Herbalife Ltd.(NYSE:HLF) denied knowledge of any law enforcement investigation as reported previously by the New York Post. Late Sunday night, the newspaper unearthed news about the investigation, right after the Federal Trade Commission released documents containing 192 complaints against Herbalife over the last 7 years such as false promises made on behalf of the company and the difficulty faced by distributors in collecting income they were owed and getting refunds.
The FTC agreed to release this information to the New York Post in lieu of a Freedom of Information Law request by the newspaper. However, the FTC said it didn’t have to give out information obtained by the commission in a law enforcement investigation. It is unknown if the probe was civil or criminal.
Herbalife has also been embroiled in a controversy about William Ackman, a hedge fund manager who accused that it is a pyramid scheme and that he was shorting the stock. Short-sellers make money when the shares they’re betting against decline. The company tried to fight back against the accusations by holding an analyst and investor meeting that outlined how its business operates and who its customers are.
The company stated that it demands a correction from the NY Post right away since it is not aware about any other regulatory interest or investigation apart from its voluntary dialogue with regulators. The Wall Street Journal had reported via unidentified sources that the Securities and Exchange Commission had opened an inquiry into Herbalife back in January.
Shares of HLF recovered sharply on Monday and ended higher by 1.34% at $35.54, after slumping 14% earlier in the session. Ever since Ackman’s revelation, the shares have dropped 18 percent through Friday’s close.