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Greenberg: Herbalife Tries to Discredit the Critic

By: Herb Greenberg | 05/02/14 - 05:55 PM EDT

SAN DIEGO (TheStreet) -- In my world, when companies attack a critic, in an effort to discredit, it often means one thing: It's an effort to make people look over here, not there.

So when I read Herbalife's (HLF) press release from Thursday aimed at pre-responding to a Herbalife event sponsored by Bill Ackman, I couldn't help but think about the classic crisis PR ploy of discrediting the critic.

Here's the paragraph in question:

"As for the event's new moderator, Robert Fitzpatrick, a self-proclaimed expert in multi-level marketing, he is a known critic of the industry, and a consultant to Mr. Ackman and three-time convicted felon and perpetrator of fraud Barry Minkow. Herbalife believes Mr. Fitzpatrick's involvement is further evidence that this 'documentary' is merely another biased attack on our company."

Ah, the old "guilt by association" trick!

I interviewed Robert Fitzpatrick multiple times for my CNBC.com documentary Selling the American Dream. He knows the subject as well, if not better, than anybody. No surprise, the multi-level marketing industry doesn't just hate him, it despises him.

So, let me add what the press release failed to say: Herbalife paid Barry Minkow, then a vocal critic of Herbalife, $300,000 to go away. I actually wrote about this two years ago today.

Herbalife's response to me at the time:

"Minkow is a convicted criminal who is back in prison for spreading misinformation for profit through short selling. As we have told the press before, we settled with him to avoid the time, expense and distraction of protracted litigation. Today, however, we are totally committed to using every resource to defend against any misrepresentation by short sellers, their accomplices and associates."

Reality: A payoff is a payoff. If there is one thing I've learned over the years, it's that trying to smear people they way Herbalife did Fitzpatrick is classic diversion. Nothing more, nothing less. The bigger question: Why the need to divert?

-- Written by Herb Greenberg in San Diego

Follow @herbgreenberg

Herb Greenberg, editor of Herb Greenberg's Reality Check, is a contributor to CNBC. He does not own shares, short or trade shares in an individual corporate security. He can be reached at herbonthestreet@thestreet.com.

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