On CNBC today, Carl Icahn asked Bill Ackman to produce his attorneys from Sullivan & Cromwell so that they can directly set forth why they believe Herbalife (NYSE:HLF) is a pyramid scheme. Yet Icahn didn't offer to produce his own lawyers who say it isn't.
But perhaps most importantly, as I wrote in my February 5 article on why other companies that support Herbalife may be liable for its actions:
I wonder why Herbalife has not produced for the public the opinion letter from their attorney that has provided them assurances they are not a criminal enterprise. I assume they must have received such an opinion letter, else they have no basis upon which to competently conclude they are not violating the law, as mistake of law is no excuse. While such attorney opinions are no defense to allegations, the production of such can at least help the public form its own conclusions regarding the issue.
Again, shouldn't the company itself want to come forward with proof for its shareholders that it has done the legal due diligence required to ensure it is compliant with all Federal, state and international laws? That seems as though it could be very persuasive, so I wonder every day why Herbalife hasn't produced a single attorney to answer questions or provide a legal analysis on its behalf.
Indeed, it seems quite hypocritical for Icahn to demand Ackman produce his attorneys, but not put the same demand on Herbalife or himself. Further, Ackman DID produce one of his attorneys during his December 20 presentation, while Herbalife did not include a single of its attorneys in its January 10 rebuttal thereto.
Whether Herbalife is a pyramid or not is a legal question. Non lawyers like Icahn, Ackman, and even Herbalife's executives are not competent to form such opinions on their own. They must seek the advise of legal counsel, so it would just be better for everyone if we actually heard from everyone's lawyers directly. At least Ackman has made his attorney available. Neither Herbalife nor Icahn have, and that speaks volumes to me.
Plus, as I said in my February 5 article:
I have formed the legal opinion that there is evidence to suggest Herbalife pays more money to its "distributors" for their recruitment of new "distributors" than it does for their sale of Herbalife products. This would satisfy the definition of a pyramid scheme, making the practice illegal.
Until a lawyer who knows more than me explains why they think I'm wrong, I stand by my opinion.
Disclosure: I am short HLF.