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.
The first London Value Investor Conference was held in April 2012 and it has since grown to become the largest gathering of Value Investors in Europe, bringing together some of the best investors every year. At this year’s conference, held on May 19th, Simon Brewer, the former CIO of Morgan Stanley and Senior Adviser to Read More
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.