Herbalife Disputes Report of FTC Probe; Shares Rebound

Monday, 04 Feb 2013 08:40 AM

 

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Herbalife Ltd. on Monday disputed a newspaper report that said it was the subject of a law enforcement probe, with the company saying the report had "misleading and inaccurate information."

The report, by the New York Post, sent shares of the nutritional products company down as much as 12 percent in morning trade. The stock recovered, and closed up 47 cents, or 1.3 percent, at $35.54 on the New York Stock Exchange.

The New York Post reported that Herbalife was the subject of a law enforcement investigation, citing documents the paper obtained from the U.S. Federal Trade Commission under the Freedom of Information Act. The documents, which contained consumer complaints about Herbalife, were reviewed later by Reuters.

The FTC's cover letter accompanying the documents noted that the agency was withholding some information that was exempt under a statute that covers law enforcement investigations.

But a source close to the FTC said the cover letter's reference to potential law enforcement action, which was emphasized in the Post's news story, was inappropriate boilerplate language. The source said the FTC is changing that wording in the letter.

The FTC does not reveal its own investigations unless the target company does, and the FTC does not reveal other law enforcement investigations, the source said.

Herbalife is demanding a correction from the New York Post, the company said in a statement. An official at the Post was not immediately available to comment.

"Other than the voluntary dialogue with regulators, which we communicated on our January investor day, we are unaware of any other regulatory interest and/or investigation," the company said in a statement.

Herbalife said during its January investor day that it had contacted regulators after hedge fund manager William Ackman in December revealed a short position in the stock and called the business, which relies on independent distributors who can earn extra money from recruiting more representatives, "a pyramid scheme."

Herbalife shares dropped dramatically after Ackman's accusations, but have recovered some of their losses as investors questioned whether the FTC would take any action against Herbalife, as Ackman wanted.

© 2014 Thomson/Reuters. All rights reserved.

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