Herbalife Lawsuit Dismissed
View Herbalife International Profile
3/22/2015
Herbalife stock jumped approximately 13% after a lawsuit filed by investor Bill Ackman against the company was dismissed by the court. Ackman has accused Herbalife of running a pyramid scheme and using deceptive marketing practices. U.S. District Judge Dale Fischer dismissed thge case, citing insufficient proof to show that Herbalife engaged in fraud. In addition, the judge stated that since no fraud was proven, Herbalife shareholders could not claim that any losses they suffered were due to alleged misrepresentation by the company.
There have been recent reports that employees of Ackman have been contacted by the FBI and there is an investigation into whether false statements about Herbalife's business model were made by Ackman in order to lower its stock price. Ackman had a $1 billion short position in Herbalife shares in December 2012 when he began accusing the company of making money by recruiting new representatives and not from sales of product.
Ackman also reportedly unsuccessfully tried to lobby Congress members for an investigation into Herbalife by the Federal Trade Commission and other federal and state regulators.
Herbalife released the following statement: "Herbalife welcomes the decision by the U.S. District Court for the Central District of California to dismiss the case. As we have consistently stated, we are confident in the strong fundamentals of our business model and remain committed to helping people and communities improve their nutrition."