• A Global Strategy to Destroy Herbalife

    A COMMENTARY from Cloakroom Confidential:

    A new movie has come out purporting to be an expose on the company Herbalife.  The movie is titled “Betting on Zero” and is an attempt to make liberal hedge fund activist, Bill Ackman, CEO of Pershing Square Capital, as a billionaire hero for the little guy.

    What the movie leaves out is that Bill Ackman has resorted to using his cash to lobby Washington to make good on a billion dollar bet that Herbalife will go out of business. Ackman took a short against the company Herbalife and then make a case to investors that the company was a flawed business model.  He did drive down the stock price but not enough to make good on his bet, so he then resorted to paying public relations firms and lobbyists to get the federal government to investigate the company in the hopes that a federal investigation would help him drive the company out of business.

    The anti-Herbalife movie is not balanced and does not address the fact that Ackman’s campaign against Herbalife is completely astroturf in nature.  The movie features “victims” of Hebalife who were found by paid non-government organizations (NGOs) that Ackman hired to find upset former subcontractors for Herbalife who didn’t make money when they resold the Herbalife products. The groups was hired to find individuals to file a series of complaints against the health food giant in an effort to instigate a federal investigation.

    And the movie left out one other important fact and the fact that one of the individuals in the movie is under investigation and the maker of the movie is an old college buddy of Ackman.

    In the movie, there is a scene where our hero Bill Ackman is talking to Jon Silvan, “a PR specialist,”  who happens to work with the Global Strategy Group (GSG).  The GSG is paid by Bill Ackman to help Pershing Square destroy Herbalife.  This would be an important issue that was not disclosed by the makers of the film.

    Also interesting to note that Bill Ackman and the producer the movie rowed crew together at Harvard.  One should not expect objectivity from a college buddy of the hedge fund giant.

    The Global Strategy Group was a perfect fit for the liberal billionaire to help destroy Herbalife, because of the firm’s strong ties to the Democratic party.

    According to Forbes:

    When hedge fund billionaire William Ackman was looking for help in Washington in his battle against Herbalife, he turned to Global Strategy Group, a public affairs firm he had worked with for years that is known for its ties to the Democratic Party in general and the Obama Administration in particular. Global Strategy Group’s Washington office is run by Jim Papa, who had worked in the White House as President Barack Obama’s special assistant for legislative affairs. Bill Burton, an early Obama ally and Obama’s former deputy White House Secretary, also worked for the firm when it was doing work for Ackman’s hedge fund on Herbalife. Burton joined a different firm in January.”

    The Forbes piece quoted Ackman as admitting that they hired Global Strategy and that the group was the subject of interviews with the FBI.  The group denies that they were being investigated, yet the Forbes story cited a Wall Street Journal piece about an FBI investigation into the potential manipulation of stock that may have touched on the group’s role in trying to get the feds to investigate Herbalife.

    The Wall Street Journal broke news of the federal investigation into the potential manipulation of the company’s stock, marking yet another twist in the marathon Wall Street battle over Herbalife. Federal prosecutors have subpoenaed and interviewed people connected to Global Strategies Group, Ackman said on Friday. The federal probe is reportedly looking into whether people made false statements about Herbalife’s business model to federal officials and regulators for the purposes of spurring a federal investigation into Herbalife and manipulating the company’s stock.

    The movie is not doing well at the box office, much like billionaire Bill Ackman’s attempt to destroy Herbalife to make good on a short bet.  This speaks to the idea that the movie was not made for profit, but to serve the public relations goals of Bill Ackman.

    This is the types of fact pattern that drive average Americans nuts.  A liberal billionaire hedge fund manager fails to convince the market through the use of arguments and facts that a company is going to go under.  Then the wealthy individual hires PR firms and lobbying firms to get the feds to investigate a company to make good on a Wall Street gamble.

    Ackman’s cronies helped make a movie that is nothing more than a public relations ploy to drive the company out of business.  He went to an old buddy from college to help him make the movie and had his subcontractors appear in the movie in a deceptive way without disclosing that he was paying them to talk down the company.

    Hopefully, Congress and the federal government will not be fooled into helping a billionaire make even more money by destroying a company that provides healthy products to willing consumers.

    Cloakroom Confidential

    Cloakroom Confidential was a longtime Capitol Hill staffer and insider who has contacts in the House and Senate at the highest levels.

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