Herbalife Ltd. (NYSE:HLF) executives arrived at the company’s investor conference this morning armed with 2 ½ hours’ worth of slides and videos defending its business model against claims made by well-known hedge fund manager Bill Ackman. Then company CEO Michael Johnson appeared on CNBC to defend it further.


Ackman called the company a pyramid scheme last month, setting off a storm of back-and-forth arguments, which eventually drew in another well-known hedge fund manager—Dan Loeb. Herbalife Ltd. (NYSE:HLF) is reportedly considering legal action against Ackman because of his comments.

Today in an interview with CNBC, Johnson raised doubts about Ackman’s promise to donate the profits from his hedge fund’s short of the company’s stock. He also said that some of the claims made by Ackman were strange.

However he did retract one key statement linked to Ackman’s arguments. He previously said that 90 percent of Herbalife Ltd. (NYSE:HLF)’s sales were from outside its distribution network. Johnson told CNBC that it was a “misstatement.” He said that in reality, 90 percent of the company’s distributors who purchase its products do so for the purpose of self-consumption. He wouldn’t estimate what percentage of the company’s sales are to non-distributors of its products.

The percentage of sales which come from non-distributors is important because of how it relates to the multi-level marketing business model. If distributors earn more profits from recruiting other distributors than they do for selling the products, then the profits rise up to the top of the company. It is that type of business model which Ackman contends is a pyramid scheme.

Today there are new reports indicating that the Securities and Exchange Commission is once again looking into]Herbalife Ltd. (NYSE:HLF)’s business model. The company’s stock has fallen more than 4 percent since those reports came out.