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Ackman Targets Herbalife's China Activities in Short Campaign

NEW YORK (The Deal) -- Activist investor Bill Ackman stepped up his campaign Tuesday to convince regulators in the U.S. and elsewhere that nutritional supplement company Herbalife (HLF - Get Report) is an illegal pyramid scheme, arguing in a more than two hour-long presentation and question and answer session that the company's operations in China allegedly violate civil and criminal law there and its regulatory filings in the U.S. are false and misleading.

"There is no circumstance under which we are wrong on whether or not Herbalife is a pyramid scheme," Ackman said. "Where there is investment risk is that there is no certainty that the government will investigate the company. I believe that if the FTC and or the SEC or state attorneys general looked into the issues we've identified, it is a certainty that the company would be found in violation of U.S. law, Chinese law and the government would work to shut the company down."

The webcast was the latest step in a wide-ranging campaign by Ackman to convince regulators, including the Securities and Exchange Commission, that the nutritional supplement company, which sells vitamins and other supplements through individual distributors, is an illegal pyramid scheme that functions by continuously bringing on new distributors rather than predominantly through product sales.

Ackman is making a roughly $2 billion short-sale bet the stock would drop to zero. Even though the insurgent investor said he would donate any of his own profits from the Herbalife investment to charity he acknowledged that investors in his fund, Pershing Square Capital Management, would keep their share of any profits.

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"If the company would disappear tonight we would make a couple billion dollars," Ackman said.

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