAS A PYRAMID SCHEME. WE SPENT THE NEXT SEVEN MONTHS PUTTING TOGETHER A PRESENTATION WE FELT COMFORTABLE TO PUT IN FRONT OF THE WORLD AND THAT TOOK A LONG TIME. ONE POINT I WANT TO MAKE, I SAID SOMETHING IN MY Q AND THAT I THINK IS NOT CORRECT. I SUSPECT THE COMPANY IS BUYING BACK STOCK TODAY. AND AGAIN ULTIMATELY ALL PYRAMID SCHEMES ARE CONFIDENCE GAMES.

SORKIN: YOU THINK THEY ARE PUSHING UP THE STOCK?

ACKMAN: I THINK THEY ARE DOING THEIR BEST TO SUPPORT IT. I CAN'T IMAGINE WHO WOULD BUY IT TODAY AT $35 A SHARE.

SORKIN: OK WELL WE ARE GOING TO HAVE TO GET IN TOUCH WITH THE COMPANY TO FIND THAT OUT.

ACKMAN: WHY DON'T YOU ASK THAT.

SORKIN: BEFORE I LET YOU GO IT IS THE HOLIDAY SEASON SO I DO HAVE TO ASK ABOUT JCPENNEY, ANOTHER HIGH PROFILE INVESTMENT YOU HAVE. DO YOU STILL HAVE CONFIDENCE IN RON JOHNSON?

ACKMAN: ENORMOUS CONFIDENCE.

SORKIN: WHAT ABOUT THE STRATEGY THAT SEEMS TO HAVE TURNED A LITTLE BIT DURING THE HOLIDAY SEASON, MOVING A LITTLE MORE TOWARDS DISCOUNTS THAN PREVIOUSLY ARTICULATED.

ACKMAN: SURE. AGAIN THE REASON WHY I HAVE CONFIDENCE IN RON JOHNSON, BECAUSE HE IS A CEO. WHEN THE FACTS DON'T WORK OUT EXACTLY THE WAY HE EXPECTS, HE MAKES CHANGES TO THE BUSINESS MODEL. SO THE COMPANY IS BECOMING MORE PROMOTIONAL. THEY HAD THANKSGIVING DAY SALE, PROMOTIONS DURING CHRISTMAS. I SUSPECT IF WE GET GOOD RESULTS FROM THAT, YOU WILL SEE MORE OF THAT.

SORKIN: SO WE COULD SEE MORE OF THAT.

ACKMAN: YES.