Ackman to PwC: Herbalife may get you in trouble

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Bill Ackman delivered the latest punch in one of the biggest fights on Wall Street, this time warning major accounting firm PricewaterhouseCoopers that it could face "substantial liabilities" for its work in certifying Herbalife's books.

The CEO of Pershing Square Capital Management—who has called Herbalife a "pyramid scheme" and placed a $1 billion short bet against it in December—sent a letter to PwC executives Aug. 29 , with copies to the Securities and Exchange Commission and three Herbalife directors who sit on its audit committee.

"If we are correct that Herbalife is a pyramid scheme and PwC fails to accurately inform investors of this risk, PwC may incur substantial liabilities in the event of the Company's failure," Ackman wrote in the letter, which was obtained by CNBC after it was sent to Pershing Square investors last night.

The hedge fund manager also asked PwC to review accounting issues that it claims to have found and that it detailed in the 52-page letter.

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"We would also like you to explain how PwC intends to overcome and resolve the appearance of impaired independence with respect to its in-progress and impending audit and review work in light of non-audit services performed by PwC and/or members of the PwC global network for Herbalife," Ackman wrote. "In light of the materiality of this audit to Herbalife, it is critical that investors can be confident of the independence and objectivity."

For example, the letter claims that the nutrition company's accounting understates by about $300 million the amount of recruiting-based incentives paid to some employees.

"As Mr. Ackman continues to lose his investors' money on a reckless $1 billion bet against Herbalife, he has become increasingly desperate," Herbalife spokeswoman Barb Henderson said in a statement to "Unfortunately, this is just the latest example."

Caroline Nolan, a PwC spokeswoman, wouldn't respond. "Due to client confidentiality, we will not have a statement on the Herbalife matter," she said.

Spokespeople for Pershing Square and the SEC did not respond to requests for comment.

Herbalife hired PwC in May, after the previous auditor, KPMG, resigned because of an insider trading scandal. PWC is set to complete a new audit this year that could result in a large share buyback—a move that would hurt Ackman's investment, according to the New York Post.

Tim Ramey, a senior research analyst with D.A. Davidson who covers Herbalife, said the new letter doesn't alter his bullish stance.

"It doesn't in any way change our view," he said. "We are still buy-rated, with a $92 price target."

Ramey added that the issues Ackman raised were not "material."

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So far, Ackman's gamble on Herbalife's demise hasn't paid off.

The stock price hit a low of $26.06 a share Dec. 24 following his public presentation. But other prominent investors, including Dan Loeb of Third Point and Carl Icahn, went long.

The shares are trading near $66 today.

Pershing Square manages $10.7 billion, down from $13.2 billion in March. The firm's flagship fund is up 0.3 percent net of fees through August.

—By CNBC's Lawrence Delevingne. Follow him on Twitter @ldelevingne.