Did Ackman Campaign Contributions Influence NY AG To Pursue Herbalife?

Bill AckmanBill Ackman Photo via InsiderMonkey, Flickr (CC BY-ND 2.0)

As hedge fund manager Bill Ackman sunk into a thick steak at Del Frisco’s Double Eagle Steakhouse in midtown Manhattan last June, he looked at the information-hungry hedge fund managers at the table and painted a picture of Herbalife Ltd. (NYSE:HLF) as a company soon to be in trouble with the government. Ackman’s “prophecy” turned correct this winter, when regulators and the New York Attorney General announced regulatory and criminal probes into the firm’s business practices – benefiting Ackman’s $1 billion short position.

Bringing about government’s wrath on Herbalife

How exactly Ackman was able to engineer such government to focus on his target is still unclear, but a picture of a sophisticated lobbying campaign with several moving parts is emerging, with the latest news pointing to political influence.

Fox Business Network is reporting that New York State Attorney General Eric Schneiderman launched an investigation into whether nutritional-supplement maker Herbalife was an illegal pyramid scheme “after his campaign received tens of thousands of dollars from a hedge fund manager would could reap millions if regulators take tough action against the company.”

Fund manager is among largest campaign contributors to New York Attorney General, who is investigating Herbalife

Campaign contribution documents document that Ackman contributed $30,000 to Schneiderman’s political campaign since 2010, making Ackman one of the Attorney General’s largest contributors.  Schneiderman is empowered by New York’s Martin Act to bring serious criminal charges against financial crime without the same high bar as required under federal law, the report noted.

Ackman’s attack on Herbalife Ltd. (NYSE:HLF), which has met resistance from other hedge fund managers, most notably Carl Icahn, is considered the most aggressive use of lobbying power to bring down a thriving company.  Ackman is documented to have hired various lobbyists and grass roots activists in an effort to encourage government regulators to investigate Herbalife.  It is unclear if a relatively small $30,000 campaign donation can be considered enough to influence a criminal investigation.



About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com