When the Wolves Bite
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Federal Trade Commission (FTC), 13–14, 44, 85, 89, 137–138, 142–145, 160, 181, 189–190
Bureau of Consumer Protection, 146
formal complaint against Herbalife, 191–192, 194–195 (see also Herbalife: settlement with FTC)
letters received about Herbalife, 145–146, 150–151
opening investigation of Herbalife, 154, 159
Section 5 of FTC act, 192
Ferguson, Scott, 17, 72
Filo, David, 93
financial crisis of 2007–2008, 11, 58. See also Great Recession
Financial Times, 155
Fink, Laurence D., 3–4
First Union Real Estate Equity & Mortgage Investments, 30
Five Star company, 14
Fleming, Ibi, 177
Food and Drug Administration, 47
Fooling Some of the People All of the Time (Einhorn), 63
Forbes, 128, 166
Fortune, 52, 104, 108, 206
Fraidin, Stephen, 153
Franklin, Martin E., 88
fraud, 62, 63, 75, 84, 89, 138, 158, 161, 170, 174, 196. See also insider trading; pyramid schemes
Freeport-McMoRan, 184
Friedman, Mark, 196
Gasparino, Charles, 87
General Growth Properties (GGP), 16
Gibson Dunn, 178
Gillette razor model, 64
Global Information Network, 14
Global Strategy Group, 144, 167
Glumetza diabetes drug, 172
Golden Gate Capital, 49, 111
Goldsmith, Barry, 178
Gotham Golf, 30, 31
Gotham Partners Management, 10, 28, 29, 30, 101, 102
“A Recommendation for Pre-Paid Legal Services, Inc.” report, 31
winding down, 32
Goudis, Richard, 57, 96–97, 207
Graham, Benjamin, 26–27
Great Recession, 37–38, 53. See also financial crisis of 2007–2008
Greenberg, Herb, 59, 60, 81, 84, 85–86, 154
Greenberg, Sally, 143
Greenlight Capital, 37, 58, 61–62
Greenmail, 125
Green Mountain Coffee, 59, 64
Grisham, Michelle Lujan, 144
Grossman, Mike, 22, 23, 24, 25
Gruntal & Company, 117
Gundlach, Jeffrey, 67–68
Hallwood Realty, 33, 34, 101, 102, 106–107
Hammermill Paper, 121
Handler, Richard B., 203–206, 208
Harbor Investment Conference (2014), 152
Hartman, Jo Ann and Stuart, 42–43
hedge funds, 2, 62, 88, 127, 164, 211
assets under management, 2
human investors vs. wolf packs, 3
redemptions to investors, 30, 33, 180, 210
See also shareholder activism
Heidrick and Struggles search firm, 51
Hempton, John, 83–84, 85, 100, 172–173
Henderson, Barbara, 152
Herbalife, 4, 7, 9, 15–22, 64–69, 96, 104, 106, 107, 176, 179–180
annual meeting of 2012, 66
Best Defense pill, 110
board seats of, 131, 148
business model changes, 163
Chairman’s Club, 20, 45, 65, 80, 82
as changed from earlier years, 212–213
class-action suit against, 49, 51, 53
complaints against, 144–145
consumer base of, 97–98 (see also Herbalife: sales)
early products, 45
FBI/Justice Department investigation of, 155, 167
financial results in 2012 and 2013, 131, 139, 140
fine imposed by FTC, 198
Formula 1 meal replacement, 79
founder of Herbalife International Inc., 41, 44
Founder’s Circle, 149
FTC investigation of, 154, 159, 190–191, 203 (see also Herbalife: settlement with FTC)
growth of, 57, 58, 79, 200
independent compliance auditor (ICA) for, 201
investigative report by Richard/Schulman, 20
market cap, 209
membership of Preferred Members and Distributors, 200
“Newest Way to Health” program of, 48–49, 53
nutrition clubs of, 18–20, 58, 65–66, 158, 160, 161, 192
overseas markets of, 48, 55, 57, 58, 89, 163, 195
President’s Team Summit, 66–67
as pyramid scheme, 13, 19, 20, 21, 46, 54, 60, 75, 80, 81, 83, 89, 90, 109, 140 143, 145, 146, 150, 151, 161, 164, 167, 190, 194, 196, 197, 198, 199
recruiting by, 54, 77, 80, 181, 189–190, 191, 192, 197, 198, 213
sales, 48, 54, 59, 78, 79, 80, 81, 96, 97, 131, 164, 191, 198, 201
sales leaders, 163–164, 192
SEC investigation of, 96
settlement with FTC, 194–195, 196, 197, 198, 200–201, 205, 209
shutting down, 189–190
stock prices of, 48, 53, 54, 55, 57, 60, 73, 76, 81, 82, 83, 84, 85, 88, 90, 96, 97, 98, 100, 111, 113, 130, 132, 133, 134, 139, 140, 142, 148, 150, 151, 152, 154, 155, 161, 163, 164, 167, 180, 193, 195, 197, 206, 214, 215
sued by California attorney general, 46, 47
survey commissioned by Paul Sohn concerning, 135–136
taken public/private, 48, 49, 53, 112, 209
testimonial video about, 191–192
top distributors, 52
training materials of, 20–21
video about distributors of, 196–197
website about Ackman unveiled by, 178
winner/loser concerning, 212–213
See also short selling: of Herbalife shares
Herbalife Foundation, 211
Herera, Sue, 60
Hertz, 184
Hilal, Paul, 17, 72
Hirsch, Douglas, 75, 76
Hispanic Federation, 142, 143
Hispanic Magazine, 145
Hispanics, 135, 142–143, 145, 189, 190
Hoffman, Alan, 176–178, 192, 194, 196, 197, 207
Howard Hughes Corporation, 137
HRPT Property Trust, 102
Huffington Post, 178
Hughes, Darcy, 41
Hughes, Mark Reynolds, 41–43, 44, 45–47, 53, 84
and Ackman, 85
death of, 41–42, 48, 52
testifying before Congress, 46–47
Iberra, Mickey, 145
Icahn, Carl C., 1, 2, 33–35, 110–129, 131, 142, 150, 156, 182, 183
and Apple, 184–188
buying Herbalife stock, 110–111, 207, 208–209
calls to CNBC, 104–109, 112
cash hoard of, 100
at Delivering Alpha conference, 147
father of, 120
and FTC settlement, 199
getting out of Herbalife, 203, 204, 205, 206–207
and Herbalife board seats, 131–132
Icahn Manifesto, 118–119
in medical school, 116
as poker player, 115, 116
taking Herbalife private, 203, 209
uncle of (see Schnall, Elliot)
wealth of, 127, 128, 129
See also Ackman, William A.: and Icahn; Johnson, Michael O.: and Icahn
Icahn & Company, 118
Icahn Partners, 127
Iger, Robert, 51, 52
Indago Group, 12, 64
Ingram, Robert, 175
insider trading, 125–126, 132–133, 169
Intelligent Investor, The (Graham), 26–27
interest rates, 2, 156
investment banks, 77, 126, 203, 205, 206
iPhones, 184, 187, 188
Ira W. Sohn Investment Research Conferences, 62, 63, 68, 73–74, 75, 104, 171. See also Sohn special event
“Is MBIA Triple A?” (Ackman), 10–11
Isuprel heart drug, 172
Jacobs, Irwin L., 123
JC Penney, 1, 39–40, 71–72, 73, 176, 178
Jefferies investment bank, 203, 205, 206
JH Whitney & Company, 49, 111
job losses, 39
Johnson, Michael O., 5, 9, 18, 49–55, 56–58, 61, 66–67, 71, 72, 76–77, 78, 82, 96, 97, 98, 99, 131, 132, 139, 148, 151, 158, 162, 163, 178, 191, 192, 196, 207, 209
bike accident of, 68–69
father of, 49–50
and FTC settlement, 198–199, 201
going to FTC, 152
as highest paid CEO, 54
and Icahn, 99–100, 131, 192, 199, 203
and Loeb, 90–91
retiring from Herbalife, 211
writing to SEC’s chairwoman, 180
See also Ackman, William A.: and Johnson
Johnson, Ron, 39, 40
junk bonds, 121
Justice Department, 155
Karabu Ticket Agreement, 125
Katzovicz, Roy, 15, 72, 74
KDP Advisors Inc., 179
Kelly, Kate, 76, 77–78
Keswin, Jeff, 61
Keurig, 64
Khuzami, Robert, 170
Kingdon, Mark, 134
King pharmaceuticals, 127
Kingsley, Alfred D., 118, 119
Klafter, David, 81, 141
Koscot Interplanetary company, 13–14
KPMG accounting firm, 132, 133
K-Streeters, 141
Kynikos firm, 170
LBO. See leveraged buyout
LCH Investments, 164
League of United Latin American Citizens (LULAC), 142, 177
LeBow, Bennett, 126
Left, Andrew, 174
Lehman Brothers, 11, 58, 63–64
“Let’s Go” travel guides, 25
Leucadia National Corporation, 29, 35–36
leveraged buyout (LBO), 121, 122, 124, 125
Levinsohn, Ross, 95
Levy, Robert C., 207
Lewis, Michael, 12
Lieber, Peter S., 116, 117
Lieberman Research, 97
Lipton, Martin, 4
lobbying, 141–146
Loeb, Daniel S., 1, 37, 88–94, 100
liquidating Herbalife position, 130–131
poison pen of, 91–92
London, Scott, 132–133
Longtop Financial Technologies, 174
Lopez, Linette, 147
Lorenzo, Frank, 124
Los Angeles Galaxy team, 53
Los Angeles Times, 48
LULAC. See League of United Latin American Citizens
McCabe, Mark, 179
McCain, John, 144
McClendon, Aubrey, 183
McDonald’s, 36–37
McGill, Francis, 199
Mack, Angela, 46
McNally, Dennis M., 139
Madoff, Bernard, 167, 190
Mahmoodzadegan, Navid, 77, 97
market caps of target companies, 1, 81, 128
Markey, Edward J., 141, 150–151
Markopoulos, Harry, 190
Marks, Leonard, 26
Marshall Fields, 121
Martin Marietta Materials, 68, 74
Mary Kay Cosmetics, 44
Mattner, Edward E., 111
Mayer, Marissa, 95
MBIA company, 10–12, 18, 21, 31–32, 32–33, 96, 167, 211
media, 19, 32, 36, 45, 49, 87, 90, 121, 127, 150, 159, 199. See also CNBC
Meister, Keith, 113–114
Merkin, J. Ezra, 30, 31
Messi, Lionel, 53
Meyer, Edward, 153
Meyers, Maxwell, 104
Microsoft, 92, 93, 94
Milken, Michael, 121, 125–126
Minneapolis Star Tribune, 38
MLM. See multilevel marketing companies
Model, Allen J., 153
Moelis & Company, 77
Moffett Group, 145
momentum on Wall Street, 166
Monroe, Jana, 6
Moritz, Robert E., 139
Motorola, 128
Mt. Sinai Medical School, 129
Multilevel marketing (MLM) companies, 13, 14, 30, 43–44, 51, 68, 73, 90, 112, 143, 196
and Amway decision of 1979, 44
Mylan pharmaceuticals, 127
NASDAQ Biotechnology ETF, 172
Nasdaq exchange, 48
National Consumers League (NCL), 142–143
natural gas, 183
Newton, Wayne, 46
New Yorker, 115
New York Post, 138
New York Stock Exchange, 53, 54, 62
price for seat on, 118
New York Supreme Court, 31
New York Times, 32, 34–35, 60, 96, 101, 117, 123, 128, 144, 168, 169
DealBook page/site, 110, 157
Nixon, Richard M., 119
Northstar Capital, 113–114
Och, Daniel, 29
Och Ziff Capital Management, 29
oil prices, 119, 183
One57 high-rise, 168
OPEC, 119
Oppenheimer, Peter, 185–186
options market, 117
Ozark Airlines, 124
Parsons, Richard D., 128
Pauli, Matthew H., 153
Paulson, John, 67
Pearson, J. Michael, 168–169, 171, 172, 173, 175, 181, 193
Peltz, Nelson, 1
Penn Virginia Corporation, 92
PepsiCo, 1
Perenchio, Jerry, 82–83
Peretz, Martin H., 28, 153
Perrica, Xenia, 145–146
Pershing Square Capital Management, 5, 14, 70, 71, 75, 143, 145, 164
advisory board of, 153
assets growth/decline of, 37, 181, 210
holdings in 2016, 209
investment committee of, 16, 72
IPO of, 180
launching of, 36, 211
long-term incentive program of, 210
performance in 2015, 180, 181–182
returns in 2014, 166
as underperforming, 40
video made about Herbalife’s distributors, 196–197
Pershing Square Holdings, 180
philanthropy, 7, 212
Philidor Rx Services, 172–173, 174, 175
Philip Morris Cos., 126
Phillips Petroleum, 122–123
Pickens, T. Boone, 121, 122
Pitt, Harvey, 146
Platform Specialty Products, 182
Ponzi schemes, 135. See also pyramid schemes
Porter, Michael, 153
Post Holdings, 148
“Preliminary Report on Bill Ackman” (Dietz), 5–9
Pre-Paid Legal Services, 3031, 32, 33
PricewaterhouseCoopers (PwC), 133, 139–140
Protess, Ben, 96
proxy fights, 38, 72, 118, 119, 120, 126, 128, 215
put options, 148–149, 178, 215
pyramid schemes, 13, 14, 19, 44, 138, 181
laws concerning, 17, 75, 112
and recruiting, 149
See also Herbalife: as pyramid scheme
Ramey, Tim, 83, 132, 133, 200
Ramirez, Edith, 142, 143, 144, 189–190, 196, 198
Rausch, George, 28
Reagan, Ronald, 43
Real Bill Ackman, The (website), 178
“Real Effects of Hedge Fund Activism: Productivity, Asset Allocation, and Industry Concentration, The,” 214
real estate investment trusts (REIT), 29, 30, 33
recessions, 119. See also Great Recession
redemptions, 30, 33, 180, 210
Regan, Trish, 100
regulators, 73, 85, 89, 193. See also Federal Trade Commission; Securities and Exchange Commission
Reuters, 155
Rich, Jessica, 146
Richard, Christine S., 10, 12–13, 14, 15, 17, 18, 19–20, 64–67, 79, 160
RJR Nabisco, 126
Robin Hood Investment Conference, 149, 190
Rockefeller Center, 29
Rogers, Kenny, 46
Rory, Kim, 97
Roth, William V., 47
Rudman, Warren B., 47
Russia, 58
Salix Pharmaceuticals, 171
&
nbsp; Sánchez, Linda T., 137–138, 144
Sánchez, Loretta, 144
Sard, George, 167–168
Saxon Industries, 120–121
Schaitkin, Keith, 34, 35, 111
Schechter, David, 186
Schiller, Howard, 181
Schnall, Elliot, 116–117, 118
Schuessler, Jack, 36
Schulman, Diane, 12, 20
Schultz, Howard, 40
Sears department store chain, 37
Securities and Exchange Commission (SEC), 1, 10, 63, 64, 88, 91, 96, 112, 121, 125, 128, 139, 149, 150, 170, 205
investigating Ackman, 180
and Madoff, 190
Seyforth, Mark, 43–44
shale gas, 183
shareholder activists, 1–4, 9, 29, 36, 70, 82, 119, 127
impact on corporate culture, 213–214
share prices
decreases, 6, 11, 16, 32, 38, 39, 63, 64, 71, 76, 82, 83, 93, 94, 100, 117, 119, 133, 151, 152, 154, 155, 163, 164, 174, 175, 179, 183–184, 187, 188, 193, 206
increases, 2, 3, 32, 36, 68, 70, 71, 84, 85, 88, 96, 97, 113, 129, 133, 134, 139, 140, 148, 150, 161, 165, 168, 169, 171, 180, 182, 183, 184, 187, 188, 195, 197, 211
Kennedy Slide on Wall Street (1962), 117
See also Herbalife: stock prices of; Valeant pharmaceutical company: stock prices of
Shaw, Bryan, 133
short selling, 10, 12, 13, 30, 31, 59, 62, 63, 83, 108, 127, 147, 170, 174
of Herbalife shares, 17, 64–65, 66, 68, 72, 73, 75, 76, 109, 147, 148–149, 199, 201–202
and short squeezes, 85, 106, 107, 112, 139, 148, 202, 203, 215
Silverman, Howard, 117
Simplicity Pattern, 121
Singapore, 58
Singer, Paul, 164
Slater, Robert, 120
Slendernow company, 43, 44
Small Business Administration, 62
Société du Louvre, 113
Sohn, Paul, 134–137, 138–139, 143
Sohn special event, 75–81. See also Ira W. Sohn Investment Research Conferences
Sonnenfeld, Jeffrey A., 3
Sorkin, Andrew Ross, 81, 85, 88, 97, 131
Soros, George, 133–134, 139, 164
Southern Investigative Reporting Foundation (SIRF), 173
South Korea, 58
Spear, Leeds and Kellogg, 61
Special Purpose Investment Vehicle (SPIV), 37, 39
Spitzer, Eliot, 10, 11, 32, 211
Stanford, Leslie, 52
Star Gas Partners, 92
Starwood Capital, 29
Stearns, Dione J., 144
Steinberg, Joseph S., 29, 36
Stern, Daniel H., 29
Sternlicht, Barry, 29
Stevens, Mark, 118
Stewart, Martha, 167
Stiritz, William P., 148, 209
Strine, Leo E., 2–3
subprime housing bust, 11
Sullivan, Brian, 77
Sullivan and Cromwell, 74–75, 145
Swartz, Mike, 58
Swisher, Kara, 95
Sykes, Glen, 185–186
Synergy Oil & Gas, 92
takeovers, 4, 92, 113, 119, 121, 122, 123, 126, 127
Tappan, Richard, 119, 120