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Ackman vs. Herbalife: HLF Spends 10x in Washington Lobbying

Stocks in this article: HLF

NEW YORK (TheStreet) -- If lawmakers in Washington may ultimately decide the fate of Herbalife (HLF), hedge-funder Bill Ackman of Pershing Square Capital Management might want to throw a few more lobbying dollars behind a short trade that once stood at about $1 billion.

A review of publicly disclosed political campaign donations indicates that Herbalife spent about 10 times the amount that Pershing Square did in Washington in 2013. A mid-term election year in Congressional, Senatorial and gubernatorial races across the country, however, could create a new battlefield for Herbalife and Ackman in 2014.

The notion that Ackman's fight against Herbalife may be resolved in Washington was underscored last week when Sen. Edward J. Markey (D., Mass.) asked that the Securities and Exchange Commission and Federal Trade Commission seek more information into Herbalife's business practices. A day later, the League of United Latin American Citizens applauded Markey's probe.

Both announcements sent Herbalife shares tumbling to six-month lows, however, the company's stock remains well above its trading prices prior to Ackman's disclosure of his short in late December 2012.

A Jan. 23 letter from Markey to Herbalife asked that the company detail the percentage of revenue it earns from customers outside its multi-level distributing network, echoing a similar line of questioning from Ackman and Pershing Square. The Senator also queried for details on the amount of profit the average distributor might make on out-of-network sales.

Markey's questions appear to be aimed at judging whether or not Herbalife is a so-called pyramid scheme, a characterization the company has vehemently denied. His entrance into the debate, meanwhile, re-ignited speculation that political influencing could ultimately decide one of the most controversial trades in the history of the hedge fund industry. 

Were that to be the case, Ackman and Pershing Square are far behind Herbalife in direct campaign spending and lobbying, even as the hedge funder has publicly said his short trade could come down to whether or not the FTC or SEC decides to take up his claims. Publicly disclosed spending figures also show that while Herbalife has increased spending efforts in 2013, Ackman may just be figuring out how to play the Washington game.

In 2013, Pershing Square began lobbying in Washington, spending $90,000.00 with the Wexler & Walker Public Policy Association and $48,000.00 with the Moffett Group, a lobbyist that Politico reported worked to gain signatures on a letter Rep. Linda Sanchez (D-Calif.) sent to the FTC to investigate Herbalife's business practices. Pershing's lobbyists targeted signatures from the Congressional Hispanic Caucus (CHC), according to Politico's reporting. Prior to 2013, Pershing Square hadn't conducted lobbying in Washington.

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