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Ackman's battle to uncover Herbalife (NYSE:HLF) as a fraud, Ponzi scheme, illegal pyramid scheme has really gone nowhere, maybe a dead end on Ackman's part.

There is still no smoking gun that Herbalife is violating any law whatsoever. No Attorney General of any state in the US or on the Federal Level has even alleged Herbalife is a scam, scheme, Ponzi, pyramid scheme. Throw all the nasty false allegations and labels into one boat, that is all we have been presented so far.

First of all. who is Robert Chapman and why is he relevant to Herbalife?

"Robert Chapman is the founder of the activist hedge fund, Chapman Capital. Chapman was the first to use the required 13-D SEC filing to his advantage. In 2000, after being ignored by American Community Properties Trust CEO Michael Wilson, Chapman sent letters to Wilson voicing his complaints. Other fund managers, including Third Point's Dan Loeb and JANA Partners' Barry Rosenstein, took notice and have used the 13-D to their advantage too."

Robert Chapman is a much better indicator of the true value of Herbalife value moving forward. Mr. Chapman has been closely pushing in the past for changes to Herbalife at the board level through previous and current management. Such a savvy investor would know and inform others of any real concerns about the stability and accounting of the company.

Why may you ask is Robert Chapman so important?"... Chapman is not a new investor in Herbalife, he owned 3-5 percent of the company back in 2000 and launched an activist campaign with the board to press for the sale of late CEO Mark Hughes' majority stake and also berated the company for paying overlarge compensations to its top employees."

Interestingly, Chapman's first tussle with Herbalife was underway around the same time he was battling it out with American Community Properties and this one spiked Loeb's interest and approval.

...."Herbalife has been here before, and it's no stranger to the Federal Trade Commission, the agency Ackman ostensibly wants to take action. Chapman contends that the issue of how many of Herbalife's products are consumed internally - a key focus of Ackman's attack - was already addressed by the FTC in 2004. He links to a PDF of a document on FTC letterhead arguing that the question of whether employees consume most of the product isn't the factor that determines whether an operation is a pyramid scheme."

Chapman also infers from Ackman's going public that he has already concluded regulators will take a pass. "I believe Ackman already had concluded the FTC wasn't going to assist his crusade. Instead, he realized that he had to focus on existing and prospective HLF distributors, praying the media attention would have a materially deleterious impact on any decision to join or to continue with the HLF team. Indeed, without the FTC taking injunctive actions against HLF, Ackman's crusade toward 'zero' is doomed," he writes.'

Shorts in Herbalife are a very confused crowd. They claim wrongdoing in the company. My question is this. If the company was so wrong ethically, so morally questionable why do all the interested parties (consumers, distributors) keep buying the products and why does EPS keep going up? Why are there NO insiders bolting to the Feds and coming out publicly with their concerns? Usually there are groups within the company who will in some channel leave or whistleblow. Why hasn't Ackman been able to find any of these people inside the company?

When KPMG announced they were resigning as Herbalife auditor, these shorts were desperate to confuse that they spread info online that this was due to some wrongdoing on Herbalife's part which is absolutely false. The fact is that Herbalife has accounting practices which are almost the same as almost all other publicly traded marketing companies such as Nu Skin (NYSE:NUS) and private ones such as Amway. There is a whole crowd of people who are against MLM since they have been burned or could not produce any results so are angry at these types of firms. This type of anger does not at all prove any wrongdoing.

"Robert Chapman Jr., an activist investor who has been betting on Herbalife shares, told MarketBeat he's "very long and will double my position today if it falls materially, as even KPMG has stated there is no reason to believe any accounting/audit work is improper."

All of this implies Herbalife has a ways to go but it is upward not downward that we shall see from the fog of shorts clearing out gradually over the near term.

Disclosure: I am long HLF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Why Robert Chapman Is A Better Leading Indicator Of The True Value Of Herbalife Than Bill Ackman