By Veronique De Rugy at Investor’s Business Daily
Using all the political influence his corporate money can buy, he has been putting pressure on state and federal regulators to investigate Herbalife in hope that the company’s stock would finally dive.
To build his case, an investigation by the New York Times reports that he organized “protests, news conferences and letter-writing campaigns in California, Nevada, Connecticut, New York and Illinois, although several of the people who signed the letters to state and federal officials say they do not remember sending them.”
His lobbyists also scoured the country to find distributors who lost money and could be held up as victims, and convinced members of Congress to write to the Federal Trade Commission encouraging an investigation. Ackman also made presentations directly to the FTC, the Securities and Exchange Commission and federal prosecutors.
The costly efforts are beginning to pay off, with the FTC and SEC initiating investigations, and now a New York state senator promising to introduce legislation.
What’s troubling is not that a company is being scrutinized; it’s how that scrutiny can be bought by another private entity with a vested interest in the outcome. Short selling is a valid investment strategy with numerous benefits, such as providing liquidity and checks against bubble-inducing hype and excessive optimism.
It’s another matter entirely if officials step in when that strategy goes awry.
Regardless of one’s impression of Herbalife as a good or bad company, one place of common ground should be in the belief that the super-rich should not get bailed out by the government. If Ackman’s lobbying pays off, however, we can expect many more to follow his example.