Bill Ackman got emotional while firing his latest shot at Herbalife on Tuesday, visibly fighting back tears as he recounted his own family's humble immigrant origins and how the nutritional supplement company was manipulating that same American Dream as part of its alleged fraud.
"When you run out of middle class people, you have to go to people who make $2 a day," said Ackman, who during a more than 3½-hour presentation in New York City told of his great-grandfather's immigration from Russia to the United States.
Referring to Herbalife, he said: "They sell the American dream ... It's criminal."
"It's time to shut the company down," Ackman added. "This company is a travesty and also a tragedy."
Herbalife's stock fell more than 7 percent Monday and early Tuesday ahead of the presentation. But during and after Ackman's presentation, shares spiked by more than 25 percent, the best single day gain in the stock's history. More than 20 million shares exchanged hands by midafternoon.
"Once again, Bill Ackman has over-promised and under-delivered on his $1 billion bet against our company," Herbalife said in a statement Tuesday afternoon. "After spending $50 million, two years and tens of thousands of man-hours, Bill Ackman further demonstrated today that the facts are on our side."
The Pershing Square Capital Management founder's presentation focused on the supplement company's nutrition clubs, which he said were "mini" versions of the multilevel marketer's broader "pyramid" scheme.
Ackman cited findings by his undercover investigators who joined Herbalife's nutrition clubs. The presentation purported to show evidence that the clubs, such as those under the "Club 100" umbrella, are designed to recruit and train additional product-selling members, as opposed to consumption of the company's shakes and other products as is suggested by Herbalife.
"This is a mini-Herbalife pyramid," Ackman said of Club 100 and its own structure of recruiting new members, especially family and friends. "They are not selling weight loss in these clubs, they are selling a business opportunity," he said.
Ackman called the labor provided to Club 100s by recruits "free" and "illegal." He noted that to "graduate" from a Club 100, you first had to recruit 10 other members as part of a certification program.
Ackman said that 40 to 50 percent of Herbalife's revenue comes from nutrition clubs, higher than the company estimates. He said the entire company would eventually collapse because most of those club sales are from selling to new recruits or to meet club requirements and are not for actual consumption.
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"Mr. Ackman's claim about the earnings of Herbalife nutrition clubs is completely false and fabricated," the company said in a statement responding to the presentation. "In fact, according to a recent study commission by the Company, 87.5 percent of nutrition club operators feel good about the money they earn and 92 percent want to continue with their club."
"Club 100 was a program that contained many of the best elements of nutrition clubs, including education, mentoring and fiscal responsibility," Herbalife added. "These elements are the cornerstone of our clubs today.Herbalife is proud of our members who use nutrition clubs as an important tool of social support to achieve good nutrition and a healthy active lifestyle."
The Club 100 investigation was led by private researcher Christine Richard, a former Bloomberg News reporter who wrote "Confidence Game," a book chronicling Ackman's successful short bet against MBIA. She said she estimated that the average Club 100 trainee spends $3,000 on shakes for family and friends as part of the institutionalized recruitment process.
One part of the presentation focused on what Ackman said were false income claims. In one undercover recording of a Club 100 event, an Herbalife promoter is heard implying that members could earn as much as $657,000 a year.
Ackman cited internal Herbalife documents that described a strategy to expand in developing countries, like Burundi and Mexico, and to target Latinos in the U.S. He said the company works to attract—and mislead—the "poorest of the poor."
Ackman addressed the stock's move up Tuesday by saying that Herbalife shares routinely move up during bad news. He suggested regulators examine if Herbalfe was buying back stock during negative events to prop up its value.
Ackman spoke following an appearance on CNBC by Herbalife CFO John DeSimone earlier in the morning. "His bark is always worse than his bite," DeSimone said.
DeSimone appeared on "Squawk on the Street" to rebut charges Ackman has made about the multilevel marketing company, saying that the hedge fund manager's claims of fraud were "outrageous." He staunchly defended Herbalife's product and business model, even as regulators probe the company.
"There's no doubt he's missing the real analysis, the real research," DeSimone said. "What he's missing is that fundamentally millions of people use the product and enjoy the product."
On Herbalife's 5,000 nutrition clubs—the focus on Ackman's latest presenation—DeSimone said they were benign "social gatherings" to encourage use of the product. "It's person to person selling," he said.
For more than a year, the company has been in the crosshairs of Ackman, who steadfastly insists Herbalife is a "pyramid scheme." On Monday, Ackman told CNBC he was attempting to persuade Carl Icahn to abandon his investment in the company. He also said Tuesday's event "will be the most important presentation that I have made in my career."
Several federal agencies and some state attorneys general are investigating the nutritional supplement company, which has repeatedly said its business practices are sound and legal.
—By CNBC's Lawrence Delevingne