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Ackman's New Strategy: Targeting Herbalife Distributors And Board Members

Ackman's New Strategy: Targeting Herbalife Distributors And Board Members

As a Latino advocacy group met with a federal regulator Tuesday to discuss their concerns about alleged abuses perpetrated by Herbalife (NYSE: HLF) against Latinos and others, hedge-fund manager Bill Ackman continued his efforts to portray the company as an illegal pyramid scheme.

This time Ackman and his Pershing Square L. P. Fund employed a new twist.

On a new website, Ackman began what he said would be a series of white papers detailing the exploits of Herbalife “key wrongdoers.”

Starting with former Herbalife distributor and member of the Chairman’s Club, Shawn Dahl who, Ackman said, made false claims about the ease with which potential distributors could make money, the charges go on to cite a number of alleged infractions.

Ackman said he believed Dahl’s lead generation company, Online Business Systems (OBS) continues to sell leads to new Herbalife distributors and that OBS is, in fact, nothing more than a new name affixed to a lead generation business Dahl inherited from his mother-in-law.

The Canadian government 10 years ago outlawed that business, known as Global Online Systems (GOS) for being an illegal pyramid scheme.

Related: Will Latinos Help Bill Ackman Convince Washington Herbalife is a Pyramid Scheme?

It’s important to note that according to a November 18, 2004 Agreed Statement of Facts in the Canadian case, GOS was deemed “a plan that promotes and supplies a proprietary system to sell and distribute Herbalife products.” In effect, GOS was “a multi-level marketing plan within the larger Herbalife multi-level marketing plan.”

After making the case that Dahl’s activities and business practices constituted an illegal pyramid scheme, Ackman and Pershing Square closed the entry on Dahl with these words:

“…Herbalife cannot escape liability for participating in Dahl’s deceptive and destructive conduct for nearly a decade.”

More recently, the website included similar claims against Doran Andry, a current Herbalife distributor and member of the Chairman’s Club.

Others to be profiled in the future include:

Leslie Stanford, a 33-year Herbalife veteran, member of the Founder’s Circle, and former member of the Board of Directors;

John Tartol, a 32-year Herbalife veteran, a member of the Chairman’s Club, and current member of the Board of Directors;

Other senior distributors are expected to be added over time.

Herbalife has strongly denied Ackman’s allegations that it’s a pyramid scheme and has won the support of investors such as Carl Icahn and Post Holdings chief executive officer Bill Stiritz.

At the time of this writing, Jim Probasco had no position in any mentioned securities.


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