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Herbalife's criminal investigation confirmed by CNBC's own source.

Herbalife's dismissive statement makes the matter more concerning.

Investors should steer clear of Herbalife for now.

What a day for Herbalife (NYSE:HLF)!

First rumors hit the blogs of an FBI and DOJ criminal investigation. Twitter was lit up. Articles started to come out repeating it. CNBC confirmed the rumor. The stock started getting killed on volume, crashing all the way into the close.

Then in after hours, Herbalife released a statement:

We have no knowledge of any ongoing investigation by the DOJ or the FBI, and we have not received any formal nor informal request for information from either agency. We take our public disclosure obligations very seriously. Herbalife does not intend to make any additional comments regarding this matter unless and until there are material developments.

All is well, right? The Financial Times that first posted the rumor must have been making it up, right? At least that's the story if you believe the bulls on the message boards, blogs, and Twitter. And by all accounts it sounds like they have a point.

Until you read the original report by the Financial Times.

For starters, the original report contained the exact same statement that Herbalife issued above. Apparently the two journalists who wrote the piece took the effort to contact the company and get statement before issuing its report. We know this because the statement matched the exact verbatim of the statement Herbalife later issued to the public.

Yet the Financial Times decided to run the report anyway. In it the Financial Times stated:

The US Department of Justice and the Federal Bureau of Investigation are investigating Herbalife, the multi-level marketing company that hedge fund manager Bill Ackman has alleged is a pyramid scheme, according to people familiar with the matter.

The Financial Times apparently trusts its sources. It claims the offices involved are the FBI and the US Attorney's office out of Manhattan. Both decline to comment, but that is to be expected.

As I am writing this, CNBC confirmed its OWN source that there is an FBI investigation into Herbalife though it added that so far there is no evidence of criminal wrongdoing (yet). It also confirmed a 20/20 piece of Herbalife will be coming out.

Meanwhile, Reuters confirmed its own source has knowledge about an FBI investigation. Additionally, Reuters reported:

Former Herbalife distributors have told Reuters that they had been contacted by agents who were interested in finding out more about the company's business practices.

Bottom line here is that the reports are credible and worse, since Herbalife has no knowledge itself of a criminal investigation: could there be a raid to take place soon and the FBI didn't want to give Herbalife the chance to destroy evidence? It seems odd that apparently multiple sources would know of an FBI investigation but Herbalife itself doesn't know about it. The worst kinds of criminal investigations are the type where the target doesn't have a clue it's happening because it often means authorities want to surprise their target. Investors should steer clear of Herbalife until more information emerges.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.