Will the Herbalife Scandal Affect These Companies?
The case against Herbalife (NYSE:HLF) has gathered momentum since hedge fund manager Bill Ackman, who took a $1 billion short position on the supplement-maker, told CNBC in December that the company used inflated pricing, misleading sales information, and a complicated incentive structure to hide what he termed was “little more than a pyramid scheme.”
The U.S. Federal Trade Commission launched an investigation into the company on Monday after receiving more than 192 complaints against it in the past seven years, and CNBC published an in-depth expose on Herbalife’s business on January 9.
Now another voice has joined the accusations. Daniel Ravicher, a law professor at the Benjamin N. Cardozo School of Law and Executive Director of the Public Patent Foundation, wrote a series of letters to participants who, according to him, played critical roles in Herbalife’s business, informing them of what he believed was their culpability in its pyramid scheme. He sent letters to eBay (NASDAQ:EBAY), FedEx (NYSE:FDX), and NYSE Euronext (NYSE:NYX), each of which helps further the company’s business to some degree. FedEx transports the company’s products, the New York Stock Exchange enables Herbalife gain additional participants in its scheme and build brand recognition, eBay provides an outlet for Herbalife participants to unload unsellable products so that they can invest more money in the company…