Pershing Square: Herbalife Operates In Violation of China's Direct Selling and Pyramid Sales Laws

Pershing Square responds to The Wall Street Journal article about Herbalife in China

NEW YORK--()--Pershing Square Capital Management, L.P. (“Pershing Square”) today released the following statement:

We are pleased that regulators are reviewing Pershing Square’s presentation on Herbalife’s business practices in China. We urge all interested parties to review our Herbalife China presentation at www.factsaboutherbalife.com.

Based upon the evidence we presented on March 11, 2014 and additional information we have learned since then, Pershing Square is confident that Herbalife is violating Chinese law prohibiting direct selling and pyramid sales.

Subsequent to our presentation, we have been contacted by multiple former distributors in China and a former Herbalife China employee who have provided additional evidence that confirms that Herbalife is violating Chinese law.

Herbalife claims that its Chinese ‘hourly’ compensation system is different from its ‘royalty’ system elsewhere, but its public filings and other documentary evidence show that its business model in China mirrors almost precisely its global ‘royalty’ commission structure. Internal Herbalife documents we have received from a former Herbalife employee show that Herbalife has internally accounted for its Chinese ‘hourly’ compensation system using the same ‘royalty’ terms it applies to the rest of the world (such as “Royalty Overrides,” “Production Bonus” and “Mark Hughes Bonus”).

Herbalife claims to use an ‘hourly compensation’ system in China, but the evidence confirms that the ‘hourly compensation’ system is a sham. Herbalife has never provided any evidence that contradicts our conclusions.

Herbalife’s SEC filings fail to accurately describe its compensation system in China and, as a result, Herbalife is also in violation of U.S. securities regulations.

About Pershing Square Capital Management, L.P.

Pershing Square Capital Management, L.P. ("Pershing Square"), based in New York City, is a SEC-registered investment advisor to investment funds. Pershing Square manages funds that are in the business of trading — buying and selling — securities and other financial instruments. Funds managed by Pershing Square are short the stock of Herbalife Ltd and own put options on the Company. Pershing Square may increase, decrease, dispose of, or change the form of its investment in Herbalife for any or no reason, at any time. Pershing Square may change its views about or its investment positions in Herbalife at any time, for any reason or no reason. Pershing Square may buy, sell, cover or otherwise change the form or substance of its Herbalife investment. Pershing Square disclaims any obligation to notify the market of any such changes. Please see the full Disclaimer appearing on website www.factsaboutherbalife.com and www.herbalifepyramidscheme.com.

Contacts

Rubenstein
Fran McGill, 212-843-9353
fmcgill@rubenstein.com

Contacts

Rubenstein
Fran McGill, 212-843-9353
fmcgill@rubenstein.com