There is very little that I can add to the letter sent by Michael Johnson to Senator Markey this past Tuesday.
Where I will add my own commentary is simply to say that I am very pleased that Senator Markey made his office available to meet with Herbalife executives. I am also pleased to know that Herbalife was able to answer all of Senator Markey's, and Mark Bayer's questions to their satisfaction.
If in fact Herbalife did answer all of the Senator's questions to his satisfaction, which I'd venture they did, I would also venture that both the Federal Trade Commission and the Securities and Exchange commission are also in receipt of all of the same material and information considered by Senator Markey's office and that they've also come to the same conclusion.
I think that Herbalife's recently announced "gold standard" initiative is a testament to the productive nature of their continued dialogue with regulatory agencies. I think that many people have assumed that the regulatory agencies are not, or have not been in receipt of very detailed sales and membership data supplied by Herbalife and that Herbalife has been hiding in the shadows waiting in fear of an imminent announcement that the FTC has launched an investigation into the company. I would suggest that there is no FTC investigation because Herbalife voluntarily provided very detailed data to the FTC months and months ago and that they are likely very pleased with the data they've seen. In other words, there is no investigation because there is nothing to act on. I'd also venture that Herbalife has proactively been providing that same detailed information to regulatory agencies, at both the federal and state levels, and that we are much more likely to discover that there is an investigation into the trading behavior of Pershing Square than there is an investigation in Herbalife's business practices. Let's not forget how Herbalife crawled to audited freedom through five hundred yards of Ackman's shit smelling foulness and came out clean on the other side. Contrary to what the short side of the argument would have people believe, PwC's sign-off on the company's audited financials went far beyond the typical audit and covered business practices as well. Pershing did their best to run interference on the audit, but PwC scrubbed every nook and cranny of the company and found nothing material.
So at the end of the day I can't help but wonder if I were a state or federal regulator would I be more inclined to believe a hedge fund manager that stands to gain an enormous sum of money(both capital gains and 2+20) from a highly orchestrated and overtly lobbied bear-raid filled with misinformation and personal attacks or would I believe a company that is proactively feeding me data that has been verified by not one, but two separate auditors(KPMG & PwC) as well as two separate unbiased research companies(Lieberman & Nielsen), millions of distributors around the world and millions of satisfied customers?
Pershing Square's claims have been verified by whom exactly? Oh that's right, that information was verified by two analysts that are no longer with the firm, three separate lobbying firms, the research boutique that sold him the story in the first place (and wrote a book about him), a guy suing Herbalife because he failed to return his products for his refund, some phantom in Norton, Massachusetts and $1.5B in redemptions/losses.
Ackman's whole shpeel to regulators has effectively been who is protecting Americans from Herbalife?
I think a more important question that regulators need to be asked is who is protecting Americans from Pershing Square?
Hopefully that question will be answered tomorrow when Herbalife meets with numerous congressional representatives about their business. I wonder if the NY Post will write about it. Maybe I'll help them and write another article for Michelle Celarier.
Herbalife response to Markey by theskeptic21