FUTURE PRIMATE

Herbalife CEO accused of running ‘Ponzi scheme’

Herbalife CEO accused of running ‘Ponzi scheme’

America’s highest-paid chief executive has been accused of duping some of the world’s poorest people out of $3.8bn (£2.4bn) in “the best managed pyramid scheme in the history of the world”.

Michael Johnson has been accused of misleadingly implying that his Herbalife empire of self-employed salespeople could all become millionaires selling dieting supplements door-to-door.

Bill Ackman, an activist investor, said he had made it his “patriotic” duty to bring the company down. He claims that 1.9 million Herbalife salespeople from Arizona to Zambia have failed to make money since the company was founded 32 years ago. Each recruit would have paid about $2,000 for supplies and training, which Ackman said meant they had collectively lost $3.8bn. Last year, Johnson earned $89m, according to the financial research firm GMI Ratings.

In a three-and-half hour presentation entitled “how to be a millionaire”, Ackman, founder and chief executive of hedge fund Pershing Square Capital Management, accused Herbalife of running a modern day “Ponzi scheme”. He said his hedge fund had built up an enormous short position in the company, which means he is betting its share price will fall.

“Our target price is zero,” Ackman said, “Because we think the business will fail.”

This entry was published on December 23, 2012 at 9:24 pm. It’s filed under Politics and tagged . Bookmark the permalink. Follow any comments here with the RSS feed for this post.

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